Modine Manufacturing Company
07/30/2026 | Press release | Distributed by Public on 07/30/2026 10:51
Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations.
When we use the terms "Modine," "we," "us," the "Company," or "our" in this report, we are referring to Modine Manufacturing Company. Our fiscal year ends on March 31 and, accordingly, all references to quarters refer to our fiscal quarters. The quarter ended June 30, 2026 was the first quarter of fiscal 2027.
Pending Reverse Morris Trust Transaction
We have entered into definitive agreements with Gentherm Incorporated ("Gentherm"), whereby we will spin-off and simultaneously combine our Performance Technologies segment businesses with Gentherm in a Reverse Morris Trust transaction. We anticipate this transaction will close by the end of calendar 2026, subject to approval by Gentherm's shareholders and other customary closing conditions. The transaction is intended to establish Gentherm as a scaled leader in thermal management. We will retain our Data Centers and Commercial HVAC segment businesses, creating a pure-play climate solutions company.
Under the terms of the agreements, at the time of the spin-off of our Performance Technologies segment businesses, our shareholders will receive newly-issued Gentherm stock, representing ownership of approximately 40 percent of the combined company. In addition, immediately prior to transaction closing, we will receive cash proceeds of $210.0 million, subject to adjustment, which we will use to pay down our long-term debt obligations. Based upon the Gentherm stock price, the transaction was valued at approximately $1.0 billion when we entered into the agreements in January 2026. The Reverse Morris Trust transaction is structured to be generally tax-free for U.S. federal income tax purposes for the Company and our shareholders. To facilitate this transaction, we have incurred expenses to separate the Performance Technologies business, including fees for transaction advisory, legal, accounting, tax, and other professional services. Through June 30, 2026, we have incurred disposition-related costs totaling $22.1 million. We estimate that we will incur $25.0 million to $35.0 million of additional costs directly related to the transaction during the remainder of fiscal 2027.
Fiscal 2026 acquisitions
During fiscal 2026, we acquired three businesses, each supporting our growth strategy by expanding our product portfolio and broadening our customer base. On April 1, 2025 we acquired substantially all of the net operating assets of AbsolutAire, Inc. ("AbsolutAire") for $11.3 million. On May 31, 2025, we acquired LBW Holding Corp. ("L.B. White") for $110.5 million. On July 1, 2025, we acquired Climate by Design International ("Climate by Design") for $64.4 million. We report the financial results of these businesses within the Commercial HVAC segment.
First quarter highlights
Net sales in the first quarter of fiscal 2027 increased $191.3 million, or 28 percent, from the first quarter of fiscal 2026, primarily due to higher sales in our Data Centers segment. Cost of sales increased $174.7 million, or 34 percent. Gross profit increased $16.6 million. Gross margin declined 340 basis points to 20.8 percent, primarily due to lower gross margin in the Data Centers segment, largely driven by higher material costs and operating inefficiencies associated with our rapid expansion of manufacturing capacity for data center cooling solutions and supplier capacity constraints. Selling, general and administrative ("SG&A") expenses increased $18.4 million, primarily due to higher compensation-related expenses and disposition-related costs. Operating income of $74.8 million during the first quarter of fiscal 2027 decreased $0.9 million from the prior year, primarily due to higher SG&A expenses, partially offset by higher gross profit.
CONSOLIDATED RESULTS OF OPERATIONS
The following table presents our consolidated financial results on a comparative basis for the three months ended June 30, 2026 and 2025:
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Three months ended June 30, |
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2026 |
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2025 |
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(in millions) |
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$'s |
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% of sales |
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$'s |
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% of sales |
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Net sales |
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$ |
874.1 |
100.0 |
% |
$ |
682.8 |
100.0 |
% |
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Cost of sales |
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692.1 |
79.2 |
% |
517.4 |
75.8 |
% |
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Gross profit |
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182.0 |
20.8 |
% |
165.4 |
24.2 |
% |
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Selling, general and administrative expenses |
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103.3 |
11.8 |
% |
84.9 |
12.4 |
% |
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Restructuring expenses |
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3.9 |
0.4 |
% |
4.8 |
0.7 |
% |
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Operating income |
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74.8 |
8.6 |
% |
75.7 |
11.1 |
% |
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Interest expense |
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(6.4) |
(0.7) |
% |
(5.8) |
(0.8) |
% |
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Other income (expense) - net |
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0.2 |
- |
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(4.2) |
(0.6) |
% |
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Earnings before income taxes |
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68.6 |
7.9 |
% |
65.7 |
9.6 |
% |
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Benefit (provision) for income taxes |
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5.7 |
0.6 |
% |
(14.0) |
(2.1) |
% |
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Net earnings |
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$ |
74.3 |
8.5 |
% |
$ |
51.7 |
7.6 |
% |
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Comparison of the three months ended June 30, 2026 and 2025
First quarter net sales of $874.1 million were $191.3 million, or 28 percent, higher than the first quarter of the prior year, primarily due to $164.9 million of higher sales in our Data Centers segment, primarily driven by sales growth to hyperscale data center customers in North America. In addition, sales in our Commercial HVAC segment increased $47.4 million, driven by higher sales volume, including $19.7 million of incremental sales from the acquired L.B. White and Climate by Design businesses. The higher sales in the Data Centers and Commercial HVAC segments were partially offset by lower sales in our Performance Technologies segment, which decreased $7.7 million. Foreign currency exchange rates favorably impacted sales by $6.1 million.
First quarter cost of sales increased $174.7 million, or 34 percent, primarily due to higher sales volume, approximately $21.0 million of higher material costs, including higher component and raw material costs and tariffs. In addition, cost of sales was negatively impacted by operating inefficiencies and a $4.8 million unfavorable impact of foreign currency exchange rates. The operating inefficiencies were primarily in our Data Centers segment, where we incurred higher costs related to the rapid expansion of manufacturing capacity for data center cooling solutions and supplier capacity constraints that temporarily disrupted our production schedules. As a percentage of sales, cost of sales increased 340 basis points to 79.2 percent, primarily due to the higher material costs and the operating inefficiencies.
As a result of higher sales and higher cost of sales as a percentage of sales, first quarter gross profit increased $16.6 million, or 10 percent, and gross margin declined 340 basis points to 20.8 percent.
First quarter SG&A expenses increased $18.4 million, or 22 percent. As a percentage of sales, SG&A expenses decreased 60 basis points. The increase in SG&A expenses was driven by higher compensation-related expenses, which increased approximately $10.0 million, and $7.1 million of costs incurred related to the pending Reverse Morris Trust transaction with Gentherm. The higher compensation-related expenses include increases in the Data Centers segment, supporting the segment's growth, incremental expenses from acquired businesses in the Commercial HVAC segment, and higher incentive compensation expenses. These increases were partially offset by lower compensation-related expenses in the Performance Technologies segment, which included the benefits of previous restructuring actions. In addition, costs associated with acquisition activities decreased $1.7 million.
Restructuring expenses decreased $0.9 million compared with the first quarter of fiscal 2026, primarily due to lower severance expenses in the Performance Technologies segment. This decrease was partially offset by higher costs related to transferring production for certain product lines.
Operating income of $74.8 million in the first quarter of fiscal 2027 decreased $0.9 million, or 1 percent, compared with the first quarter of fiscal 2026, primarily due to higher SG&A expenses, partially offset by higher gross profit.
Interest expense during the first quarter of fiscal 2027 increased $0.6 million compared with the first quarter of fiscal 2026, primarily due to higher average outstanding borrowings on our revolving credit facility, partially offset by favorable changes in interest rates.
Other income of $0.2 million during the first quarter of fiscal 2027 represents a $4.4 million change compared with other expense of $4.2 million during the first quarter of fiscal 2026. Compared with the prior-year period, foreign currency transaction losses decreased $3.2 million and pension benefit costs decreased $1.3 million, as we completed the termination of our primary U.S. pension plan during the third quarter of fiscal 2026.
The benefit for income taxes was $5.7 million in the first quarter of fiscal 2027, compared with a provision for income taxes of $14.0 million in the same period in the prior year. The $19.7 million change was primarily due to $26.5 million of tax benefits related to stock-based compensation awards, partially offset by a $3.8 million income tax detriment related to nondeductible compensation in the first quarter of fiscal 2027 and changes in the mix and amount of foreign and U.S. earnings, as compared with the same period in the prior year. The tax benefits related to stock-based compensation awards were primarily driven by performance-based stock awards granted in fiscal 2024, for which shares were issued during the first quarter of fiscal 2027. We expect the benefit from the $26.5 million of tax benefits recorded in the first quarter will be largely offset by tax detriments related to nondeductible compensation during the remainder of fiscal 2027. As a result, we do not expect that our full-year fiscal 2027 effective tax rate will be impacted significantly.
SEGMENT RESULTS OF OPERATIONS
Effective April 1, 2026, we reorganized our Climate Solutions segment and split it into two separate operating segments: 1) Data Centers and 2) Commercial HVAC. We believe managing these businesses independently allows us to better deploy our 80/20 strategy focused on capitalizing on growth opportunities, particularly in the Data Centers business, and optimizing profit margins and cash flow. Segment financial information for fiscal 2026 has been recast to conform to the current presentation. The segment realignment had no impact on the financial results of the Performance Technologies segment.
The following is a discussion of our segment results of operations for the three months ended June 30, 2026 and 2025:
Data Centers
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Three months ended June 30, |
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2026 |
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2025 |
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(in millions) |
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$'s |
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% of sales |
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$'s |
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% of sales |
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Net sales |
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$ |
348.6 |
100.0 |
% |
$ |
183.7 |
100.0 |
% |
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Cost of sales |
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278.3 |
79.8 |
% |
129.0 |
70.2 |
% |
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Gross profit |
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70.3 |
20.2 |
% |
54.7 |
29.8 |
% |
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Selling, general and administrative expenses |
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24.0 |
6.9 |
% |
19.8 |
10.8 |
% |
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Restructuring expenses |
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- |
- |
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0.2 |
0.1 |
% |
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Operating income |
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$ |
46.3 |
13.3 |
% |
$ |
34.7 |
18.9 |
% |
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Comparison of the three months ended June 30, 2026 and 2025
Data Centers net sales increased $164.9 million, or 90 percent, from the first quarter of fiscal 2026 to the first quarter of fiscal 2027, primarily due to higher sales volume in North America, driven by sales growth to hyperscale customers.
Data Centers cost of sales increased $149.3 million, or 116 percent, from the first quarter of fiscal 2026 to the first quarter of fiscal 2027, primarily due to higher sales volume and higher material costs, which increased approximately $16.0 million. We also incurred higher expenses related to the rapid expansion of manufacturing capacity in the U.S. and our production schedules were temporarily disrupted during the first quarter of fiscal 2027 due to supplier capacity constraints for certain key components, which resulted in unfavorable absorption of manufacturing overhead, facility, and labor costs. We have been and will continue to take actions to secure supply, including working with current partners and qualifying additional suppliers. These actions began yielding positive results over the course of the first quarter. In addition, warranty expense increased approximately $4.0 million compared to the prior year, primarily due to the absence of a favorable warranty settlement in the prior year. As a percentage of sales, cost of sales increased 960 basis points to 79.8 percent, primarily due to higher material costs and the operating inefficiencies associated with the business's rapid growth and the supplier capacity constraints.
As a result of the higher sales and higher cost of sales as a percentage of sales, gross profit increased $15.6 million, or 29 percent, and gross margin declined 960 basis points to 20.2 percent.
Data Centers SG&A expenses increased $4.2 million, or 21 percent, compared with the first quarter of the prior year. As a percentage of sales, SG&A expenses decreased 390 basis points. The increase in SG&A expenses was primarily driven by costs to support the segment's strategic growth initiatives, including higher compensation-related expenses, which increased approximately $5.0 million, and increases across other general and administrative expenses. These increases were partially offset by lower amortization expense, which decreased $1.8 million. The lower amortization expense was primarily driven by an order backlog intangible asset related to our acquisition of Scott Springfield Mfg. Inc., which we finished amortizing during the first quarter of fiscal 2026.
Operating income of $46.3 million increased $11.6 million, or 33 percent, from the first quarter of fiscal 2026 to the first quarter of fiscal 2027, primarily due to higher gross profit, partially offset by higher SG&A expenses.
Commercial HVAC
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Three months ended June 30, |
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2026 |
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2025 |
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(in millions) |
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$'s |
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% of sales |
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$'s |
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% of sales |
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Net sales |
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$ |
261.6 |
100.0 |
% |
$ |
214.2 |
100.0 |
% |
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Cost of sales |
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197.7 |
75.6 |
% |
156.0 |
72.8 |
% |
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Gross profit |
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63.9 |
24.4 |
% |
58.2 |
27.2 |
% |
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Selling, general and administrative expenses |
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30.3 |
11.6 |
% |
24.9 |
11.7 |
% |
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Restructuring expenses |
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2.2 |
0.8 |
% |
1.1 |
0.5 |
% |
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Operating income |
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$ |
31.4 |
12.0 |
% |
$ |
32.2 |
15.0 |
% |
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Comparison of the three months ended June 30, 2026 and 2025
Commercial HVAC net sales increased $47.4 million, or 22 percent, from the first quarter of fiscal 2026 to the first quarter of fiscal 2027, primarily due to higher sales volume, including $19.7 million of incremental sales from the L.B. White and Climate by Design businesses acquired during fiscal 2026, and higher average selling prices. In addition, foreign currency exchange rates favorably impacted sales by $2.0 million. Compared with the first quarter of the prior year, sales of HVAC technologies and heat transfer solution products increased $23.5 million and $10.7 million, respectively. The higher HVAC technologies product sales were primarily driven by the incremental sales from the acquired businesses. The higher heat transfer solutions product sales were primarily driven by higher sales of heat exchanger coils to customers in the data center market.
Commercial HVAC cost of sales increased $41.7 million, or 27 percent, from the first quarter of fiscal 2026 to the first quarter of fiscal 2027, primarily due to higher sales volume and higher raw material costs, which increased approximately $6.0 million. In addition, cost of sales was negatively impacted by temporary operating inefficiencies, largely associated with product line transfers, and $1.6 million from foreign currency exchange rates. As a percentage of sales, cost of sales increased 280 basis points to 75.6 percent, primarily due to higher material costs, temporary operating inefficiencies and unfavorable sales mix, partially offset by higher average selling prices.
As a result of the higher sales and higher cost of sales as a percentage of sales, gross profit increased $5.7 million, or 10 percent, and gross margin declined 280 basis points to 24.4 percent.
Commercial HVAC SG&A expenses increased $5.4 million, or 22 percent, compared with the first quarter of the prior year. As a percentage of sales, SG&A expenses decreased 10 basis points. The increase in SG&A expenses was driven by higher compensation-related expenses, which increased approximately $2.0 million from incremental expenses from the acquired businesses, and increases across other general and administrative expenses. The higher SG&A expenses included incremental expenses from the businesses acquired during fiscal 2026.
Restructuring expenses increased $1.1 million compared with the first quarter of fiscal 2026, primarily due to higher costs related to transferring production for certain product lines.
Operating income of $31.4 million decreased $0.8 million, or 2 percent, from the first quarter of fiscal 2026 to the first quarter of fiscal 2027, primarily due to higher SG&A and restructuring expenses, partially offset by higher gross profit.
Performance Technologies
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Three months ended June 30, |
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2026 |
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2025 |
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(in millions) |
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$'s |
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% of sales |
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$'s |
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% of sales |
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Net sales |
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$ |
277.8 |
100.0 |
% |
$ |
285.5 |
100.0 |
% |
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Cost of sales |
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229.0 |
82.4 |
% |
233.6 |
81.8 |
% |
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Gross profit |
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48.8 |
17.6 |
% |
51.9 |
18.2 |
% |
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Selling, general and administrative expenses |
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19.5 |
7.0 |
% |
21.9 |
7.7 |
% |
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Restructuring expenses |
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1.7 |
0.6 |
% |
3.5 |
1.2 |
% |
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Operating income |
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$ |
27.6 |
9.9 |
% |
$ |
26.5 |
9.3 |
% |
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Comparison of the three months ended June 30, 2026 and 2025
Performance Technologies net sales decreased $7.7 million, or 3 percent, from the first quarter of fiscal 2026 to the first quarter of fiscal 2027, primarily due to lower sales volume in North America. The lower sales were largely due to market weakness and our strategic exit from lower-margin business in connection with 80/20 product rationalization initiatives. These decreases were partially offset by a $4.1 million favorable impact of foreign currency exchange rates. Compared with the first quarter of the prior year, sales of on-highway application products decreased $9.0 million, while sales of heavy-duty equipment products increased $1.3 million.
Performance Technologies cost of sales decreased $4.6 million, or 2 percent, from the first quarter of fiscal 2026 to the first quarter of fiscal 2027, primarily due to lower sales volume and improved operating efficiencies, partially offset by a $3.2 million unfavorable impact of foreign currency exchange rates. As a percentage of sales, cost of sales increased 60 basis points to 82.4 percent, primarily due to the unfavorable impact of lower sales, partially offset by improved operating efficiencies.
As a result of the lower sales and higher cost of sales as a percentage of sales, gross profit decreased $3.1 million, or 6 percent, and gross margin declined 60 basis points to 17.6 percent.
Performance Technologies SG&A expenses decreased $2.4 million, or 11 percent, compared with the first quarter of the prior year. As a percentage of sales, SG&A expenses decreased 70 basis points. The decrease in SG&A expenses was primarily due to lower compensation-related expenses, which decreased approximately $3.0 million and included the benefits of previous restructuring actions.
Restructuring expenses decreased $1.8 million compared with the first quarter of the prior year, primarily due to lower severance expenses, partially offset by higher costs related to transferring production for certain product lines.
Operating income of $27.6 million increased $1.1 million, or 4 percent, from the first quarter of fiscal 2026 to the first quarter of fiscal 2027, primarily due to lower SG&A and restructuring expenses, partially offset by lower gross profit.
Liquidity and Capital Resources
Our primary sources of liquidity are cash flow from operating activities, our cash and cash equivalents as of June 30, 2026 of $95.3 million, and available borrowing capacity of $294.2 million under our revolving credit facility. Given our extensive international operations, approximately $69.0 million of our cash and cash equivalents are held by our non-U.S. subsidiaries. Amounts held by non-U.S. subsidiaries are available for general corporate use; however, these funds may be subject to foreign withholding taxes if repatriated. We believe our sources of liquidity will provide sufficient cash flow to adequately cover our funding needs on both a short-term and long-term basis.
Net cash provided by operating activities
Net cash provided by operating activities for the three months ended June 30, 2026 was $41.4 million, which represents a $13.7 million increase compared with the same period in the prior year. This increase was primarily due to favorable net changes in working capital. Decreases in accounts receivable, primarily driven by a sequential decrease in net sales from the fourth quarter of fiscal 2026, and higher accounts payable levels favorably impacted operating cash flow during the first quarter of fiscal 2027. Our Data Centers segment production schedules were negatively impacted by supplier capacity constraints during the first quarter of fiscal 2027 and contributed to the sequential sales decrease. We have been and will continue to take actions to secure supply, including working with current partners and qualifying additional suppliers. These actions began yielding positive results over the course of the first quarter. The favorable working capital drivers were partially offset by increases in inventory to support expected sales growth in our Data Centers segment, and higher contract assets related to revenue recognized over time.
Capital expenditures
Capital expenditures of $46.4 million during the first three months of fiscal 2027 increased $18.9 million compared with the same period in the prior year, primarily driven by investments in the Data Centers segment to increase production capacity in support of expected growth in that business.
Business acquisitions
During the first quarter of fiscal 2026, we made cash payments totaling $119.0 million to acquire L.B. White and AbsolutAire. See Note 2 of the Notes to Condensed Consolidated Financial Statements for additional information regarding these acquisitions.
Debt
During the first three months of fiscal 2027, borrowings on our credit facilities, net of repayments, totaled $91.9 million.
Our credit agreements require us to maintain compliance with various covenants, including a leverage ratio covenant and an interest expense coverage ratio covenant, which are discussed further below. Indebtedness under our credit agreements is secured by liens on substantially all domestic assets, excluding real estate. These agreements further require compliance with various covenants that may limit our ability to incur additional indebtedness; grant liens; make investments, loans, or guarantees; engage in certain transactions with affiliates; or make restricted payments, including dividends. Also, the credit agreements may require prepayments in the event of certain asset sales. In connection with the pending transaction with Gentherm, we expect to receive $210.0 million, subject to adjustment, immediately prior to transaction closing and plan to use such proceeds to repay principal balances outstanding under our credit agreements.
The leverage ratio covenant within our primary credit agreements requires us to limit our consolidated indebtedness, less a portion of our cash balance, both as defined by the credit agreements, to no more than three and one-half times consolidated net earnings before interest, taxes, depreciation, amortization, and certain other adjustments ("Adjusted EBITDA"). We are also subject to an interest expense coverage ratio covenant, which requires us to maintain Adjusted EBITDA of at least three times consolidated interest expense.
As of June 30, 2026, we were in compliance with our debt covenants. We expect to remain in compliance with our debt covenants during the remainder of fiscal 2027 and beyond.
Purchases of treasury stock
Under our equity compensation plans, participants have the option to sell back shares from their vested awards to satisfy their individual tax withholding obligations. We hold these purchased shares as treasury shares, which reduces the number of shares outstanding used to calculate earnings per share. During the first quarter of fiscal 2027 and in connection with the vesting of stock awards, we purchased 219,667 shares for $64.6 million, an increase of $59.5 million compared with the same period last year. The increase was primarily related to performance-based stock awards granted in fiscal 2024, for which shares were issued during the first quarter of fiscal 2027 after the requisite three-year performance period. In fiscal 2023, performance-based cash awards were granted in lieu of performance-based stock awards; therefore, there were no share purchases related to performance-based awards in fiscal 2026 since the awards were settled in cash. Modine's share price appreciated significantly from the grant date of the fiscal 2024 performance-based stock awards ($27.29 per share) to the date of issuance in the first quarter of fiscal 2027 ($295.88 per share). The share price appreciation increased the value of the shares delivered to participants and the shares delivered back to Modine by participants to satisfy their associated tax withholding obligations.
We did not purchase shares under our share repurchase program during the first three months of fiscal 2027. As of June 30, 2026, we had $81.6 million of share repurchase authorization remaining under the repurchase program, which does not expire. Our decision whether and to what extent to repurchase additional shares under the program will depend on a number of factors, including business conditions, other cash priorities, and stock price.
Forward-looking statements
This report, including, but not limited to, the discussion under Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, contains statements, including information about future financial performance, accompanied by phrases such as "believes," "estimates," "expects," "plans," "anticipates," "intends," and other similar "forward-looking" statements, as defined in the Private Securities Litigation Reform Act of 1995. Modine's actual results, performance or achievements may differ materially from those expressed or implied in these statements, because of certain risks and uncertainties, including, but not limited to, those described under "Risk Factors" in Item 1A. in Part I. of the Company's Annual Report on Form 10-K for the year ended March 31, 2026. Other risks and uncertainties include, but are not limited to, the following:
Market risks
| ● | The impact of potential adverse developments or disruptions in the global economy and financial markets, including impacts related to geopolitical tensions and military conflicts, including the conflict between the U.S. and Iran, inflation, energy costs, government incentive or funding programs, supply chain challenges, logistical disruptions, including those related to sea, land or air freight, tariffs, sanctions and other trade issues or cross-border trade restrictions; |
| ● | The impact of other economic, social and political conditions, changes, challenges and unrest, particularly in the geographic, product and financial markets where we and our customers operate and compete, including foreign currency exchange rate fluctuations; changes in interest rates; recession and recovery therefrom; and the general uncertainties about the impact of statutory, regulatory and/or policy changes, including those related to tax and trade that have been or may be implemented in the U.S. or abroad; |
| ● | The impact of potential price increases associated with raw materials, including aluminum, copper, steel and stainless steel (nickel), and other purchased component inventory including, but not limited to, increases in the underlying material cost based upon the London Metal Exchange and related premiums or fabrication costs. These prices may be impacted by a variety of factors, including changes in trade laws and tariffs, the behavior of our suppliers and significant fluctuations in demand. This risk includes our ability to successfully manage our exposure and our ability to adjust product pricing in response to price increases, including through our quotation process or through contract provisions for prospective price adjustments, as well as the inherent lag in timing of such contract provisions; |
| ● | Our ability to be at the forefront of technological advances to differentiate ourselves from our competitors and provide innovative products and services to our customers, the impacts of any changes in or the adoption rate of technologies that we expect to drive sales growth, including those related to data center cooling, and the impacts of threats or changes to the market growth prospects for our customers; |
| ● | Our ability to mitigate increases in labor costs and labor shortages; |
| ● | The impact of public health threats on the national and global economy, our business, suppliers (and the supply chain), customers, and employees; and |
| ● | The impact of legislation, regulations, and government incentive programs, including those addressing climate change, on demand for our products and the markets we serve, including our ability to take advantage of opportunities to supply alternative new technologies to meet environmental and/or energy standards and objectives. |
Operational risks
| ● | The impact of problems, including logistic and transportation challenges, associated with suppliers meeting our quantity, quality, price and timing demands, and the overall health of our suppliers, including their ability and willingness to supply our volume demands if their production capacity becomes constrained; |
| ● | The overall health of and pricing pressure from our customers in light of economic and market-specific factors and the potential impact on us from any deterioration in the stability or performance of any of our major customers; |
| ● | Our ability to maintain current customer relationships and compete effectively for new business, including our ability to achieve profit margins acceptable to us by offsetting or otherwise addressing any cost increases associated with supply chain challenges and inflationary market conditions; |
| ● | The impact of product or manufacturing difficulties or operating inefficiencies, including any product or program launches, product transfer challenges and product warranty and liability claims; |
| ● | The impact of delays or modifications initiated by major customers with respect to product or program launches, product applications or requirements, or timing of construction or development projects that incorporate our products and services; |
| ● | Our ability to consistently structure our operations in order to develop and maintain a competitive cost base with appropriately skilled and stable labor, while also positioning ourselves geographically, so that we can continue to support our customers with the technical expertise and market-leading products they demand and expect from Modine; |
| ● | Our ability to effectively and efficiently manage our operations in response to sales volume changes, including maintaining adequate production capacity to meet demand in our growing businesses, particularly in our Data Centers businesses, while also completing restructuring activities and realizing the anticipated benefits thereof; |
| ● | Costs and other effects of the investigation and remediation of environmental contamination; including when related to the actions or inactions of others and/or facilities over which we have no control; |
| ● | Our ability to recruit and maintain talent, including personnel in managerial, leadership, operational and administrative functions; |
| ● | Our ability to protect our proprietary information and intellectual property from theft or attack by internal or external sources; |
| ● | The impact of a substantial disruption, including any prolonged service outage, or material breach of our information technology systems, and any related delays, problems or costs; |
| ● | Increasingly complex and restrictive laws and regulations and the costs associated with compliance therewith, including state and federal labor regulations, laws and regulations associated with being a U.S. public company, and other laws and regulations present in various jurisdictions in which we operate; |
| ● | Increasing emphasis by global regulatory bodies, customers, investors, and employees on environmental, social and corporate governance matters may impose additional costs on us, adversely affect our reputation, or expose us to new risks; |
| ● | Work stoppages or interference at our facilities or those of our major customers and/or suppliers; and |
| ● | The constant and increasing pressures associated with healthcare and associated insurance costs. |
Strategic risks related to the pending Reverse Morris Trust transaction with Gentherm
| ● | Our ability to complete the pending transaction on the terms or in the time frame expected by the parties, or at all; |
| ● | The occurrence of any event that could give rise to the termination of the pending transaction; |
| ● | Potential shareholder litigation in connection with the pending transaction or other litigation, settlements or investigations may affect the timing or occurrence of the pending transaction or result in significant costs of defense, indemnification and liability; |
| ● | Our ability to obtain the anticipated tax treatment of the pending transaction; |
| ● | Greater than expected difficulty in separating the businesses subject to the pending disposition from our other businesses; and |
| ● | Disruption of management time from ongoing business operations due to the pending transaction, or other effects of the pending transaction on our relationship with our employees, customers, suppliers, or other counterparties. |
Strategic risks related to business growth and optimization
| ● | Our ability to realize the sales growth and return on investments anticipated in our Data Centers segment; |
| ● | Our ability to identify and execute on other organic growth opportunities and acquisitions, and to efficiently and successfully integrate acquired businesses; |
| ● | Our ability to successfully realize anticipated benefits, including improved profit margins and cash flow, from strategic initiatives and our continued application of 80/20 principles across our businesses; and |
| ● | Our ability to successfully exit portions of our business that do not align with our strategic plans. Business dispositions involve risks, including transaction-related and other costs, damage to or the loss of customer relationships, the diversion of management's attention from our other business concerns, and other effects of litigation, claims, or other obligations, including those that may be asserted against us in connection with disposed businesses. |
Financial risks
| ● | Our ability to fund our global liquidity requirements efficiently for our current operations and meet our long-term commitments in the event of disruption in or tightening of the credit markets or extended recessionary conditions in the global economy; |
| ● | The impact of increases in interest rates in relation to our variable-rate debt obligations; |
| ● | The impact of changes in federal, state or local tax regulations that could have the effect of increasing our income tax expense; |
| ● | Our ability to comply with the financial covenants in our credit agreements, including our leverage ratio (net debt divided by Adjusted EBITDA, as defined in our credit agreements) and our interest coverage ratio (Adjusted EBITDA divided by interest expense, as defined in our credit agreements); |
| ● | The potential unfavorable impact of foreign currency exchange rate fluctuations on our financial results; and |
| ● | Our ability to effectively realize the benefits of deferred tax assets in various jurisdictions in which we operate. |
Forward-looking statements are as of the date of this report; we do not assume any obligation to update any forward-looking statements.
Modine Manufacturing Company published this content on July 30, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on July 30, 2026 at 16:51 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]