Financial Analysis

Note 17: Indebtedness Long-term debt consisted of the following: Fiscal year of maturity June 30, 2026 March 31, 2026 Revolving credit facility 2031 $ 250.0 $ 150.0 Term loan 2031 192.5 195.0 5.9% Senior Notes 2029 68.8 75.0 5.8% Senior Notes 2027 8.3 8.3 Finance lease obligations 2.1 2.3 521.7 430.6 Less: current portion (43.9) (43.9) Less: unamortized debt issuance costs (1.6) (1.8) Total long-term debt $ 476.2 $ 384.9 Long-term debt, including the current portion of long-term debt, matures as follows: Fiscal Year Remainder of 2027 $ 35.0 2028 35.6 2029 35.5 2030 10.1 2031 405.1 2032 & beyond 0.4 Total $ 521.7 Borrowings under the Companys 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 Companys leverage ratio, as described below. At June 30, 2026, the interest rate for revolving credit facility borrowings and the term loan was 4.9 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 June 30, 2026, the Companys borrowings under its revolving credit facilities totaled $250.0 million and domestic letters of credit totaled $5.8 million. As a result, available borrowing capacity under the Companys revolving credit facility was $294.2 million as …

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Three months ended June 30, 2026 Three months ended June 30, 2025 Data Commercial Performance Segment Data Commercial Performance Segment Centers HVAC Technologies Total Centers HVAC Technologies Total Product groups: Data Center Cooling Solutions $ 348.4 $ $ $ 348.4 $ 183.6 $ $ $ 183.6 Heat Transfer Solutions 172.5 172.5 161.8 161.8 HVAC Technologies 75.4 75.4 51.9 51.9 Heavy-Duty Equipment 107.6 107.6 106.3 106.3 On-Highway Applications 170.2 170.2 179.2 179.2 Inter-segment sales 0.2 13.7 13.9 0.1 0.5 0.6 Net sales $ 348.6 $ 261.6 $ 277.8 $ 888.0 $ 183.7 $ 214.2 $ 285.5 $ 683.4 Geographic location: Americas $ 297.8 $ 178.0 $ 138.3 $ 614.1 $ 140.8 $ 135.9 $ 153.0 $ 429.7 Europe 50.8 77.3 85.6 213.7 42.9 71.8 84.0 198.7 Asia 6.3 53.9 60.2 6.5 48.5 55.0 Net sales $ 348.6 $ 261.6 $ 277.8 $ 888.0 $ 183.7 $ 214.2 $ 285.5 $ 683.4 …

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Note 6: Stock-Based Compensation The Companys 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 to incentivize 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 $8.0 million and $5.3 million for the three months ended June 30, 2026 and 2025, respectively. During the first three months of fiscal 2027, 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, 2029. The weighted-average fair value of stock-based compensation awards granted during the three months ended June 30, 2026 and 2025 were as follows: Three months ended June 30, 2026 2025 Fair Value Fair …

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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: Level 1 Quoted prices for identical instruments in active markets. Level 2 Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets. Level 3 Model-derived valuations in which one or more significant inputs are not observable. 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 in …

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Note 14: Goodwill and Intangible Assets Effective April 1, 2026, the Company reorganized its Climate Solutions segment and split it into two separate operating segments: 1) Data Centers and 2) Commercial HVAC. The following table presents a roll forward of the carrying value of goodwill from March 31, 2026 to June 30, 2026. The Company has recast the March 31, 2026 goodwill balances to be comparable with the current segment structure. Data Centers Commercial HVAC Total Goodwill, March 31, 2026 $ 87.0 $ 205.1 $ 292.1 Effect of exchange rate changes (1.3) (0.6) (1.9) Goodwill, June 30, 2026 $ 85.7 $ 204.5 $ 290.2 Intangible assets consisted of the following: June 30, 2026 March 31, 2026 Gross Net Gross Net Carrying Accumulated Intangible Carrying Accumulated Intangible Value Amortization Assets Value Amortization Assets Customer relationships $ 196.0 $ (65.6) $ 130.4 $ 198.2 $ (63.1) $ 135.1 Trade names 69.4 (26.1) 43.3 69.7 (25.2) 44.5 Acquired technology 36.6 (20.1) 16.5 36.8 (19.4) 17.4 Total intangible assets $ 302.0 $ (111.8) $ 190.2 $ 304.7 $ (107.7) $ 197.0 The Company recorded amortization expense of $5.2 million and $5.7 million for the three months ended June 30, 2026 and 2025, respectively. The Company estimates that it will record approximately $15.0 million of amortization expense during the remainder of fiscal 2027. The Company estimates that it will record approximately $21.0 million, $20.0 million, $19.0 million, $19.0 million, and $19.0 million of annual amorti …

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Note 9: Income Taxes The Companys effective tax rate for the three months ended June 30, 2026 and 2025 was (8.3) percent and 21.3 percent, respectively. The effective tax rate for the first quarter of fiscal 2027 was positively impacted by $26.5 million of tax benefits related to stock-based compensation awards. The tax benefits were primarily driven by performance-based stock awards granted in fiscal 2024, for which shares were issued to participants during the first quarter of fiscal 2027. Modines share price appreciated significantly from the grant date of the stock awards to the share issuance date, which increased the value of the awards and the Companys corresponding tax benefit. The tax benefits related to stock-based compensation awards were partially offset by a $3.8 million income tax detriment related to nondeductible compensation in the first quarter of fiscal 2027 and changes in the mix and amount of foreign and U.S. earnings. As of June 30, 2026 and March 31, 2026, income tax liabilities included within other current liabilities on the Companys consolidated balance sheets totaled $ 20.0 million and $ 37.0 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 adjustment …

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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 Companys accruals for environmental matters totaled $12.2 million and $12.7 million as of June 30, 2026 and March 31, 2026, 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 …

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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 Companys 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. …

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Note 5: Pensions During the third quarter of fiscal 2026, the Company completed the termination of its primary U.S. pension plan. The Company fully funded the plan and settled all future obligations under it through a combination of lump-sum payments to participants and the purchase of irrevocable annuity contracts. Certain non-U.S. subsidiaries of the Company have legacy defined benefit plans which cover a small number of active employees and are substantially unfunded. The primary non-U.S. plans are maintained in Germany and Italy and are closed to new participants. Pension cost included the following components: Three months ended June 30, 2026 2025 Service cost $ $ Interest cost 0.1 2.4 Expected return on plan assets (2.2) Amortization of unrecognized net loss 1.2 Net periodic benefit cost $ 0.1 $ 1.4 ____ …

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Note 7: Restructuring Activities Restructuring and repositioning expenses were as follows: Three months ended June 30, 2026 2025 Employee severance and related benefits $ 1.6 $ 4.5 Other restructuring and repositioning expenses 2.3 0.3 Total $ 3.9 $ 4.8 During the first three months of fiscal 2027, restructuring and repositioning expenses primarily consisted of costs associated with transferring product lines among its facilities and severance expenses in the Commercial HVAC and Performance Technologies segments. 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. The severance expenses were primarily recorded in North America and Europe and include severance related to targeted headcount reductions intended to reduce selling, general and administrative (SG&A) and operational expenses. During the first three months of fiscal 2026, restructuring and repositioning expenses primarily consisted of severance expenses, the majority of which were recorded in the Performance Technologies segment. The Performance Technologies severance charges were primarily recorded in Europe and North America and included severance related to targeted headcount reductions. In addition, the Company incurred equipment transfer costs within the Commercial HVAC and Pe …

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Note 3: Revenue Recognition Disaggregation of revenue The tables below present revenue for each of the Companys operating segments. Each segments revenue is disaggregated by product group and by geographic location. Effective April 1, 2026, the Company reorganized its Climate Solutions segment and split it into two separate operating segments: 1) Data Centers and 2) Commercial HVAC. The segment realignment did not impact the Performance Technologies segment. See Note 20 for additional segment financial information. The fiscal 2026 disaggregated revenue information presented below has been recast to be comparable with the fiscal 2027 presentation. Data Centers The Data Centers segment is managed regionally and sells data center cooling solutions, including chillers, dry coolers, precision air handling units, computer room air conditioning and air handler units, fan walls, rear-door heat exchangers, coolant distribution units and immersion solutions. In addition, the Data Centers segment sells modular data center solutions, replacement parts, maintenance service and control solutions for building management controls and systems. Commercial HVAC The Commercial HVAC segment revenue is comprised of two product groups: i) Heat Transfer Solutions and ii) HVAC Technologies. The Heat Transfer Solutions business provides heat exchanger coils, anti-corrosion coating products, commercial and industrial coolers and power generation and transmission cooling solutions. In addition, the Heat …

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Note 20: Segment Information The Companys 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 a basis for allocating company resources. The tables below present net sales and significant expense categories for each of the Companys 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. Effective April 1, 2026, the Company reorganized its Climate Solutions segment and split it into two separate operating segments: 1) Data Centers and 2) Commercial HVAC. The Company believes managing these businesses independently allows it to better deploy its 80/20 strategy focused on capitalizing on growth opportunities, particularly in the Data Centers business, and optimizing profit margins and cash flow. The segment realignment had no impact on the financial results of the Performance Technologies segment or the Companys consolidated financial position, results of operations, and cash flows. Segment financial information for the prior periods has been recast to conform to the current presentation. Three months ended June 30, 2026 Three months ended June 30, 2025 Corporat …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing