Modine Manufacturing pany(MOD) - 2026 Q1 - Quarterly Report

PART I Item 1. Financial Statements Q1 FY2026 unaudited financials report 3.2% net sales growth to $682.8M and 8.2% net earnings increase to $51.2M, with assets growing to $2,228.5M Consolidated Statements of Operations Q1 FY2026 net sales increased 3.2% to $682.8M, operating income rose to $75.7M, and net earnings grew 8.2% to $51.2M Consolidated Statements of Operations Highlights (Q1 FY2026 vs Q1 FY2025) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Net sales | $682.8 M | $661.5 M | +3.2% | | Gross profit | $165.4 M | $162.6 M | +1.7% | | Operating income | $75.7 M | $74.4 M | +1.7% | | Net earnings attributable to Modine | $51.2 M | $47.3 M | +8.2% | | Diluted EPS | $0.95 | $0.88 | +8.0% | Consolidated Balance Sheets Total assets grew to $2,228.5M by June 30, 2025, driven by acquisitions and increased inventories, while total liabilities rose to $1,209.8M Key Balance Sheet Items (June 30, 2025 vs March 31, 2025) | Account | June 30, 2025 (M) | March 31, 2025 (M) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $124.5 | $71.6 | | Inventories | $434.8 | $340.9 | | Goodwill | $268.2 | $233.9 | | Total assets | $2,228.5 | $1,917.6 | | Liabilities & Equity | | | | Long-term debt | $482.1 | $296.7 | | Total liabilities | $1,209.8 | $999.4 | | Total Modine shareholders' equity | $1,011.5 | $910.2 | Condensed Consolidated Statements of Cash Flows Q1 FY2026 operating cash flow decreased to $27.7M, investing activities used $144.0M for acquisitions, and financing provided $166.9M from debt Cash Flow Summary (Q1 FY2026 vs Q1 FY2025) | Cash Flow Activity | Three months ended June 30, 2025 (M) | Three months ended June 30, 2024 (M) | | :--- | :--- | :--- | | Net cash provided by operating activities | $27.7 | $40.5 | | Net cash used for investing activities | $(144.0) | $(26.5) | | Net cash provided by financing activities | $166.9 | $0.0 | | Net increase in cash | $52.8 | $12.9 | Notes to Condensed Consolidated Financial Statements Notes detail $121.8M in acquisitions, strong Data Centers revenue growth, U.S. pension plan termination, and amended credit facilities post-quarter - Acquired AbsolutAire for $11.3 million on April 1, 2025, and L.B. White for $110.5 million on May 31, 2025. A third acquisition, Climate by Design, was completed on July 1, 2025, for $64.1 million[25][28][37] - Data Centers product group revenue grew to $186.9 million from $162.6 million year-over-year, driving growth in the Climate Solutions segment[42] - Approved the termination of its primary U.S. pension plan, expecting to make additional cash contributions of $17.0 to $22.0 million and record non-cash settlement charges of $115.0 to $125.0 million in the second half of fiscal 2026[49] - In July 2025, the company executed an amended credit agreement, providing a $400.0 million revolving credit facility and a $200.0 million term loan facility, both maturing in July 2030[82] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 net sales up 3% driven by Climate Solutions and acquisitions, offset by Performance Technologies decline, with gross margin slightly down and strong liquidity Consolidated Results of Operations Q1 net sales rose 3% to $682.8M, driven by Climate Solutions, while gross margin declined 40 basis points to 24.2% due to higher material costs - Q1 net sales increased by $21.3 million (3%) YoY, primarily due to a $40.1 million sales increase in Climate Solutions, driven by data center customers and $10.0 million from new acquisitions[103] - Gross margin declined by 40 basis points to 24.2%, as higher material costs and unfavorable sales mix in the Performance Technologies segment offset gains elsewhere[104][105] - SG&A expenses increased by $2.1 million, reflecting higher compensation in the growing Climate Solutions segment and $1.4 million in acquisition-related costs[106] - The effective tax rate decreased to 21.3% from 28.2% in the prior year, primarily due to changes in the geographic mix of earnings[58][110] Segment Results of Operations Climate Solutions net sales grew 11% to $397.4M driven by data centers and acquisitions, while Performance Technologies net sales declined 8% to $285.5M due to market weakness Climate Solutions Segment Performance (Q1 FY2026 vs Q1 FY2025) | Metric | Q1 FY2026 | Q1 FY2025 | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $397.4 M | $357.3 M | +11.2% | | Gross Profit | $112.9 M | $100.8 M | +12.0% | | Operating Income | $66.9 M | $59.8 M | +11.9% | | Operating Margin | 16.8% | 16.7% | +10 bps | Performance Technologies Segment Performance (Q1 FY2026 vs Q1 FY2025) | Metric | Q1 FY2026 | Q1 FY2025 | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $285.5 M | $309.0 M | -7.6% | | Gross Profit | $51.9 M | $63.5 M | -18.3% | | Operating Income | $26.5 M | $31.5 M | -15.9% | | Operating Margin | 9.3% | 10.2% | -90 bps | Liquidity and Capital Resources Liquidity is supported by operating cash flow of $27.7M and credit facilities, with $119.0M spent on acquisitions and $100.0M planned for data center capacity expansion - Net cash from operating activities decreased to $27.7 million from $40.5 million YoY, mainly due to higher inventory levels to support growing data center customer demand[125] - The company plans to invest $100.0 million over the next twelve months to expand manufacturing capacity in the U.S. for data center products[126] - Paid $119.0 million for the acquisitions of L.B. White and AbsolutAire during the quarter, and an additional $64.1 million for Climate by Design International on July 1, 2025[127] - Net borrowings on credit facilities increased by $172.0 million in Q1 to fund acquisitions. The company was in compliance with all debt covenants as of June 30, 2025[128][132] Quantitative and Qualitative Disclosures About Market Risk No material changes in market risks have occurred since the fiscal 2025 Form 10-K filing, with prior disclosures incorporated by reference - There have been no material changes in the company's market risks since the fiscal 2025 Form 10-K was filed[144] Controls and Procedures Disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during Q1 FY2026 - Management concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[145] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls[146] PART II Unregistered Sales of Equity Securities and Use of Proceeds No shares were repurchased under the program in Q1 FY2026, but 53,840 shares were acquired for tax withholding, with $81.6M remaining authorized - No shares were purchased under the publicly announced share repurchase program during the quarter[148] - The company acquired 53,840 shares from employees/directors to satisfy tax withholding obligations related to vested stock awards[148] - As of June 30, 2025, $81.6 million remains available for repurchase under the company's share repurchase authorization, which has no expiration date[148] Other Information Director Suresh V. Garimella adopted a Rule 10b5-1 plan on May 23, 2025, to sell 72,344 shares between August 2025 and September 2027 - Director Suresh V. Garimella adopted a Rule 10b5-1 stock sale plan on May 23, 2025, for the sale of 72,344 shares between August 2025 and September 2027[149] Exhibits This section lists exhibits filed with Form 10-Q, including merger agreements, amended credit facilities, and officer certifications