Modine Manufacturing Company

Company Overview

Business Model: Modine Manufacturing Company designs, engineers, tests, and manufactures mission-critical thermal solutions. The company's technologies provide heating, cooling, and ventilation systems that enhance performance, efficiency, and reliability for customers. Modine Manufacturing Company focuses on improving indoor air quality, lowering harmful emissions, enabling cleaner running vehicles, and utilizing environmentally friendly refrigerants. It serves a wide array of commercial, industrial, and building heating, ventilating, air conditioning, and refrigeration ("HVAC&R") markets, and is a leading provider of engineered heat transfer systems and components for on- and off-highway original equipment manufacturer ("OEM") vehicular applications.

Market Position: Modine Manufacturing Company competes with numerous manufacturers of heat transfer and HVAC&R solutions, including divisions of larger companies. The markets served are dynamic, with data center customers expanding globally and requiring new technologies, and electric vehicle demand creating opportunities with existing and emergent OEMs. Global power generation customers also seek new technologies and manufacturing capacity. Modine Manufacturing Company is investing in geographic and capacity expansion, particularly in response to competition from suppliers in regions with economic advantages. The company's competitive value is built on its leading-edge technologies, product quality, and historical product performance, often involving R&D, design, and validation support for new projects, fostering strong customer relationships.

Recent Strategic Developments: Modine Manufacturing Company has been undergoing a strategic transformation since late fiscal 2021, simplifying and re-segmenting its organization and aligning resources around specific strategies and market-based verticals. This includes embracing 80/20 principles to focus on high-growth, high-margin businesses and sustainable growth opportunities. Key developments include:

• Acquisitions:
  • Acquired Scott Springfield Mfg. Inc. in March 2024 for $184.1 million, a manufacturer of air handling units for data center cooling and indoor air quality markets in the U.S. and Canada.
  • Acquired Napps Technology Corporation in July 2023 for $6 million, a manufacturer of air- and water-cooled chillers, condensing units, and heat pumps.
  • Purchased intellectual property related to liquid immersion cooling technology from TMGcore, Inc. in January 2024 for $12 million.
  • Acquired AbsolutAire, Inc. in April 2025 for $11.2 million, a manufacturer of direct-fired heating, ventilation, and make-up air systems, expanding heating and indoor air quality portfolios.
• Dispositions:
  • Sold three automotive businesses in Germany in October 2023, which produced air- and liquid-cooled products for internal combustion diesel and gasoline engines for the European automotive market.
  • Sold two coatings facilities in California and Florida in September 2023.
  • Signed a definitive agreement in December 2024 to sell a technical service center and administrative support facility in Germany for €11.5 million ($12.4 million), expected to close in the first half of fiscal 2026.
• Organizational Realignment: Effective April 1, 2024, the Coatings business was moved from the Performance Technologies segment to the Climate Solutions segment to better align with the Heat Transfer Products business and focus resources on targeted growth.
• Product Launches: In fiscal 2025, Modine Manufacturing Company launched its Coolant Distribution Unit (CDU) to provide critical cooling capacity for high-density data center environments.

Geographic Footprint: Modine Manufacturing Company operates in four continents and 16 countries, maintaining administrative organizations in all key regions for customer support, development, testing, and other functions.

• North America: Canada, Mexico, United States
• South America: Brazil
• Europe: Germany, Hungary, Italy, Netherlands, Serbia, Spain, Sweden, United Kingdom
• Asia: China, India, South Korea, United Arab Emirates Export sales from the U.S. to foreign countries represented 7% of consolidated net sales in fiscal 2025.

Financial Performance

Revenue Analysis

Profitability Metrics (FY25):

• Gross Margin: 24.9%
• Operating Margin: 11.0%
• Net Margin: 7.2%

Investment in Growth:

• R&D Expenditure: $34.9 million (1.4% of revenue)
• Capital Expenditures: $84.0 million
• Strategic Investments:
  • Payments for business acquisitions: $3.4 million (primarily related to purchase price working capital adjustment for Scott Springfield Mfg. Inc. and Napps Technology Corporation)
  • Purchase of TMGcore, Inc. technology and related assets: $0 million (all $12 million paid in FY24)

Business Segment Analysis

Climate Solutions Segment

Financial Performance:

• Revenue: $1,440.8 million (+30.0% YoY)
• Operating Income: $248.4 million (+38.8% YoY)
• Operating Margin: 17.2%
• Key Growth Drivers: Higher sales of data center cooling and HVAC&R products, including $240 million from the Scott Springfield Mfg. Inc. and Napps Technology Corporation acquisitions, and significant organic sales growth to hyperscale and colocation data center customers. Favorable sales mix and commercial pricing settlements also contributed.

Product Portfolio:

• Data Center Cooling: IT cooling solutions, precision air conditioning units, computer room air conditioning (CRAC) and computer room air handler (CRAH) units, hybrid fan coils, fan walls, chillers, condensers, condensing units, liquid cooling solutions (coolant distribution units (CDU), immersion solutions), replacement parts, maintenance service, and control solutions.
• Heat Transfer Products: Heat exchanger coils (round tube plate fin construction), anti-corrosive coatings products and application services.
• HVAC&R: Unit heaters (gas-fired, hydronic, electric, oil-fired), roof-mounted direct- and indirect-fired makeup air units, duct furnaces, infrared units, perimeter heating products, single packaged unit ventilators, modular chillers, air handler units, condensing units, ceiling cassettes, evaporator unit coolers, remote condensers, fluid coolers, gas coolers, dry and brine coolers, motor and generator cooling coils, transformer oil coolers, radiators, dryers, and industrial heat exchangers.

Market Dynamics:

• Data Center Cooling: Experienced exceptionally strong growth in fiscal 2025, with strong growth expected in fiscal 2026, driven by increasing reliance on digital technologies, IoT, artificial intelligence, machine learning, and 5G technology. High-performance computing increases heat loads, driving demand for high-density cooling solutions.
• Heat Transfer Products: HVAC&R markets experienced declines in fiscal 2025, particularly the European heat pump market due to delayed adoption. Commercial and residential markets are expected to be relatively flat in fiscal 2026. Trends include refrigerant substitution and energy efficiency requirements.
• HVAC&R: North American residential and commercial heating markets were relatively flat in fiscal 2025, with modest growth expected in fiscal 2026. North American school and commercial HVAC markets experienced growth in fiscal 2025, with modest growth expected in fiscal 2026, driven by indoor air quality and energy efficiency priorities. Commercial and industrial refrigeration markets saw modest growth in fiscal 2025, with moderate global growth expected in fiscal 2026, driven by improving living standards and stringent energy efficiency regulations, partially offset by economic uncertainties. Industrial power generation and process markets experienced modest growth in fiscal 2025, with stability expected in fiscal 2026, and increased demand for transformer oil coolers.

Sub-segment Breakdown (FY25):

• Data center cooling: $644.2 million revenue
• Heat transfer: $402.9 million revenue
• HVAC&R: $393.5 million revenue

Performance Technologies Segment

Financial Performance:

• Revenue: $1,163.5 million (-12.0% YoY)
• Operating Income: $108.0 million (-3.6% YoY)
• Operating Margin: 9.3%
• Key Growth Drivers: Lower sales volume, including a $54 million impact from the disposition of three automotive businesses in Germany. Partially offset by higher average selling prices and recognition of sales tax credits in Brazil. Despite lower sales, gross margin improved due to 80/20 principles application.

Product Portfolio:

• Air-Cooled Applications: Powertrain cooling products (radiators, condensers, engine cooling modules, charge air coolers, fan shrouds, surge tanks), cooling module generator sets (Gensets).
• Liquid-Cooled Applications: Engine oil coolers, exhaust gas recirculation (EGR) coolers, liquid charge air coolers, transmission and retarder oil coolers, chillers, and condensers.
• Advanced Solutions: Battery thermal management systems, electronics cooling packages, battery chillers, battery cooling plates, coolers and casings for electronics cooling, and coolers for electric axles (e-axles).

Market Dynamics:

• Air-Cooled Applications: Commercial vehicle markets saw moderate growth in India and Brazil, but weakness in North America in fiscal 2025, with similar trends expected in fiscal 2026. Agriculture markets in North America and Europe experienced significant declines in fiscal 2025, with further declines expected in fiscal 2026. Global construction and mining markets were weak, except for U.S. construction which benefited from government programs. Power generation markets saw strong growth in fiscal 2025, driven by data center construction and backup power demand.
• Liquid-Cooled Applications: Global commercial vehicle markets experienced declines in fiscal 2025, particularly in Europe and North America, with market softness expected to continue but stabilization anticipated in fiscal 2026. Automotive markets in Europe and North America saw moderate declines, while China experienced moderate growth in fiscal 2025; global automotive markets are expected to remain relatively weak in fiscal 2026. Off-highway markets experienced declines in fiscal 2025, with further weakness expected in fiscal 2026.
• Advanced Solutions: Experienced strong growth in the first half of fiscal 2025, but slowed in the second half due to uncertainty in federal government funding for electric vehicles, with softness expected to continue into fiscal 2026. Long-term demand for electric, fuel cell, and hybrid vehicle platforms is anticipated to benefit this business.

Sub-segment Breakdown (FY25):

• Air-cooled: $609.0 million revenue
• Liquid-cooled: $404.5 million revenue
• Advanced solutions: $129.4 million revenue

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: $30.9 million (fiscal 2025) and $17.7 million (fiscal 2024) of common stock were repurchased.
• Dividend Payments: Modine Manufacturing Company did not pay dividends during fiscal 2025 or 2024. The company currently does not intend to pay dividends in fiscal 2026.
• Future Capital Return Commitments: The Board of Directors authorized the repurchase of up to $100 million of Modine Manufacturing Company common stock, effective March 7, 2025, with no expiration.

Balance Sheet Position (as of March 31, 2025):

• Cash and Equivalents: $71.6 million
• Total Debt: $351.0 million (Short-term debt $9.3 million + Long-term debt - current portion $44.8 million + Long-term debt $296.7 million, excluding unamortized debt issuance costs)
• Net Cash Position: -$279.4 million (Total Debt - Cash and Equivalents)
• Credit Rating: Not disclosed.
• Debt Maturity Profile:
  • 2026: $44.8 million
  • 2027: $44.8 million
  • 2028: $227.4 million
  • 2029: $25.5 million
  • 2030: $0.1 million
  • 2031 & beyond: $0.5 million

Cash Flow Generation:

• Operating Cash Flow: $213.3 million
• Free Cash Flow: $129.3 million (Operating Cash Flow $213.3 million - Capital Expenditures $84.0 million)
• Cash Conversion Metrics: Net cash provided by operating activities decreased by $2 million in fiscal 2025, primarily due to unfavorable net changes in working capital (decrease in customer deposits, higher incentive compensation payments), partially offset by higher operating earnings and lower inventory levels.

Operational Excellence

Production & Service Model: Modine Manufacturing Company designs, engineers, tests, and manufactures mission-critical thermal solutions, leveraging over 100 years of expertise. The company focuses on product design from raw materials to end-of-life recyclability to optimize total cost of ownership and reduce environmental impacts. It manufactures products for the majority of customers on an as-ordered basis, minimizing large finished product inventories, except for certain Climate Solutions segment products due to seasonal demand and project construction schedules. The company maintains a Global Modine Management System and Modine Quality Strategy, with most facilities registered to ISO 9001:2015 or IATF 16949:2016 standards.

Supply Chain Architecture: Modine Manufacturing Company purchases aluminum, copper, steel, stainless steel (nickel), brass, refrigerants, and gases from several domestic and foreign suppliers, generally not relying on any single supplier. The company adjusts metals pricing with raw material suppliers monthly and fabricated component suppliers quarterly. Long-term customer contracts often include provisions for prospective price adjustments based on key raw material costs, though these may have a 3-month to 1-year lag. The company also uses forward contracts to hedge a portion of aluminum and copper purchases. A supplier risk management program is in place to identify and mitigate high-risk situations.

Key Suppliers & Partners:

• Raw Materials: Aluminum, copper, steel, stainless steel (nickel), brass, refrigerants, natural gas, helium, nitrogen.
• Manufacturing Partners: Not explicitly named, but the company uses suppliers for certain components and parts, some of which use Modine Manufacturing Company's tooling.
• Technology Partners: Modine Manufacturing Company collaborates with industry, university, and government-sponsored research organizations.

Facility Network (as of March 31, 2025):

• Manufacturing: 41 manufacturing facilities globally (22 in Climate Solutions, 19 in Performance Technologies).
  • Americas: 18 facilities (10 Climate Solutions, 8 Performance Technologies)
  • Europe: 15 facilities (10 Climate Solutions, 5 Performance Technologies)
  • Asia: 8 facilities (2 Climate Solutions, 6 Performance Technologies)
• Coatings Facilities: 4 additional coatings facilities in North America and Europe.
• Research & Development: World headquarters in Racine, Wisconsin, with additional technical support functions in Grenada, Mississippi; Allen, Texas; Leeds, United Kingdom; Pocenia, Italy; Guadalajara, Spain; Söderköping, Sweden; Mezökövesd, Hungary; Sao Paulo, Brazil; Changzhou, China; and Chennai, India.
• Distribution: Not explicitly detailed, but the company maintains varying levels of finished goods inventory for seasonal demand and project construction schedules.

Operational Metrics:

• Quality Indicators: Modine Manufacturing Company's Recordable Incident Rate (RIR) was 1.0 in fiscal 2025, well below the manufacturing sector average of 2.8 in 2023.
• Efficiency Measures: The company applies 80/20 principles to drive production efficiency improvements and optimize its manufacturing footprint and processes.

Market Access & Customer Relationships

Go-to-Market Strategy: Modine Manufacturing Company partners with customers across multiple industries to provide sustainable thermal management solutions. The company sells customer-centric solutions directly to commercial and industrial OEM and end-user customers, and through wholesalers, distributors, consulting engineers, contractors, and data center operators.

Distribution Channels:

• Direct Sales: Enterprise sales force for large colocation, cloud service providers, hyperscale customers, and commercial/industrial sectors (telecommunications, healthcare, commercial real estate).
• Channel Partners: HVAC wholesalers, installers, mechanical contractors, distributors, and resellers.
• Digital Platforms: Not explicitly detailed, but implied through e-commerce initiatives for certain products.

Customer Portfolio:

• Enterprise Customers: Top five customers are in the data center, commercial vehicle, and off-highway markets.
• Strategic Partnerships: Top ten largest customers accounted for 43% of net sales in fiscal 2025. The largest customer accounted for less than 10% of net sales in fiscal 2025.
• Key Customers (alphabetical): Ascent, Carrier, Caterpillar, Deere, Stellantis (including Chrysler, Fiat, PSA-Peugeot-Citroen, and VM Motori), Trane, Volkswagen (including Audi, MAN, Porsche, Scania, and International), and Volvo (including Mack Trucks and Renault Trucks).
• Customer Concentration: 43% of net sales from top ten customers in fiscal 2025. 43% of trade accounts receivable were due from top ten customers at March 31, 2025.
• Contractual Relationships: Generally supplies products based on individual purchase orders. Utilizes long-term sales agreements (typically 3-5 years) with mutual interest to minimize investment risks and provide competitive pricing.

Geographic Revenue Distribution (FY25):

• United States: $1,287.5 million (49.8% of total revenue)
• Canada: $241.7 million (9.4% of total revenue)
• Italy: $209.7 million (8.1% of total revenue)
• Hungary: $179.8 million (7.0% of total revenue)
• United Kingdom: $157.8 million (6.1% of total revenue)
• China: $130.7 million (5.1% of total revenue)
• Other: $376.3 million (14.6% of total revenue)
• Growth Markets: Modine Manufacturing Company's international presence positions it to benefit from anticipated long-term growth in global data center cooling, HVAC&R, and vehicular markets.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The markets for Modine Manufacturing Company's products are dynamic. Data center customers are expanding globally and demanding new technologies, driving investment in geographic and capacity expansion and product portfolio expansion. The expansion of electric vehicle demand creates opportunities with existing and emergent OEMs. Global power generation customers, driven by new data center construction and demand for backup power for critical infrastructure, seek new technologies and global manufacturing capacity. HVAC&R OEM customers face significant international competition and maintain global manufacturing footprints. Consolidation within the supply base and vertical integration may introduce new or restructured competitors.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors: Modine Manufacturing Company competes with many manufacturers of heat transfer and HVAC&R solutions, some of which are divisions of larger companies. Specific competitors are not named in the filing beyond general descriptions.

Emerging Competitive Threats: New entrants, disruptive technologies, and alternative solutions are present, particularly from suppliers in different geographies with economic advantages (e.g., lower labor costs, tax rates). The expansion of electric vehicle demand and high-performance computing (AI/ML) drives the need for new cooling technologies.

Competitive Response Strategy: Modine Manufacturing Company is committed to evolving its product portfolio towards highly engineered, mission-critical thermal solutions and strategically investing in high-growth end markets (e.g., Data Center Cooling). The company leverages its deep expertise, expands its global manufacturing presence, standardizes processes, and utilizes state-of-the-art technical resources to rapidly bring customized solutions to customers. It also focuses on 80/20 principles to optimize resources, improve processes, and enhance profitability, while strategically exiting businesses that do not align with its transformation goals (e.g., automotive business).

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Economic uncertainties: Global economic, political, and industry conditions (e.g., military conflicts, inflation, interest rates, trade policies, tariffs, public health threats) can adversely affect demand, costs, and financial stability.
• Climate change and ESG risks: Increased public awareness and regulations regarding greenhouse gas emissions, extreme weather conditions, and evolving stakeholder expectations for ESG matters could impact demand, costs, and reputation.
• Competitive environment: Intense competition, including from lower-cost regions and through industry consolidation/vertical integration, could lead to pricing pressures and adversely affect results.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Supplier Dependency: Increases in costs of raw materials (aluminum, copper, steel, stainless steel (nickel)) and purchased components, or shortages/delays from suppliers due to strong demand, trade laws, sanctions, capacity constraints, or financial instability, could negatively impact results and production schedules.
• Geographic Concentration: International operations in 16 countries expose Modine Manufacturing Company to complex international laws, regulations, monetary/fiscal policies, trade restrictions, foreign currency fluctuations, social unrest, political instability, and terrorism.
• Capacity Constraints: Challenges in ramping up and maintaining adequate production capacity in growing businesses, or effectively managing restructuring activities (headcount reductions, product line transfers), could impact competitiveness and financial results.

Financial & Regulatory Risks

Market & Financial Risks:

• Demand Volatility: Susceptibility to unfavorable trends or disruptions in end markets (e.g., customer demand for their products, regulatory initiatives, economic conditions) could lead to asset impairment and reduced sales.
• Foreign Exchange: Fluctuations in foreign currency exchange rates (U.S. dollar against European currencies, Brazilian real, Canadian dollar, Chinese yuan) can affect reported sales and operating costs, potentially creating pricing pressure.
• Credit & Liquidity: Indebtedness ($351 million at March 31, 2025) and related debt service obligations limit cash flow for other business purposes and expose the company to interest rate risk (variable rates). Failure to comply with debt covenants (leverage ratio, interest expense coverage ratio) could trigger early repayment.
• Goodwill and intangible assets: Significant amounts of goodwill ($233.9 million) and intangible assets ($146.7 million) on the balance sheet are subject to impairment risk if fair value falls below carrying value due to lower-than-forecasted revenues, market trends, or increased discount rates.

Regulatory & Compliance Risks:

• Industry Regulation: Operations are subject to various federal, state, local, and foreign environmental, health, and safety laws and regulations, with potential for material costs or liabilities for compliance or remediation.
• Export Controls: Embargoes or sanctions imposed by governments (e.g., related to Ukraine/Russia conflicts) could restrict sales or purchases, leading to potential criminal and civil sanctions.
• Data Privacy: Dependence on IT systems and increased use of advanced technology (including AI) heighten cybersecurity risks, potentially leading to data breaches, confidential information release, and compliance issues (e.g., GDPR).

Geopolitical & External Risks

Geopolitical Exposure: Operations in 16 countries expose Modine Manufacturing Company to risks from military conflicts (Ukraine, Middle East, Red Sea), trade tensions (U.S. with China, Canada, Mexico, Europe), and changes in foreign visitor/immigration policies. Compliance with anti-corruption laws (FCPA, U.K. Bribery Act) is also a risk.

Innovation & Technology Leadership

Research & Development Focus: Modine Manufacturing Company is committed to investing in products and technology to meet challenging thermal management and air quality needs. R&D expenditures totaled $34.9 million in fiscal 2025. The company's R&D teams collaborate closely with customers on projects and system designs. Core Technology Areas:

• Data Center Cooling: Strategic expansion of technology and product portfolio, recognizing the need for high-density cooling solutions due to artificial intelligence, machine learning, and high-performance computing. Launched Coolant Distribution Unit (CDU) in fiscal 2025.
• HVAC&R: Developing sustainable solutions to optimize thermal efficiency and manufacturing to support decarbonization and the use of next-generation refrigerants.
• Vehicular Markets: Developing solutions to optimize efficiency and reliability of commercial and off-highway vehicles, including precision battery cooling for zero-emission and hybrid vehicles.

Intellectual Property Portfolio: Modine Manufacturing Company protects its intellectual property through patents, trademarks, trade secrets, and copyrights. It routinely seeks patents on new products and processes, managed by its Patent Review Committee. The business as a whole is not materially dependent on any particular patent or license, and the company aggressively defends its rights globally.

Technology Partnerships: Modine Manufacturing Company collaborates with industry, university, and government-sponsored research organizations to conduct research and provide data on practical applications. It also engages in external research projects that complement internal strategic initiatives.

Leadership & Governance

Executive Leadership Team (as of March 31, 2025)

Leadership Continuity: The company performs strategic talent reviews and succession planning on a regular cadence.

Board Composition: The Board of Directors has oversight responsibility for cybersecurity risk management and regularly receives updates from the Vice President, Chief Information Officer and Chief Information Security Officer. The Board has designated two members as primary liaisons for cybersecurity matters. The Board has approved charters for its Audit Committee, Human Capital and Compensation Committee, Corporate Governance and Nominating Committee, and Technology Committee.

Human Capital Strategy

Workforce Composition: As of March 31, 2025, Modine Manufacturing Company employed approximately 11,300 persons worldwide.

Talent Management: Acquisition & Retention: Modine Manufacturing Company strives to be an employer of choice by fostering a fair, respectful, and safe work environment. Priorities include providing career development programs, promoting health and safety, fostering people-centric values, and providing competitive compensation and benefits. New employees undergo comprehensive onboarding. Retention Metrics: The company has consistently outperformed the private-industry Recordable Incident Rate (RIR) average for the manufacturing sector, with an RIR of 1.0 in fiscal 2025 (vs. 2.8 in 2023).

Diversity & Development:

• Development Programs: Employees are encouraged to develop skills through internal and external training. The Performance and Development Process (PDP) provides salaried employees with a structured development and performance review experience, focusing on annual performance goals and longer-term career development.
• Culture & Engagement: The company is committed to providing supportive and valued working environments, treating all people equally and with dignity and respect. It formally recognizes employee accomplishments through Modine Values People Awards and focuses on qualitative indicators like employee movement and promotion between global business units. Compensation and benefits are benchmarked against comparable industries and geographic areas to attract and retain talent.

Environmental & Social Impact

Environmental Commitments: Modine Manufacturing Company is committed to "Engineering a Cleaner, Healthier World™" by using thermal management expertise to improve air quality, reduce energy and water consumption, lower harmful emissions, enable cleaner running vehicles, and use environmentally friendly refrigerants. The company became a signatory to the United Nations Global Compact in fiscal 2025. Climate Strategy:

• Emissions Targets: Committed to reducing the carbon footprint of operations, products, and value chain, and promoting renewable energy programs.
• Carbon Neutrality: Not explicitly stated, but efforts include improving energy efficiency, minimizing water waste, and increasing waste recycling/diversion from landfills.
• Renewable Energy: Partnering with local utilities and government entities to implement renewable energy and conservation projects, installing solar panel systems, and more efficient LED lighting.
• Product Impact: Climate Solutions segment develops high-efficiency solutions, particularly in data center cooling, heating, and indoor air quality, focusing on solutions that optimize performance and reduce energy and water consumption. Shifting product portfolios toward lower-emission propellants and refrigerants. Performance Technologies segment focuses on innovations to improve efficiency and lower carbon emissions in vehicular applications (oil, charge-air, EGR coolers, radiators, A/C condensers, battery thermal management systems).

Supply Chain Sustainability:

• Supplier Engagement: Not explicitly detailed, but the company is embracing responsibility to reduce the carbon footprint across its value chain.
• Responsible Sourcing: Not explicitly detailed.

Social Impact Initiatives:

• Community Investment: Not explicitly detailed.
• Product Impact: Products aim to improve indoor air quality, enable cleaner running vehicles, and use environmentally friendly refrigerants, contributing to a healthier world.
• Employee Well-being: Focus on health and safety, with a behavior-based safety program and an RIR of 1.0 in fiscal 2025.

Business Cyclicality & Seasonality

Demand Patterns: Modine Manufacturing Company's overall operating performance is generally not subject to a significant degree of seasonality.

• Seasonal Trends: The Climate Solutions segment experiences some seasonality.
  • Heating products: Generally stronger sales in the second and third fiscal quarters.
  • Refrigeration, power generation, and heat transfer products: Generally higher sales volume during the first and second fiscal quarters due to construction seasons in the northern hemisphere.
• Economic Sensitivity: Sales to Performance Technologies vehicular OEM customers depend on market demand for new vehicles.
• Industry Cycles: The second fiscal quarter production schedules are typically impacted by customer summer shutdowns, and the third fiscal quarter is affected by customer holiday shutdowns.

Planning & Forecasting: Modine Manufacturing Company manufactures products for the majority of customers on an as-ordered basis, which makes large inventories of finished products unnecessary, except for certain Climate Solutions segment products (heating and data center cooling) due to seasonal demand and project construction schedules. In Brazil, the Performance Technologies segment maintains aftermarket product inventory to meet customer needs.

Regulatory Environment & Compliance

Regulatory Framework: Modine Manufacturing Company's operations are subject to various federal, state, local, and foreign laws and regulations governing emissions, discharges, waste management, and other environmental, health, and safety matters. Compliance with multiple and often conflicting laws and regulations across various countries is challenging and expensive. Industry-Specific Regulations:

• Environmental: Evolving environmental, health, and safety laws and regulations (including those related to climate control) may require material expenditures for compliance.
• Refrigerants: Regulations focused on eliminating fluorinated gases are driving investments from synthetic to natural gas, including carbon dioxide cooling solutions, impacting the refrigeration markets.
• Vehicular Emissions: The U.S. Environmental Protection Agency’s upcoming Greenhouse Gas Phase 3 regulations for commercial vehicles (stricter emissions for heavy-duty trucks starting 2027 model year) are being monitored.

Trade & Export Controls:

• Export Restrictions: Changes in U.S. or international trade policies, including tariffs, trade restrictions, or prohibitions, could adversely affect the business. Certain manufacturing facilities in Mexico operate under the Mexican Maquiladora (IMMEX) program, which provides for reduced tariffs and eased import regulations.
• Sanctions Compliance: Embargoes or sanctions (e.g., against Russia and entities supporting Russian interests) may expose the company to potential criminal and civil sanctions. Modine Manufacturing Company monitors sanctions requirements to ensure compliance.

Legal Proceedings: Modine Manufacturing Company and its subsidiaries are named as defendants in various lawsuits and enforcement proceedings. The company believes that any additional loss in excess of amounts already accrued would not have a material effect on its consolidated balance sheet, results of operations, and cash flows. Environmental liabilities for monitoring and remediation totaled $16 million at March 31, 2025.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: 27.0% in fiscal 2025, 23.9% in fiscal 2024, and -22.6% in fiscal 2023. The fiscal 2025 rate was higher due to the absence of a $3 million tax benefit in fiscal 2024 related to the sale of automotive businesses in Germany and an unfavorable impact of foreign currency exchange rates, partially offset by changes in the mix and amount of foreign and U.S. earnings. The fiscal 2023 rate was favorably impacted by a $57.3 million income tax benefit from the reversal of a valuation allowance on certain U.S. deferred tax assets.
• Geographic Tax Planning: The company's practice and intention is to reinvest the earnings of its non-U.S. subsidiaries outside of the U.S., with certain insignificant exceptions, and therefore has not recorded foreign withholding taxes or deferred income taxes for these earnings. The estimated net amount of unrecognized foreign withholding tax and deferred tax liabilities would total approximately $14.0 million if accumulated foreign earnings were distributed.
• Tax Reform Impact: The Organization for Economic Cooperation and Development (OECD) Base Erosion and Profit Shifting Pillar Two (Pillar Two) agreement, which provides for a minimum corporate income tax rate of at least 15%, could result in an increase in income tax expense.
• Deferred Tax Assets: Net deferred tax assets totaled $42.9 million at March 31, 2025. Valuation allowances against deferred tax assets in the U.S. and certain foreign jurisdictions totaled $67.6 million at March 31, 2025.
• Tax Audits: Subject to examination by taxing authorities globally, including the United States (fiscal 2022-2024), Italy (fiscal 2020-2024), and Canada (fiscal 2024).
• Tax Carryforwards: At March 31, 2025, the company had federal and state tax credits of $47.9 million (expiring between fiscal 2026 and 2049), state and local tax loss carryforwards totaling $124.5 million (some expiring between fiscal 2026 and 2043, some unlimited), and foreign tax loss and attribute carryforwards totaling $292.1 million (some expiring between fiscal 2026 and 2034, $211.3 million unlimited, mainly Germany and Italy).

Insurance & Risk Transfer

Risk Management Framework: Modine Manufacturing Company manages credit risk by investing excess cash in investment quality, short-term liquid debt instruments, performing periodic customer credit evaluations, and actively monitoring customer financial conditions. Counterparty risk is managed through reviews of customer credit reports, a supplier risk management program, and ensuring derivative counterparties maintain acceptable credit ratings.

• Insurance Coverage: Retains a portion of financial risk for certain insurance coverage, including property, general liability, workers compensation, and employee healthcare. Maintains reserves for estimated settlement costs of known and incurred but not reported claims. Monitors insurance providers to ensure acceptable financial ratings.
• Risk Transfer Mechanisms: Enters into forward contracts to hedge a portion of forecasted aluminum and copper purchases to mitigate commodity price risk. Utilizes foreign currency derivative contracts to manage foreign currency exchange risk on transactions and foreign currency-denominated debt obligations. Customer contracts for certain products contain provisions for prospective price adjustments based on raw material price changes.