MODINE MANUFACTURING CO
For the period ended Sep 30, 2025. Filed Oct 29, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2025 · Filed Oct 29, 2025
MOD$96.61+5.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-06-30; filed 2025-07-31.
0001558370-25-009865
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-09-30; filed 2025-10-29.
0001104659-25-103646
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 66 previous paragraphs and 91 current paragraphs.
26 unchanged; 32 reworded; 33 added; 8 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 34 previous and 34 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (33)
Current report
Second quarter highlights
Current report
Net sales in the second quarter of fiscal 2026 increased $80.9 million, or 12 percent, from the second quarter of fiscal 2025, primarily due to higher sales in our Climate Solutions segment, partially offset by lower sales in our Performance Technologies segment. Cost of sales increased $81.6 million, or 17 percent. Gross profit decreased $0.7 million. Gross margin declined 290 basis points to 22.3 percent, primarily due to lower gross margin in the Climate Solutions segment, largely driven by temporary operating inefficiencies associated with our rapid expansion of data center manufacturing capacity. Selling, general and administrative (“SG&A”) expenses decreased $1.6 million. We recorded a $4.1 million impairment charge in our Performance Technology segment related to a technical service center and administrative support facility in Germany, which we expect to sell during the second half of fiscal 2026. Operating income of $73.5 million during the second quarter of fiscal 2026 decreased $1.8 million from the prior year, primarily due to the impairment charge, partially offset by lower SG&A and restructuring expenses.
Current report
Year-to-date highlights
Current report
Second quarter cost of sales increased $81.6 million, or 17 percent, primarily due to higher sales volume in the Climate Solutions segment and a $7.8 million unfavorable impact of foreign currency exchange rates. In addition, cost of sales was unfavorably impacted by temporary operating inefficiencies in the Climate Solutions segment, largely due to the rapid expansion of manufacturing capacity for data center products, and higher raw material costs, which increased approximately $5.0 million. These drivers, which increased cost of sales, were partially offset by lower sales volume and improved operating efficiencies in the Performance Technologies segment. As a percentage of sales, cost of sales increased 290 basis points to 77.7 percent, primarily due to the absence of commercial pricing settlements and the recognition of sales tax credits in Brazil, both of which favorably impacted the prior year, higher material costs, and temporary operating inefficiencies.
Current report
Second quarter SG&A expenses decreased $1.6 million, or 2 percent. As a percentage of sales, SG&A expenses decreased by 160 basis points. The decrease in SG&A expenses was driven by lower compensation-related expenses in the Performance Technologies segment, which included the benefits of previous restructuring actions, and lower incentive compensation expense. These drivers, which decreased SG&A, were partially offset by higher compensation-related expenses in the Climate Solutions segment, supporting the segment’s growth and including incremental expenses from the acquired businesses. Other costs directly associated with acquisition and integration activities increased $2.3 million.
Current report
During the second quarter of fiscal 2026, we recorded a $4.1 million non-cash impairment charge in the Performance Technologies segment related to a technical service center and administrative support facility in Germany, which we expect to sell during the second half of fiscal 2026.
Current report
Operating income of $73.5 million in the second quarter of fiscal 2026 decreased $1.8 million compared with the second quarter of fiscal 2025, primarily due to the $4.1 million impairment charge, partially offset by lower SG&A and restructuring expenses.
Current report
Fiscal 2026 year-to-date net sales of $1,421.7 million were $102.2 million, or 8 percent, higher than the same period last year, primarily due to $128.1 million of higher sales in our Climate Solutions segment, including $38.1 million of incremental sales from the acquired businesses and organic sales growth to hyperscale and colocation data center customers. The higher sales in the Climate Solutions segment were partially offset by $34.7 million of lower sales in our Performance Technologies segment, largely due to market weakness. Foreign currency exchange rates favorably impacted sales by $17.5 million.
Current report
Fiscal 2026 year-to-date cost of sales of $1,091.4 million increased $100.1 million, or 10 percent, primarily due to higher sales volume in the Climate Solutions segment and a $14.3 million unfavorable impact of foreign currency exchange rates. In addition, cost of sales was unfavorably impacted by temporary operating inefficiencies in the Climate Solutions segment, largely due to the rapid expansion of manufacturing capacity for data center products, and higher raw material costs, which increased approximately $7.0 million. These drivers, which increased cost of sales, were partially offset by lower sales volume and improved operating efficiencies in the Performance Technologies segment. As a percentage of sales, cost of sales increased 170 basis points to 76.8 percent, primarily due to higher material and labor costs and the absence of commercial pricing settlements and sales tax credits, which favorably impacted the prior year.
Current report
As a result of higher sales and higher cost of sales as a percentage of sales, gross profit increased $2.1 million and gross margin declined 170 basis points to 23.2 percent.
Current report
Restructuring expenses during the first six months of fiscal 2026 decreased $2.0 million compared with the same period last year, primarily due to lower severance expenses in the Performance Technologies segment, partially offset by higher severance expenses in the Climate Solutions segment.
Current report
During the second quarter of fiscal 2026, we recorded a $4.1 million non-cash impairment charge in the Performance Technologies segment related to a technical service center and administrative support facility in Germany, which we expect to sell during the second half of fiscal 2026.
Current report
Operating income of $149.2 million in the first six months of fiscal 2026 decreased $0.5 million compared with the same period last year, primarily due to the $4.1 million impairment charge, partially offset by higher gross profit and lower restructuring expenses.
Current report
Interest expense during the first six months of fiscal 2026 decreased $0.8 million compared with the same period last year, primarily due to favorable changes in interest rates, partially offset by higher average outstanding borrowings on our revolving credit facility.
Current report
Other net expenses during the first six months of fiscal 2026 increased $3.9 million compared with the same period last year, primarily due to an increase in net foreign currency transaction losses.
Current report
The provision for income taxes was $32.9 million and $38.8 million during the first six months of fiscal 2026 and 2025, respectively. The $5.9 million decrease included favorable changes in the mix and amount of foreign and U.S. earnings, as compared with the same period in the prior year. The decrease in the provision for income taxes for fiscal 2026 was partially offset by impacts associated with provisions of the OBBBA on state deferred taxes and the utilization of foreign tax credits, which increased the income tax provision during the second quarter of fiscal 2026 by $3.1 million. The Company is continuing to assess provisions of the OBBBA that are expected to impact future periods.
Current report
Climate Solutions cost of sales increased $82.3 million, or 32 percent, from the second quarter of fiscal 2025 to the second quarter of fiscal 2026, primarily due to higher sales volume, temporary operating inefficiencies, largely due to the rapid expansion of manufacturing capacity in the U.S. for data center products, and higher raw material costs, which increased approximately $4.0 million. In addition, cost of sales was negatively impacted by $4.1 million from foreign currency exchange rates. As a percentage of sales, cost of sales increased 440 basis points to 75.4 percent, primarily due to the temporary operating inefficiencies, the absence of the commercial pricing settlements in the prior year, and higher material costs.
Current report
As a result of the higher sales and higher cost of sales as a percentage of sales, gross profit increased $5.7 million and gross margin declined 440 basis points to 24.6 percent.
Current report
Operating income of $62.2 million decreased $2.5 million from the second quarter of fiscal 2025 to the second quarter of fiscal 2026, primarily due to higher SG&A expenses, partially offset by higher gross profit.
Current report
Climate Solutions year-to-date net sales increased $128.1 million, or 18 percent, from the same period last year, primarily due to higher sales volume, and an $11.2 million favorable impact of foreign currency exchange rates. Compared with the same period in the prior year, sales of data center, HVAC technologies, and heat transfer solutions products increased $91.7 million, $34.3 million, and $1.8 million respectively. The higher data center product sales include sales growth to hyperscale and colocation customers in North America and Europe. The higher HVAC technologies product sales are primarily driven by$38.1 million of incremental sales from the acquired businesses. The increase in sales of heat transfer products was partially offset by the absence of commercial pricing settlements with heat pump customers in Europe, which had a favorable impact during the prior year.
Current report
Climate Solutions year-to-date cost of sales increased $110.3 million, or 21 percent, from the same period last year, primarily due to higher sales volume and an $8.8 million unfavorable impact of foreign currency exchange rates. In addition, cost of sales was negatively impacted by temporary operating inefficiencies, largely due to the rapid expansion of manufacturing capacity in the U.S. for data center products, and higher raw material costs, which increased approximately $4.0 million. As a percentage of sales, cost of sales increased 220 basis points to 73.6 percent, primarily due to the temporary operating inefficiencies, the absence of the commercial pricing settlements in the prior year, and higher material costs.
Current report
As a result of the higher sales and higher cost of sales as a percentage of sales, gross profit increased $17.8 million and gross margin declined 220 basis points to 26.4 percent.
Current report
Climate Solutions year-to-date SG&A expenses increased $11.2 million, yet decreased 40 basis points as a percentage of sales. The increase in SG&A expenses was primarily driven by higher compensation-related expenses and increases across other general and administrative expenses. The higher compensation-related expenses, which increased approximately $12.0 million, includes expenses from the acquired businesses. This increase was partially offset by lower amortization expense, which decreased $3.3 million.
Current report
Restructuring expenses during the first six months of fiscal 2026 increased $2.0 million compared with the same period last year, primarily due to higher severance expenses, partially offset by lower costs related to transferring production and warehousing for certain product lines.
Current report
Operating income of $129.1 million during the first six months of fiscal 2026 increased $4.6 million from the same period last year, primarily due to higher gross profit, partially offset by higher SG&A expenses.
Current report
Restructuring expenses decreased $2.4 million compared with the second quarter of the prior year, primarily due to lower severance expenses in Europe.
Current report
During the second quarter of fiscal 2026, we recorded a $4.1 million non-cash impairment charge to reduce the carrying value of a technical service center and administrative support facility in Germany to estimated fair value, less costs to sell.
Current report
Operating income of $29.7 million decreased $1.1 million from the second quarter of fiscal 2025 to the second quarter of fiscal 2026, primarily due to lower gross profit and the impairment charge recorded in the current year, partially offset by lower SG&A and restructuring expenses.
Current report
Performance Technologies year-to-date net sales decreased $34.7 million, or 6 percent, from the same period last year, primarily due tolower sales volume, largely due to market weakness, our strategic exit from lower-margin business, and, to a lesser extent, the absence of sales tax credits recognized in Brazil during the prior year. These decreases were partially offset by a $6.3 million favorable impact of foreign currency exchanges rates. Compared with the same period in the prior year, sales of on-highway applications and heavy-duty equipment products decreased $21.1 million and $4.5 million, respectively.
Current report
As a result of the lower sales and higher cost of sales as a percentage of sales, gross profit decreased $17.6 million and gross margin declined 190 basis points to 18.5 percent.
Current report
Performance Technologies year-to-date SG&A expenses decreased $11.5 million, or 22 percent, compared with the same period last year. As a percentage of sales, year-to-date SG&A expenses decreased by 140 basis points. The decrease in SG&A expenses was primarily due to lower compensation-related expenses, which decreased approximately $14.0 million and included the benefits of previous restructuring actions.
Current report
During the second quarter of fiscal 2026, we recorded a $4.1 million non-cash impairment charge to reduce the carrying value of a technical service center and administrative support facility in Germany to estimated fair value, less costs to sell.
Current report
Operating income of $56.2 million during the first six months of fiscal 2026 decreased $6.1 million from the same period last year, primarily due to lower gross profitand the impair ment charge recorded in the current year, partially offset by lower SG&A and restructuring expenses.
Removed paragraphs (8)
Previous report
First quarter highlights
Previous report
Operating income of $75.7 million in the first quarter of fiscal 2026 increased $1.3 million compared with the first quarter of fiscal 2025, primarily due to higher gross profit, partially offset by higher SG&A expenses.
Previous report
Other net expenses increased $3.9 million compared with the first quarter of fiscal 2025, primarily due to net foreign currency transaction losses of $3.4 million. In the first quarter of fiscal 2025, the net impact of foreign currency transactions was a gain of $0.2 million.
Previous report
We are currently assessing the impact of the One Big Beautiful Bill Act (“OBBBA”) that was enacted in the U.S. on July 4, 2025. The OBBBA permanently extends certain expiring provisions of the Tax Cuts and Jobs Act, including 100% bonus depreciation and domestic research cost expensing. It also includes modifications to the international tax framework. The legislation has multiple effective dates, with certain provisions being implemented through our fiscal 2027.
Previous report
Climate Solutions cost of sales increased $28.0 million, or 11 percent, from the first quarter of fiscal 2025 to the first quarter of fiscal 2026, primarily due to higher sales volume and a $4.7 million unfavorable impact of foreign currency exchange rates. These increases were partially offset by lower warranty expense, which decreased approximately $3.0 million. As a percentage of sales, cost of sales decreased 20 basis points to 71.6 percent, primarily due to favorable sales mix.
Previous report
As a result of the higher sales and lower cost of sales as a percentage of sales, gross profit increased $12.1 million and gross margin improved 20 basis points to 28.4 percent.
Previous report
Operating income of $66.9 million increased $7.1 million from the first quarter of fiscal 2025 to the first quarter of fiscal 2026, primarily due to higher gross profit, partially offset by higher SG&A and restructuring expenses.
Previous report
Operating income of $26.5 million decreased $5.0 million from the first quarter of fiscal 2025 to the first quarter of fiscal 2026, primarily due to lower gross profit, partially offset by lower SG&A and restructuring expenses.
Reworded paragraphs (32)
Previous wording
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, 2025 was the first quarter of fiscal 2026.
Current wording
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 September 30, 2025 was the second quarter of fiscal 2026.
Previous wording
On May 31, 2025, we acquired LBW Holding Corp. (“L.B. White”) for $110.5 million. Headquartered in Onalaska, Wisconsin with additional manufacturing and distribution operations in Georgia, L.B. White has annual sales of approximately $75.0 million and is a leading provider of specialty heating solutions, including direct-fired forced air, radiant, indirect-fired, and electric heating solutions, for the agriculture, construction, and special event industries. L.B. White holds a leading position in the swine and poultry agricultural heating markets in North America and is a market leader in portables heating.
Current wording
On May 31, 2025, we acquired LBW Holding Corp. (“L.B. White”) for $110.5 million. Headquartered in Wisconsin, with additional manufacturing and distribution operations in Georgia, L.B. White has annual sales of approximately $75.0 million and is a leading provider of specialty heating solutions, including direct-fired forced air, radiant, indirect-fired, and electric heating solutions, for the agriculture, construction, and special event industries.
Previous wording
On July 1, 2025, we acquired Climate by Design International (“Climate by Design”) and paid $64.1 million upon closing. Based in Minnesota, Climate by Design specializes in desiccant dehumidification technology and critical process air handlers and has annual sales of approximately $45.0 million.
Current wording
On July 1, 2025, we acquired Climate by Design International (“Climate by Design”) for $64.4 million. Based in Minnesota, Climate by Design specializes in desiccant dehumidification technology and critical process air handlers and has annual sales of approximately $45.0 million.
Previous wording
See Note 2 of the Notes to Consolidated Financial Statements for further information.
Current wording
See Note 2 of the Notes to Condensed Consolidated Financial Statements for further information.
Previous wording
Net sales in the first quarter of fiscal 2026 increased $21.3 million, or 3 percent, from the first quarter of fiscal 2025, primarily due to higher sales in our Climate Solutions segment, partially offset by lower sales in our Performance Technologies segment. Cost of sales increased $18.5 million, or 4 percent. Gross profit increased $2.8 million and gross margin declined 40 basis points to 24.2 percent. Selling, general and administrative (“SG&A”) expenses increased $2.1 million. Operating income of $75.7 million during the first quarter of fiscal 2026 increased $1.3 million from the prior year, primarily due to higher gross profit, partially offset by higher SG&A expenses.
Current wording
Net sales in the first six months of fiscal 2026 increased $102.2 million, or 8 percent, from the same period last year, primarily due to higher sales in our Climate Solutions segment, partially offset by lower sales in our Performance Technologies segment. Cost of sales increased $100.1 million, or 10 percent, from the same period last year. Gross profit increased $2.1 million, yet gross margin declined 170 basis points to 23.2 percent. SG&A expenses increased $0.5 million. Operating income of $149.2 million during the first six months of fiscal 2026 decreased $0.5 million from the prior year, primarily due to the impairment charge recorded during the second quarter, partially offset by higher gross profit and lower restructuring expenses.
Previous wording
The following table presents our consolidated financial results on a comparative basis for the three months ended June 30, 2025 and 2024:
Current wording
The following table presents our consolidated financial results on a comparative basis for the three and six months ended September 30, 2025 and 2024:
Previous wording
First quarter net sales of $682.8 million were $21.3 million, or 3 percent, higher than the first quarter of the prior year, primarily due to $40.1 million of higher sales in our Climate Solutions segment, driven by sales growth to hyperscale and colocation data center customers in North America and $10.0 million of incremental sales from the acquired AbsolutAire and L.B. White businesses. The higher sales in Climate Solutions were partially offset by lower sales in our Performance Technologies segment, which decreased $23.5 million, largely due to market weakness. Foreign currency exchange rates favorably impacted sales by $8.1 million.
Current wording
Second quarter net sales of $738.9 million were $80.9 million, or 12 percent, higher than the second quarter of the prior year, primarily due to $88.0 million of higher sales in our Climate Solutions segment, driven by sales growth to hyperscale and colocation data center customers in North America and $28.1 million of incremental sales from the acquired L.B. White, Climate by Design, and AbsolutAire businesses. The higher sales in the Climate Solutions segment were partially offset by lower sales in our Performance Technologies segment, which decreased $11.2 million, largely due to market weakness. Foreign currency exchange rates favorably impacted sales by $9.4 million.
Previous wording
As a result of higher sales and higher cost of sales as a percentage of sales, first quarter gross profit increased $2.8 million, yet gross margin declined 40 basis points to 24.2 percent.
Current wording
As a result of higher sales and higher cost of sales as a percentage of sales, second quarter gross profit decreased $0.7 million and gross margin declined 290 basis points to 22.3 percent.
Previous wording
Restructuring expenses during the first quarter of fiscal 2026 primarily consisted of severance expenses, the majority of which were recorded in the Performance Technologies segment. Compared with the first quarter of fiscal 2025, restructuring expenses decreased $0.6 million, primarily due to lower severance expenses in the Performance Technologies segment, partially offset by higher severance expenses in the Climate Solutions segment.
Current wording
Restructuring expenses decreased $1.4 million compared with the second quarter of fiscal 2025, primarily due to lower severance expenses in the Performance Technologies segment, partially offset by higher severance expenses in the Climate Solutions segment.
Previous wording
Interest expense during the first quarter of fiscal 2026 decreased $1.7 million compared with the first quarter of fiscal 2025, primarily due to lower average outstanding borrowings on our revolving credit facility, and to a lesser extent, favorable changes in interest rates.
Current wording
Interest expense during the second quarter of fiscal 2026 increased $0.9 million compared with the second quarter of fiscal 2025, primarily due to higher average outstanding borrowings on our revolving credit facility, partially offset by favorable changes in interest rates.
Previous wording
The provision for income taxes was $14.0 million and $18.8 million in the first quarter of fiscal 2026 and 2025, respectively. The $4.8 million decrease was primarily due tochanges in the mix and amount of foreign and U.S. earnings, as compared with the same period in the prior year.
Current wording
The provision for income taxes was $18.9 million and $20.0 million in the second quarter of fiscal 2026 and 2025, respectively. The $1.1 million decrease included favorable changes in the mix and amount of foreign and U.S. earnings, as compared with the same period in the prior year. The decrease in the provision for income taxes for fiscal 2026 was partially offset by impacts associated with provisions of the One Big Beautiful Bill Act (“OBBBA”) on state deferred taxes and the utilization of foreign tax credits, which increased the income tax provision during the second quarter of fiscal 2026 by $3.1 million. The Company is continuing to assess provisions of the OBBBA that are expected to impact future periods.
Previous wording
First quarter SG&A expenses increased $2.1 million, or 3 percent. As a percentage of sales, SG&A expenses decreased by 10 basis points. The increase in SG&A expenses includes higher compensation-related expenses in the Climate Solutions segment, supporting the segment’s growth and including incremental expenses from the acquired AbsolutAire and L.B. White businesses. Other costs directly associated with acquisition and integration activities increased $1.4 million. These drivers, which increased SG&A expenses, were partially offset by lower compensation-related expenses in the Performance Technologies segment, including the benefit of recent restructuring actions.
Current wording
Fiscal 2026 year-to-date SG&A expenses increased $0.5 million. As a percentage of sales, SG&A expenses decreased by 90 basis points. The increase in SG&A expenses includes higher compensation-related expenses in the Climate Solutions segment, supporting the segment’s growth and including incremental expenses from the acquired businesses. Other costs directly associated with acquisition and integration activities increased $3.7 million. These drivers, which increased SG&A expenses, were partially offset by lower compensation-related expenses in the Performance Technologies segment, which included the benefits of previous restructuring actions, and lower incentive compensation expense.
Previous wording
The following is a discussion of our segment results of operations for the three months ended June 30, 2025 and 2024:
Current wording
The following is a discussion of our segment results of operations for the three and six months ended September 30, 2025 and 2024:
Previous wording
Climate Solutions net sales increased $40.1 million, or 11 percent, from the first quarter of fiscal 2025 to the first quarter of fiscal 2026, primarily due to higher sales volume and a $6.1 million favorable impact of foreign currency exchange rates. The higher sales volume includes sales growth to hyperscale and colocation customers in North America and $10.0 million of incremental sales from the recently-acquired AbsolutAire and L.B. White businesses. Compared with the first quarter of the prior year, sales of data center and HVAC technologies products increased $24.3 million and $17.2 million, respectively. Sales of heat transfer solution products decreased $1.4 million.
Current wording
Climate Solutions net sales increased $88.0 million, or 24 percent, from the second quarter of fiscal 2025 to the second quarter of fiscal 2026, primarily due to higher sales volume and a $5.1 million favorable impact of foreign currency exchange rates. Compared with the second quarter of the prior year, sales of data center, HVAC technologies, and heat transfer solution products increased $67.4 million, $17.1 million, and $3.2 million, respectively. The higher data center product sales include sales growth to hyperscale and colocation customers in North America and Europe. The higher HVAC technologies product sales are primarily driven by$28.1 million of incremental sales from the acquired L.B. White, Climate by Design, and AbsolutAire businesses, partially offset by lower sales of other heating and indoor air quality products. The increase in sales of heat transfer products was partially offset by the absence of commercial pricing settlements with heat pump customers in Europe, which had a favorable impact during the prior year.
Previous wording
Climate Solutions SG&A expenses increased $3.9 million compared with the first quarter of the prior year. As apercentage of sales, SG&A expenses decreased by 10 basis points. The increase in SG&A expenses includes higher compensation-related expenses, which increased approximately $6.0 million, including expenses from the acquired businesses. This increase was partially offset by lower amortization expense, which decreased $1.2 million, anddecreases across other general and administrative expenses. The lower amortization expense was primarily driven by an order backlog intangible asset, which we recorded in connection with our acquisition of Scott Springfield Mfg. Inc. and finished amortizing during the first quarter of fiscal 2026.
Current wording
Climate Solutions SG&A expenses increased $7.3 million compared with the second quarter of the prior year. As apercentage of sales, SG&A expenses decreased by 60 basis points. The increase in SG&A expenses was primarily driven by higher compensation-related expenses and increases across other general and administrative expenses, including costs to support strategic growth initiatives. The higher compensation-related expenses, which increased approximately $6.0 million, also included expenses from the acquired businesses. These increases were partially offset by lower amortization expense, which decreased $2.2 million. The lower amortization expense was primarily driven by an order backlog intangible asset, which we recorded in connection with our acquisition of Scott Springfield Mfg. Inc. and finished amortizing during the first quarter of fiscal 2026.
Previous wording
Restructuring expenses increased $1.1 million compared with the first quarter of fiscal 2025, primarily due to higher severance expenses and equipment transfer costs.
Current wording
Restructuring expenses increased $0.9 million compared with the second quarter of fiscal 2025, primarily due to higher severance expenses, partially offset by lower equipment transfer costs.
Previous wording
Performance Technologies net sales decreased $23.5 million, or 8 percent, from the first quarter of fiscal 2025 to the first quarter of fiscal 2026, primarily due to lower sales volume in North America, largely due to market weakness and our strategic exit from lower-margin business in connection with 80/20 product rationalization initiatives. This decrease was partially offset by a $2.0 million favorable impact of foreign currency exchange rates. Compared with the first quarter of the prior year, sales of on-highway application and heavy-duty equipment products decreased $14.6 million and $4.2 million, respectively.
Current wording
Performance Technologies net sales decreased $11.2 million, or 4 percent, from the second quarter of fiscal 2025 to the second quarter of fiscal 2026, primarily due to lower sales volume in North America, largely due to market weakness, our strategic exit from lower-margin business in connection with 80/20 product rationalization initiatives, and, to a lesser extent, the absence of sales tax credits recognized in Brazil during the prior year. These decreases were partially offset by higher average selling prices, and a $4.3 million favorable impact of foreign currency exchange rates. Compared with the second quarter of the prior year, sales of on-highway application and heavy-duty equipment products decreased $6.5 million and $0.3 million, respectively.
Previous wording
Performance Technologies cost of sales decreased $11.9 million, or 5 percent, from the first quarter of fiscal 2025 to the first quarter of fiscal 2026, primarily due to lower sales volume and, to a lesser extent, improved operating efficiencies. These drivers, which decreased cost of sales, were partially offset by higher material costs, which increased $2.0 million and a $1.8 million unfavorable impact of foreign currency exchange rates. As a percentage of sales, cost of sales increased 240 basis points to 81.8 percent, primarily due to the unfavorable impact of lower sales and higher material costs, partially offset by improved operating efficiencies.
Current wording
Performance Technologies cost of sales decreased $5.2 million, or 2 percent, from the second quarter of fiscal 2025 to the second quarter of fiscal 2026, primarily due to lower sales volume and, to a lesser extent, improved operating efficiencies. These drivers, which decreased cost of sales, were partially offset by a $3.7 million unfavorable impact of foreign currency exchange rates and higher raw material costs, which increased approximately $1.0 million. As a percentage of sales, cost of sales increased 130 basis points to 81.1 percent, primarily due to the unfavorable impact of lower sales and higher material costs, partially offset by improved operating efficiencies.
Previous wording
As a result of the lower sales and higher cost of sales as a percentage of sales, gross profit decreased $11.6 million and gross margin declined 240 basis points to 18.2 percent.
Current wording
As a result of the lower sales and higher cost of sales as a percentage of sales, gross profit decreased $6.0 million and gross margin declined 130 basis points to 18.9 percent.
Previous wording
Performance Technologies SG&A expenses decreased $4.9 million compared with the first quarter of the prior year. As apercentage of sales, SG&A expenses decreased by 100 basis points. The decrease in SG&A expenses was primarily due to lower compensation-related expenses, which decreased approximately $6.0 million and included the benefit of recent restructuring actions.
Current wording
Performance Technologies SG&A expenses decreased $6.6 million compared with the second quarter of the prior year. As apercentage of sales, SG&A expenses decreased by 190 basis points. The decrease in SG&A expenses was primarily due to lower compensation-related expenses, which decreased approximately $8.0 million and included the benefits of previous restructuring actions.
Previous wording
First quarter cost of sales increased $18.5 million, or 4 percent, primarily due to higher sales volume and a $6.5 million unfavorable impact of foreign currency exchange rates. In addition, cost of sales was unfavorably impacted by higher raw material costs, which increased approximately $2.0 million, and to a lesser extent, higher labor and inflationary costs. These drivers, which increased cost of sales, were partially offset by lower warranty expense, which decreased approximately $3.0 million. In addition, cost of sales was favorably impacted by the absence of a $1.6 million inventory purchase accounting adjustment recorded during the first quarter of fiscal 2025 at Corporate related to Scott Springfield Mfg. Inc. As a percentage of sales, cost of sales increased 40 basis points to 75.8 percent, primarily due to the unfavorable impact of lower sales and higher material costs in the Performance Technologies segment.
Current wording
Performance Technologies year-to-date cost of sales decreased $17.1 million, or 4 percent, from the same period last year, primarily due to lower sales volume and, to a lesser extent, improved operating efficiencies. These drivers, which decreased cost of sales, were partially offset by higher raw material costs, which increased approximately $3.0 million, and a $5.5 million unfavorable impact of foreign currency exchange rates. As a percentage of sales, cost of sales increased 190 basis points to 81.5 percent, primarily due to the unfavorable impact of lower sales and higher material costs, partially offset by improved operating efficiencies.
Previous wording
Restructuring expenses decreased $1.7 million compared with the first quarter of the prior year, primarily due to lower severance expenses in Europe, partially offset by higher severance expenses in North America.
Current wording
Restructuring expenses during the first six months of fiscal 2026 decreased $4.1 million compared with the same period last year, primarily due to lower severance expenses in Europe, partially offset by higher severance expenses in North America.
Previous wording
Our primary sources of liquidity are cash flow from operating activities, our cash and cash equivalents as of June 30,2025 of $124.5 million, and available borrowing capacity under our revolving credit facility. Given our extensive international operations, approximately $53.0 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.
Current wording
Our primary sources of liquidity are cash flow from operating activities, our cash and cash equivalents as of September 30,2025 of $83.8 million, and available borrowing capacity of $128.8 million under our revolving credit facility. Given our extensive international operations, approximately $53.0 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.
Previous wording
Net cash provided by operating activities for the three months ended June 30, 2025 was $27.7 million, which represents a $12.8 million decrease compared with the same period in the prior year. This decrease in operating cash flow was primarily due to unfavorable net changes in working capital, as compared with the same period in the prior year. The unfavorable changes in working capital include the impact of higher inventory levels and higher payments for incentive compensation. Our Climate Solutions segment has increased inventory levels in fiscal 2026, primarily to support growing customer demand for data center products in the U.S. These drivers were partially offset by the favorable impact of increases in accounts payable, which largely resulted from the higher inventory levels.
Current wording
Net cash provided by operating activities for the six months ended September 30, 2025 was $29.1 million, which represents a $68.7 million decrease compared with the same period in the prior year. This decrease in operating cash flow was primarily due to unfavorable net changes in working capital, as compared with the same period in the prior year. The unfavorable changes in working capital include the impact of higher inventory levels and higher payments for incentive compensation. Our Climate Solutions segment has increased inventory levels in fiscal 2026, primarily to support growing customer demand for data center products in the U.S. These drivers were partially offset by the favorable impact of increases in accounts payable, which largely results from the higher inventory levels.
Previous wording
Capital expenditures of $27.5 million during the first three months of fiscal 2026 increased $0.7 million compared with the same period in the prior year. We are focused on investments that support our strategic growth initiatives. We recently announced that we plan to invest $100.0 million over the next twelve months to expand our manufacturing capacity in the U.S. for data center products.
Current wording
Capital expenditures of $59.4 million during the first six months of fiscal 2026 increased $19.1 million compared with the same period in the prior year. During the second quarter of fiscal 2026, we announced a new plan to invest an incremental $100.0 million over the next twelve months to expand our manufacturing capacity in the U.S. for data center products.
Previous wording
Under our strategy based upon 80/20 principles, we are focused on acquiring businesses that we expect will accelerate our strategic growth in select markets. During the first quarter of fiscal 2026, we made cash payments totaling $119.0 million to acquire L.B. White and AbsolutAire. On July 1, 2025, we paid $64.1 million upon closing for the acquisition of Climate by Design International. See Note 2 of the Notes to Consolidated Financial Statements for additional information regarding acquisitions.
Current wording
We are focused on acquiring businesses that we expect will accelerate our strategic growth. During the first half of fiscal 2026, we made cash payments totaling $182.1 million to acquire L.B. White, Climate by Design, and AbsolutAire. See Note 2 of the Notes to Condensed Consolidated Financial Statements for additional information regarding these acquisitions.
Previous wording
During the first quarter of fiscal 2026, borrowings on our credit facilities, net of repayments, totaled $172.0 million. We primarily used the incremental borrowings for funding our acquisitions of L.B. White and Climate by Design International, which closed on May 31, 2025 and July 1, 2025, respectively.
Current wording
During the first six months of fiscal 2026, borrowings on our credit facilities, net of repayments, totaled $224.6 million. We primarily used the incremental borrowings to fund our acquisitions of L.B. White and Climate by Design, which closed on May 31, 2025 and July 1, 2025, respectively.
Previous wording
In July 2025, we executed an amended and restated credit agreement with a syndicate of banks that provides for a multi-currency $400.0 million revolving credit facility and a $200.0 million term loan facility maturing in July 2030. This credit agreement modified our then-existing revolving credit and term loan facilities, which would have matured in October 2027. We also amended the agreement governing our Senior Notes, toconform the applicable terms to those of the aforementioned amended and restated credit agreement.
Current wording
In July 2025, we executed an amended and restated credit agreement with a syndicate of banks that provides for a multi-currency $400.0 million revolving credit facility and a $200.0 million term loan facility maturing in July 2030. This credit agreement modified our then-existing revolving credit and term loan facilities, which would have matured in October 2027. We also amended the agreement governing our Senior Notes, to conform the applicable terms to those of the aforementioned amended and restated credit agreement.
Previous wording
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 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.
Current wording
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.
Previous wording
We were in compliance with our debt covenants as of June 30, 2025 and expect to remain in compliance with our debt covenants during the remainder of fiscal 2026 and beyond.
Current wording
As of September 30,2025, we were in compliance with our debt covenants. We expect to remain in compliance with our debt covenants during the remainder of fiscal 2026 and beyond.
Previous wording
In June 2024, we approved the termination of our U.S. pension plan, which is pending approval from the Pension Benefit Guaranty Corporation. We intend to offer certain participants the option to receive their pension benefits in the form of a lump-sum distribution prior to purchasing annuity contracts to transfer our remaining obligations under the plan. In connection with the plan termination, we expect to make additional cash contributions in the range of $17.0 million to $22.0 million to fully fund the plan, on a plan termination basis, and to record non-cash pension settlement charges totaling approximately $115.0 million to $125.0 million during the second half of fiscal 2026. The timing and amount of the final cash contribution and settlement charges could materially differ from our estimates due to the nature and timing of participant settlements, prevailing market and economic conditions, the duration of the termination process, and/or other factors.
Current wording
In June 2024, we approved the termination of our U.S. pension plan. We offered certain participants the option to receive their pension benefits in the form of a lump-sum distribution and plan to purchase annuity contracts to transfer our remaining obligations under the plan. In connection with the plan termination, we expect to make additional cash contributions in the range of $20.0 million to $25.0 million to fully fund the plan, on a plan termination basis, and to record non-cash pension settlement charges totaling approximately $120.0 million to $125.0 million during the second half of fiscal 2026. The timing and amount of the final cash contribution and settlement charges could materially differ from our estimates due to the nature and timing of participant settlements, prevailing market and economic conditions, the duration of the termination process, or other factors.
Previous wording
We did not purchase shares under our share repurchase program during the first quarter of fiscal 2026. As of June 30, 2025, 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.
Current wording
We did not purchase shares under our share repurchase program during the first half of fiscal 2026. As of September 30, 2025, 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.