What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-05-22 compared with 2023-05-25 · 900 added, 660 removed, 1055 unchanged (60% of the section changed)

8 unchanged sentences

Impairment charges (reversals) – net

Loss on sale of assets

Operating income (loss)

(Gain) loss on sale of assets

Operating income

Interest expense

Other expense – net

Earnings (loss) before income taxes

Benefit (provision) for income taxes

Net earnings (loss)

Earnings before income taxes

(Provision) benefit for income taxes

Net earnings attributable to noncontrolling interest

Net earnings (loss) attributable to Modine

Net earnings (loss) per share attributable to Modine shareholders:

Net earnings attributable to Modine

Net earnings per share attributable to Modine shareholders:

Weighted-average shares outstanding:

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(In millions)

Net earnings (loss)

Other comprehensive income (loss):

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Total other comprehensive income (loss)

Comprehensive income (loss)

Comprehensive income

Comprehensive income attributable to noncontrolling interest

Comprehensive income (loss) attributable to Modine

Comprehensive income attributable to Modine

The notes to consolidated financial statements are an integral part of these statements.

39 unchanged sentences

Cash flows from operating activities:

Net earnings (loss)

Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:

Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation and amortization

Impairment charges (reversals) – net

Loss on sale of assets

(Gain) loss on sale of assets

Stock-based compensation expense

8 unchanged sentences

Expenditures for property, plant and equipment

Business acquisitions, net of cash acquired (see Note 2)

Purchase of TMGcore, Inc.

technology and related assets (see Note 2)

Proceeds from (payments for) dispositions of assets

Disbursements for loan origination (see Note 1)

Proceeds from maturities of short-term investments

Purchases of short-term investments

Disbursements for loan origination (see Note 2)

Net cash used for investing activities

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Dividend paid to noncontrolling interest

Financing fees paid

Net cash (used for) provided by financing activities

Net cash provided by (used for) financing activities

Effect of exchange rate changes on cash

Net increase (decrease) in cash, cash equivalents and restricted cash

Net (decrease) increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash – beginning of year

5 unchanged sentences

(In millions)

Accumulated other

comprehensive

Balance, March 31, 2021

Net (loss) earnings

Other comprehensive income

Other comprehensive income (loss)

Stock options and awards

1 unchanged sentence

Stock-based compensation expense

Dividend paid to noncontrolling interest

Balance, March 31, 2022

Other comprehensive income (loss)

Other comprehensive loss

Stock options and awards

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Nature of operations

Modine Manufacturing Company (“Modine” or the “Company”) specializes in providing innovative and environmentally responsible thermal management

products and solutions to diversified global markets and customers in a wide array of commercial, industrial, and building heating, ventilating, air conditioning, and refrigeration (“HVAC&R”) markets.

In addition, the Company is a leading

provider of engineered heat transfer systems and high-quality heat transfer components for use in on- and off-highway original equipment manufacturer (“OEM”) vehicular applications.

Modine Manufacturing Company (“Modine” or the “Company”) specializes in providing innovative and environmentally responsible thermal management products and

solutions to diversified global markets and customers in a wide array of commercial, industrial, and building heating, ventilating, air conditioning, and refrigeration (“HVAC&R”) markets.

In addition, the Company is a leading provider of

engineered heat transfer systems and high-quality heat transfer components for use in on- and off-highway original equipment manufacturer (“OEM”) vehicular applications.

The Company’s primary product groups include i) heat transfer;

HVAC & refrigeration;

ii) HVAC& R ;

iii) data center cooling;

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and vi) advanced solutions.

Disposition of Austrian Air-cooled Automotive Business in Fiscal 2022

On April 30, 2021, the Company sold i ts Austrian a ir-cooled automotive business to Schmid Metall GmbH.

As a result of

this transaction, the Company recorded a loss of $ 6.6 million during fiscal 2022, which included the write-off of $ 1.7 million of net actuarial losses related to its pension plan.

The Company reported this loss within the loss on sale of assets line on the

consolidated statement of operations.

Upon transaction closing, $ 5.9 million of cash within the business transferred to the buyer.

Later in fiscal 2022, the Company paid the buyer $ 2.4 million upon the finalization of a purchase price adjustment for net working

capital and certain other items.

Financial results of this business, prior to the disposition, are reported within the Performance Technologies segment.

See Note 2 for information regarding the accounting for this business while it was held for

Net sales of this business were $ 63.0 million in fiscal 2021.

In connection with the sale of this business, the Company provided the buyer with a 5 -year, € 4.0 million loan facility.

Borrowings under the

agreement currently bear interest at 5.4 percent.

During fiscal 2022, the Company disbursed € 4.0 million ($ 4.7 million) to the buyer under this facility.

both March 31, 2023 and 2022, the Company recorded the loan receivable within other noncurrent assets on its consolidated balance sheet because the Company expects to receive the principal repayment more than twelve months from the balance sheet

Disposition of Previously-Closed Facility in Fiscal 2022

During fiscal 2022, the Company sold a previously-closed manufacturing facility in the U.S.

and received net cash proceeds of $ 0.7 million.

As a result of the sale, the Company recorded an impairment charge of $ 0.3 million within the Climate Solutions segment to write down the property to fair value less costs to sell.

Chief Executive Officer (“CEO”) Transition in Fiscal 2021

In August 2020 , Thomas A.

Burke stepped down from his position as President and CEO.

The Board of Directors subsequently conducted a search for his successor and, effective December 1, 2020 , appointed Neil D.

Brinker as President and CEO.

As a result of Mr.

Burke’s departure and in connection with the search for and

transition to his successor, the Company recorded costs totaling $ 6.7 million during fiscal 2021 .

These costs, which were recorded as selling, general and administrative (“SG&A”) expenses at

Corporate, primarily consisted of severance and benefit-related expenses based upon the terms of Mr.

Burke’s transition and separation agreement and costs directly associated with the CEO search, partially offset by the impact of Mr.

forfeited stock-based compensation awards.

Acquisitions and dispositions

The Company accounts for acquired businesses using the acquisition method.

Under the acquisition method, the Company records

assets acquired and liabilities assumed at their respective fair values.

If the assets acquired do not constitute a business, the Company accounts for the transaction as an asset acquisition.

For asset purchases, the Company allocates the

purchase price to the underlying assets based on their relative fair values.

During fiscal 2024, the Company acquired

Scott Springfield Mfg.

Inc., a Canadian-based manufacturer of air handling units, and substantially all of the net operating assets of Napps Technology Corporation, a Texas-based manufacturer of air- and water-cooled chillers, condensing units

and heat pumps.

In addition, the Company purchased intellectual property related to liquid immersion cooling technology from TMGcore, Inc.

Also during fiscal 2024, the Company sold three automotive businesses based in Germany and two coatings

facilities in the United States.

During fiscal 2022, the Company sold its

Austrian air-cooled automotive business and a previously-closed manufacturing facility in the U.S.

See Note 2 for information regarding the

Company’s acquisitions and dispositions .

Basis of presentation

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The Company eliminates intercompany transactions and balances in consolidation.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

Revenue recognition

17 unchanged sentences

of current-period provisions, write-offs charged against the allowance, recoveries collected, and foreign currency translation.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

The Company enters into supply chain financing programs from time to time to sell accounts receivable, without recourse, to third-party financial

1 unchanged sentence

Sales of accounts receivable are reflected as a reduction of accounts receivable on the consolidated balance sheets and the proceeds are included in cash flows from operating activities in the consolidated statements of cash flows.

During fiscal 2023, 2022, and 2021, the Company sold $ 150.6 million, $ 126.4 million, and $ 88.7 million, respectively, of accounts

receivable to accelerate cash receipts.

During fiscal 2023, 2022, and 2021, the Company recorded costs totaling $ 1.2 million, $ 0.3 million, and $ 0.2 million, respectively, related to selling accounts receivable in the

consolidated statements of operations.

During fiscal 2024, 2023, and 2022, the Company sold $ 130.2 million, $ 150.6 million, and $ 126.4 million, respectively, of accounts receivable to

accelerate cash receipts.

During fiscal 2024, 2023, and 2022, the Company recorded costs totaling $ 1.6 million, $ 1.2 million, and $ 0.3 million, respectively, related to selling accounts receivable in the consolidated statements of

The Company provides product warranties for specific product lines and accrues for estimated future warranty costs in the period in which the sale is

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equipment when it owns title to the tooling and amortizes the capitalized cost to cost of sales over the estimated life of the asset, which is generally three years .

At March 31, 2023 and 2022 ,

Company-owned tooling totaled $ 17.1 million

and $ 18.3 million , respectively.

At March 31, 2024 and 2023 , Company-owned tooling totaled $ 16.1 million and $ 17.1 million , respectively.

In certain instances, tooling is owned by the customer.

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Research and development

The Company expenses research and development costs as incurred within SG&A

The Company expenses research and development costs as incurred within selling, general,

and administrative (“SG&A”) expenses.

During fiscal 2024, 2023, and 2022 , research and development costs totaled $ 42.0 million, $ 44.0 million, and $ 50.3 million, respectively.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

Translation of foreign currencies

19 unchanged sentences

See Note 8 for additional information.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

Earnings per share

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short-term investments at cost, which approximates fair value, within other current assets in the consolidated balance sheets.

As of March 31, 2023 and 2022, the Company’s short-term investments totaled $ 3.5 million and $ 3.7 million, respectively.

As of March 31, 2023, the Company’s short-term investments totaled $ 3.5 million.

The Company had no short-term investments as of March 31, 2024.

The Company values inventories using a first-in, first-out or weighted-average basis, at the lower of cost and net realizable value.

12 unchanged sentences

See Note 16 for additional information.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

The Company does not amortize goodwill;

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The Company performed its goodwill impairment

test as of March 31, 2023 and determined the fair value of each of its reporting units exceeded the respective book value.

tests as of March 31, 2024 and determined the fair value of each of its reporting units exceeded the respective book value.

See Note 14 for additional information.

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In addition, the Company ceases to record depreciation for assets held for sale.

See Note 2 for additional information.

The Company had no

assets classified as held for sale as of March 31, 2024 and 2023.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

Deferred compensation trusts

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supplemental cash flow information related to the Company’s leases.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

New accounting guidance

Supplier finance programs

In September 2022, the Financial Accounting Standards Board (“FASB”) issued new guidance that will require companies that use supplier finance programs to disclose information about the programs,

including key terms, outstanding obligations under such programs and where outstanding amounts are presented within their financial statements.

In addition, a roll forward of obligations under supplier finance programs will be required annually.

The new guidance is effective for the Company’s fiscal 2024 financial statements, with the exception of the roll forward disclosure requirement, which will become effective one year later.

The Company is currently evaluating the new disclosures,

but does not expect the guidance will have a material impact on its consolidated financial statements.

Income Tax Simplification

In December 2019, the FASB issued new guidance designed to simplify the accounting for income taxes.

The new guidance eliminated certain exceptions related to the approach

for intraperiod tax allocations and the methodology for deferred tax liabilities.

The Company adopted this guidance as of April 1, 2021.

The adoption did not have a material impact on the Company’s consolidated financial statements.

Credit Losses

In June 2016, the FASB issued new guidance related to the accounting for credit losses for certain financial assets, including trade accounts receivable and contract

The new guidance modified the credit loss model to measure and recognize credit losses based upon expected losses rather than incurred losses.

In September 2022, the Financial Accounting Standards Board (“FASB”) issued new guidance regarding disclosure of supplier finance programs including the key terms, outstanding obligations, and where such

obligations are presented within the financial statements.

In addition, beginning for fiscal 2025, a roll forward of obligations under such programs is required annually.

The new guidance does not impact the recognition, measurement or financial

statement presentation of supplier finance program obligations.

The Company adopted this guidance as of April 1, 2023.

The adoption did not have a material impact

on the Company’s consolidated balance sheets, statements of operations or statements of cash flows.

Assets Held for Sale

On November 2, 2020, the Company signed a definitive agreement to sell its liquid-cooled automotive business to Dana Incorporated (“Dana”).

Beginning at that time, the

Company classified this business as held for sale and ceased recording depreciation expense for its long-lived assets.

On October 25, 2021, the Company announced that it agreed with Dana to terminate the sale agreement.

Both companies had been

actively engaged in the regulatory review process in Germany for many months and agreed that it was no longer in the best interest of either party to pursue the sale transaction further.

In connection with the termination of the sale agreement, the Company determined that the liquid-cooled automotive business no longer met the requirements to

be classified as held for sale.

As a result, the Company remeasured the long-lived assets reverting back to held and used classification at the lower of their (i) carrying value, as if held for sale classification had not been met;

value at the date of the decision not to sell and reversed $ 57.2 million of held for sale impairment charges during the third quarter of

The long-lived assets primarily consisted of property, plant and equipment assets and were fully impaired while classified as held for sale.

For purposes of the remeasurement, the Company engaged third-party valuation specialists to

assist in estimating the fair values of the assets.

The Company primarily used the market and cost valuation approaches and utilized third-party information from various industry-accepted sources, including applicable government-published statistics

and data from appraisal and resale service providers.

The market approach focused on prices for comparable assets in arm’s length transactions.

For land and building assets, for example, sales of similar properties near the Company’s facilities

were analyzed.

For machinery and equipment assets, the Company referenced available third-party information regarding the selling prices of similar equipment.

The cost approach focused on the amount for which an asset could be replaced or

The cost of an asset was then adjusted downward based on various factors including, but not limited to, age, location, and physical condition.

After estimating the fair values of the assets reverting back to held and used

classification, the Company compared the fair value for each asset to its carrying value.

Carrying value represented each asset’s carrying value before the initial impairment charge, reduced for depreciation that would have been recorded if the

asset had not been classified as held for sale.

The Company then adjusted each asset to the lower of fair value or carrying value, resulting in the reversal of $ 57.2 million of previous impairment charges.

In addition, the Company resumed depreciating the property, plant and equipment assets of the liquid-cooled automotive business based on the

remeasured asset values during the third quarter of fiscal 2022.

In addition, the Company early adopted the disclosure requirements regarding roll forward information.

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 the 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.

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 are included

within accounts payable in the consolidated balance sheets.

MODINE MANUFACTURING COMPANY

1 unchanged sentence

(In millions, except per share amounts)

The $ 57.2 million held for sale impairment reversal during

the third quarter of fiscal 2022 was partially offset by $ 1.2 million of net held for sale impairment charges recorded earlier in fiscal

At both June 30, 2021 and September 30, 2021, while the liquid-cooled automotive business was held for sale, the Company reassessed its fair value less costs to sell.

As a result of these evaluations, the Company recorded a total of $ 8.6 million of impairment charges during the first and second quarters of fiscal 2022.

These impairment charges reduced the net carrying value of

property, plant and equipment additions during each quarter to zero .

In addition, in connection with a modification of the sale

perimeter in the first quarter of fiscal 2022, the Company determined that certain manufacturing operations no longer met the requirements to be classified as held for sale.

As a result, the Company reversed $ 7.4 million of previous impairment charges to adjust the long-lived assets within the asset groups impacted by the sale perimeter change to their estimated fair value.

Company’s determination of fair value for the long-lived assets within the businesses impacted by the sale perimeter

change in the first quarter involved judgement and the use of significant estimates and assumptions, including assumptions regarding future revenue projections and operating profit margins and risk-adjusted discount rates.

When the liquid-cooled automotive business was initially classified as held for sale during the third quarter of fiscal 2021, the Company assessed the disposal group’s fair

value less costs to sell and reduced the net carrying value of the disposal group’s long-lived assets to zero .

The following table presents a roll forward of the Company’s obligations associated with its supplier finance program during fiscal 2024.

Obligations outstanding, March 31, 2023

Invoices submitted

Invoices paid

Obligations outstanding, March 31, 2024

Segment reporting disclosures

In November 2023, the FASB issued new disclosure guidance for reportable segments.

The new guidance will require disclosure of significant segment expenses, which are

expenses that are (i) significant to the segment, (ii) regularly provided to the chief operating decision maker (“CODM”) and (iii) included in the reported measure of segment profit or loss.

In addition, the new guidance will require companies to

disclose the title and position of their CODM and expand interim disclosures to include the majority of the annual segment disclosures.

The definition of and method for determining reportable segments is unchanged.

The new disclosure requirements

will become effective for the Company’s fiscal 2025 annual financial statements.

The Company is currently evaluating potential impacts of the new disclosure requirements, but does not expect the guidance will have a material impact on its

consolidated financial statements.

Acquisitions and Dispositions

Acquisition of Scott Springfield Mfg.

On March 1, 2024, the Company acquired all of the issued and outstanding shares in the capital of Scott Springfield Mfg.

(“Scott Springfield Manufacturing”) for consideration totaling $ 184.1 million ($ 183.8 million net of cash acquired.) The final purchase price is pending and will be adjusted for net working capital and certain other items, as defined by the purchase

The Company paid $ 181.4 million upon transaction closing and expects to pay the seller $ 2.4 million during the first half of fiscal 2025, primarily for the working capital adjustment.

The Company utilized its revolving credit facility and

cash on hand to fund the purchase price.

Based in Calgary, Canada, Scott Springfield Manufacturing is a leading manufacturer of air handling units to customers in

the data center, telecommunications, healthcare, and aerospace markets.

This acquisition expands the Company’s product offerings and customer base in the high-growth data center and indoor air quality markets in the U.S.

being acquired by the Company, Scott Springfield Manufacturing reported approximately $ 110.0 million of net sales during the year ended

December 31, 2023.

Since the date of the acquisition, March 1, 2024, the Company has reported the financial results of the Scott Springfield Manufacturing business within the Climate Solutions segment.

For the one month in fiscal 2024 that the Company owned Scott Springfield Manufacturing, it included $ 7.9 million of net sales of the acquired business within its consolidated statement of operations.

Operating income attributable to the acquired business in fiscal 2024 was not significant

and included the impact of the inventory fair value adjustment, as further described below.

In addition, the Company recorded $ 2.1

million of costs directly related to the acquisition and integration of Scott Springfield Manufacturing as SG&A expenses within the consolidated statement of operations during the year ended March 31, 2024.

These costs principally consisted of

fees for i) transaction advisors, ii) legal, accounting, and other professional services, and iii) incremental costs directly associated with integration activities.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

The Company has preliminarily

allocated the purchase price of Scott Springfield Manufacturing to the identifiable tangible and intangible assets acquired and the liabilities assumed based upon their estimated fair values as of the acquisition date, as follows:

Cash and cash

Trade accounts

Property, plant and

Intangible assets

Accounts payable

Accrued compensation

and employee benefits

Deferred income taxes

Other liabilities

Purchase price

At the time the March 31, 2024 financial statements were finalized, the Company was continuing its review of the fair value estimates for certain assets

acquired, including intangible assets, 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 business with those of the Company.

As part of this process, the Company is continuing to review the appropriateness of accruals and reserves, including those related to accounts receivable, inventory, and product warranties.

addition, the final determination of the purchase price is pending calculations of working capital and other adjustments.

As such, the allocation of purchase

price above is considered preliminary.

The Company expects to complete its accounting for the acquisition of Scott Springfield Manufacturing during the first half of fiscal 2025.

The Company primarily based its fair value estimates upon third-party valuations

using 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 $ 65.2 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.

Specifically, the goodwill recorded as part of the acquisition includes Scott Springfield Manufacturing’s workforce and anticipated

future revenue and cost synergies.

Below is a summary of the methodologies and significant assumptions used in

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.

The Company determined the fair value of acquired inventory by estimating the selling price of finished goods inventory, less an estimate of costs to be incurred to complete work-in-process inventory.

For raw materials

acquired, the Company estimated the cost of replacement.

As a result, the Company wrote-up acquired inventory by $ 3.2 million.

Company charged $ 1.6 million of this write-up to cost of sales in March 2024 and expects to charge the remaining $ 1.6 million to cost of sales during the first quarter of fiscal 2025, as the remaining underlying inventory is sold.

Property, plant and equipment:

The Company valued property, plant and equipment primarily utilizing the cost and market approaches.

The cost approach considers the amount required to replace an asset by constructing or purchasing a new asset with

similar utility and adjusting the value in consideration of 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.

approach considers values on secondary equipment markets for similar assets.

The fair value of property, plant and equipment will be recognized as depreciation expense in our results of operations over the expected remaining useful lives of the

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

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 discretely 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:

Customer relationships

Order backlog

Total intangible assets acquired

Customer relationships represent the estimated fair value of Scott Springfield

Manufacturing’s business relationship with existing customers.

Order backlog represents the estimated fair value of open purchase orders as of the acquisition date.

The fair values for the customer relationship and order backlog intangible assets

were 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 and order backlog.

Key inputs used in the valuation

included future revenue growth rates, customer attrition rates, and discount rates.

The Company determined the value of the acquired Scott Springfield Manufacturing

trade name using the relief-from-royalty method, a variation of the income approach, 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.

The following unaudited supplemental pro forma information presents the Company’s consolidated results of operations as though the acquisition of Scott

Springfield Manufacturing had occurred at the beginning of fiscal 2023.

This pro forma financial information is presented for illustrative purposes only and is not considered to be indicative of the operating results that would have been achieved

had the acquisition been completed as of the date indicated or the operating results that may be obtained in the future.

Years ended March 31,

Net earnings attributable to Modine

The supplemental pro forma financial information above is based upon the Company’s historical results and the historical results of Scott Springfield

Manufacturing, which have been translated from Canadian dollars to U.S.

dollars using the historical average foreign exchange rates.

The proforma information includes adjustments for:

(i) annual amortization and depreciation expense totaling

approximately $ 20.0 million for fiscal 2023 and approximately $ 9.0 million for fiscal 2024 for acquired tangible and intangible assets, (ii) estimated annual interest expense of approximately $ 6.0 million resulting from acquisition-related borrowings, and (iii) the estimated income tax impacts related to the pro forma adjustments, considering the statutory tax

rates within Canada.

In addition, the pro forma financial information assumes that both $ 2.0 million of acquisition-related transaction

costs, not including costs for integration-related activities, and $ 3.2 million of inventory purchase accounting adjustments were incurred

during fiscal 2023.

The pro forma financial information does not reflect any expected revenue or cost synergies.

Purchase of TMGcore, Inc.

intellectual property

In January 2024, the Company purchased intellectual property and other specific

assets from TMGcore, Inc., a specialist in single- and two-phase liquid immersion cooling technology for data centers.

The Company expects to utilize the liquid cooling immersion technology to support its growth strategy of expanding its global

data center product offerings.

The initial purchase price of the assets was $ 12.0 million.

The Company allocated $ 11.4 million to acquired technology, which it will amortize over a 10-year useful life, and the remaining $ 0.6 million to property, plant and

Additional contingent consideration may be payable to the seller in fiscal 2029.

The amount of any additional consideration is dependent upon future financial metrics associated with the acquired technology.

At this time, the Company

cannot estimate the amount or range of additional consideration that may be payable to the seller in fiscal 2029.

In line with asset acquisition accounting rules under U.S.

GAAP, the Company will record an accrual for the contingent consideration

if and when it becomes probable and estimable.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

Acquisition of Napps Technology Corporation

On July 1, 2023, the Company acquired substantially all of the net operating assets

of Napps Technology Corporation (“Napps”) for consideration totaling $ 5.8 million.

The Company paid $ 4.8 million during fiscal 2024 and, based upon the terms of the agreement, expects to pay the remaining $ 1.0 million to the seller one year after closing.

Napps is a Texas-based manufacturer of air- and water-cooled chillers, condensing

units and heat pumps.

This acquisition expands the Company’s indoor air quality product portfolio and supports its growth strategy and mission of improving indoor air quality.

Since the date of the acquisition, the Company has reported the

financial results of the Napps business within the Climate Solutions segment.

For the fiscal year ended March 31, 2024, the Company included $ 4.5

million of net sales within its consolidated statement of operations attributable to nine months of Napps operations.

The Company has completed the purchase price allocation for its acquisition of

The purchase price of $ 5.8 million was allocated to the identifiable tangible and intangible assets acquired and the liabilities

assumed based upon their estimated fair values as of the acquisition date.

The Company engaged a third-party valuation specialist to assist in determining the fair value of the acquired intangible assets.

The valuation analysis considered the

expected future cash flows of the acquired business.

The Company recorded $ 2.9 million of intangible assets, including customer

relationship and acquired technology assets.

The Company is amortizing the acquired intangible assets using a weighted-average life of approximately ten years .

The Company allocated the excess of the purchase price over the net assets recognized to goodwill in the amount of $ 1.0

million, which is deductible for income tax purposes.

The Company’s allocation of the purchase price was as follows:

Trade accounts receivable

Property, plant and equipment and other assets

Intangible assets

Accounts payable and other liabilities

Purchase price

Disposition of two coatings facilities

In September 2023, the Company sold two coatings facilities, located in California and Florida, to Protecall, LLC.

These facilities provide aftermarket application services, in which HVAC units are sprayed

with an anti-corrosion protective coating.

The Company’s other coatings businesses continue to own and license its spray-applied coatings used in aftermarket applications and are strategically pursuing growth through product licensing

arrangements.

Prior to the disposition, the Company reported the financial results of these businesses within the Performance Technologies segment.

In fiscal 2023, the net sales of these two businesses totaled $ 6.4 million.

As a result of this

transaction, the Company wrote-off $ 0.7 million of goodwill attributable to the disposed businesses and recorded a gain on sale of less

than $ 0.1 million during fiscal 2024.

Disposition of Germany automotive businesses

On October 31, 2023, the Company sold three automotive businesses based in Germany (the “disposal group”) to affiliates of Regent, L.P.

The sale of these businesses, which produce air- and liquid-cooled products

for internal combustion diesel and gasoline engines for the European automotive market, is in line with the Company’s strategic prioritization of resources towards higher-margin technologies.

The Company determined the disposal group did not

qualify as a discontinued operation for reporting purposes under U.S.

As part of its evaluation, the Company considered anticipated future sales in Europe to automotive and other vehicular customers with similar product offerings and using

similar heat-transfer technology within the Performance Technologies segment.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

The net transaction price for the sale of the disposal group was less than $ 1.0 million.

As a result of the sale, the Company recorded a $ 4.0 million gain on sale during fiscal 2024, primarily driven by the net liability position of the disposal group at the time of sale.

In addition, the gain on sale includes the write-off of $ 0.6 million of net actuarial gains related to the disposal group’s pension plans.

The Company reported the $ 4.0 million gain on the gain on sale of assets line within the consolidated statement of operations.

Prior to the disposition, the Company reported the financial results of the

disposal group within its Performance Technologies segment.

Net sales of the disposal group included within the Company’s consolidated statements of operations for fiscal 2024 and 2023 totaled $ 54.2 million and $ 79.0 million, respectively.

Automotive business previously held for sale

During fiscal 2022, in connection with the termination of an agreement to sell

the liquid-cooled automotive business within its Performance Technologies segment, the Company determined that the business no longer met the requirements to be classified as held for sale.

The Company remeasured the long-lived assets reverting

back to held and used classification at the lower of their (i) carrying value, as if held for sale classification had not been met;

or (ii) fair value at the date of the decision not to sell.

The long-lived assets primarily consisted of

property, plant and equipment assets and were fully impaired while classified as held for sale.

For purposes of the remeasurement, the Company engaged third-party valuation specialists to assist in estimating the fair values of the assets.

Company primarily used the market and cost valuation approaches and utilized third-party information from various industry-accepted sources, including applicable government-published statistics and data from appraisal and resale service

As a result of the remeasurement, the Company recorded a net impairment reversal of $ 56.0 million during fiscal 2022 within

the impairment charges (reversals) line on the consolidated statement of operations.

In addition, the Company resumed depreciating the property, plant and equipment assets of the liquid-cooled automotive business based on the remeasured asset

values during the third quarter of fiscal 2022.

Disposition of Austrian air-cooled automotive business

During fiscal 2022 the

Company recorded impairment charges totaling $ 138.3 million related to the long-lived assets within the liquid-cooled automotive business.

Also during fiscal 2021, the Company signed a definitive agreement to sell its Austrian air-cooled automotive business to Schmid Metall GmbH.

Upon classification as held

for sale, the Company estimated an implied loss in excess of the carrying value of the disposal group’s long-lived assets, which primarily consisted of property, plant and equipment assets.

As a result, the Company recorded a $ 26.8 million impairment charge related to this business, reducing the carrying value of the disposal group’s long-lived assets to zero .

In addition, the Company recorded an impairment charge of $ 1.7 million related to other equipment within the Performance Technologies segment.

See Note 1 for additional information regarding the accounting for the sale of the Austrian air-cooled

automotive business, which was completed in fiscal 2022.

The Company reported the impairment charges and reversals during fiscal 2022 and 2021 within the impairment charges (reversals) line on the consolidated statements of

Company sold its Austrian air-cooled automotive business to Schmid Metall GmbH.

As a result of this transaction, the Company recorded a loss of $ 6.6

million during fiscal 2022, which included the write-off of $ 1.7 million of net actuarial losses related to its pension plan.

Company reported this loss within the loss on sale of assets line on the consolidated statement of operations.

Upon transaction closing, $ 5.9

million of cash within the business transferred to the buyer.

Later in fiscal 2022, the Company paid the buyer $ 2.4 million upon the

finalization of a purchase price adjustment for net working capital and certain other items.

Financial results of this business, prior to the disposition, are reported within the Performance Technologies segment.

For the one month in fiscal 2022 that the Company owned this business, it included $ 5.3 million of net sales

within its consolidated statement of operations.

In connection with the sale of this business, the Company provided the buyer with

a 5 -year, € 4.0

million loan facility.

Borrowings under the agreement currently bear interest at 7.8 percent.

During fiscal 2022, the Company

disbursed € 4.0 million ($ 4.7

million) to the buyer under this facility.

At both March 31, 2024 and 2023, the Company recorded the loan receivable within other noncurrent assets on its consolidated balance sheet because the Company expects to receive the principal repayment

more than twelve months from the balance sheet date.

Disposition of previously-closed facility in fiscal 2022

During fiscal 2022, the Company sold a previously-closed manufacturing facility

and received net cash proceeds of $ 0.7 million.

As a result of the sale, the Company recorded an impairment charge of $ 0.3 million within the Climate Solutions segment to write down the property to fair value less costs to sell.

Revenue Recognition

The Company generates revenue from selling innovative thermal management products and solutions to diversified global markets and customers.

Company recognizes revenue based upon consideration specified in a contract and as it satisfies performance obligations by transferring control over its products to its customers, which may be at a point in time or over time.

The majority of the

Company’s revenue is recognized at a point in time, based upon shipment terms.

recognizes revenue based upon consideration specified in a contract and as it satisfies performance obligations by transferring control over its products to its customers, which may be at a point in time or over time.

The majority of the Company’s

revenue is recognized at a point in time, based upon shipment terms.

The Company records an allowance for credit losses and accrues for estimated warranty costs at the time of sale.

These estimates are based upon historical experience,

current business trends, and current economic conditions.

The Company accounts for shipping and handling activities as fulfilment costs rather than separate performance obligations and records shipping and handling costs in cost of sales and related

amounts billed to customers in net sales.

The Company establishes payment terms with its customers based upon industry and regional practices, which typically do not exceed 90 days .

As the Company expects to receive payment from its customers within one year from the time of sale, it disregards the effects of the time value of money in its determination of the

transaction price.

The Company has not disclosed the value of unsatisfied performance obligations because the revenue associated with customer contracts for which the original expected performance period is greater than one year is immaterial.

These estimates are based upon historical experience, current

business trends, and current economic conditions.

The Company accounts for shipping and handling activities as fulfil l ment costs rather than separate performance

obligations and records shipping and handling costs in cost of sales and related amounts billed to customers in net sales.

The Company establishes payment terms with its customers based upon industry and regional practices, which typically do not

exceed 90 days .

As the Company expects to receive payment from its customers within one year from the time of sale, it disregards the

effects of the time value of money in its determination of the transaction price.

The Company has not disclosed the value of unsatisfied performance obligations because the revenue associated with customer contracts for which the original expected

performance period is greater than one year is immaterial.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

The following is a description of the Company’s principal revenue-generating activities:

Climate Solutions

The Climate Solutions

segment principally generates revenue from selling heat transfer products, heating, ventilating, air conditioning, and refrigeration (“HVAC & refrigeration”) products, and data center cooling solutions.

The Climate Solutions segment principally generates revenue from selling heat transfer products, HVAC& R products, and data center cooling solutions.

Heat transfer products include heat recovery and round tube plate fin coils.

Heating products include unit heaters, roof-mounted direct- and

indirect-fired makeup air units, duct furnaces, infrared units and perimeter heating products.

Indoor air quality products include ventilation and air conditioning products, such as single packaged unit ventilators, modular chillers, air handler

units, condensing units and ceiling cassettes.

Refrigeration products include evaporator unit coolers, remote condensers and fluid, gas, dry, and brine coolers.

In addition, the segment provides products to the industrial power generation

Data center cooling products include IT cooling solutions, including precision air conditioning units for data center applications;

computer room air conditioning and computer room air handler units;

hybrid fan coils;

condensing units;

and liquid cooling solutions for high-density computing.

Heating products are manufactured in the U.S.

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shipping terms, which is generally upon shipment.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

Ventilation and air conditioning products are highly-specified to a customer’s needs;

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segment recognizes revenue for these products primarily at the time control is transferred to the customer based upon shipping terms, which is generally upon shipment.

For sales to customers whose contract cancellation terms provide an enforceable right to payment, the Climate Solutions segment recognizes revenue over time based upon its

estimated progress toward satisfaction of the performance obligations.

The segment measures progress by evaluating the production status toward completion of ordered products not yet shipped to its customers.

For sales to customers whose contract cancellation terms provide an enforceable right to payment for customized products and solutions, the Climate Solutions segment

recognizes revenue over time based upon its estimated progress toward satisfaction of the performance obligations.

The segment measures progress by evaluating the production status toward completion of ordered products not yet shipped to its

Performance Technologies

The Performance Technologies

segment provides products and solutions that enhance the performance of customer applications.

The Performance Technologies segment designs and manufactures air- and liquid-cooled technology for vehicular, stationary power, and industrial

applications.

Air-cooled products include radiators, charge air coolers, condensers, and engine cooling modules.

Liquid-cooled products include engine oil coolers, charge air coolers, condensers, and exhaust gas recirculation coolers.

the Performance Technologies segment provides advanced solutions, which are designed to improve battery range and vehicle life, to zero-emission and hybrid commercial vehicle, automotive, bus and specialty vehicle customers.

These solutions include

battery thermal management systems, electronics cooling packages, and battery chillers.

The advanced solutions provided by the segment also include coating products and application services that extend the life of equipment and components by

protecting against corrosion.

The Performance Technologies segment provides products and solutions that enhance the performance of customer applications and develops solutions that

provide mission critical power, increase fuel economy and lower emissions in light of increasingly stringent government regulations.

The Performance Technologies segment designs and manufactures air- and liquid-cooled heat exchangers for

vehicular, stationary power, and industrial applications.

Air-cooled products consist primarily of powertrain cooling products, such as radiators, condensers, engine cooling modules, charge air coolers, fan shrouds, and surge tanks;

module generator sets.

Liquid-cooled products include engine oil coolers, EGR coolers, liquid charge air coolers, transmission and retarder oil coolers, chillers, and condensers.

In addition, the Performance Technologies segment provides advanced

solutions, designed to improve battery range and vehicle life, to zero-emission and hybrid commercial vehicle, off-highway machine and automotive customers.

These solutions include battery thermal management systems, electronics cooling packages,

and battery chillers.

The advanced solutions provided by the segment also include coating products and application services that extend the life of equipment and components by protecting against corrosion.

While the Performance Technologies segment provides customized production and service parts to customers under multi-year programs, these programs typically do not contain

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time control is transferred to the customer based upon shipping terms, which is generally upon shipment.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

In regard to the Performance Technologies customers with contractual cancellation terms that provide an enforceable right to payment for performance completed to date, the

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payments, which it expects to recover through future sales, and amortizes the assets as a reduction to revenue when the related products are sold to customers.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

Disaggregation of revenue

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Each segment’s revenue is disaggregated by product group, by geographic location and based upon the timing of revenue recognition.

Effective April 1, 2022,

the Company began managing its operations under two operating segments, Climate Solutions and Performance Technologies.

The Climate Solutions segment includes the previously-reported Building HVAC Systems (“BHVAC”) and the Commercial and Industrial

Solutions (“CIS”) segments, with the exception of CIS Coatings.

The Performance Technologies segment includes the previously-reported Heavy Duty Equipment (“HDE”) and Automotive segments and the CIS Coatings business.

See Note 22 for additional

information regarding the Company’s operating segments.

The disaggregated revenue information presented in the tables below for fiscal 2022 and 2021 has been recast to be comparable with the fiscal 2023 presentation.

Beginning in fiscal 2024 and in connection with the Company’s strategic transformation and continued application of 80/20 principles across its

businesses, the Company has refined its reporting of disaggregated revenue within the Climate Solutions segment to be more consistent with how the segment has aligned its teams around three market-based verticals:

i) heat transfer products;

and iii) data center cooling.

For the refined fiscal 2024 presentation, the Company reports revenue based upon the respective product lines and

related customer relationships managed by each market-based vertical team.

See Note 22 for additional information regarding the Company’s operating segments.

The disaggregated revenue information presented in the tables below for fiscal 2023

and 2022 has been recast to be comparable with the fiscal 2024 presentation.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

Year ended March 31, 2024

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Heat transfer

HVAC & refrigeration

Data center cooling

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Products transferred over time

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

Year ended March 31, 2023

1 unchanged sentence

Heat transfer

HVAC & refrigeration

Data center cooling

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Products transferred over time

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

Year ended March 31, 2022

1 unchanged sentence

Heat transfer

HVAC & refrigeration

Data center cooling

6 unchanged sentences

Products transferred over time

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

Contract balances

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contracts, wherein the customer has guaranteed reimbursement, and assets recorded for revenue recognized over time, which represent the Company’s rights to consideration for work completed but not yet billed.

The $ 7.5 million decrease in contract assets during fiscal 2023 primarily resulted from a decrease in contract assets for revenue recognized over time.

The $ 6.4 million decrease in contract assets during fiscal 2024 primarily resulted from a decrease in capitalized costs related to customer-owned tooling

contracts and contract assets for revenue recognized over time.

Contract liabilities, included within other current liabilities in the consolidated balance sheets, consist of payments received in advance of satisfying performance

obligations under customer contracts, including contracts for customer-owned tooling.

The $ 9.7 million increase in contract liabilities

during fiscal 2023 primarily resulted from payments received in advance of the Company’s satisfaction of performance obligations.

obligations under customer contracts, including contracts for data center cooling products and customer-owned tooling.

The $ 57.9 million

increase in contract liabilities during fiscal 2024 primarily resulted from payments received in advance of the Company’s satisfaction of performance obligations, largely associated with contracts with long inventory lead times.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

Fair Value Measurements

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At March 31, 2024 and 2023, the fair values of the investments and obligations for the Company’s deferred compensation plans each totaled $ 4.1 million and $ 2.3 million, respectively.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

Plan assets related to the Company’s pension plans were classified as follows:

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Money market investments

Fixed income securities

Pooled equity funds

government and agency securities

Fair value excluding investments measured at net asset value

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Money market investments

Fixed income securities

Pooled equity funds

government and agency securities

Fair value excluding investment measured at net asset value

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Total fair value

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

The Company determined the fair value of money market investments to approximate their net asset values, without discounts for credit quality or

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The Company’s stock-based incentive programs consist of the following:

(1) a long-term incentive plan (“LTIP”) for officers and other executives that consists of stock

awards, stock options, and performance-based awards granted for retention and performance, (2) a discretionary equity program for other management and key employees, and (3) stock awards for non-employee directors.

The Company’s Board of Directors

and the Human Capital and Compensation Committee, as applicable, have discretionary authority to set the terms of the stock-based awards.

Grants to employees during fiscal 2023 were issued under the Company’s Amended and Restated 2020 Incentive

Compensation Plan.

In lieu of performance-based stock awards, the Company granted performance cash awards to the LTIP participants in fiscal 2023, 2022, and 2021.

At present, the Company accomplishes the fulfillment of equity-based grants through

the issuance of new common shares.

As of March 31, 2023, approximately 2.2 million shares authorized under the Amended and Restated 2020 Incentive Compensation Plan remain

available for future grants.

Employee participants have the opportunity to deliver back to the Company the number of shares from the vesting of stock awards sufficient to satisfy the individual’s minimum tax withholding obligations.

are held as treasury shares.

The Company recorded stock-based compensation expense of $ 6.6 million , $ 5.7 million , and $ 6.3 million in

fiscal 2023, 2022 , and 2021, respectively.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

a long-term incentive plan (“LTIP”) for officers and other executives that authorizes grants of stock awards, stock options, and performance-based awards granted for retention and performance, ( ii ) a discretionary equity program for other management and key employees, and ( iii ) stock awards for non-employee directors.

Company’s Board of Directors and the Human Capital and Compensation Committee, as applicable, have discretionary authority to set the terms of the stock-based awards.

Grants to employees during fiscal 2024 were issued under the Company’s Amended

and Restated 2020 Incentive Compensation Plan.

In fiscal 2024, the Company granted performance-based stock awards and restricted stock awards.

In fiscal 2023 and 2022, the Company granted performance cash awards, restricted stock awards, and

stock options.

The Company recorded $ 1.2 million , $ 1.1 million , and $ 0.9 million of compensation expense related to stock options in fiscal 2023, 2022 , and 2021, respectively.

At present, the Company settles equity-based grants through the issuance of new common shares.

As of March 31, 2024, approximately 1.5 million shares authorized under the Amended and Restated 2020

Incentive Compensation Plan remain available for future grants.

Employee participants have the opportunity to deliver back to the Company the number of shares from the vesting of stock awards sufficient to satisfy the individual’s minimum tax

withholding obligations.

These shares are held as treasury shares.

The Company recorded stock-based compensation expense of $ 10.8

million , $ 6.6 million , and $ 5.7 million in fiscal 2024, 2023 , and 2022, respectively.

Stock options

The Company recorded $ 1.0 million , $ 1.2 million , and $ 1.1 million of compensation expense related to stock options in fiscal 2024, 2023 , and

2022, respectively.

The grant date fair value of stock options that vested during fiscal 2024, 2023 , and 2022, was $ 1.2 million , $ 1.0 million , and $ 0.9 million , respectively.

As of March 31, 2023 , the total compensation expense not yet recognized related to non-vested stock options was $ 2.3 million and the weighted-average period in which the remaining expense is expected to be recognized was

As of March 31, 2024 , the total compensation expense not yet recognized related to non-vested stock options was $ 1.1 million and the weighted-average period in which the remaining expense is expected to be

recognized was 1.2 years.

The Company estimated the fair value of option awards on the date of grant using the Black-Scholes option valuation model and the following

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The expected lives of the awards are based upon historical patterns and the terms of the options.

Based upon the terms of the fiscal 2023 annual awards, stock options vest 33 percent, 33 percent, and 34 percent per year for three years , respectively.

grants preceding the fiscal 2023 grant vest 25 percent per year for four years .

The Company did no t

grant options in fiscal 2024.

Based upon the terms of the fiscal 2023 awards, stock options vest 33 percent, 33 percent, and 34 percent per year for three years , respectively.

Stock option grants preceding the fiscal 2023 grant vest 25 percent per year for four years .

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

A summary of stock option activity for fiscal 2024 was as follows:

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Proceeds from stock options exercised

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

Restricted stock

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closing market price of its common shares on the date of grant.

Based upon the terms of the fiscal 2023 annual awards, restricted stock awards vest 33 percent, 33 percent, and 34 percent per year for three years , respectively.

stock award grants preceding the fiscal 2023 grant vest 25 percent per year for four years .

Based upon the terms of the annual awards, restricted stock awards vest 33

percent, 33 percent, and 34

percent per year for three years , respectively.

Restricted stock award grants preceding the fiscal 2023 grant vest 25 percent per year for four years .

Restricted stock awards granted to non-employee directors in fiscal 2024 vest one year from the time of grant.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

A summary of restricted stock activity for fiscal 2024 was as follows:

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Restricted stock – performance-based shares

The Company granted performance-based cash awards in fiscal 2023, 2022, and 2021 in lieu of performance-based stock awards.

For performance-based stock

awards, the Company values the awards using the closing market price of its common shares on the date of grant.

During fiscal 2023 all performance-based awards were cash-based, therefore, the Company did no t recognize compensation expense related to performance-based stock awards.

In fiscal 2022, the Company recorded a $ 0.4 million benefit related to the performance-based stock awards granted in fiscal 2020.

The payout earned for the fiscal 2020 awards was less than previously estimated.

In fiscal 2021, the

Company recorded $ 1.1 million of compensation expense related to performance-based stock awards.

The payouts earned under the performance portion of the award program are based upon the attainment of certain financial targets over a three-year period and are paid after the end of that three-year performance period, if the performance targets have

been achieved.

The performance metrics for the performance-based cash awards granted in fiscal 2021 are based upon both a target three-year average consolidated cash flow return on invested capital and a target three-year average annual revenue growth at the end of the three-year performance period, commencing with the fiscal year of grant.

performance metrics for the performance-based cash awards granted in fiscal 2022 and fiscal 2023 are based upon both a target three-year

average consolidated 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 three-year performance

period, commencing with the fiscal year of grant.

The Company granted performance-based stock awards in fiscal 2024.

The Company granted performance - based

cash awards in fiscal 2023 and 2022 in lieu of performance-based stock awards.

For performance-based stock awards, the Company values the awards using the closing market price of its common shares on the date of grant.

In fiscal 2024, the Company

recorded $ 4.5 million of compensation expense related to performance-based stock awards.

During fiscal 2023 all performance-based awards

were cash-based, therefore, the Company did no t recognize compensation expense related to performance-based stock awards.

In fiscal 2022,

the Company recorded a $ 0.4 million benefit related to the performance-based stock awards granted in fiscal 2020.

The payout earned for

the fiscal 2020 awards was less than previously estimated.

At March 31, 2024, the Company had $ 10.8 million of total unrecognized compensation expense related to non-vested performance-based

stock awards, which is expected to be recognized over a weighted-average period of 2.0

The payouts earned under the performance portion of the award program are based upon the attainment of certain financial targets over a three-year period and are paid after the end of that three-year

performance period, if the performance targets have been achieved.

The performance metrics for the performance-based awards granted in fiscal 2024, 2023, and 2022 are based upon both a target three-year average consolidated 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 three-year performance period, commencing with the fiscal year of grant.

Restructuring Activities

During fiscal 2024,

restructuring and repositioning expenses primarily consisted of severance expenses.

During fiscal 2024, the Company recorded $ 12.9 million

of severance expenses, of which $ 11.5 million were recorded in the Performance Technologies segment and primarily relate to the pending

closure of a technical service center in Europe.

In addition, the Company incurred equipment transfer costs within the Climate Solutions and Performance Technology segments.

These restructuring activities are part of the Company’s transformational

initiatives supported by 80/20 principles and include product line transfers intended to achieve production efficiency improvements in its manufacturing facilities.

During fiscal 2023,

restructuring and repositioning expenses primarily consisted of severance-related expenses for targeted headcount reductions in each the Climate Solutions and Performance Technologies segments and supported the Company’s objective of reducing

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In addition, the Performance Technologies and Climate Solutions segments incurred equipment transfer costs in Europe and closure costs related to a previously-leased facility in the U.S., respectively.

During fiscal 2022, the Company committed to restructuring actions intended to reduce SG&A and operational expenses, particularly within the Performance Technologies

During fiscal 2022, the Company committed to restructuring actions to reduce SG&A and operational expenses, particularly within the Performance Technologies

During fiscal 2022, the Company recorded $ 22.1 million of severance expenses, of which $ 20.3 million were recorded in the Performance Technologies segment and primarily related to

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(In millions, except per share amounts)

During fiscal 2021, restructuring actions consisted primarily of targeted headcount reductions and plant consolidation activities.

The headcount reductions were primarily

in Europe and in the Americas within the Performance Technologies segment and supported the Company’s objective of reducing operational and SG&A cost structures.

During fiscal 2021, the Company transferred production from its manufacturing

facility in Zhongshan, China to another Climate Solutions segment manufacturing facility in China.

As a result of this plant consolidation, the Company recorded $ 3.7 million of severance expenses during fiscal 2021.

Other plant consolidation activities in fiscal 2021 included transferring product lines to the Company’s Climate Solutions manufacturing facility in Mexico.

Restructuring and repositioning expenses were as follows:

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Beginning balance

Reclassified from held for sale

Disposition (a)

Effect of exchange rate changes

Ending balance

During fiscal 2022 and 2021, the Company recorded $ 56.0 million of a net asset impairment reversal and $ 166.8 million of impairment charges, respectively, within its Performance Technologies segment.

See Note 2 for additional information.

Also during fiscal 2022, the Company recorded an impairment charge of $ 0.3 million to reduce the carrying value of a previously closed Climate Solutions facility to its estimated fair value, less costs to sell.

The Company sold three automotive businesses based in Germany during the third quarter of fiscal 2024.

See Note 2 for additional information regarding the sale.

Other Income and Expense

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Total other expense - net

Foreign currency transactions primarily

consist of foreign currency transaction gains and losses on the re-measurement or settlement of foreign currency-denominated assets and liabilities, including transactions denominated in a foreign currency and intercompany loans , along with gains and

losses on foreign currency exchange contracts.

Foreign currency transactions primarily consist of foreign currency transaction gains and losses on the re-measurement or settlement of foreign currency-denominated assets and liabilities, including

transactions denominated in a foreign currency and intercompany loans ,

along with gains and losses on foreign currency exchange contracts.

Net periodic benefit cost for the

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(In millions, except per share amounts)

and foreign components of earnings or loss before income taxes and the benefit or provision for income taxes consisted of the following:

and foreign components of earnings before income taxes and the provision or benefit for income taxes consisted of the following:

Years ended March 31,

Components of earnings (loss) before income taxes:

Components of earnings before income taxes:

United States

Total earnings (loss) before income taxes

Income tax (benefit) provision:

Total income tax (benefit) provision

Total earnings before income taxes

Income tax provision (benefit):

Total income tax provision (benefit)

The reconciliation between the U.S.

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Valuation allowances

Tax credits and benefits

Tax rate or law changes

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Effective tax rate

The Company’s fiscal 2023 effective tax rate was favorably impacted by an income tax benefit related to the valuation allowance on deferred tax assets in the U.S.

effective tax rates in both fiscal 2022 and 2021 were significantly impacted by impairment charges or reversals, largely related to the liquid-cooled automotive business, and income tax charges or benefits related to valuation allowances.

Note 2 for information regarding the impairment charges and reversals.

The income tax charges or benefits related to valuation allowances are described below .

MODINE MANUFACTURING COMPANY

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(In millions, except per share amounts)

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.

The Company’s fiscal 2024 effective tax rate was favorably impacted by a $ 3.1

million tax benefit related to the sale of three automotive businesses based in Germany , which is presented in the table above within dividends and taxable foreign inclusions.

The Company’s fiscal 2023 effective tax rate was favorably impacted by an income tax benefit related to the reversal of a valuation

allowance on deferred tax assets in the U.S.

The effective tax rate in fiscal 2022 was significantly impacted by an impairment reversal related to the liquid-cooled automotive business and income tax charges or benefits related to valuation

See Note 2 for information regarding the sale of the three automotive businesses in fiscal 2024 and the impairment

reversal in fiscal 2022.

The income tax charges or benefits related to valuation allowances are described below.

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 judgement 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.

Since the third quarter of fiscal 2021, the Company has maintained a full valuation allowance against net deferred tax assets in the U.S.

since the Company determined, at that time, it was more likely than

not that the net deferred tax assets would not be realized.

In the fourth quarter of fiscal 2023, based on the Company’s recent history of earnings, coupled with its forecasted profitability, the Company determined it was more likely than not that

certain deferred tax assets in the U.S.

will be realized.

As a result, the Company reversed the valuation allowance related to these deferred tax assets and recorded an income tax benefit of $ 57.3 million.

The Company evaluated both positive and negative objectively verifiable evidence and placed substantial weight on its fiscal 2022 and 2023 earnings, which resulted

in a significant cumulative three-year income position.

The Company also considered its forecasts for future earnings in certain key

The Company has determined it is more likely than not that a portion of the deferred tax assets in the U.S.

related to certain federal and state tax attributes will not be realized prior to expiration and, as such, has maintained a

valuation allowance against these assets.

In addition, the Company recorded a net increase of other deferred tax asset valuation allowances totaling $ 3.6

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

Based upon its analyses during fiscal 2024, the Company recorded net tax expense to increase deferred tax asset valuation allowances by $ 5.4 million.

Based upon its analyses during fiscal 2023, the Company reversed the valuation allowance related to certain deferred tax assets in the U.S.

result, recorded an income tax benefit of $ 57.3 million.

The Company had previously maintained a full valuation allowance against net deferred tax assets in the U.S.

since fiscal 2021.

During fiscal 2023, the Company determined it was more likely than not that these deferred tax assets in the

would be realized after consideration of both positive and negative objectively verifiable evidence.

The Company placed substantial weight on its fiscal 2022

and 2023 earnings, which resulted in a significant cumulative three-year income position.

The Company also considered forecasted future

earnings in certain key businesses.

The Company maintained, however, a valuation allowance on the portion of the deferred tax assets in the U.S.

related to certain federal and state tax attributes that are not expected to be realized prior to

In addition, the Company recorded net tax expense to increase other deferred tax asset valuation allowances by $ 3.6 million.

Based upon its analyses during fiscal 2022, the Company determined it was more likely than not that the deferred tax assets in certain foreign jurisdictions would be

As a result, the Company reversed the valuation allowances related to these deferred tax assets and recorded income tax benefits totaling $ 13.0

The Company’s analyses included consideration of the transaction perimeter modification and the termination of the sale agreement for the liquid-cooled automotive business and the related impairment reversals.

Separately, the Company

determined it was more likely than not that the deferred tax assets in a foreign jurisdiction would not be realized.

As a result, the Company recorded an income tax charge of $ 1.6 million.

Together, these fiscal 2022 valuation allowance adjustments resulted in a net income tax benefit of $ 11.4 million during fiscal 2022.

In addition, the Company recorded a net increase of other deferred tax asset valuation allowances totaling $ 2.5 million.

Based upon its analyses during fiscal 2021, the Company determined it was more likely than not that its deferred tax assets in the U.S.

and in certain foreign jurisdictions would not be realized.

As a result, the Company

recorded income tax charges totaling $ 116.5 million to increase the valuation allowances on deferred tax assets in the U.S.

($ 103.3 million) and in certain foreign jurisdictions ($ 13.2

The Company’s analyses during fiscal 2021 included consideration of the impairment charges recorded for the liquid-cooled automotive business, which contributed to the Company entering into a three-year cumulative loss position in the U.S.

and in certain foreign jurisdictions as of December 31, 2020.

Also during fiscal 2021, the Company recorded a net increase of

other deferred tax asset valuation allowances totaling $ 22.0 million and recorded a $ 9.3 million income tax benefit resulting from allocation of the income tax provision between net earnings and other comprehensive income .

The Company’s analyses included consideration of the termination of a sale agreement for the liquid-cooled automotive business and the related impairment reversal.

Separately, the Company determined it was more likely than not that the

deferred tax assets in a foreign jurisdiction would not be realized.

As a result, the Company recorded an income tax charge of $ 1.6

Together, these valuation allowance adjustments resulted in a net income tax benefit of $ 11.4 million during fiscal 2022.

addition, the Company recorded net tax expense to increase other deferred tax asset valuation allowances by $ 2.5 million.

At March 31, 2024, valuation allowances against deferred tax assets in the U.S.

and in certain foreign jurisdictions totaled $ 33.9 million and $ 27.7 million, respectively.

and in certain foreign jurisdictions totaled $ 42.9 million and $ 20.1 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 certain jurisdictions, could necessitate the establishment of further valuation allowances.

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

MODINE MANUFACTURING COMPANY

27 unchanged sentences

Ending balance

The Company’s liability for unrecognized tax benefits as of March 31, 2023 was $ 9.7 million and, if recognized, $ 7.8 million would have an effective

tax rate impact.

The Company estimates a $ 2.0 million net decrease in unrecognized tax benefits during fiscal 2024 mainly due to lapses in

statutes of limitations.

If recognized, these reductions would have an impact on the Company’s effective tax rate.

The Company’s liability for unrecognized tax benefits as of March 31, 2024 was $ 9.2 million and, if recognized, $ 7.3 million would have an

effective tax rate impact.

The Company does not expect a significant change in unrecognized tax benefits during fiscal 2025.

The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense.

During fiscal 2024, 2023 and

2021, interest and penalties included within income tax expense in the consolidated statements of operations were not significant.

At March 31, 2023 and 2022, accrued interest and penalties totaled $ 0.8 million and $ 0.7 million, respectively.

The Company files income tax returns in multiple jurisdictions and is subject to examination by taxing authorities throughout the world.

2023, the Company was under income tax examination in a number of jurisdictions.

The following tax years remain subject to examination for the Company’s major tax jurisdictions:

Fiscal 2017 - Fiscal 2022

Fiscal 2018 - Fiscal 2022

United States

Fiscal 2020 - Fiscal 2022

2022, interest and penalties accrued on the consolidated balance sheets and included within income tax expense in the consolidated statements of operations were not significant.

MODINE MANUFACTURING COMPANY

1 unchanged sentence

(In millions, except per share amounts)

The Company files income tax returns in multiple jurisdictions and is subject to examination by taxing authorities throughout the world.

At March 31, 2024, the Company was under

income tax examination in a number of jurisdictions.

The Company’s major tax jurisdictions include the United States and Italy.

For the United States, fiscal 2021 through fiscal 2023 remain subject to examination.

For Italy, fiscal 2018 through fiscal 2023 remain subject

to examination.

At March 31, 2024, the Company had federal and state tax credits of $ 58.3 million that, if not utilized against U.S.

1 unchanged sentence

The Company also had state and local tax loss carryforwards totaling $ 138.6 million.

If not utilized against state apportioned taxable income, certain state and local carryforwards will expire between fiscal 2024 and 2042 , while some will not expire due to an unlimited carryforward period.

In addition, the

Company had tax loss and foreign attribute carryforwards totaling $ 285.0 million in various tax jurisdictions throughout the world.

of the carryforwards in foreign jurisdictions are offset by valuation allowances.

If not utilized against taxable income, $ 54.9 million of

these carryforwards will expire between fiscal 2024 and 2034 , and $ 230.1 million, mainly related to Germany and Italy, will not expire due to an unlimited

carryforward period.

If not utilized against state apportioned taxable income, certain state and local carryforwards will expire between fiscal 2025 and 2044 , while some will not expire

due to an unlimited carryforward period.

In addition, the Company had tax loss and foreign attribute carryforwards totaling $ 236.3 million

in various tax jurisdictions throughout the world.

Certain of the carryforwards in foreign jurisdictions are offset by valuation allowances.

If not utilized against taxable income, $ 61.7 million of these carryforwards will expire between fiscal 2025

and 2034 , and $ 174.6

million, mainly related to Germany and Italy, will not expire due to an unlimited carryforward period.

The Company’s practice and intention is to reinvest, with certain insignificant exceptions, the earnings of its non-U.S.

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Basic Earnings Per Share:

Net earnings (loss) attributable to Modine

Net earnings attributable to Modine

Weighted-average shares outstanding – basic

Net earnings (loss) per share – basic

Net earnings per share – basic

Diluted Earnings Per Share:

Net earnings (loss) attributable to Modine

Net earnings attributable to Modine

Weighted-average shares outstanding – basic

1 unchanged sentence

Weighted-average shares outstanding – diluted

Net earnings (loss) per share – diluted

For fiscal 2023, 2022 and 2021, the calculation of diluted earnings per share excluded 0.5 million, 0.5 million, and 1.0 million, stock options, respectively, because they were anti-dilutive.

For fiscal 2023, 2022 and 2021, the calculation of diluted earnings per share excluded 0.2 million, 0.2 million, and 0.4 million restricted stock awards, respectively, because they were anti-dilutive.

For fiscal 2021 the total number of potentially-dilutive securities

was 0.2 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.

Net earnings per share – diluted

For fiscal 2024 there were no

anti-dilutive securities that impacted the calculation of diluted earnings per share.

For fiscal 2023 and 2022, the calculation of diluted earnings per share each excluded 0.5 million stock options, respectively, because they were anti-dilutive.

For fiscal 2023 and 2022, the calculation of diluted earnings per share each excluded 0.2 million restricted stock awards, respectively, because they were anti-dilutive.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

Cash, Cash Equivalents and Restricted Cash

3 unchanged sentences

Total cash, cash equivalents and restricted cash

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

Restricted cash, which is reported within other current assets and other noncurrent assets in the consolidated balance sheets, consists primarily of

deposits for contractual guarantees or commitments required for rents, import and export duties, and commercial agreements.

Restricted cash, which is reported within other current assets and other noncurrent

assets in the consolidated balance sheets, consists primarily of deposits for contractual guarantees or commitments required for rents, import and export duties, and commercial agreements.

Inventories consisted of the following:

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For fiscal 2022, gains related to the disposal of property, plant and equipment totaled $ 0.1 million.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

Intangible Assets

5 unchanged sentences

Total intangible assets

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

During the second quarter of fiscal 2024, the Company recorded customer relationship and acquired technology intangible assets totaling $ 2.9 million related to the Napps acquisition.

During the fourth quarter of fiscal 2024, the Company recorded intangible assets totaling $ 102.3 million and $ 11.4 million related to

the Scott Springfield Manufacturing acquisition and the purchase of intellectual property from TMGcore, Inc., respectively.

The intangible assets recorded for the Scott Springfield Manufacturing acquisition are comprised of customer relationships,

including backlog, and trade names.

The Company recorded acquired technology as part of its purchase of certain assets from TMGcore, Inc.

See Note 2 for additional information.

The Company recorded $ 9.2 million, $ 8.0 million, and $ 8.4 million of

1 unchanged sentence

The Company estimates that it will record approximately $ 29.0

million of annual amortization expense in fiscal 2024 through 2028.

million, $ 18.0 million, $ 17.0

million, $ 17.0 million, and $ 16.0

million of annual amortization expense in fiscal 2025 through 2029, respectively.

The following table presents a roll forward of the carrying value of goodwill from March

31, 2022 to March 31, 2024 .

The Company has recast the March 31, 2022 and 2021 goodwill balances to be comparable with the current segment structure.

was no impact to the underlying reporting units as a result of the segment realignment during fiscal 2023.

Balance, March 31, 2022

1 unchanged sentence

Balance, March 31, 2023

Acquisition (disposition) (a)

Effect of exchange rate changes

Balance, March 31, 2024

During fiscal 2024, the Company recorded $ 65.2 million and $ 1.0 million of goodwill in connection

with its acquisition of Scott Springfield Manufacturing and Napps, respectively.

In addition, the Company wrote-off $ 0.7 million

of goodwill in connection with the sale of two coatings facilities.

See Note 2 for additional information.

The Company tests goodwill for impairment annually, as of March 31, or more frequently if events or circumstances change that would, more likely than not, reduce the fair

4 unchanged sentences

estimated future cash flows and risk-adjusted discount rates.

As a result of its annual goodwill impairment tests performed as of March 31, 2023, the Company determined that the fair value of each of the reporting

units within its Climate Solutions and Performance Technologies segments exceeded their respective book values.

As a result of its annual goodwill impairment tests performed as of March 31, 2024, the Company determined that the fair value of each of its reporting

units exceeded their respective book values.

At both March 31, 2024 and 2023, accumulated goodwill impairment losses totaled $ 40.8 million within the Performance Technologies segment .

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

Product Warranties and Other Commitments

8 unchanged sentences

Adjustments to pre-existing warranties

Reclassified from held for sale

Acquisition of business (a)

Disposition of businesses (a)

Effect of exchange rate changes

Ending balance

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

The Company acquired Scott Springfield Manufacturing during fiscal 2024.

The Company sold three automotive businesses based in Germany during fiscal 2024.

See Note 2 for additional information.

Indemnification agreements

From time to time, the Company provides indemnification agreements related to the sale or purchase of an entity or facility.

These indemnification

agreements cover customary representations and warranties typically provided in conjunction with such transactions, including income, sales, excise or other tax matters, environmental matters and other third-party claims.

The indemnification periods

provided generally range from less than one year to fifteen years .

In addition, standard indemnification provisions reside in many commercial agreements to which the Company is a party and relate to responsibility in the event of potential

third-party claims.

From time to time, the Company provides indemnification agreements

related to the sale or purchase of an entity or facility.

These indemnification agreements cover customary representations and warranties typically provided in conjunction with such transactions, including income, sales, excise or other tax matters,

environmental matters and other third-party claims.

The indemnification periods provided generally range from less than one year to fifteen years .

In addition, standard indemnification provisions reside in many commercial agreements to which the Company is a party and relate to

responsibility in the event of potential third-party claims.

The fair value of the Company’s outstanding indemnification obligations at March 31, 2024 was not material.

At March 31, 2023, the Company had capital expenditure commitments of $ 25.3 million .

Significant commitments include equipment expenditures to support expanding manufacturing capacity in the Climate Solutions segment and tooling and equipment expenditures for new and renewal programs with

vehicular customers in the Performance Technologies segment.

The Company utilizes inventory arrangements with certain vendors in the normal course of business under which the vendors maintain inventory stock at the Company’s facilities or at

outside facilities.

Title passes to the Company at the time goods are withdrawn for use in production.

March 31, 2024, the Company had capital expenditure commitments of $ 20.2 million.

Significant commitments include tooling and equipment

expenditures for new and renewal programs with vehicular customers in the Performance Technologies segment and equipment expenditures to support expanding manufacturing capacity in the Climate Solutions segment.

The Company utilizes inventory

arrangements with certain vendors in the normal course of business under which the vendors maintain inventory stock at the Company’s facilities or at outside facilities.

Title passes to the Company at the time goods are withdrawn for use in

The Company has agreements with the vendors to use the material within a specific period of time.

In some cases, the Company bears the risk of

loss for the inventory because Modine is required to insure the inventory against damage and/or theft.

In some cases, the Company bears the risk of loss for the inventory because Modine is required to insure the inventory against damage

and/or theft.

This inventory is included within the Company’s consolidated balance sheets as raw materials inventory.

The Company determines if an arrangement is a lease at contract inception.

The lease term begins upon lease commencement, which is when the Company

takes possession of the asset, and may include options to extend or terminate the lease when it is reasonably certain that such options will be exercised.

The Company uses the lease term within its determination of the appropriate lease

classification, either as an operating lease or as a finance lease, and to calculate straight-line lease expense for its operating leases.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make

lease payments arising from the lease.

The Company recognizes ROU assets and lease liabilities at the lease commencement date, based upon the present value of lease payments over the lease term.

As its lease agreements typically do not provide an

implicit interest rate, the Company primarily uses an incremental borrowing rate to calculate the ROU asset and lease liability.

In determining the incremental borrowing rate, the Company considers its current collateralized borrowing rate, the term

of the lease, and the economic environment where the lease activity is concentrated.

The Company believes this method effectively estimates a borrowing rate that it could obtain for a debt instrument with similar terms as the lease agreement.

Based upon its accounting policy, the Company does not separate lease and non-lease components for any asset class.

In addition, the Company does not

record short-term leases (i.e.

leases with an initial term of 12 months or less) on its consolidated balance sheets.

Certain leases require the Company to pay taxes, insurance, maintenance, and other operating expenses associated with the leased asset.

are not included in the measurement of the lease liability to the extent they are variable in nature.

These variable lease costs are recognized as variable lease expense when incurred.

The depreciable life of the ROU assets and related leasehold

improvements are limited by the expected lease term, unless the lease contains a provision to transfer title to the Company or a purchase option that the Company expects to execute.

The Company’s most significant leases represent leases of real estate, such as manufacturing facilities, warehouses, and offices.

In addition, the

Company leases manufacturing and IT equipment and vehicles.

The Company’s most significant leases have remaining lease terms of 1 to 11 years.

Certain leases contain renewal options for varying periods, which are at the Company’s discretion.

If reasonably certain of exercise, the

Company includes the renewal periods within the calculation of ROU assets and lease liabilities.

The Company’s lease agreements do not contain material residual value guarantees or material restrictive covenants.

term begins upon lease commencement, which is when the Company takes possession of the asset, and may include options to extend or terminate the lease when it is reasonably certain that such options will be exercised.

The Company uses the lease term

within its determination of the appropriate lease classification, either as an operating lease or as a finance lease, and to calculate straight-line lease expense for its operating leases.

MODINE MANUFACTURING COMPANY

1 unchanged sentence

(In millions, except per share amounts)

ROU assets represent the Company’s right to use an underlying asset for the lease term

and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

The Company recognizes ROU assets and lease liabilities at the lease commencement date, based upon the present value of lease payments over the

As its lease agreements typically do not provide an implicit interest rate, the Company primarily uses an incremental borrowing rate to calculate the ROU asset and lease liability.

In determining the incremental borrowing rate, the

Company considers its current collateralized borrowing rate, the term of the lease, and the economic environment where the lease activity is concentrated.

The Company believes this method effectively estimates a borrowing rate that it could obtain

for a debt instrument with similar terms as the lease agreement.

Based upon its accounting policy, the Company does not separate lease and non-lease

components for any asset class.

In addition, the Company does not record short-term leases (i.e.

leases with an initial term of 12 months or less) on its consolidated balance sheets.

Certain leases require the Company to pay taxes, insurance, maintenance, and other

operating expenses associated with the leased asset.

Such amounts are not included in the measurement of the lease liability to the extent they are variable in nature.

These variable lease costs are recognized as variable lease expense when incurred.

The depreciable life of the ROU assets and related leasehold improvements are limited by the expected lease term, unless the lease contains a provision to transfer title to the Company or a purchase option that the Company expects to execute.

The Company’s most significant leases represent leases of real estate, such as

manufacturing facilities, warehouses, and offices.

In addition, the Company leases manufacturing and IT equipment and vehicles.

The Company’s most significant leases have remaining lease terms of 1 to 10 years.

Certain leases contain renewal options for varying

periods, which are at the Company’s discretion.

If reasonably certain of exercise, the Company includes the renewal periods within the calculation of ROU assets and lease liabilities.

The Company’s lease agreements do not contain material residual

value guarantees or material restrictive covenants.

Lease assets and liabilities

The following table provides a summary of leases recorded on the consolidated balance

following table provides a summary of leases recorded on the consolidated balance sheets.

Balance Sheet Location

5 unchanged sentences

Property, plant and equipment - net

Lease Liabilities

Operating lease liabilities

6 unchanged sentences

Long-term debt

Finance lease ROU assets were recorded net of

accumulated amortization of $ 3.2 million and $ 2.8 million as of March 31, 2023 and 2022, respectively.

Finance lease ROU assets were recorded net of accumulated amortization of $ 3.7 million and $ 3.2 million as of March 31, 2024 and 2023, respectively.

Components of lease expense

The Company records operating lease expense as either cost of sales or SG&A expenses within its consolidated statements of operations, depending

upon the nature and use of the ROU assets.

The Company records finance lease expense as depreciation expense within cost of sales or SG&A expenses, depending upon the nature and use of the ROU assets, and as interest expense in its consolidated

statements of operations.

The Company records operating lease expense as either cost of sales or SG&A

expenses within its consolidated statements of operations, depending upon the nature and use of the ROU assets.

The Company records finance lease expense as depreciation expense within cost of sales or SG&A expenses, depending upon the nature

and use of the ROU assets, and as interest expense in its consolidated statements of operations.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

The components of lease expense were as follows:

5 unchanged sentences

Total lease expense

In fiscal 2023, 2022, and 2021 operating lease

expense included short-term lease expense of $ 5.7 million, $ 4.2 million, and $ 3.5 million respectively.

Variable lease expense

was not significant.

In fiscal 2024, 2023, and 2022 operating lease expense included short-term lease expense of $ 5.4

million, $ 5.7 million, and $ 4.2

million respectively.

Variable lease expense was not significant.

Supplemental cash flow information

6 unchanged sentences

Finance leases

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

Lease term and discount rates

7 unchanged sentences

Finance leases

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

Maturity of lease liabilities

Future minimum rental payments for leases with initial non-cancellable lease terms in excess of one year were as follows at March 31, 2023:

Future minimum rental payments for leases with initial non-cancellable lease terms in

excess of one year were as follows at March 31, 2024:

Operating Leases

Finance Leases

2030 and beyond

Total lease payments

Present value of lease liabilities

In October 2022, the Company executed an amended and restated credit agreement with a syndicate of banks that provides for a multi-currency $ 275.0 million revolving credit facility and U.S.

dollar- and euro-denominated term loan facilities maturing in October 2027.

In addition, the credit

agreement provides for shorter-duration swingline loans.

This credit agreement modified the Company’s then existing $ 250.0 million

revolver and term loan facilities, which would have matured in June 2024.

In connection with the credit agreement modification during fiscal 2023, the Company incurred $ 2.2 million of debt issuance costs.

Of these costs, the Company deferred $ 1.5

million, which will be amortized as interest expense over the term of the debt, and recorded $ 0.7 million as interest expense on the

consolidated statement of operations.

The Company paid $ 0.6 million for debt issuance costs during fiscal 2023 and the remaining

issuance costs were added to the new term loan principal at the time of the modification.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

The table above excludes approximately $ 23.0 million of future lease payments associated with a 10-year

operating lease of a manufacturing facility within the Climate Solutions segment that commenced in the first quarter of fiscal 2025.

debt consisted of the following:

2 unchanged sentences

5.9 % Senior Notes

5.8 % Senior Notes

Revolving credit facility

5.8 % Senior Notes

Finance lease obligations

current portion

1 unchanged sentence

Total long-term debt

Other long-term debt primarily includes finance lease obligations.

Long-term debt, including the current portion of long-term debt, matures as follows:

Borrowings under the revolving credit, swingline and term loan facilities bear interest at a variable rate, based upon the applicable reference

rate and including a margin percentage dependent upon the Company’s leverage ratio, as described below.

At March 31, 2023, the weighted-average interest rate for the term loans was 6.0 percent.

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 March 31, 2023, the Company had no outstanding borrowings related to the revolving credit and swingling facilities and domestic letters of

credit totaled $ 5.4 million.

As a result, available borrowing capacity under the Company’s revolving credit facility was $ 269.6 million as of March 31, 2023.

At March 31, 2022, the Company’s borrowings under its revolving credit and swingline facilities totaled $ 64.9 million and $ 7.0 million,

respectively.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

The Company maintains a credit agreement with a syndicate of banks that provides for a multi-currency $ 275.0 million revolving credit facility and U.S.

dollar- and euro-denominated term loan facilities maturing in October 2027.

In addition, the credit agreement provides for

shorter-duration swingline loans.

Borrowings under the revolving credit, swingline and term loan facilities bear interest at a variable rate, based upon the applicable reference rate and including a margin percentage dependent upon the Company’s

leverage ratio, as described below.

At March 31, 2024, the weighted-average interest rate for revolving credit facility borrowings and the term loans was 6.8

and 6.5 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 March 31, 2024, the Company’s borrowings under its revolving credit and swingline facilities totaled $ 90.0 million and $ 2.0 million, respectively, and domestic letters of credit totaled $ 5.6 million.

As a result, available borrowing capacity under the Company’s revolving credit facility was $ 177.4

million as of March 31, 2024.

At March 31, 2023 the Company had no outstanding borrowings under its revolving credit and swingline

The Company also maintains credit agreements for its foreign subsidiaries.

The outstanding short-term borrowings related to these foreign credit

agreements totaled $ 3.7 million and $ 0.7

million at March 31, 2023 and March 31, 2022, respectively.

The outstanding short-term borrowings related to these foreign credit agreements totaled $ 10.0 million and $ 3.7 million at March 31, 2024 and 2023, respectively.

Indebtedness under the Company’s credit agreement and Senior Note agreements is secured by liens on substantially all domestic assets.

agreements further require compliance with various covenants that may limit the Company’s ability to incur additional indebtedness;

These agreements require compliance with various covenants that may limit the Company’s ability to incur

additional indebtedness;

make investments, loans, or guarantees;

engage in certain transactions with affiliates;

restricted payments including dividends.

In addition, the agreements may require prepayment in the event of certain asset sales.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

Financial covenants within its credit agreements require 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-quarter 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 March 31, 2023, 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 March 31, 2023 and 2022, 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 approximately $ 125.9 million and $ 138.9 million,

respectively.

The fair value of the Company’s long-term debt is categorized as Level 2 within the fair value hierarchy.

and make restricted payments, including dividends.

In addition, the agreements may require prepayment in the event of

certain asset sales.

Financial covenants within its credit agreements include a leverage ratio, 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-quarter 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.

31, 2024, 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 March 31, 2024 and 2023, 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 approximately $ 120.9

million and $ 125.9 million, respectively.

The fair value of the Company’s long-term debt is categorized as Level 2 within the fair value

Refer to Note 4 for the definition of a Level 2 fair value measurement.

3 unchanged sentences

Company currently matches employee contributions up to 4.5 percent of their compensation.

During fiscal 2021, as part of its response to

the negative impacts of the COVID-19 pandemic, the Company suspended matching employee contributions for part of the year.

The Company’s expense for defined contribution employee benefit plans during fiscal 2023, 2022, and 2021 was $ 6.9 million, $ 6.4 million, and $ 3.0 million, respectively.

The Company’s expense for defined contribution

employee benefit plans during fiscal 2024, 2023, and 2022 was $ 8.3 million, $ 6.9 million, and $ 6.4 million,

respectively.

In addition, the Company maintains non-qualified deferred compensation plans for eligible employees, and various non-U.S.

19 unchanged sentences

maintained in Germany and Italy and are closed to new participants.

The Company previously maintained a pension plan in Austria that conveyed to the buyer of the air-cooled automotive business during fiscal 2022;

see Note 1 for additional

The Company previously maintained certain pension plans in Germany and Austria that conveyed to the buyers of the Germany automotive businesses and Austrian air-cooled automotive

business during fiscal 2024 and 2022, respectively;

see Note 2 for additional information.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

In connection with funding relief provisions within the American Rescue Plan Act of 2021, the

Company did no t make cash contributions to its U.S.

Company made $ 0.9 million cash contributions to its U.S.

pension plans during fiscal 2024 and no cash contributions in fiscal 2023.

The Company contributed $ 3.5

million to its U.S.

pension plans during fiscal 2022.

The Company contributed $ 3.5 million and $ 19.3 million to its U.S.

pension plans during fiscal 2022 and 2021, respectively.

In addition, the Company contributed $ 1.8 million, $ 1.5 million, and $ 1.5 million to its non-U.S.

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These contributions are

reported in the change in other liabilities in the consolidated statements of cash flows.

reported within the change in other liabilities in the consolidated statements of cash flows.

Postretirement plans

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The Company’s net periodic income for its postretirement plans in

each of fiscal 2023, 2022, and 2021 was $ 0.3 million.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

fiscal 2024 was $ 0.4 million.

The net periodic income for its postretirement plans in each fiscal 2023 and 2022 was $ 0.3 million.

Measurement date

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Benefits paid

Disposition of air-cooled automotive business

Disposition of Germany automotive businesses

Effect of exchange rate changes

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Noncurrent liability

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

As of March 31, 2024, 2023, and 2022, the benefit obligation associated with the Company’s non-U.S.

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million decrease in the benefit obligation associated with non-U.S.

pension plans as of March 31, 2023, compared with the prior year, was primarily due to net actuarial gains during the year from an increase in discount rates and employer

contributions for benefits paid to plan participants which decreased the obligation by $ 4.4 million and $ 1.5 million, respectively, and to a lesser extent, the impact of foreign currency exchange rates.

The decreases were partially offset by service and

interest cost totaling $ 0.7 million.

In fiscal 2022, the $ 9.9 million decrease was primarily due to the sale of the air-cooled automotive business in Austria, which resulted in a $ 5.5

million decrease.

In addition, net actuarial gains during the year, the impact of foreign currency exchange rate changes, and employer contributions for benefits paid to plan participants decreased the obligation by $ 1.9 million, $ 1.6 million, and $ 1.5 million, respectively.

The decreases were partially offset by service and interest cost totaling $ 0.6 million.

pension plans as of March 31, 2024, compared with the prior year, was primarily due to the sale of the Germany automotive businesses and employer contributions for benefits paid to

plan participants which decreased the obligation by $ 7.4 million and $ 1.8 million, respectively, and to a lesser extent, the impact of foreign currency exchange rates.

The decreases were partially offset by service and interest cost and net actuarial losses

during the year totaling $ 0.8 million and $ 0.5

million, respectively.

In fiscal 2023, the $ 5.3 million decrease was primarily due to net actuarial gains during the year from an

increase in discount rates and employer contributions for benefits paid to plan participants which decreased the obligation by $ 4.4

million and $ 1.5 million, respectively, and to a lesser extent, the impact of foreign currency exchange rates.

The decreases were

partially offset by service and interest cost totaling $ 0.7 million.

The accumulated benefit obligation for pension plans was $ 178.6 million and $ 194.4 million as of March 31, 2024 and 2023, respectively.

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million and $ 123.5 million as of March 31, 2024 and 2023, respectively.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

Costs for the Company’s global pension plans included the following components:

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pension plans.

The fiscal 2022 amount includes $ 1.7 million of net actuarial losses written-off as a

result of the sale of the Austrian air-cooled automotive business.

See Note 1 for additional information.

The fiscal 2024 amount includes $ 0.6 million of net actuarial

g ains written-off as a result of the sale of the Germany automotive businesses.

The fiscal 2022 amount includes

$ 1.7 million of net actuarial losses written-off as a result of the sale of the Austrian ai r-cooled automotive business.

See Note 2 for additional information on the sale of these businesses.

The Company amortized $ 3.9 million, $ 5.7 million, and $ 8.6 million of net actuarial loss in

fiscal 2024, 2023, and 2022, respectively.

Exclusive of the $ 1.7 million written-off in fiscal 2022 upon the sale of the Austrian

air-cooled automotive business referenced above, less than $ 1.0 million of the amortization was attributable to the Company’s non-U.S.

Exclusive of the $ 0.6 million and $ 1.7 million written-off in fiscal 2024 and 2022 upon the sale of the Germany automotive businesses and Austrian air-cooled automotive business, respectively,

referenced above, less than $ 1.0 million

of the amortization was attributable to the Company’s non-U.S.

pension plans in each of these years.

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pension obligations.

Plan assets in the Company’s U.S.

pension plans comprise 100

percent of the Company’s world-wide pension plan assets.

The Company’s U.S.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

Plan assets in the Company’s

pension plans comprise 100 percent of the Company’s world-wide pension plan assets.

The Company establishes its pension plan

investment guidelines considering market conditions, its tolerance for risk, and cash requirements for benefit payments.

The Company measures and monitors investment risk on an ongoing basis through quarterly investment portfolio reviews, annual

liability measurements and periodic asset/liability studies.

For fiscal 2024, in light of the highly funded status of the U.S.

pension plans, the Company revised its target allocation to increase weighting towards debt securities with durations

matched to plan liabilities.

Company’s U.S.

pension plan weighted-average asset allocations at the measurement dates of March 31, 2024 and 2023 were as follows:

March 31, 2024

March 31, 2023

Target allocation

Equity securities

Target allocation

Debt securities

Real estate investments

Equity securities

Cash and cash equivalents

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

Real estate investments

Due to market conditions and other factors, including timing of benefit payments and other transactions, actual asset allocation may vary from the

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The Company periodically rebalances the assets to the target allocations.

As of March 31, 2023 and 2022, the Company’s pension plans did not directly own shares of Modine common stock.

The Company employs a total return investment approach, whereby a mix of investments are used to maximize the long-term growth of principal, while

avoiding excessive risk.

The Company has established pension plan guidelines based upon an evaluation of market conditions, tolerance for risk and cash requirements for benefit payments.

The Company measures and monitors investment risk on an

ongoing basis through quarterly investment portfolio reviews, annual liability measurements and periodic asset/liability studies.

During fiscal 2024, 2023 and 2022, the Company’s pension plans did not directly own shares of Modine common stock.

The expected rate of return on U.S.

plan assets is based upon historical return experience and forward-looking return expectations for major asset

class categories.

For fiscal 2023, U.S.

pension plan expense, the expected rate of return on plan assets was 7.0 percent.

2022, and 2021 U.S.

pension plan expense, the expected rate of return on plan assets was 7.5 percent.

assets is based upon historical return experience and forward-looking return expectations for major asset class categories.

For fiscal 2024, 2023, and 2022 U.S.

pension plan expense, the expected rate of return on plan assets was 6.5 percent, 7.0 percent, and 7.5 percent, respectively.

For fiscal 2025 U.S.

plan expense, the Company has assumed a rate of return on plan assets of 6.5 percent.

pension plan expense, the Company has assumed a rate of return on plan assets of 5.5 percent.

The Company’s funding policy for its U.S.

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for benefits in accordance with applicable laws and regulations.

As a result of funding relief provisions within the American Rescue Plan Act of 2021, the Company does not expect to make cash contributions to its U.S.

The Company expects to contribute approximately $ 8.0 million to its U.S.

plans during fiscal 2025.

Estimated pension benefit payments for the next ten fiscal years are as follows:

Estimated pension benefit payments for the Company’s global pension plans during the next ten fiscal years are as follows:

Estimated Pension

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Derivatives designated as hedges:

Commodity derivatives

Other current assets

Foreign exchange contracts

Other current assets

Commodity derivatives

Other current assets

Derivatives not designated as hedges:

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other comprehensive income

of Operations

Gain (loss) reclassified

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Cost of sales

Total gains (losses)

The amounts associated with derivative financial instruments that the Company did not designate for hedge accounting were as follows:

Statement of Operations

Years ended March 31,

Statement of Operations Location

Foreign exchange contracts

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Other income (expense) - net

Total gains (losses)

Risks, Uncertainties, Contingencies and Litigation

Supply Chain Disruptions and Inflationary Market Conditions

economic dynamics, including the impacts of the COVID-19 pandemic, have contributed to global supply chain challenges and inflationary market conditions.

Since the fourth quarter of fiscal 2022, the military conflict between Russia and Ukraine and

the related sanctions imposed by governments in the U.S.

and abroad have also impacted these market conditions.

The Company is focused on mitigating the negative impacts of labor shortages, supply chain challenges and inflationary market conditions,

including changing raw material, energy and logistic costs, as well as delays and shortages in certain purchased commodities and components.

At this time, the Company cannot reasonably estimate the full impact that the supply chain challenges and

other related economic and market dynamics will have on the Company’s business, results of operations and cash flows in the future.

MODINE MANUFACTURING COMPANY

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(In millions, except per share amounts)

Risks, Uncertainties, Contingencies and Litigation

The Company invests excess

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range of products that provide thermal solutions to customers operating throughout the world.

In fiscal 2023 and 2022, no customers

accounted for more than ten percent of the Company’s total sales.

In fiscal 2021, one vehicular customer accounted for more than ten

percent of the Company’s total sales.

Sales to the Company’s top ten customers were 39 percent, 39 percent, and 43 percent of total sales in fiscal 2023, 2022,

and 2021, respectively.

In fiscal 2024, 2023, and 2022, no

customers accounted for more than ten percent of the Company’s total sales.

Sales to the Company’s top ten customers were 40 percent, 39 percent, and 39 percent of total sales

in fiscal 2024, 2023, and 2022, respectively.

At March 31, 2024 and 2023, 35 percent and 37 percent, respectively, of the Company’s trade accounts receivable were due from the Company’s top ten customers.

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The Company has recorded

environmental investigation and remediation accruals related to manufacturing facilities in the U.S., one of which the Company currently owns and operates, and at its 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

environmental monitoring and remediation accruals related to manufacturing facilities in the U.S., one of which the Company currently owns and operates, and at its 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.

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The Company’s accruals for environmental

matters totaled $ 17.6 million and $ 18.2

million at March 31, 2023 and 2022, respectively.

During fiscal 2023 and 2022, the Company increased its remediation accrual related to a former manufacturing facility in the U.S.

by $ 1.0 million and $ 3.4 million, 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.

matters totaled $ 17.6 million at both March 31, 2024 and 2023.

During each fiscal 2024 and 2023, the Company increased its remediation

accrual related to a former manufacturing facility in the U.S.

by $ 1.0 million.

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.

MODINE MANUFACTURING COMPANY

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Amortization of unrecognized net loss (a)

Realized gains - net (b)

Unrecognized net pension gain in disposed businesses (b)

Realized gains - net (c)

Total other comprehensive income (loss)

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Amortization of unrecognized net loss (a)

Unrecognized net pension loss in disposed business (c)

Realized gains - net (b)

Realized gains - net (c)

Total other comprehensive income (loss)

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See Note 18 for additional information about the Company’s pension plans.

Amounts represent net gains and losses associated with cash flow hedges

that were reclassified to net earnings.

As a result of the sale of three automotive businesses based in Germany, the Company wrote -off $ 0.6 million of

net actuarial gains related to the disposal group’s pension plan.

See Note 2 for additional information regarding the sale.

Amounts represent net gains and losses associated with cash flow hedges that were

reclassified to net earnings.

See Note 19 for additional information regarding derivative instruments.

As a result of the sale of the Austrian air-cooled automotive business, the

Company wrote-off $ 1.7 million of net actuarial losses related to its pension plan as a component of the loss on sale recorded

during fiscal 2022.

See Note 1 for additional information.

MODINE MANUFACTURING COMPANY

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Segment and Geographic Information

The Company’s product lines

consist of heat-transfer systems and components.

The Company serves commercial, industrial, and building HVAC&R markets and vehicular markets.

The Company’s Climate

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Financial results, including net sales, gross profit, gross

margin and operating income, together with other considerations, are used by the chief operating decision maker in evaluating the performance of each segment and in making decisions on the allocation of resources among the Company’s various

Effective April 1, 2022, the Company began managing its operations under two operating segments, Climate Solutions and Performance Technologies.

The Climate Solutions segment includes the previously-reported BHVAC and CIS segments, with the exception

of CIS Coatings.

The Performance Technologies segment includes the previously-reported HDE and Automotive segments and the CIS Coatings business.

See Note 3 for information regarding the primary operating activities of each segment.

The Company’s new

segment structure aligns businesses serving similar or complimentary end markets, products and technologies under common segment management.

The Company believes this simplified segment structure allows it to better focus resources on targeted growth

opportunities and allows for an efficient application of 80/20 principles across all product lines to optimize profit margins and cash flow.

The segment realignment had no impact on the Company’s 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.

Effective April 1, 2022, the Company began

managing its operations under two operating segments, Climate Solutions and Performance Technologies.

The Climate Solutions segment

includes the previously-reported Building HVAC Systems and Commercial and Industrial Solutions (“CIS”) segments, with the exception of CIS Coatings.

The Performance Technologies segment includes the previously-reported Heavy Duty Equipment and

Automotive segments and the CIS Coatings business.

The segment realignment had no impact on the Company’s consolidated financial position, results of operations, and cash flows.

Segment financial information for fiscal 2022 has been recast to

conform to the current presentation.

Effective April 1, 2024, the Company moved its Coatings business, which was previously managed by and reported within the Performance Technologies segment,

under the leadership of the Climate Solutions segment.

Under this refined organizational structure, the Coatings business is better aligned with the Climate Solution’s Heat Transfer Products business, which serves similar HVAC&R markets and

The Company expects that unifying these compl e mentary businesses will allow for it to better focus resources on targeted growth and allow for a more

efficient application of 80/20 principles to optimize profit margins and cash flow.

Beginning for fiscal 2025, the Company will report the financial results of the Coatings business within the Climate Solutions segment.

The following is a summary

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Corporate and eliminations

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

Year ended March 31, 2023

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Corporate and eliminations

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

Year ended March 31, 2022

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Corporate and eliminations (a)

Operating income (loss)

Operating income

The operating loss for Corporate includes certain research and development costs,

legal, finance and other general corporate and central services expenses, and other costs that are either not directly attributable to an operating segment or not considered when management evaluates segment performance.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

The following is a summary of segment assets, comprised entirely of trade accounts receivable and inventories, and other assets:

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equipment, intangible assets, goodwill, deferred income taxes, and other noncurrent assets for the Climate Solutions and Performance Technologies segments and Corporate.

MODINE MANUFACTURING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share amounts)

The following is a summary of capital expenditures and depreciation and amortization expense by segment:

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Capital expenditures:

Climate Solutions

Climate Solutions (a)

Performance Technologies

Total capital expenditures

In March 2024, the Company purchased a manufacturing

site in the U.K.

for $ 13.4 million in order to expand its production capacity for data center cooling products.

Years ended March 31,

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Climate Solutions

Performance Technologies (a)

Performance Technologies

Total depreciation and amortization expense

During fiscal 2021, upon classifying the liquid-

and air-cooled automotive businesses as held for sale, the Company ceased depreciating the long-lived assets within the disposal groups.

In fiscal 2022, the Company resumed depreciating the long-lived assets within the liquid-cooled

automotive business when it no longer met the requirements to be classified as held for sale.

See Note 2 for additional information.

The following is a summary of net sales by geographic area, based upon the location of the selling unit:

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Modine Manufacturing Company:

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheet of Modine Manufacturing Company and subsidiaries (the Company) as

of March 31, 2023, the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for the year ended March 31, 2023, and the related notes and financial statement schedule II -

Valuation and Qualifying Accounts (collectively, the consolidated financial statements).

We also have audited the Company’s internal control over financial reporting as of March 31, 2023, based on criteria established in Internal

Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of

March 31, 2023, and the results of its operations and its cash flows for the year ended March 31, 2023, in conformity with U.S.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Modine Manufacturing Company and subsidiaries (the Company) as of March 31, 2024 and March 31,

2023, the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for the years then ended, and the related notes and financial statement schedule II - Valuation and Qualifying Accounts (collectively,

the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2024 and March 31, 2023, and the results of its operations

and its cash flows for each of the years then ended, in conformity with U.S.

generally accepted accounting principles.

Also in our opinion, the Company maintained, in all material respects,

effective internal control over financial reporting as of March 31, 2023 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for

its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s

consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)

and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance

about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audit of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal

control over financial reporting as of March 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated May 22, 2024

expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated

financial statements based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and

regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable

assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial

statements, whether due to error or fraud, and performing procedures that respond to those risks.

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audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audit of internal control over financial

reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the

assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and

the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the

maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of

financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide

reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of

effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or

required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the

critical audit matter or on the accounts or disclosures to which it relates.

We believe that our audit provides a reasonable

basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were

communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on

the critical audit matters or on the accounts or disclosures to which they relate.

Realizability of certain domestic deferred tax assets

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Valuation allowances as of March 31, 2024 were $63.0 million, a portion of which are related to certain domestic deferred tax assets.

The Company recorded a reduction in its

valuation allowance on its deferred tax assets during the year ended March 31, 2023.

We identified the evaluation of the realizability of certain domestic deferred tax assets, specifically certain federal carryforward

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The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating

effectiveness of certain internal controls related to the Company’s evaluation of the realizability of the federal carryforward assets, including controls related to the projections of future taxable income and the application of tax laws to

utilize the federal carryforward assets.

We evaluated the design and tested the

operating effectiveness of certain internal controls related to the Company’s evaluation of the realizability of the federal carryforward assets, including controls related to the projections of future taxable income and the application of tax laws

to utilize the federal carryforward assets.

We evaluated the reasonableness of management’s projections of future taxable income, including positive and negative evidence used, by comparing the projections to:

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evidence obtained in other areas of the audit.

We assessed the Company’s ability to project future earnings based on comparisons of the Company’s previous annual projections to

actual results.

We assessed the Company’s ability to project future earnings based on comparisons of the Company’s previous annual projections to actual

We performed a sensitivity analysis over the amount and timing of future taxable income to assess the impact on utilization of the federal carryforward assets.

We involved tax professionals with specialized skills and knowledge, who

assisted in assessing the Company’s application of tax laws to utilize the federal carryforward assets and evaluating the recognition and realizability of the carryforward assets.

We involved tax professionals with specialized skills and knowledge, who assisted

in assessing the Company’s application of tax laws to utilize the federal carryforward assets and evaluating the recognition and realizability of the federal carryforward assets.

Acquisition date fair value of certain customer relationship intangible assets

As discussed in Notes 1, 2 and 13 to the consolidated financial statements, on March 1, 2024, the Company acquired all of the issued and

outstanding shares in the capital of Scott Springfield Mfg.

for consideration totaling $184.1 million.

The Company accounts for the acquired business using the acquisition method of accounting by recording assets acquired and liabilities assumed

at their respective fair values.

As part of the transaction, the Company acquired customer relationship intangible assets with an acquisition date fair value of $66.9 million, which was determined using the multi-period excess earnings method.

We identified the assessment of the acquisition date fair value of certain customer relationship intangible assets as a critical audit

Subjective auditor judgment was required to evaluate certain assumptions used to determine the acquisition date fair value, specifically, future revenue growth rates, customer attrition rate, and discount rate.

Changes in these assumptions

could have an impact on the forecasted future cash flows used in the multi-period excess earnings method and the resulting fair value of the customer relationship intangible assets.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the

operating effectiveness of certain internal controls related to the Company’s acquisition date valuation process over certain customer relationship intangible assets.

This included certain controls over the development of the assumptions listed

We evaluated future revenue growth rates by comparing them to industry reports.

We evaluated the customer attrition rate by comparing to historical attrition rates of similar existing customers.

We involved valuation professionals with

specialized skills and knowledge who assisted in evaluating:

the customer attrition rate by comparing the economic life of the customer relationship to prior acquisitions

the discount rate by comparing it against a discount rate range that was independently developed using publicly available data for comparable entities

We have served as the Company’s auditor since 2022.

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Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Modine Manufacturing Company:

Opinion on Internal Control Over Financial Reporting

We have audited Modine Manufacturing Company and subsidiaries’ (the Company) internal control over financial reporting as of March 31, 2024, based on criteria

established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, because of the effect of the material weakness, described below, on the achievement of the

objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of March 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of

Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance

sheets of the Company as of March 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for the years then ended, and the related notes and financial statement schedule II -

Valuation and Qualifying Accounts (collectively, the consolidated financial statements), and our report dated May 22, 2024 expressed an unqualified opinion on those consolidated financial statements.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable

possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weakness was identified and included in management’s assessment.

Company had ineffective information technology (“IT”) general controls (“ITGC’s”) in Europe related to systems supporting the Company’s accounting and financial reporting processes.

Specifically, the Company did not appropriately restrict access to

certain systems.

The material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the March 31, 2024 consolidated financial statements, and this report does not affect our report on those

consolidated financial statements.

The Company acquired Scott Springfield Mfg.

during 2024, and management excluded from its assessment of the effectiveness of the Company’s internal

control over financial reporting as of March 31, 2024, Scott Springfield Mfg.’s internal control over financial reporting associated with total assets of $228 million and total net sales of $8 million included in the consolidated financial statements

of the Company as of and for the year ended March 31, 2024.

Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Scott Springfield Mfg.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of

internal control over financial reporting, included in the accompanying Management’s report on internal control over financial reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and

Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable

assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial

reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered

necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting

and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the

maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of

and (3) provide

reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of

Milwaukee, Wisconsin

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Modine Manufacturing

Opinion on the Financial Statements

We have audited the consolidated balance sheet of Modine Manufacturing Company and its subsidiaries (the “Company”) as of March 31, 2022, and the related

consolidated statements of operations, comprehensive income, cash flows and shareholders’ equity for each of the two years in the period ended March 31, 2022, including the related notes and schedule of valuation and qualifying accounts as of and

for each of the two years in the period ended March 31, 2022 listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present

fairly, in all material respects, the financial position of the Company as of March 31, 2022, and the results of its operations and its cash flows for each of the two years in the period ended March 31, 2022 in conformity with accounting

principles generally accepted in the United States of America.

We have audited the consolidated statement of operations, comprehensive income, cash flows and shareholders’ equity of Modine Manufacturing Company and its

subsidiaries (the “Company”) for the year ended March 31, 2022, including the related notes and schedule of valuation and qualifying accounts for the year ended March 31, 2022 listed in the index appearing under Item 15(a)(2) (collectively referred

to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the results of operations and cash flows of the Company for the year ended March 31, 2022 in conformity

with accounting principles generally accepted in the United States of America.

Basis for Opinion

1 unchanged sentence

Our responsibility is to express an opinion on the Company’s

consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in

accordance with the U.S.

consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance

with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB.

We conducted our audit of these consolidated financial statements in accordance with the standards of the PCAOB.

Those standards require that we plan and

perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud,

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud,

and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the

accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit also included evaluating the accounting

principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

6 unchanged sentences

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What changed 10-K

Item 8. Financial Statements and Supplementary Data