Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
þ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2025
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 1-1373
MODINE MANUFACTURING COMPANY
(Exact name of registrant as specified in its charter)
Wisconsin
39-0482000
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
1500 DeKoven Avenue, Racine, Wisconsin
53403
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code (262) 636-1200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.625 par value
MOD
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer þ
Accelerated Filer ☐
Non-accelerated Filer ☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No þ
The number of shares outstanding of the registrant’s common stock, $0.625 par value, was 52,731,197 at January 30, 2026.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
28
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
40
Item 4. Controls and Procedures.
PART II. OTHER INFORMATION
Item 1A. Risk Factors.
41
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
42
Item 5. Other Information.
Item 6. Exhibits.
43
SIGNATURE
44
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and nine months ended December 31, 2025 and 2024
(In millions, except per share amounts)
(Unaudited)
Three months ended December 31,
Nine months ended December 31,
2025
2024
Net sales
$
805.0
616.8
2,226.7
1,936.3
Cost of sales
618.9
467.2
1,710.3
1,458.5
Gross profit
186.1
149.6
516.4
477.8
Selling, general and administrative expenses
89.3
82.0
258.4
250.6
Restructuring expenses
7.5
8.3
15.4
18.2
Impairment charge
—
4.1
Operating income
59.3
238.5
209.0
Interest expense
(8.9)
(6.2)
(23.0)
(21.1)
Pension termination charge
(116.1)
Other (expense) income – net
(2.8)
1.1
(8.5)
(0.7)
(Loss) earnings before income taxes
(38.5)
54.2
90.9
187.2
Provision for income taxes
(8.3)
(13.0)
(41.2)
(51.8)
Net (loss) earnings
(46.8)
41.2
49.7
135.4
Net earnings attributable to noncontrolling interest
(0.6)
(0.2)
(1.5)
(1.0)
Net (loss) earnings attributable to Modine
(47.4)
41.0
48.2
134.4
Net (loss) earnings per share attributable to Modine shareholders:
Basic
(0.90)
0.78
0.91
2.56
Diluted
0.76
0.90
2.49
Weighted-average shares outstanding:
52.8
52.7
52.6
53.9
53.7
The notes to condensed consolidated financial statements are an integral part of these statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
Other comprehensive income (loss), net of income taxes:
Foreign currency translation
(48.9)
45.9
(34.8)
Defined benefit plans
105.8
0.8
107.4
2.4
Cash flow hedges
(0.1)
0.7
0.1
Total other comprehensive income (loss)
109.9
(48.2)
154.0
(32.3)
Comprehensive income (loss)
63.1
(7.0)
203.7
103.1
Comprehensive (income) loss attributable to noncontrolling interest
(0.4)
0.5
(1.8)
Comprehensive income (loss) attributable to Modine
62.7
(6.5)
201.9
102.5
2
CONSOLIDATED BALANCE SHEETS
December 31, 2025 and March 31, 2025
December 31, 2025
March 31, 2025
ASSETS
Cash and cash equivalents
98.7
71.6
Trade accounts receivable – net
569.1
478.9
Inventories
542.9
340.9
Other current assets
93.0
69.8
Total current assets
1,303.7
961.2
Property, plant and equipment – net
479.6
390.5
Intangible assets – net
203.4
146.7
Goodwill
293.4
233.9
Deferred income taxes
43.6
67.0
Other noncurrent assets
159.2
118.3
Total assets
2,482.9
1,917.6
LIABILITIES AND SHAREHOLDERS’ EQUITY
Short-term debt
1.2
9.3
Long-term debt – current portion
43.9
44.8
Accounts payable
390.3
290.8
Accrued compensation and employee benefits
86.5
102.7
Other current liabilities
74.3
93.4
Total current liabilities
596.2
541.0
Long-term debt
570.7
296.7
23.3
24.1
Pensions
11.8
29.4
Other noncurrent liabilities
151.1
108.2
Total liabilities
1,353.1
999.4
Commitments and contingencies (see Note 18)
Shareholders’ equity:
Preferred stock, $0.025 par value, authorized 16.0 million shares, issued – none
Common stock, $0.625 par value, authorized 80.0 million shares, issued 56.9 million and 56.5 million shares
35.5
35.3
Additional paid-in capital
327.1
310.8
Retained earnings
891.2
843.0
Accumulated other comprehensive loss
(27.6)
(181.3)
Treasury stock, at cost, 4.1 million shares
(104.4)
(97.6)
Total Modine shareholders’ equity
1,121.8
910.2
Noncontrolling interest
8.0
Total equity
1,129.8
918.2
Total liabilities and equity
3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended December 31, 2025 and 2024
Cash flows from operating activities:
Net earnings
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
59.1
58.5
116.1
Stock-based compensation expense
14.1
16.7
8.5
Other – net
6.3
5.2
Changes in operating assets and liabilities:
Trade accounts receivable
(56.4)
(11.6)
(161.3)
13.2
93.8
(19.3)
Other assets and liabilities
(71.8)
(48.1)
Net cash provided by operating activities
53.8
158.5
Cash flows from investing activities:
Expenditures for property, plant and equipment
(101.2)
(56.3)
Payments for business acquisitions, net of cash acquired
(182.4)
(3.4)
3.5
0.6
Net cash used for investing activities
(280.1)
(59.1)
Cash flows from financing activities:
Borrowings of debt
700.5
355.0
Repayments of debt
(433.4)
(406.0)
Repayments on bank overdraft facilities – net
(8.8)
(9.6)
Purchases of treasury stock
(6.8)
(12.3)
Dividends paid to noncontrolling interest
1.9
0.9
Net cash provided by (used for) financing activities
251.6
(72.4)
Effect of exchange rate changes on cash
1.7
(3.2)
Net increase in cash, cash equivalents and restricted cash
27.0
23.8
Cash, cash equivalents and restricted cash – beginning of period
71.9
60.3
Cash, cash equivalents and restricted cash – end of period
98.9
84.1
4
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the three and nine months ended December 31, 2025
Accumulated
Additional
other
Treasury
Non-
Common stock
paid-in
Retained
comprehensive
stock, at
controlling
Shares
Amount
capital
earnings
loss
cost
interest
Total
Balance, March 31, 2025
56.5
51.2
51.7
Other comprehensive income
49.4
49.9
Stock options and awards
0.4
(5.1)
5.3
Dividends declared or paid to noncontrolling interest
Balance, June 30, 2025
56.6
35.4
316.5
894.2
(131.9)
(102.7)
7.2
1,018.7
44.4
Other comprehensive loss
(5.8)
0.2
1.8
2.1
Balance, September 30, 2025
56.8
320.4
938.6
(137.7)
(103.3)
7.6
1,061.1
Other comprehensive income (loss)
110.1
(1.1)
6.7
Balance, December 31, 2025
56.9
5
For the three and nine months ended December 31, 2024
Balance, March 31, 2024
56.1
35.0
283.7
659.0
(163.4)
(66.7)
7.9
755.5
47.3
47.8
(6.1)
(4.7)
4.2
Dividend paid to noncontrolling interest
Balance, June 30, 2024
56.2
35.1
287.9
706.3
(169.5)
(71.4)
796.3
46.1
0.3
46.4
21.7
22.1
(3.1)
5.6
Balance, September 30, 2024
56.3
35.2
293.5
752.4
(147.8)
(74.5)
8.6
867.4
(47.5)
(4.5)
6.9
Balance, December 31, 2024
56.4
300.7
793.4
(195.3)
(79.0)
8.1
863.2
6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1: General
The accompanying unaudited condensed consolidated financial statements of Modine Manufacturing Company (“Modine” or the “Company”) were prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes necessary for a comprehensive presentation of financial position, results of operations and cash flows required by GAAP for complete financial statements. The financial statements include all normal recurring adjustments that are, in the opinion of management, necessary for a fair statement of results for the interim periods. Results for the first nine months of fiscal 2026 are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the consolidated financial statements and related notes in Modine’s Annual Report on Form 10-K for the year ended March 31, 2025.
Supplier finance program
The Company facilitates a voluntary supplier finance program through a financial institution that allows certain suppliers in the U.S. and Europe to request early payment for invoices, at a discount, from a financial institution. The Company or the financial institution may terminate the supplier finance program upon 90 days’ notice. The Company’s obligations to its suppliers, including amounts due and payment terms, are consistent, irrespective of whether a supplier participates in the program. The Company is not party to the arrangements between the participating suppliers and the financial institution. Under this program, the Company confirms the validity of supplier invoices to the financial institution and remits payments to it based on the original payment terms, which typically range from 60 to 120 days. The outstanding obligations under this program, included within accounts payable on the consolidated balance sheets, totaled $13.7 million and $15.5 million at December 31, 2025 and March 31, 2025, respectively.
New accounting guidance: Disaggregation of income statement expenses
In November 2024, the Financial Accounting Standards Board issued new guidance that will require additional disclosure regarding the nature of expenses presented within expense captions on the consolidated statements of operations and selling expenses. The new disclosure requirements will become effective for the Company’s fiscal 2028 annual financial statements. The Company is currently evaluating the new disclosures, but does not expect the guidance will have a material impact on its consolidated financial statements.
Note 2: Acquisitions and Dispositions
The Company acquired three businesses during the first and second quarters of fiscal 2026: AbsolutAire, Inc. (“AbsolutAire”), LBW Holding Corp. (“L.B. White”), and Climate by Design International (“Climate by Design”). Since the date of each acquisition, the Company has reported the financial results of these businesses within the Climate Solutions segment. At the time the December 31, 2025 financial statements were finalized, the Company was continuing its review of the fair value estimates for certain assets acquired and liabilities assumed. As part of its purchase accounting and integration activities, the Company is in the process of assessing, refining and harmonizing the internal controls and accounting processes of the acquired businesses with those of the Company. As part of this process, the Company is reviewing the appropriateness of accruals and reserves, including those related to accounts receivable, inventory, and product warranties. As such, the allocations of the purchase prices presented below are considered preliminary. The Company expects to complete its accounting for the acquisitions of AbsolutAire, L.B. White, and Climate by Design by the end of fiscal 2026. During the first nine months of fiscal 2026, the operating results for the acquired companies were not material. The Company has not presented supplemental pro forma financial information for these acquisitions since they are not material, individually or in the aggregate, to the Company’s consolidated financial statements.
7
Acquisition of AbsolutAire
On April 1, 2025, the Company acquired substantially all of the net operating assets of AbsolutAire for consideration totaling $11.3 million. AbsolutAire is a Michigan-based manufacturer of direct-fired heating, ventilation, and make-up air systems. This acquisition supports the Company’s growth strategy by expanding its heating and indoor air quality product portfolios and also broadens its customer base in the commercial, industrial, food service, and warehousing sectors. For the three and nine months ended December 31, 2025, the Company included net sales of $7.0 million and $18.7 million, respectively, within its consolidated statements of operations attributable to AbsolutAire.
The Company’s preliminary allocation of the purchase price for its acquisition of AbsolutAire is as follows:
3.4
3.9
Property, plant and equipment
2.8
Intangible assets
2.2
(1.2)
Other liabilities
(0.5)
Purchase price
11.3
The Company recorded $2.2 million of intangible assets, including customer relationship and trade name assets. The Company is amortizing the acquired intangible assets using a weighted-average life of approximately eleven years. The Company allocated the excess of the purchase price over the net assets recognized to goodwill in the amount of $1.1 million, which is expected to be deductible for income tax purposes.
Acquisition of L.B. White
On May 31, 2025, the Company acquired all of the issued and outstanding shares of L.B. White for consideration totaling $110.5 million ($107.7 million net of cash acquired). The Company primarily utilized its revolving credit facility to fund the purchase price.
Headquartered in Wisconsin, with additional manufacturing and distribution operations in Georgia, L.B. White is a leading provider of specialty heating solutions, including direct-fired forced air, radiant, indirect-fired, and electric heating solutions, for the agriculture, construction, and special event industries. L.B. White holds a leading position in the swine and poultry agricultural heating markets in North America and is a market leader in portables heating. This acquisition expands the Company’s product portfolio and also broadens its network into adjacent heating markets. For the three and nine months ended December 31, 2025, the Company included net sales of $25.6 million and $44.7 million, respectively, within its consolidated statements of operations attributable to L.B. White.
During the third quarter of fiscal 2026 and in connection with harmonizing internal controls and accounting processes at L.B. White, the Company identified and recorded measurement period adjustments, primarily related to inventory and associated reserves. These adjustments, including the impact on deferred income taxes, resulted in an increase to goodwill of $1.4 million.
8
The Company’s preliminary allocation of the purchase price for its acquisition of L.B. White is as follows:
10.2
17.1
15.9
50.1
27.1
Other assets
1.0
(1.9)
(1.7)
110.5
The Company engaged third-party valuation specialists to assist in estimating the fair value of assets acquired. The third-party valuations utilized assumptions developed by management and other information compiled by management, including, but not limited to, future expected cash flows. The Company allocated the excess of the purchase price over the net assets recognized to goodwill in the amount of $27.1 million, none of which is expected to be deductible for income tax purposes. Goodwill represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The goodwill recorded as part of the acquisition includes L.B. White’s workforce and anticipated future revenue and cost synergies.
Below is a summary of the methodologies and significant assumptions used within the third-party valuations for estimating the fair value of certain classes of acquired assets. The fair values were primarily based upon significant inputs that are not observable in the market and thus represent Level 3 measurements. See Note 4 for information regarding Level 3 fair value measurements.
Inventories: The Company determined the fair value of acquired work-in-process and finished goods inventory using both the comparative sales and cost of reproduction valuation methods. For raw materials acquired, the Company estimated the cost of replacement. In total, the Company wrote-up acquired inventory by $1.0 million. The Company charged $0.2 million and $0.8 million to cost of sales during the first and second quarters of fiscal 2026, respectively, as the underlying inventory was sold.
Property, plant and equipment: The Company valued the land and facilities acquired using the cost approach. The cost approach included consideration of recent sales of comparable land parcels and estimated replacement costs for structures and site improvements, adjusting such values for estimated depreciation as of the acquisition date. The cost approach relies on assumptions regarding replacement costs and the age and estimated remaining useful lives of the assets. For personal property, which primarily consists of machinery and equipment assets, the Company utilized the market valuation approach that considers values for similar assets on secondary equipment markets. The fair value of property, plant and equipment will be recognized as depreciation expense in the Company’s results of operations over the expected remaining useful lives of the assets.
9
Intangible assets: The Company determined the fair value of acquired intangible assets by using variations of the income approach. These methods generally forecast expected future net cash flows associated with each of the identified intangible assets and adjust the forecasts to present value by applying a discount rate intended to reflect risk factors associated with the cash flows and the time value of money. Acquired intangible assets were as follows:
Gross Carrying Value
Weighted- Average Useful Life
Customer relationships
38.5
14 years
Trade name
11.6
20 years
Total intangible assets acquired
Customer relationships represent the estimated fair value of L.B. White’s business relationships with existing customers, the majority of which are dealers and/or distributors in the agriculture and portable heating markets. The fair value of customer relationships was determined using the multi-period excess earnings method, in which the value is derived by projecting the future anticipated after-tax cash flows attributable to the customer relationships. Key inputs used in the valuation included future revenue growth rates, customer attrition rates, and discount rates.
The Company determined the estimated fair value of the acquired L.B. White trade name using the relief-from-royalty method, which applies an assumed royalty rate to revenue expected to be derived under the acquired trade name. The fair value was estimated to be the present value of the royalties saved because the Company owns the trade name.
Acquisition of Climate by Design
On July 1, 2025, the Company acquired Climate by Design for $64.4 million ($63.4 million net of cash acquired). The Company paid $64.1 million upon closing and the remaining $0.3 million in October 2025. The Company primarily utilized its revolving credit facility to fund the purchase price.
Based in Minnesota, Climate by Design specializes in desiccant dehumidification technology and critical process air handlers. This acquisition supports the Company’s growth strategy by expanding its commercial indoor air quality product portfolio. For the three and nine months ended December 31, 2025, the Company included $10.2 million and $17.5 million, respectively, of net sales within its consolidated statements of operations attributable to Climate by Design.
The Company’s preliminary allocation of the purchase price for its acquisition of Climate by Design is as follows:
7.3
10.1
10.5
15.0
23.6
10.4
(10.7)
64.4
10
The Company engaged third-party valuation specialists to assist in estimating the fair value of assets acquired. The third-party valuations utilized assumptions developed by management and other information compiled by management, including, but not limited to, future expected cash flows. The Company allocated the excess of the purchase price over the net assets recognized to goodwill in the amount of $23.6 million. Goodwill represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The goodwill recorded as part of the acquisition includes Climate by Design’s workforce and anticipated future revenue and cost synergies. Goodwill is expected to be deductible for income tax purposes.
Inventories: The Company estimated the fair value of acquired work-in-process and finished goods inventory using both the comparative sales and cost of reproduction valuation methods. For raw materials acquired, the Company estimated the cost of replacement. The Company wrote-up acquired inventory by $0.3 million. The Company charged the write-up to cost of sales during the second quarter of fiscal 2026 as the underlying inventory was sold.
Intangible assets: The Company estimated the fair value of acquired intangible assets by using variations of the income approach. These methods generally forecast expected future net cash flows associated with each of the identified intangible assets and adjust the forecasts to present value by applying a discount rate intended to reflect risk factors associated with the cash flows and the time value of money. Acquired intangible assets were as follows:
10 years
Acquired technology
3.2
Customer relationships represent the estimated fair value of Climate by Design’s business relationships with existing customers. The fair value of customer relationships was estimated using the multi-period excess earnings method, in which the value is derived by projecting the future anticipated after-tax cash flows attributable to the customer relationships. Key inputs used in the valuation included future revenue growth rates, customer attrition rates, and discount rates.
The Company estimated the fair value of the acquired Climate by Design technology using the relief-from-royalty method, considering estimated royalties that would hypothetically be paid to use the technology.
The Company estimated the fair value of the acquired Climate by Design trade name using the relief-from-royalty method, which applies an assumed royalty rate to revenue expected to be derived under the acquired trade name. The fair value was estimated to be the present value of the royalties saved because the Company owns the trade name.
11
Pending disposition of facilities in Germany
In fiscal 2025, the Company signed a definitive agreement to sell its technical service center and administrative support facility in Germany to a real estate investment firm. The Company closed the technical service center earlier in fiscal 2025 and reduced headcount in light of the sale of three automotive businesses in Germany during fiscal 2024. During the second quarter of fiscal 2026 and based upon a lower expected selling price of approximately $5.0 million in light of market and other transaction-specific factors, the Company estimated an implied loss in excess of the building and related assets’ carrying value. As a result, the Company recorded a non-cash impairment charge of $4.1 million during the second quarter of fiscal 2026. As of December 31, 2025 and March 31, 2025, the Company classified $4.6 million and $8.2 million, respectively, of building and related assets as held for sale and presented them within other current assets on its consolidated balance sheets. The Company expects the sale transaction will close during the fourth quarter of fiscal 2026 or the first quarter of fiscal 2027.
Note 3: Revenue Recognition
Disaggregation of revenue
The tables below present revenue for each of the Company’s operating segments. Each segment’s revenue is disaggregated by product group and by geographic location.
Effective April 1, 2025 and in connection with the Company’s strategic transformation and application of 80/20 principles, the Company realigned its segment teams around five market-based product groups, as summarized below. Accordingly, the Company has updated its disaggregated revenue disclosure to reflect the new product group structure. The disaggregated revenue information presented for fiscal 2025 has been recast to be comparable with the fiscal 2026 presentation.
Climate Solutions
The Climate Solutions segment has aligned its teams around three product groups: i) Data Centers, ii) Heat Transfer Solutions and iii) HVAC Technologies. The Data Centers business provides sustainable cooling solutions for data center customers. Data center products include precision air conditioning units, computer room air conditioning and air handler units, fan coils and fan walls. The Heat Transfer Solutions business provides heat exchanger coils, commercial refrigeration coolers, and anti-corrosion coating products. The HVAC Technologies business provides a wide array of commercial and residential heating products, including unit heaters, roof-mounted makeup air units, duct furnaces, infrared units, and perimeter heating products. In addition, the HVAC Technologies business sells indoor air quality products for schools and commercial applications.
Performance Technologies
The Performance Technologies segment has aligned its teams around two product groups: i) Heavy-Duty Equipment and ii) On-Highway Applications. The Heavy-Duty Equipment business provides heat exchangers and cooling modules for off-highway markets, including agricultural, construction, and mining. In addition, the Heavy-Duty Equipment business sells cooling module generator sets that provide mission critical stationary power. The On-Highway Applications business provides heat exchangers and cooling systems for commercial vehicle, automotive, and specialty vehicle customers. In addition to products for traditional powertrains, the On-Highway Applications business provides products and solutions for zero-emission and hybrid vehicles, primarily for commercial vehicle, bus and specialty vehicles.
12
Three months ended December 31, 2025
Three months ended December 31, 2024
Climate
Performance
Segment
Solutions
Technologies
Product groups:
Data centers
296.9
166.9
Heat transfer solutions
138.0
121.3
HVAC technologies
107.1
72.5
Heavy-duty equipment
92.4
95.5
On-highway applications
170.6
160.6
Inter-segment sales
2.6
3.0
6.1
6.2
544.6
266.0
810.6
360.8
262.2
623.0
Geographic location:
Americas
416.6
138.5
555.1
255.5
160.2
415.7
Europe
122.7
78.6
201.3
97.9
62.1
160.0
Asia
48.9
7.4
39.9
Nine months ended December 31, 2025
Nine months ended December 31, 2024
710.1
488.4
422.4
403.9
260.9
192.0
300.9
308.5
532.4
543.5
4.5
16.9
1,396.4
837.8
2,234.2
1,084.5
868.7
1,953.2
1,016.8
448.1
1,464.9
748.1
527.6
1,275.7
361.0
242.8
603.8
315.3
214.7
530.0
18.6
146.9
165.5
21.1
126.4
147.5
Contract balances
Contract assets and contract liabilities from contracts with customers were as follows:
Contract assets
13.3
Contract liabilities
31.1
13
Contract assets primarily consist of assets recorded for revenue recognized over time, which represent the Company’s rights to consideration for work completed but not yet billed, and capitalized costs related to customer-owned tooling contracts, wherein the customer has guaranteed reimbursement. Contract assets are included within other current assets on the Company’s consolidated balance sheets. The $8.8 million increase in contract assets during the first nine months of fiscal 2026 primarily resulted from an increase in contract assets for revenue recognized over time, partially offset by a decrease in capitalized costs related to the Company’s fulfillment of its performance obligations.
Contract liabilities consist of payments received in advance of satisfying performance obligations under customer contracts, including contracts for data center cooling products and customer-owned tooling. Contract liabilities are included within other current and noncurrent liabilities on the Company’s consolidated balance sheets. The $4.0 million decrease in contract liabilities during the first nine months of fiscal 2026 primarily resulted from the Company’s satisfaction of performance obligations.
Note 4: Fair Value Measurements
Fair value is defined as the price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. Fair value measurements are classified under the following hierarchy:
When available, the Company uses quoted market prices to determine fair value and classifies such measurements as Level 1. In some cases, where market prices are not available, the Company uses observable market-based inputs to calculate fair value, in which case the measurements are classified as Level 2. If quoted or observable market prices are not available, the Company determines fair value based upon valuation models that use, where possible, market-based data such as interest rates, yield curves or currency rates. These measurements are classified as Level 3.
The carrying values of cash, cash equivalents, restricted cash, trade accounts receivable, accounts payable, and short-term debt approximate fair value due to the short-term nature of these instruments. In addition, the Company assesses the fair value of a disposal group for each reporting period it is held for sale. The fair value of the Company’s long-term debt is disclosed in Note 17.
Note 5: Pensions
During the third quarter of fiscal 2026 and in connection with the previously-announced plan termination, the Company contributed $14.9 million to fully fund its primary U.S. pension plan. In addition, the Company settled all future obligations under the pension plan through a combination of lump-sum payments to participants and the purchase of irrevocable annuity contracts. As a result, the Company recorded a non-cash pension termination charge of $116.1 million during the third quarter of fiscal 2026 to recognize actuarial losses that were previously included within accumulated other comprehensive loss on its consolidated balance sheet.
14
Pension cost included the following components:
Service cost
Interest cost
2.3
6.8
Expected return on plan assets
(2.2)
Amortization of unrecognized net loss
3.1
Pension termination charge (a)
Net periodic benefit cost
117.0
1.3
119.8
____
Note 6: Stock-Based Compensation
The Company’s stock-based incentive programs consist of the following: (i) a long-term incentive plan for officers and other executives that authorizes grants of stock awards, stock options, and performance-based awards for retention and performance, (ii) a discretionary equity program for other management and key employees, and (iii) stock awards for non-employee directors.
The Company calculates stock-based compensation expense based upon the fair value of the awards at the time of grant and subsequently recognizes expense ratably over the respective vesting periods of the stock-based awards. The Company recognized stock-based compensation expense of $6.7 million and $6.9 million for the three months ended December 31, 2025 and 2024, respectively. The Company recognized stock-based compensation expense of $14.1 million and $16.7 million for the nine months ended December 31, 2025 and 2024, respectively.
During the first nine months of fiscal 2026, the Company granted performance-based stock awards and restricted stock awards. The performance metrics for the performance-based stock awards are based upon a target three-year average cash flow return on invested capital and a target three-year average growth in consolidated net earnings before interest, taxes, depreciation, amortization, and certain other adjustments (“Adjusted EBITDA”) at the end of the performance period ending March 31, 2028.
The weighted-average fair value of stock-based compensation awards granted during the nine months ended December 31, 2025 and 2024 were as follows:
Fair Value
Per Award
Performance stock awards
106.93
103.98
Restricted stock awards
119.39
110.99
15
As of December 31, 2025, unrecognized compensation expense related to non-vested stock-based compensation awards, which will be recognized as expense over the remaining service periods, was as follows:
Unrecognized
Weighted-Average
Compensation
Remaining Service
Expense
Period in Years
26.2
33.4
Note 7: Restructuring Activities
Restructuring and repositioning expenses were as follows:
Employee severance and related benefits
3.8
10.3
15.3
Other restructuring and repositioning expenses
3.7
5.1
2.9
During the first nine months of fiscal 2026, restructuring and repositioning expenses primarily consisted of severance expenses. The severance charges were primarily recorded in Europe and North America and include severance related to targeted headcount reductions intended to reduce selling, general and administrative (“SG&A”) and operational expenses. In addition, as part of its transformational initiatives supported by 80/20 principles, the Company is taking steps to optimize its supply chain and manufacturing footprint in order to support its expansion of manufacturing capacity in the U.S. for data center products and to improve profit margins. These restructuring activities have included transferring the production for certain product lines among its facilities.
During the first nine months of fiscal 2025, restructuring and repositioning expenses primarily consisted of severance expenses, the majority of which were recorded in the Performance Technologies segment. These severance charges were primarily recorded in Europe and North America and include severance related to the closure of a European technical service center and other targeted headcount reductions. In addition, the Company incurred equipment transfer costs within the Climate Solutions and Performance Technologies segments.
16
The Company accrues severance in accordance with its written plans, procedures, and relevant statutory requirements. Changes in accrued severance were as follows:
Beginning balance
6.4
Additions (a)
5.9
Payments
(2.6)
(7.5)
Effect of exchange rate changes
Ending balance
6.6
13.0
9.5
13.9
(20.8)
Note 8: Other Income and Expense
Other income and expense consisted of the following:
Interest income
1.5
2.0
Foreign currency transactions (a)
(2.4)
(6.6)
Net periodic benefit cost (b)
(0.9)
(3.5)
Total other (expense) income – net
17
Note 9: Income Taxes
In July 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes the permanent extension of certain provisions of the Tax Cuts and Jobs Act, including 100% bonus depreciation and domestic research cost expensing. It also includes modifications to the international tax framework. The legislation has multiple effective dates, with certain provisions impacting the Company through fiscal 2027. The Company began recognizing the impacts of the OBBBA for the provisions currently enacted during the second quarter of fiscal 2026, including the provision regarding domestic research costs. The Company is continuing to assess provisions that are expected to impact future periods.
The Company’s effective tax rate for the three months ended December 31, 2025 and 2024 was (21.6) percent and 24.0 percent, respectively. The Company’s effective tax rate for the nine months ended December 31, 2025 and 2024 was 45.3 percent and 27.7 percent, respectively. The effective tax rates for fiscal 2026 were negatively impacted by a non-cash pension termination charge of $116.1 million recorded during the third quarter of fiscal 2026; see Note 5 for information regarding the U.S. pension plan termination. The pension termination charge resulted in a net income tax benefit of $13.1 million, which included a $16.8 million income tax detriment recorded to clear disproportionate income tax effects from accumulated other comprehensive loss. In addition, the effective tax rates for fiscal 2026 were negatively impacted by provisions of the OBBBA on state deferred taxes and the utilization of foreign tax credits, which increased income tax expense during the three and nine months ended December 31, 2025 by $0.6 million and $3.7 million, respectively.
The Company records valuation allowances against its net deferred tax assets to the extent it determines it is more likely than not that such assets will not be realized in the future. Each quarter, the Company evaluates the probability that its deferred tax assets will be realized and determines whether valuation allowances or adjustments thereto are needed. This determination involves judgment and the use of significant estimates and assumptions, including expectations of future taxable income and tax planning strategies. In addition, the Company considers the duration of statutory carryforward periods and historical financial results.
At December 31, 2025, valuation allowances against deferred tax assets in the U.S. and in certain foreign jurisdictions totaled $48.7 million and $29.0 million, respectively. The Company will maintain the valuation allowances in each applicable tax jurisdiction until it determines it is more likely than not the deferred tax assets will be realized, thereby eliminating the need for a valuation allowance. Future events or circumstances, such as lower taxable income or unfavorable changes in the financial outlook of the Company’s operations in the U.S. and certain foreign jurisdictions, could necessitate the establishment of further valuation allowances.
Accounting policies for interim reporting require the Company to adjust its effective tax rate each quarter to be consistent with its estimated annual effective tax rate. Under this methodology, the Company applies its estimated annual income tax rate to its year-to-date ordinary earnings to derive its income tax provision each quarter. The Company records the tax impacts of certain significant, unusual or infrequently occurring items in the period in which they occur. In addition, the Company excludes the impact of operations anticipated to generate net operating losses for the full fiscal year from the overall effective tax rate calculation and instead records them discretely based upon year-to-date results. The Company does not anticipate a significant change in unrecognized tax benefits during the remainder of fiscal 2026.
18
Note 10: Earnings Per Share
The components of basic and diluted earnings per share were as follows:
Weighted-average shares outstanding – basic
Effect of dilutive securities
Weighted-average shares outstanding – diluted
(Loss) earnings per share:
Net (loss) earnings per share – basic
Net (loss) earnings per share – diluted
There were no securities that were anti-dilutive in the periods presented above. For the three months ended December 31, 2025, the total number of potentially-dilutive securities was 1.0 million. However, these securities were not included in the computation of diluted net loss per share, since to do so, would have decreased the loss per share.
Note 11: Cash, Cash Equivalents and Restricted Cash
Cash, cash equivalents and restricted cash consisted of the following:
Restricted cash
Total cash, cash equivalents and restricted cash
Restricted cash, which is reported within other current assets on the consolidated balance sheets, consists primarily of deposits for contractual guarantees or commitments required for rents, import and export duties, and commercial agreements.
Note 12: Inventories
Inventories consisted of the following:
Raw materials
380.0
223.3
Work in process
98.6
65.9
Finished goods
64.3
Total inventories
19
Note 13: Property, Plant and Equipment
Property, plant and equipment, including depreciable lives, consisted of the following:
Land
19.3
16.4
Buildings and improvements (10-40 years)
285.7
257.7
Machinery and equipment (3-15 years)
843.7
Office equipment (3-10 years)
95.9
92.6
Construction in progress
91.9
69.5
1,387.0
1,279.9
Less: accumulated depreciation
(907.4)
(889.4)
Net property, plant and equipment
The December 31, 2025 and March 31, 2025 property, plant and equipment in the table above exclude amounts classified as held for sale. See Note 2 for additional information.
Note 14: Goodwill and Intangible Assets
The following table presents a roll forward of the carrying value of goodwill from March 31, 2025 to December 31, 2025.
Goodwill, March 31, 2025
Acquisitions (a)
51.8
7.7
Goodwill, December 31, 2025
Intangible assets consisted of the following:
Gross
Net
Carrying
Intangible
Value
Amortization
Assets
199.7
(60.3)
139.4
145.4
Trade names
70.0
(24.3)
45.7
53.1
(21.2)
31.9
37.0
(18.7)
18.3
32.6
(15.7)
Total intangible assets
306.7
231.1
(84.4)
In connection with its acquisitions of three businesses during the first nine months of fiscal 2026, the Company recorded customer relationship, trade name, and acquired technology intangible assets totaling $48.1 million, $15.7 million, and $3.5 million, respectively.
20
The Company recorded amortization expense of $5.2 million and $6.9 million for the three months ended December 31, 2025 and 2024, respectively. The Company recorded amortization expense of $15.8 million and $20.7 million for the nine months ended December 31, 2025 and 2024, respectively. The Company estimates that it will record approximately $5.0 million of amortization expense during the remainder of fiscal 2026. The Company estimates that it will record approximately $21.0 million, $21.0 million, $20.0 million, $19.0 million, and $19.0 million of annual amortization expense in fiscal 2027 through 2031, respectively.
Note 15: Product Warranties
Changes in accrued warranty costs were as follows:
7.8
11.1
Warranties recorded at time of sale
Adjustments to pre-existing warranties
2.7
(0.3)
Settlements
(3.8)
10.7
9.2
(8.1)
(4.8)
Business acquisitions (a)
21
Note 16: Leases
Lease assets and liabilities
The following table provides a summary of leases recorded on the consolidated balance sheets.
Balance Sheet Location
Lease Assets
Operating lease ROU assets
97.2
Finance lease ROU assets (a)
Property, plant and equipment - net
Lease Liabilities
Operating lease liabilities
18.0
114.0
80.6
Finance lease liabilities
Long-term debt - current portion
The increases in operating lease ROU assets and liabilities from March 31, 2025 to December 31, 2025 primarily resulted from the commencement of a 7-year manufacturing facility lease within the Climate Solutions segment. During the third quarter of fiscal 2026, the Company signed a 5-year operating lease for a manufacturing facility with future lease payments totaling approximately $10.0 million. The Company expects this lease will commence during the fourth quarter of fiscal 2026. The Company is increasing its production capacity to support organic growth opportunities within its Data Center business.
Components of lease expense
The components of lease expense were as follows:
Operating lease expense (a)
12.4
23.1
Finance lease expense:
Depreciation of ROU assets
Interest on lease liabilities
Total lease expense
12.5
33.1
22
Note 17: Indebtedness
In July 2025, the Company executed an amended and restated credit agreement with a syndicate of banks for a multi-currency $400.0 million revolving credit facility and a $200.0 million term loan facility maturing in July 2030. In addition, the credit agreement provides for shorter-duration swingline loans. This credit agreement modified the Company’s then existing revolving credit and term loan facilities, which would have matured in October 2027. In connection with the credit agreement modification, the Company capitalized $2.3 million of debt issuance costs, which will be amortized as interest expense over the term of the debt. In December 2025, the Company further amended the credit agreement primarily to increase the borrowing capacity under the revolving credit facility by $150.0 million to $550.0 million.
Long-term debt consisted of the following:
Fiscal year
of maturity
Revolving credit facility
2031
327.0
30.0
Term loans
197.5
193.7
5.9% Senior Notes
2029
81.3
100.0
5.8% Senior Notes
2027
Finance lease obligations
2.5
616.6
343.1
Less: current portion
(43.9)
(44.8)
Less: unamortized debt issuance costs
(2.0)
(1.6)
Total long-term debt
Long-term debt, including the current portion of long-term debt, matures as follows:
Fiscal Year
Remainder of 2026
8.9
2028
35.6
2030
2031 & beyond
482.6
Borrowings under the revolving credit, swingline and term loan facility bear interest at variable rates, based upon the applicable reference rate and including a margin percentage dependent upon the Company’s leverage ratio, as described below. At December 31, 2025, the interest rate for revolving credit facility borrowings and the term loan was 5.1 percent and 5.0 percent, respectively.
Based upon the terms of the credit agreement, the Company classifies borrowings under its revolving credit and swingline facilities as long-term and short-term debt, respectively, on its consolidated balance sheets. At December 31, 2025, the Company’s borrowings under its revolving credit facilities totaled $327.0 million and domestic letters of credit totaled $6.2 million. As a result, available borrowing capacity under the Company’s revolving credit facility was $216.8 million as of December 31, 2025. At December 31, 2025 and March 31, 2025, the Company had no borrowings under the swingline facility. At March 31, 2025, the Company’s borrowings under its revolving credit facility totaled $30.0 million.
23
The Company also maintains credit agreements for its foreign subsidiaries. The outstanding short-term borrowings related to these foreign credit agreements totaled $1.2 million and $9.3 million at December 31, 2025 and March 31, 2025, respectively.
Indebtedness under the Company’s credit agreement and Senior Notes is secured by substantially all domestic assets, excluding real estate. These agreements further require compliance with various covenants that may limit the Company’s ability to incur additional indebtedness; grant liens; make investments, loans, or guarantees; engage in certain transactions with affiliates; and make restricted payments, including dividends. In addition, the agreements may require prepayment in the event of certain asset sales.
Financial covenants within the credit agreements include a leverage ratio covenant, which requires the Company to limit its consolidated indebtedness, less a portion of its cash balances, both as defined by the credit agreements, to no more than three and one-half times consolidated net earnings before interest, taxes, depreciation, amortization, and certain other adjustments (“Adjusted EBITDA”). The Company must also maintain a ratio of Adjusted EBITDA of at least three times consolidated interest expense. As of December 31, 2025, the Company was in compliance with its debt covenants.
The Company estimates the fair value of long-term debt using discounted future cash flows at rates offered to the Company for similar debt instruments of comparable maturities. As of December 31, 2025 and March 31, 2025, the carrying value of the Company’s long-term debt approximated fair value, with the exception of the Senior Notes, which had an aggregate fair value of $90.7 million and $116.6 million, respectively. The fair value of the Company’s long-term debt is categorized as Level 2 within the fair value hierarchy. Refer to Note 4 for the definition of a Level 2 fair value measurement.
Note 18: Risks, Uncertainties, Contingencies and Litigation
Environmental
The Company has recorded environmental monitoring and remediation accruals related to manufacturing facilities in the U.S., one of which the Company currently owns and operates, and a former manufacturing facility in the Netherlands. These accruals primarily relate to soil and groundwater contamination at facilities where past operations followed practices and procedures that were considered acceptable under then-existing regulations, or where the Company is a successor to the obligations of prior owners, and current laws and regulations require investigative and/or remedial work to ensure sufficient environmental compliance. In instances where a range of loss can be reasonably estimated for a probable environmental liability, but no amount within the range is a better estimate than any other amount, the Company accrues the minimum of the range. The Company’s accruals for environmental matters totaled $14.0 million and $15.8 million as of December 31, 2025 and March 31, 2025, respectively. As additional information becomes available regarding environmental matters, the Company will re-assess the liabilities and revise the estimated accruals, if necessary. While it is possible that the ultimate environmental remediation costs may be in excess of amounts accrued, the Company believes, based upon currently available information, that the ultimate outcome of these matters, individually and in the aggregate, will not have a material adverse effect on its financial position. However, these matters are subject to inherent uncertainties, and unfavorable outcomes could occur, including significant monetary damages.
Information technology purchase commitments
The Company has entered into purchase commitments for information technology services, primarily related to implementation and support for cloud infrastructure, data analytics, and AI-enablement services. In total, the Company expects to spend approximately $35.0 million in connection with these purchase commitments from fiscal 2027 through fiscal 2030.
24
Other litigation
In the normal course of business, the Company and its subsidiaries are named as defendants in various lawsuits and enforcement proceedings by private parties, governmental agencies and/or others in which claims are asserted against Modine. The Company believes that any additional loss in excess of amounts already accrued would not have a material effect on the Company’s consolidated balance sheet, results of operations, and cash flows. In addition, management expects that the liabilities which may ultimately result from such lawsuits or proceedings, if any, would not have a material adverse effect on the Company’s financial position.
Note 19: Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive loss were as follows:
Foreign
Currency
Defined
Cash Flow
Translation
Benefit Plans
Hedges
(35.5)
(102.2)
(76.8)
(103.8)
Other comprehensive income (loss) before reclassifications
4.3
45.6
48.7
Reclassifications:
Amortization of unrecognized net loss (a)
Pension termination charge (b)
Realized losses - net (c)
Income taxes (d)
(14.1)
(14.7)
(14.9)
Total other comprehensive income
153.7
(31.2)
3.6
(49.0)
(99.1)
(62.8)
(100.7)
(48.3)
(34.4)
(34.1)
Realized gains - net (c)
Income taxes
(0.8)
(31.9)
(97.2)
(98.3)
25
Note 20: Segment Information
The Company’s chief operating decision maker (“CODM”), its President and Chief Executive Officer, reviews the separate financial results for each of its operating segments. The CODM uses segment operating income as a measure of profit and loss to evaluate the financial performance of each segment and as the basis for allocating company resources. The tables below present net sales and significant expense categories for each of the Company’s segments that are regularly provided to the CODM. Net sales for Corporate and eliminations primarily represent the elimination of inter-segment sales. Inter-segment sales are accounted for based upon an established markup over production costs.
Corporate
and
eliminations
External sales
542.0
263.0
360.7
256.1
(5.6)
409.5
215.9
215.5
(6.0)
135.1
46.7
50.0
18.7
20.6
39.6
25.4
17.0
5.5
83.2
25.8
(19.7)
62.4
15.8
(18.9)
1,393.4
833.3
1,084.3
852.0
(16.9)
1,036.4
681.7
(7.8)
774.3
698.4
(14.2)
360.0
156.1
310.2
170.3
(2.7)
142.1
56.0
120.5
78.5
51.6
9.7
13.7
212.3
(55.8)
186.9
78.1
(56.0)
SG&A expenses at Corporate include legal, finance, general corporate and central services expenses and other costs that are either not directly attributable to an operating segment or not considered when the CODM evaluates segment performance.
The following is a summary of capital expenditures and depreciation and amortization expense by segment:
Capital expenditures:
36.1
82.8
5.7
4.4
18.1
20.9
Total capital expenditures
41.8
16.0
101.2
26
Depreciation and amortization expense:
12.3
12.2
34.9
36.7
7.1
23.2
21.3
Total depreciation and amortization expense
20.4
19.4
The following is a summary of segment assets, comprised entirely of trade accounts receivable and inventories, and other assets:
Assets:
756.6
448.7
355.4
371.1
Other (a)
1,370.9
1,097.8
Note 21: Proposed Reverse Morris Trust Transaction
In January 2026, the Company and Gentherm Incorporated (“Gentherm”) announced that they had entered into definitive agreements whereby the Company will spin-off and simultaneously combine its Performance Technologies segment businesses with Gentherm in a Reverse Morris Trust transaction. Gentherm, a Michigan-based corporation, is a global leader of innovative thermal management and pneumatic comfort technologies. The transaction is intended to establish Gentherm as a scaled leader in thermal management. The Company will retain its Climate Solutions segment businesses, creating a pure-play climate solutions company focused on the data center and commercial HVAC and refrigeration markets.
Under the terms of the agreements, at the time of the spin-off of its Performance Technologies segment businesses, the Company’s shareholders will receive newly-issued Gentherm stock, representing ownership of approximately 40 percent of the combined company. In addition, immediately prior to transaction closing, the Company is to receive cash proceeds of $210.0 million, subject to adjustment. In total, the transaction value is approximately $1.0 billion. The Company anticipates this transaction will close by the end of calendar 2026, subject to approval by Gentherm’s shareholders and other closing conditions, including regulatory approvals. Under the Reverse Morris Trust structure, the transaction is intended to be generally tax-free for U.S. federal income tax purposes for the Company and its shareholders.
27
When we use the terms “Modine,” “we,” “us,” the “Company,” or “our” in this report, we are referring to Modine Manufacturing Company. Our fiscal year ends on March 31 and, accordingly, all references to quarters refer to our fiscal quarters. The quarter ended December 31, 2025 was the third quarter of fiscal 2026.
Recent announcement
In January 2026, we announced that we entered into definitive agreements with Gentherm Incorporated (“Gentherm”), whereby we will spin-off and simultaneously combine our Performance Technologies segment businesses with Gentherm in a Reverse Morris Trust transaction. Gentherm, a Michigan-based corporation, is a global leader of innovative thermal management and pneumatic comfort technologies. The transaction is intended to establish Gentherm as a scaled leader in thermal management. We will retain our Climate Solutions segment businesses, creating a pure-play climate solutions company focused on the data center and commercial HVAC and refrigeration markets.
Under the terms of the agreement, at the time of the spin-off of our Performance Technologies segment businesses, our shareholders will receive newly-issued Gentherm stock, representing ownership of approximately 40 percent of the combined company. In addition, immediately prior to transaction closing, we will receive cash proceeds of $210.0 million, subject to adjustment. In total, the transaction value is approximately $1.0 billion. We anticipate this transaction will close by the end of calendar 2026, subject to approval by Gentherm’s shareholders and other closing conditions, including regulatory approvals. Under the Reverse Morris Trust structure, the transaction is intended to be generally tax-free for U.S. federal income tax purposes for the Company and our shareholders. To facilitate this transaction, we expect to incur significant fees for transaction advisory, legal, accounting, tax and other professional services. While we are in the early phases of the process, we currently estimate that these fees and other costs directly related to the transaction will total approximately $30.0 million to $40.0 million.
Fiscal 2026 acquisitions
During the first and second quarter of fiscal 2026, we acquired three businesses within our Climate Solutions segment, each supporting our growth strategy by expanding our product portfolio and broadening our customer base.
On April 1, 2025, we acquired substantially all of the net operating assets of AbsolutAire, Inc. (“AbsolutAire”) for $11.3 million. AbsolutAire is a Michigan-based manufacturer of direct-fired heating, ventilation, and make-up air systems and has annual sales of approximately $25.0 million.
On May 31, 2025, we acquired LBW Holding Corp. (“L.B. White”) for $110.5 million. Headquartered in Wisconsin, with additional manufacturing and distribution operations in Georgia, L.B. White has annual sales of approximately $75.0 million and is a leading provider of specialty heating solutions, including direct-fired forced air, radiant, indirect-fired, and electric heating solutions, for the agriculture, construction, and special event industries.
On July 1, 2025, we acquired Climate by Design International (“Climate by Design”) for $64.4 million. Based in Minnesota, Climate by Design specializes in desiccant dehumidification technology and critical process air handlers and has annual sales of approximately $45.0 million.
See Note 2 of the Notes to Condensed Consolidated Financial Statements for further information.
Third quarter highlights
Net sales in the third quarter of fiscal 2026 increased $188.2 million, or 31 percent, from the third quarter of fiscal 2025, primarily due to higher sales in our Climate Solutions segment. Cost of sales increased $151.7 million, or 32 percent. Gross profit increased $36.5 million. Gross margin declined 120 basis points to 23.1 percent, primarily due to lower gross margin in the Climate Solutions segment, largely driven by temporary operating inefficiencies associated with our rapid expansion of data center manufacturing capacity. Selling, general and administrative (“SG&A”) expenses increased $7.3 million. Operating income of $89.3 million during the third quarter of fiscal 2026 increased $30.0 million from the prior year, primarily due to higher gross profit, partially offset by higher SG&A expenses. During the third quarter of fiscal 2026, we recorded a $116.1 million non-cash pension termination charge in connection with the termination of our primary U.S. pension plan.
Year-to-date highlights
Net sales in the first nine months of fiscal 2026 increased $290.4 million, or 15 percent, from the same period last year, primarily due to higher sales in our Climate Solutions segment, partially offset by lower sales in our Performance Technologies segment. Cost of sales increased $251.8 million, or 17 percent, from the same period last year. Gross profit increased $38.6 million, yet gross margin declined 150 basis points to 23.2 percent. SG&A expenses increased $7.8 million. We recorded a $4.1 million impairment charge in our Performance Technologies segment during the second quarter of fiscal 2026 related to the pending sale of our technical service center and administrative support facility in Germany, which we expect to close during the fourth quarter of fiscal 2026 or the first quarter of fiscal 2027. Operating income of $238.5 million during the first nine months of fiscal 2026 increased $29.5 million from the prior year, primarily due to higher gross profit and lower restructuring expenses, partially offset by higher SG&A expenses and the impairment charge recorded during the second quarter. During the third quarter of fiscal 2026, we recorded a $116.1 million non-cash pension termination charge in connection with the termination of our primary U.S. pension plan.
CONSOLIDATED RESULTS OF OPERATIONS
The following table presents our consolidated financial results on a comparative basis for the three and nine months ended December 31, 2025 and 2024:
(in millions)
$’s
% of sales
%
76.9
75.7
76.8
75.3
24.3
24.7
12.9
9.6
10.8
(14.4)
(5.2)
8.8
(2.1)
7.0
Comparison of the three months ended December 31, 2025 and 2024
Third quarter net sales of $805.0 million were $188.2 million, or 31 percent, higher than the third quarter of the prior year, primarily due to $183.8 million of higher sales in our Climate Solutions segment, driven by sales growth to hyperscale and colocation data center customers in North America and Europe and $42.8 million of incremental sales from the acquired L.B. White, Climate by Design, and AbsolutAire businesses. Foreign currency exchange rates favorably impacted sales by $16.3 million.
Third quarter cost of sales increased $151.7 million, or 32 percent, primarily due to higher sales volume in the Climate Solutions segment and a $12.9 million unfavorable impact of foreign currency exchange rates. In addition, cost of sales was unfavorably impacted by temporary operating inefficiencies in the Climate Solutions segment, largely due to the rapid expansion of manufacturing capacity for data center products. As a percentage of sales, cost of sales increased 120 basis points to 76.9 percent, primarily due to the temporary operating inefficiencies.
As a result of higher sales and higher cost of sales as a percentage of sales, third quarter gross profit increased $36.5 million and gross margin declined 120 basis points to 23.1 percent.
29
Third quarter SG&A expenses increased $7.3 million, or 9 percent. As a percentage of sales, SG&A expenses decreased by 220 basis points. The increase in SG&A expenses was driven by higher compensation-related expenses in the Climate Solutions segment, supporting the segment’s growth and including incremental expenses from the acquired businesses, partially offset by lower compensation-related expenses in the Performance Technologies segment, which included the benefits of previous restructuring actions. Other costs directly associated with acquisition and disposition activities increased $2.3 million, primarily driven by costs for legal and other professional services in connection with the proposed Reverse Morris Trust transaction with Gentherm.
Restructuring expenses decreased $0.8 million compared with the third quarter of fiscal 2025, primarily due to lower severance expenses in the Performance Technologies segment and at Corporate. These decreases were partially offset by higher costs related to transferring production for certain product lines in the Performance Technologies segment and higher severance expenses in the Climate Solutions segment.
Operating income of $89.3 million in the third quarter of fiscal 2026 increased $30.0 million compared with the third quarter of fiscal 2025, primarily due to higher gross profit, partially offset by higher SG&A expenses.
Interest expense during the third quarter of fiscal 2026 increased $2.7 million compared with the third quarter of fiscal 2025, primarily due to higher average outstanding borrowings on our revolving credit facility, partially offset by favorable changes in interest rates.
During the third quarter of fiscal 2026 and in connection with the previously-announced plan termination, we recorded a $116.1 million non-cash pension termination charge to recognize actuarial losses that were included within accumulated other comprehensive loss on our consolidated balance sheet.
Other net expense of $2.8 million during the third quarter of fiscal 2026 represents a $3.9 million decline compared with other income of $1.1 million during the third quarter of fiscal 2025. The net expense in fiscal 2026 was primarily due to net foreign currency transaction losses of $2.4 million. In the third quarter of fiscal 2025, the net impact of foreign currency transactions was a gain of $1.8 million.
The provision for income taxes of $8.3 million decreased $4.7 million from the third quarter of fiscal 2025. The impact of higher operating earnings in fiscal 2026, which caused an increase in the income tax provision, was more than offset by a $13.1 million net income tax benefit related to the $116.1 million pension termination charge recorded in the third quarter of fiscal 2026. The $13.1 million net income tax benefit from the pension termination charge included a $16.8 million income tax detriment resulting from disproportionate income tax effects in accumulated other comprehensive loss. In addition, impacts associated with provisions of the One Big Beautiful Bill Act (“OBBBA”) on state deferred taxes and the utilization of foreign tax credits increased the income tax provision during the third quarter of fiscal 2026 by $0.6 million. The Company is continuing to assess provisions of the OBBBA that are expected to impact future periods.
Comparison of the nine months ended December 31, 2025 and 2024
Fiscal 2026 year-to-date net sales of $2,226.7 million were $290.4 million, or 15 percent, higher than the same period last year, primarily due to $311.9 million of higher sales in our Climate Solutions segment, including organic sales growth to hyperscale and colocation data center customers in North America and Europe and $80.9 million of incremental sales from the acquired businesses. The higher sales in the Climate Solutions segment were partially offset by $30.9 million of lower sales in our Performance Technologies segment, largely due to market weakness. Foreign currency exchange rates favorably impacted sales by $33.8 million.
30
Fiscal 2026 year-to-date cost of sales of $1,710.3 million increased $251.8 million, or 17 percent, primarily due to higher sales volume in the Climate Solutions segment and a $27.2 million unfavorable impact of foreign currency exchange rates. In addition, cost of sales was unfavorably impacted by temporary operating inefficiencies in the Climate Solutions segment, largely due to the rapid expansion of manufacturing capacity for data center products, and higher raw material costs, which increased approximately $9.0 million. These drivers, which increased cost of sales, were partially offset by lower sales volume and improved operating efficiencies in the Performance Technologies segment. As a percentage of sales, cost of sales increased 150 basis points to 76.8 percent, primarily due to temporary operating inefficiencies, higher material costs, and the absence of commercial pricing settlements and sales tax credits, which favorably impacted the prior year.
As a result of higher sales and higher cost of sales as a percentage of sales, gross profit increased $38.6 million and gross margin declined 150 basis points to 23.2 percent.
Fiscal 2026 year-to-date SG&A expenses increased $7.8 million. As a percentage of sales, SG&A expenses decreased by 130 basis points. The increase in SG&A expenses includes higher compensation-related expenses in the Climate Solutions segment, supporting the segment’s growth and including incremental expenses from the acquired businesses. Other costs directly associated with acquisition and disposition activities increased $6.0 million. These drivers, which increased SG&A expenses, were partially offset by lower compensation-related expenses in the Performance Technologies segment, which included the benefits of previous restructuring actions, and lower incentive compensation expense.
Restructuring expenses during the first nine months of fiscal 2026 decreased $2.8 million compared with the same period last year, primarily due to lower severance expenses in the Performance Technologies segment and at Corporate, partially offset by higher severance expenses in the Climate Solutions segment and higher costs related to transferring production for certain product lines in the Performance Technologies segment.
During the second quarter of fiscal 2026, we recorded a $4.1 million non-cash impairment charge in the Performance Technologies segment related to a technical service center and administrative support facility in Germany, the sale of which is pending.
Operating income of $238.5 million in the first nine months of fiscal 2026 increased $29.5 million compared with the same period last year, primarily due to higher gross profit and lower restructuring expenses, partially offset by higher SG&A expenses and the $4.1 million impairment charge.
Interest expense during the first nine months of fiscal 2026 increased $1.9 million compared with the same period last year, primarily due to higher average outstanding borrowings on our revolving credit facility, partially offset by favorable changes in interest rates.
Other net expense during the first nine months of fiscal 2026 increased $7.8 million compared with the same period last year, primarily due to net foreign currency transaction losses of $6.6 million. In fiscal 2025, the net impact of foreign currency transactions was a gain of $0.8 million.
The provision for income taxes of $41.2 million decreased $10.6 million from the first nine months of fiscal 2025. The impact of higher operating earnings during the current year, which caused an increase in the income tax provision, was more than offset by a $13.1 million net income tax benefit related to the $116.1 million pension termination charge recorded in the third quarter of fiscal 2026. The $13.1 million net income tax benefit from the pension termination charge included a $16.8 million income tax detriment resulting from disproportionate income tax effects in accumulated other comprehensive loss. In addition, impacts associated with provisions of the OBBBA on state deferred taxes and the utilization of foreign tax credits increased the income tax provision during the first nine months of fiscal 2026 by $3.7 million. The Company is continuing to assess provisions of the OBBBA that are expected to impact future periods.
31
SEGMENT RESULTS OF OPERATIONS
The following is a discussion of our segment results of operations for the three and nine months ended December 31, 2025 and 2024:
75.2
71.4
74.2
24.8
28.6
11.0
17.3
15.2
17.2
Climate Solutions net sales increased $183.8 million, or 51 percent, from the third quarter of fiscal 2025 to the third quarter of fiscal 2026, primarily due to higher sales volume. In addition, foreign currency exchange rates favorably impacted sales by $9.3 million. Compared with the third quarter of the prior year, sales of data center, HVAC technologies, and heat transfer solution products increased $130.0 million, $34.6 million, and $16.7 million, respectively. The higher data center product sales included sales growth to hyperscale and colocation customers in North America and Europe. The higher HVAC technologies product sales were primarily driven by $42.8 million of incremental sales from the acquired L.B. White, Climate by Design, and AbsolutAire businesses, partially offset by lower sales of other indoor air quality products.
Climate Solutions cost of sales increased $151.8 million, or 59 percent, from the third quarter of fiscal 2025 to the third quarter of fiscal 2026, primarily due to higher sales volume and, to a lesser extent, temporary operating inefficiencies, largely due to the rapid expansion of manufacturing capacity in the U.S. for data center products, and higher raw material costs, which increased approximately $3.0 million. In addition, cost of sales was negatively impacted by $7.0 million from foreign currency exchange rates. As a percentage of sales, cost of sales increased 380 basis points to 75.2 percent, primarily due to the temporary operating inefficiencies and higher material costs.
As a result of the higher sales and higher cost of sales as a percentage of sales, gross profit increased $32.0 million and gross margin declined 380 basis points to 24.8 percent.
Climate Solutions SG&A expenses increased $10.4 million, or 26 percent, compared with the third quarter of the prior year. As a percentage of sales, SG&A expenses decreased by 180 basis points. The increase in SG&A expenses was primarily driven by higher compensation-related expenses and increases across other general and administrative expenses, including costs to support strategic growth initiatives. The higher compensation-related expenses, which increased approximately $8.0 million, also included expenses from the acquired businesses. These increases were partially offset by lower amortization expense, which decreased $1.7 million. The lower amortization expense was primarily driven by an order backlog intangible asset, which we recorded in connection with our acquisition of Scott Springfield Mfg. Inc. and finished amortizing during the first quarter of fiscal 2026.
Restructuring expenses increased $0.8 million compared with the third quarter of fiscal 2025, primarily due to higher severance expenses.
Operating income of $83.2 million increased $20.8 million from the third quarter of fiscal 2025 to the third quarter of fiscal 2026, primarily due to higher gross profit, partially offset by higher SG&A expenses.
32
Climate Solutions year-to-date net sales increased $311.9 million, or 29 percent, from the same period last year, primarily due to higher sales volume. In addition, foreign currency exchange rates favorably impacted sales by $20.5 million. Compared with the same period in the prior year, sales of data center, HVAC technologies, and heat transfer solutions products increased $221.7 million, $68.9 million, and $18.5 million respectively. The higher data center product sales include sales growth to hyperscale and colocation customers in North America and Europe. The higher HVAC technologies product sales are primarily driven by $80.9 million of incremental sales from the acquired businesses, partially offset by lower sales of other indoor air quality products. The increase in sales of heat transfer products, driven by higher sales of heat transfer coils for commercial and residential applications, was partially offset by the absence of commercial pricing settlements with heat pump customers in Europe, which had a favorable impact during the prior year.
Climate Solutions year-to-date cost of sales increased $262.1 million, or 34 percent, from the same period last year, primarily due to higher sales volume and, to a lesser extent, temporary operating inefficiencies, largely due to the rapid expansion of manufacturing capacity in the U.S. for data center products, and higher raw material costs, which increased approximately $7.0 million. In addition, cost of sales was negatively impacted by $15.8 million from foreign currency exchange rates. As a percentage of sales, cost of sales increased 280 basis points to 74.2 percent, primarily due to the temporary operating inefficiencies, higher material costs, and the absence of the commercial pricing settlements in the prior year.
As a result of the higher sales and higher cost of sales as a percentage of sales, gross profit increased $49.8 million and gross margin declined 280 basis points to 25.8 percent.
Climate Solutions year-to-date SG&A expenses increased $21.6 million, or 18 percent, yet decreased 90 basis points as a percentage of sales. The increase in SG&A expenses was primarily driven by higher compensation-related expenses and increases across other general and administrative expenses. The higher compensation-related expenses, which increased approximately $19.0 million, includes expenses from the acquired businesses. This increase was partially offset by lower amortization expense, which decreased $5.0 million.
Restructuring expenses during the first nine months of fiscal 2026 increased $2.8 million compared with the same period last year, primarily due to higher severance expenses.
Operating income of $212.3 million during the first nine months of fiscal 2026 increased $25.4 million from the same period last year, primarily due to higher gross profit, partially offset by higher SG&A expenses.
33
81.1
82.2
81.4
80.4
18.9
17.8
19.6
9.0
1.6
6.0
9.8
Performance Technologies net sales increased $3.8 million, or 1 percent, from the third quarter of fiscal 2025 to the third quarter of fiscal 2026, primarily due to a $7.0 million favorable impact of foreign currency exchange rates and higher average selling prices, partially offset by lower sales volume in North America, largely due to market weakness, and our strategic exit from lower-margin business in connection with 80/20 product rationalization initiatives. Compared with the third quarter of the prior year, sales of on-highway application products increased $10.0 million and sales of heavy-duty equipment products decreased $3.1 million.
Performance Technologies cost of sales increased $0.4 million from the third quarter of fiscal 2025 to the third quarter of fiscal 2026, primarily due to a $5.9 million unfavorable impact of foreign currency exchange rates, partially offset by lower sales volume and improved operating efficiencies. In addition, raw material costs decreased approximately $1.0 million. As a percentage of sales, cost of sales decreased 110 basis points to 81.1 percent, primarily due to higher average selling prices and improved operating efficiencies, partially offset by the unfavorable impact of lower sales volume.
As a result of the higher sales and lower cost of sales as a percentage of sales, gross profit increased $3.4 million and gross margin improved 110 basis points to 18.9 percent.
Performance Technologies SG&A expenses decreased $6.7 million, or 26 percent, compared with the third quarter of the prior year. As a percentage of sales, SG&A expenses decreased 260 basis points. The decrease in SG&A expenses was primarily due to lower compensation-related expenses, which decreased approximately $8.0 million and included the benefits of previous restructuring actions.
Restructuring expenses increased $0.1 million compared with the third quarter of the prior year, primarily due to higher costs related to transferring production for certain product lines, partially offset by lower severance expenses.
Operating income of $25.8 million increased $10.0 million from the third quarter of fiscal 2025 to the third quarter of fiscal 2026, primarily due to lower SG&A expenses and higher gross profit.
Performance Technologies year-to-date net sales decreased $30.9 million, or 4 percent, from the same period last year, primarily due to lower sales volume in North America, largely due to market weakness and our strategic exit from lower-margin business, and, to a lesser extent, the absence of sales tax credits recognized in Brazil during the prior year. These decreases were partially offset by a $13.3 million favorable impact of foreign currency exchanges rates and higher average selling prices. Compared with the same period in the prior year, sales of on-highway applications and heavy-duty equipment products decreased $11.1 million and $7.6 million, respectively.
34
Performance Technologies year-to-date cost of sales decreased $16.7 million, or 2 percent, from the same period last year, primarily due to lower sales volume and, to a lesser extent, improved operating efficiencies. These drivers, which decreased cost of sales, were partially offset by higher raw material costs, which increased approximately $2.0 million, and an $11.4 million unfavorable impact of foreign currency exchange rates. As a percentage of sales, cost of sales increased 100 basis points to 81.4 percent, primarily due to the unfavorable impact of lower sales, partially offset by improved operating efficiencies and higher average selling prices.
As a result of the lower sales and higher cost of sales as a percentage of sales, gross profit decreased $14.2 million and gross margin declined 100 basis points to 18.6 percent.
Performance Technologies year-to-date SG&A expenses decreased $18.2 million, or 23 percent, compared with the same period last year. As a percentage of sales, year-to-date SG&A expenses decreased 180 basis points. The decrease in SG&A expenses was primarily due to lower compensation-related expenses, which decreased approximately $21.0 million and included the benefits of previous restructuring actions.
Restructuring expenses during the first nine months of fiscal 2026 decreased $4.0 million compared with the same period last year, primarily due to lower severance expenses, partially offset by higher costs related to transferring production for certain product lines.
During the second quarter of fiscal 2026, we recorded a $4.1 million non-cash impairment charge to reduce the carrying value of a technical service center and administrative support facility in Germany to estimated fair value, less costs to sell.
Operating income of $82.0 million during the first nine months of fiscal 2026 increased $3.9 million from the same period last year, primarily due to lower SG&A and restructuring expenses, partially offset by lower gross profit and the impairment charge recorded in the current year.
Liquidity and Capital Resources
Our primary sources of liquidity are cash flow from operating activities, our cash and cash equivalents as of December 31, 2025 of $98.7 million, and available borrowing capacity of $216.8 million under our revolving credit facility. Given our extensive international operations, approximately $80.0 million of 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. We believe our sources of liquidity will provide sufficient cash flow to adequately cover our funding needs on both a short-term and long-term basis.
Net cash provided by operating activities for the nine months ended December 31, 2025 was $53.8 million, which represents a $104.7 million decrease compared with the same period in the prior year. This decrease was primarily due to an increase in working capital. The Climate Solutions segment’s Data Center business is growing rapidly, and we have increased inventory levels to support the growing customer demand. In addition, higher sales have resulted in increased accounts receivable. The increases in inventory and accounts receivable were partially offset by increases in accounts payable, largely resulting from the higher inventory levels. The impact of the working capital growth, which decreased operating cash flow, was partially offset by the favorable impact of higher operating earnings.
Capital expenditures
Capital expenditures of $101.2 million during the first nine months of fiscal 2026 increased $44.9 million compared with the same period in the prior year, primarily driven by investments in the Climate Solutions segment to support the growth of our Data Center business. During the second quarter of fiscal 2026, we announced a plan to invest an incremental $100.0 million over the next twelve months to expand our manufacturing capacity in the U.S. for data center products.
35
Business acquisitions
We are focused on acquiring businesses that we expect will accelerate our strategic growth. During the first nine months of fiscal 2026, we made cash payments totaling $182.4 million to acquire L.B. White, Climate by Design, and AbsolutAire. See Note 2 of the Notes to Condensed Consolidated Financial Statements for additional information regarding these acquisitions.
Debt
During the first nine months of fiscal 2026, borrowings on our credit facilities, net of repayments, totaled $258.3 million. We borrowed on our credit facilities to support our strategic growth initiatives, including our acquisitions of L.B. White and Climate by Design and the rapid expansion of our Data Center business.
In July 2025, we executed an amended and restated credit agreement with a syndicate of banks for a multi-currency $400.0 million revolving credit facility and a $200.0 million term loan facility maturing in July 2030. This credit agreement modified our then-existing revolving credit and term loan facilities, which would have matured in October 2027. We also amended the agreement governing our Senior Notes, to conform the applicable terms to those of the aforementioned amended and restated credit agreement. In December 2025, we further amended the credit agreement primarily to increase the borrowing capacity under the revolving credit facility by $150.0 million to $550.0 million.
Our credit agreements require us to maintain compliance with various covenants, including a leverage ratio covenant and an interest expense coverage ratio covenant, which are discussed further below. Indebtedness under our credit agreements is secured by liens on substantially all domestic assets, excluding real estate. These agreements further require compliance with various covenants that may limit our ability to incur additional indebtedness; grant liens; make investments, loans, or guarantees; engage in certain transactions with affiliates; or make restricted payments, including dividends. Also, the credit agreements may require prepayments in the event of certain asset sales.
As amended, the leverage ratio covenant within our primary credit agreements requires us to limit our consolidated indebtedness, less a portion of our cash balance, both as defined by the credit agreements, to no more than three and one-half times consolidated net earnings before interest, taxes, depreciation, amortization, and certain other adjustments (“Adjusted EBITDA”). 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 December 31, 2025, we were in compliance with our debt covenants. We expect to remain in compliance with our debt covenants during the remainder of fiscal 2026 and beyond.
U.S. pension plan termination
During the third quarter of fiscal 2026 and in connection with the previously-announced plan termination, we contributed $14.9 million to fully fund our primary U.S. pension plan and settled all future obligations under the pension plan through a combination of lump-sum payments to participants and the purchase of irrevocable annuity contracts. As a result, we recorded a non-cash pension termination charge of $116.1 million during the third quarter of fiscal 2026.
Share repurchase program
We did not purchase shares under our share repurchase program during the first nine months of fiscal 2026. As of December 31, 2025, we had $81.6 million of share repurchase authorization remaining under the repurchase program, which does not expire. Our decision whether and to what extent to repurchase additional shares under the program will depend on a number of factors, including business conditions, other cash priorities, and stock price.
36
Forward-looking statements
This report, including, but not limited to, the discussion under Item 2. 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 the Company’s Annual Report on Form 10-K for the year ended March 31, 2025. Other risks and uncertainties include, but are not limited to, the following:
Market risks:
Operational risks:
37
Strategic risks:
38
Financial risks:
Risks related to the proposed Reverse Morris Trust transaction with Gentherm:
Forward-looking statements are as of the date of this report; we do not assume any obligation to update any forward-looking statements.
39
The Company’s quantitative and qualitative disclosures about market risk are incorporated by reference from Part II, Item 7A. of the Company’s Annual Report on Form 10-K for the year ended March 31, 2025. The Company’s market risks have not materially changed since the fiscal 2025 Form 10-K was filed.
Evaluation of disclosure controls and procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, management of the Company, with the participation of the Company’s President and Chief Executive Officer and Executive Vice President, Chief Financial Officer, and under the oversight of the Audit Committee of the Board of Directors, evaluated the effectiveness of the Company’s disclosure controls and procedures, at a reasonable assurance level, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended. Based upon that evaluation, the President and Chief Executive Officer and Executive Vice President, Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2025.
Changes in internal control over financial reporting
There have been no changes in internal control over financial reporting during the third quarter of fiscal 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 1A. Risk Factors
Other than as noted below, the Company’s risk factors have not materially changed since the fiscal 2025 Form 10-K was filed.
The proposed Reverse Morris Trust transaction with Gentherm is subject to various risks and uncertainties. There can be no assurance that it will be completed on the terms and timeline planned, if at all, and it will result in significant costs to the Company.
The proposed spin-off of our Performance Technologies segment businesses and simultaneous combination with Gentherm may not be completed as currently planned. Completion of the Reverse Morris Trust transaction is subject to the satisfaction or waiver of a number of conditions, including the approval of Gentherm’s shareholders and regulatory approvals. There can be no assurance that we will receive the required approvals in a timely manner or at all. The completion of the pending Reverse Morris Trust transaction is also subject to obtaining opinions and a private letter ruling from the IRS regarding its qualification as a tax-free transaction for U.S. federal income tax purposes. In addition, we may experience greater than expected difficulties in separating the Performance Technologies segment businesses from our other businesses. Any significant delays in completing the transaction may increase the amount of fees and resources spent on the transaction and the risk that it may not be completed. We will incur costs related to the transaction, including legal, accounting, tax, and other professional fees, whether or not the transaction is completed. If the transaction is not completed or not completed in the timeframe expected, our business, financial results and market price of our shares could be adversely affected.
We are subject to uncertainties while the Reverse Morris Trust transaction with Gentherm is pending.
Uncertainties regarding the impacts of the pending Reverse Morris Trust transaction with Gentherm on our employees, customers, and suppliers could adversely affect our business and results of operations. Our employees may be distracted due to uncertainty regarding their future roles and we may face challenges in attracting, retaining and motivating key employees. Our suppliers or customers may delay or defer decisions or may terminate their relationships with us or our Performance Technologies segment businesses, which could adversely affect our sales, results of operations, and cash flows. In addition, the proposed transaction will require significant time and attention from management, which could detract from other business concerns.
In addition, potential shareholder litigation in connection with the proposed transaction or other litigation, settlements or investigations may affect the timing or occurrence of the proposed transaction or result in significant costs of defense, indemnification and liability.
We may be unable to achieve some or all of the anticipated benefits from the Reverse Morris Trust transaction with Gentherm.
We may not achieve the financial and operational benefits expected from the pending Reverse Morris Trust transaction. The transaction might not provide us and our shareholders benefits or value in excess of what might have been realized had we retained the Performance Technologies segment businesses or undertaken a different strategic alternative.
Following the spin-off and merger with Gentherm, our remaining company will be less diversified, with a more concentrated focus on the data center and commercial HVAC and refrigeration markets. As a result, we will be more vulnerable to changing market conditions in these markets, which could adversely affect our business, results of operations and financial condition.
There can be no assurance as to the value of the shares of the combined company to be received by our shareholders in the proposed Reverse Morris Trust transaction with Gentherm.
At the time of the spin-off of the Performance Technologies segment businesses, our shareholders are expected to receive newly-issued Gentherm stock, representing ownership of approximately 40 percent of the combined company. The actual value of the stock to be received by our shareholders will depend on the value of such shares at the time of transaction closing. Following the merger, the combined company could face difficulties in integrating the businesses, or the combined company could experience difficulties or delays in achieving anticipated revenue and cost synergies or other expected operational and financial benefits. As a result, our shareholders may not receive the benefits anticipated from the transaction.
ISSUER PURCHASES OF EQUITY SECURITIES
The following describes the Company’s purchases of common stock during the third quarter of fiscal 2026:
Maximum
Number (or
Total Number of
Approximate Dollar
Shares Purchased
Value) of Shares
Average
as Part of Publicly
that May Yet Be
Price Paid
Announced Plans
Purchased Under the
Period
Per Share
or Programs
Plans or Programs (a)
October 1 - October 31, 2025
365 (b)
154.73
81,600,955
November 1 - November 30, 2025
3,591 (b)
158.97
December 1 - December 31, 2025
3,667 (b)
133.58
7,623
146.55
During the three months ended December 31, 2025, no director or “officer” of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Exhibit No.
Description
Incorporated Herein ByReference To
FiledHerewith
Separation Agreement, dated as of January 29, 2026, by and among Modine Manufacturing Company, Gentherm Incorporated and Platinum
SpinCo Inc.
Exhibit 2.1 to Registrant’s Current Report on Form 8-K dated January 29, 2026
Agreement and Plan of Merger, dated as of January 29, 2026, by and among Modine Manufacturing Company, Gentherm Incorporated and Platinum Gold Merger Sub, Inc.
Exhibit 2.2 to Registrant’s Current Report on Form 8-K dated January 29, 2026
Amendment No. 1 to Credit Agreement among the Company, the initial subsidiary borrower, the institutions party thereto as lenders, and JPMorgan Chase Bank, N.A. as administrative agent, dated as of December 23, 2025.
Exhibit 4.1 to Registrant’s Current Report on Form 8-K dated December 23, 2025
Rule 13a-14(a)/15d-14(a) Certification of Neil D. Brinker, President and Chief Executive Officer.
X
31.2
Rule 13a-14(a)/15d-14(a) Certification of Michael B. Lucareli, Executive Vice President, Chief Financial Officer.
32.1
Section 1350 Certification of Neil D. Brinker, President and Chief Executive Officer.
32.2
Section 1350 Certification of Michael B. Lucareli, Executive Vice President, Chief Financial Officer.
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Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
(Registrant)
By:
/s/ Michael B. Lucareli
Michael B. Lucareli, Executive Vice President, Chief Financial Officer*
Date: February 5, 2026
* Executing as both the principal financial officer and a duly authorized officer of the Company