MODINE MANUFACTURING CO
For the period ended Jun 30, 2024. Filed Jul 31, 2024.
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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.
Jun 30, 2024 · Filed Jul 31, 2024
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 2023-12-31; filed 2024-01-31.
0001140361-24-004740
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-07-31.
0001140361-24-035058
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 78 previous paragraphs and 51 current paragraphs.
16 unchanged; 23 reworded; 12 added; 39 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 36 previous and 36 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 (12)
Current report
Fiscal 2024 acquisitions and dispositions
Current report
First quarter highlights
Current report
First quarter net sales of $661.5 million were $39.1 million, or 6 percent, higher than the first quarter of the prior year, primarily due to $70.6 million of higher sales in our Climate Solutions segment, including $41.1 million of incremental sales from the acquired Scott Springfield Manufacturing and Napps businesses, partially offset by $34.1 million of lower sales in our Performance Technologies segment, largely driven by the $24.3 million impact of the disposition of three automotive businesses in Germany during the third quarter of fiscal 2024. From a product group perspective, compared with the first quarter of the prior year, sales of data center cooling products increased $94.4 million, while sales of liquid-cooled and heat transfer products decreased $30.7 million and $29.0 million, respectively.
Current report
First quarter cost of sales increased $4.4 million, or 1 percent, yet decreased 400 basis points as a percentage of sales to 75.4 percent, primarily due to favorable sales mix, higher average selling prices, lower raw material costs, which decreased approximately $9.0 million, and improved operating efficiencies. These favorable drivers were partially offset by higher labor and inflationary costs and a $1.6 million inventory purchase accounting adjustment recorded at Corporate related to the acquisition of Scott Springfield Manufacturing.
Current report
Restructuring expenses of $5.4 million in the first quarter of fiscal 2025 primarily consisted of severance expenses in the Performance Technologies segment.
Current report
Interest expense during the first quarter of fiscal 2025 increased $1.6 million compared with the first quarter of fiscal 2024, primarily due to higher borrowings on our revolving credit facility, which we used to fund a portion of the purchase price for the acquisition of Scott Springfield Manufacturing.
Current report
Effective April 1, 2024, we moved our Coatings business, which was previously managed by and reported within the Performance Technologies segment, under the leadership of the Climate Solutions segment. Under this refined organizational structure, the Coatings business is better aligned with the Climate Solution’s Heat Transfer Products business, which serves similar heating, ventilating, air conditioning, and refrigeration (“HVAC&R”) markets and customers. We believe that unifying these complementary businesses will allow for us to better focus resources on targeted growth and allow for a more efficient application of 80/20 principles to optimize profit margins and cash flow. Segment financial information for fiscal 2024 has been recast to conform to the current presentation.
Current report
As a result of the higher sales and lower cost of sales as a percentage of sales, gross profit increased $25.0 million and gross margin improved 180 basis points to 28.2 percent.
Current report
Operating income of $59.8 million increased $11.2 million from the first quarter of fiscal 2024 to the first quarter of fiscal 2025, primarily due to higher gross profit, partially offset by higher SG&A expenses.
Current report
Restructuring expenses of $5.2 million during the first quarter of fiscal 2025 primarily consisted of severance-related expenses associated with the closure of a technical service center in Europe, and equipment transfer costs.
Current report
U.S. pension plan termination
Current report
In June 2024, we approved the termination of our U.S. pension plan, subject to approvals from the Internal Revenue Service and 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 a cash contribution in the range of $15.0 million to $30.0 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 $130.0 million during 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.
Removed paragraphs (39)
Previous report
Acquisition of Napps Technology Corporation
Previous report
Disposition of two coatings facilities
Previous report
On September 19, 2023, we sold two coatings facilities, located in California and Florida, to Protecall, LLC. These facilities provide aftermarket application services, in which HVAC units are sprayed with an anti-corrosion protective coating. Our other coatings businesses continue to own and license spray-applied coatings used in aftermarket applications and are strategically pursuing growth through product licensing arrangements. Prior to the disposition, we reported the financial results of these businesses within the Performance Technologies segment. In fiscal 2023, net sales of these two businesses totaled $6.4 million. As a result of this transaction, we recorded a gain on sale of less than $0.1 million during the second quarter of fiscal 2024.
Previous report
Disposition of Germany automotive businesses
Previous report
Third quarter highlights
Previous report
Year-to-date highlights
Previous report
Net sales in the first nine months of fiscal 2024 increased $124.5 million, or 7 percent, from the same period last year, primarily due to higher sales in our Performance Technologies and Climate Solutions segments. Cost of sales increased $11.4 million, or 1 percent, from the same period last year, primarily due to higher sales volume. Gross profit increased $113.1 million and gross margin improved 510 basis points to 21.6 percent. SG&A expenses increased $25.2 million, primarily due to higher compensation-related expenses. Operating income of $193.9 million during the first nine months of fiscal 2024 increased $92.0 million from the prior year, primarily due to higher earnings in our operating segments and the gain on sale of the Germany automotive businesses, partially offset by higher SG&A expenses.
Previous report
Recent events
Previous report
In January 2024, we purchased intellectual property and other specific assets from TMGcore, Inc., a specialist in single- and two-phase liquid immersion cooling technology for data centers. We expect to utilize the liquid cooling immersion technology to support our growth strategy of expanding our global data center product offerings. The initial purchase price of the assets was $12.0 million. Additional contingent consideration may be payable to the seller in fiscal 2029. The amount of any additional consideration is dependent upon future financial metrics associated with the acquired technology. At this time, we cannot estimate the amount or range of additional consideration that may be payable to the seller in fiscal 2029.
Previous report
Also in January 2024, we approved a plan to close a technical service center in Europe. The objective of this restructuring initiative is to optimize the utilization of our technical service center capacity and realign our cost structure in light of the recent sale of three automotive businesses in Germany. We are targeting to complete the closure during the first half of fiscal 2025. At this time, we have not determined the full restructuring plan, however, we preliminarily estimate that closure costs will total approximately $8.0 million to $12.0 million. This estimate is subject to change as we complete the restructuring plan. We anticipate that severance expenses associated with this restructuring initiative will be recorded during the fourth quarter of fiscal 2024.
Previous report
Third quarter net sales of $561.4 million were $1.4 million higher than the third quarter of the prior year, primarily due to favorable commercial pricing and a $10.0 million favorable impact of foreign currency exchange rates. These increases were partially offset by lower sales volume, including lower sales from three automotive businesses in the Performance Technologies segment, which we sold on October 31, 2023.
Previous report
Third quarter cost of sales decreased $28.3 million, or 6 percent, primarily due to lower sales volume, improved operating efficiencies, and lower raw material prices, which decreased approximately $5.0 million. These decreases were partially offset by a $7.6 million unfavorable impact of foreign currency exchange rates and, to a lesser extent, higher labor and inflationary costs. As a percentage of sales, cost of sales decreased 530 basis points to 77.3 percent, primarily due to favorable sales mix, commercial pricing and improved operating efficiencies.
Previous report
Restructuring expenses increased $1.5 million compared with the third quarter of fiscal 2023, primarily due to higher equipment transfer costs and severance expenses in the Climate Solutions segment.
Previous report
We sold three automotive businesses based in Germany on October 31, 2023. As a result of the sale, we recorded a $4.0 million gain on sale at Corporate during the third quarter of fiscal 2024.
Previous report
Interest expense during the third quarter of fiscal 2024 decreased $0.1 million compared with the third quarter of fiscal 2023. Unfavorable changes in interest rates during fiscal 2024, which resulted in higher interest costs, were offset by the absence of $0.7 million of costs recorded as interest expense during the third quarter of fiscal 2023 related to a credit agreement amendment.
Previous report
Fiscal 2024 year-to-date net sales of $1,804.3 million were $124.5 million, or 7 percent, higher than the same period last year, primarily due to favorable commercial pricing, higher sales volume and a $25.1 million favorable impact of foreign currency exchange rates. Sales in the Performance Technologies and Climate Solutions segments increased $81.5 million and $41.2 million, respectively.
Previous report
Fiscal 2024 year-to-date cost of sales of $1,414.0 million increased $11.4 million, or 1 percent, primarily due to higher sales volume, a $19.8 million unfavorable impact of foreign currency exchange rates and, to a lesser extent, higher labor and inflationary costs. These increases were partially offset by lower raw material prices, which decreased approximately $33.0 million and, to a lesser extent, improved operating efficiencies. As a percentage of sales, cost of sales decreased 510 basis points to 78.4 percent, primarily due to the favorable impact of higher sales.
Previous report
As a result of higher sales and lower cost of sales as a percentage of sales, gross profit increased $113.1 million and gross margin improved 510 basis points to 21.6 percent.
Previous report
Fiscal 2024 year-to-date SG&A expenses increased $25.2 million, or 15 percent. As a percentage of sales, SG&A expenses increased by 70 basis points. The increase in SG&A expenses was primarily driven by higher compensation-related expenses, which increased approximately $14.0 million, and increases across other general and administrative expenses, such as higher product development costs, professional service fees, and employee travel expenses. The compensation-related expenses included higher incentive compensation expenses driven by improved financial results, as compared with the prior year.
Previous report
Restructuring expenses during the first nine months of fiscal 2024 decreased $0.1 million compared with the same period last year, primarily due to lower severance expenses in the Performance Technologies segment, partially offset by higher severance and equipment transfer expenses in the Climate Solutions segment.
Previous report
We sold three automotive businesses based in Germany on October 31, 2023. As a result of the sale, we recorded a $4.0 million gain on sale at Corporate during the third quarter of fiscal 2024.
Previous report
Operating income of $193.9 million during the first nine months of fiscal 2024 increased $92.0 million compared with the same period last year, primarily due to higher gross profit in our operating segments and the gain on sale of the Germany automotive businesses, partially offset by higher SG&A expenses.
Previous report
Interest expense during the first nine months of fiscal 2024 increased $3.1 million compared with the same period last year, primarily due to unfavorable changes in interest rates, partially offset by the absence of $0.7 million of costs recorded in the prior year related to a credit agreement amendment.
Previous report
The provision for income taxes was $37.8 million and $19.8 million during the first nine months of fiscal 2024 and 2023, respectively. The $18.0 million increase was primarily due to higher earnings in the current year as compared with the same period in the prior year, partially offset by a $3.1 million tax benefit related to the sale of the Germany automotive businesses during the third quarter of fiscal 2024.
Previous report
SG&A expenses increased $1.3 million compared with the third quarter of the prior year. As a percentage of sales, SG&A expenses increased by 80 basis points. The increase in SG&A expenses was primarily driven by higher compensation-related expenses.
Previous report
Restructuring expenses totaled $1.4 million during the third quarter of fiscal 2024 and consist of equipment transfer costs and severance expenses related to targeted headcount reductions in Europe and Asia.
Previous report
Climate Solutions year-to-date net sales increased $41.2 million, or 6 percent, from the same period last year, primarily due to higher sales volume and an $11.8 million favorable impact of foreign currency exchange rates. Compared with the same period in the prior year, sales of data center cooling products increased $95.6 million, primarily due to higher sales to both hyperscale and colocation customers. Sales of heat transfer and HVAC & refrigeration products decreased $53.0 million and $1.1 million, respectively. The decrease in sales of heat transfer products was largely due to market weakness and lower customer demand compared with the prior year and the impact of the strategic exit from lower-margin business.
Previous report
Climate Solutions year-to-date cost of sales decreased $3.2 million, or 1 percent, from the same period last year, primarily due to lower raw material prices, which decreased approximately $16.0 million, and improved operating efficiencies. These decreases were partially offset by increases resulting from higher sales volume, an $8.6 million unfavorable impact of foreign currency exchanges rates, and higher labor and inflationary costs and warranty expenses. As a percentage of sales, cost of sales decreased 450 basis points to 73.8 percent, primarily due to the favorable impact of higher sales and improved operating efficiencies.
Previous report
As a result of the higher sales and lower cost of sales as a percentage of sales, gross profit increased $44.4 million and gross margin improved 450 basis points to 26.2 percent.
Previous report
Restructuring expenses increased $1.4 million compared with the first nine months of fiscal 2023. The fiscal 2024 expenses consist of equipment transfer and severance expenses. The fiscal 2023 expenses primarily relate to closure costs associated with a previously-leased facility.
Previous report
Operating income of $127.7 million during the first nine months of fiscal 2024 increased $37.8 million from the same period last year, primarily due to higher gross profit, partially offset by higher SG&A and restructuring expenses.
Previous report
Performance Technologies cost of sales decreased $12.8 million, or 5 percent, from the third quarter of fiscal 2023 to the third quarter of fiscal 2024, primarily due to lower sales volume and, to a lesser extent, lower raw material prices, which decreased approximately $3.0 million. These decreases were partially offset by a $4.6 million unfavorable impact of foreign currency exchange rates and higher labor and inflationary costs. As a percentage of sales, cost of sales decreased 540 basis points to 81.1 percent, primarily due to favorable commercial pricing, partially offset by higher labor and inflationary costs.
Previous report
As a result of the higher sales and lower cost of sales as a percentage of sales, gross profit increased $18.0 million and gross margin improved 540 basis points to 18.9 percent.
Previous report
Operating income of $31.2 million increased $13.8 million from the third quarter of fiscal 2023 to the third quarter of fiscal 2024, primarily due to higher gross profit, partially offset by higher SG&A expenses.
Previous report
Performance Technologies year-to-date net sales increased $81.5 million, or 9 percent, from the same period last year, primarily due to favorable commercial pricing, a $13.4 million favorable impact of foreign currency exchange rates, and, to a lesser extent, higher sales volume. Compared with the same period in the prior year, sales of advanced solutions, air-cooled and liquid-cooled products increased $30.2 million, $26.8 million, and $26.0 million, respectively.
Previous report
As a result of the higher sales and lower cost of sales as a percentage of sales, gross profit increased $67.2 million and gross margin improved 550 basis points to 17.6 percent.
Previous report
Performance Technologies year-to-date SG&A expenses increased $13.0 million, or 18 percent, compared with the same period last year. As a percentage of sales, year-to-date SG&A expenses increased by 60 basis points. The increase in SG&A expenses was primarily due to higher compensation-related expenses, which increased approximately $7.0 million, and increases across other general and administrative expenses.
Previous report
Restructuring expenses during the first nine months of fiscal 2024 decreased $1.5 million compared with the same period last year, primarily due to lower severance expenses.
Previous report
Operating income of $96.8 million during the first nine months of fiscal 2024 increased $55.7 million from the same period last year, primarily due to higher gross profit, partially offset by higher SG&A expenses.
Reworded paragraphs (23)
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 December 31, 2023 was the third quarter of fiscal 2024.
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 June 30, 2024 was the first quarter of fiscal 2025.
Previous wording
On July 1, 2023, we acquired substantially all of the net operating assets of Napps Technology Corporation (“Napps”) for consideration totaling $5.8 million. Napps is a Texas-based manufacturer of air- and water-cooled chillers, condensing units and heat pumps. This acquisition expands our indoor air quality product portfolio and supports our growth strategy and mission of improving indoor air quality. Napps has historical annual sales of approximately $5.0 million. Since the date of the acquisition, we have reported the financial results of the Napps business within the Climate Solutions segment.
Current wording
On March 1, 2024, we acquired Scott Springfield Mfg. Inc. (“Scott Springfield Manufacturing”), a Canadian-based manufacturer of air handling units, for consideration totaling $184.1 million. On July 1, 2023, we acquired Napps Technology Corporation (“Napps”), a Texas-based manufacturer of air- and water-cooled chillers, condensing units and heat pumps, for consideration totaling $5.8 million. These acquisitions expanded our data center and indoor air quality product portfolios and support our growth strategy and mission of improving indoor air quality. We have reported the financial results of these businesses within the Climate Solutions segment since the acquisition dates.
Previous wording
On October 31, 2023, we sold three automotive businesses based in Germany to affiliates of Regent, L.P. We expect that the sale of these businesses, which produce air- and liquid-cooled products for internal combustion diesel and gasoline engines for the European automotive market, will support our strategic prioritization of resources towards higher-margin technologies. Prior to the disposition, we reported the financial results of these businesses within the Performance Technologies segment. During the first nine months of fiscal 2024 and 2023, net sales of these three businesses totaled $54.2 million and $54.8 million, respectively. As a result of the sale, we recorded a $4.0 million gain on sale during the third quarter of fiscal 2024.
Current wording
In October 2023, we sold three automotive businesses based in Germany. The sale of these businesses, which produce air- and liquid-cooled products for internal combustion, diesel and gasoline engines for the European automotive market, supports our strategic prioritization of resources towards higher-margin technologies.
Previous wording
See Note 2 of the Notes to Condensed Consolidated Financial Statements for more information regarding business acquisitions and dispositions.
Current wording
See Note 2 of the Notes to Consolidated Financial Statements for further information.
Previous wording
Net sales in the third quarter of fiscal 2024 increased $1.4 million, or less than 1 percent, from the third quarter of fiscal 2023, primarily due to higher sales in our Performance Technologies segment, partially offset by lower sales in our Climate Solutions segment. Cost of sales decreased $28.3 million, or 6 percent. Gross profit increased $29.7 million and gross margin improved 530 basis points to 22.7 percent. Selling, general and administrative (“SG&A”) expenses increased $10.0 million, primarily due to higher compensation-related expenses. Operating income of $61.7 million during the third quarter of fiscal 2024 increased $22.2 million from the prior year, primarily due to higher earnings in our operating segments and a $4.0 million gain on sale of the Germany automotive businesses, partially offset by higher SG&A expenses.
Current wording
Net sales in the first quarter of fiscal 2025 increased $39.1 million, or 6 percent, from the first quarter of fiscal 2024, primarily due to higher sales in our Climate Solutions segment, partially offset by lower sales in our Performance Technologies segment. The higher Climate Solutions segment sales included $41.1 million of incremental sales from the acquired Scott Springfield Manufacturing and Napps businesses. The lower Performance Technologies segment sales were largely driven by the $24.3 million impact of the disposition of three automotive businesses in Germany during the third quarter of fiscal 2024. Cost of sales increased $4.4 million, or 1 percent. Gross profit increased $34.7 million and gross margin improved 400 basis points to 24.6 percent. Selling, general and administrative (“SG&A”) expenses increased $21.4 million and included higher compensation-related expenses and incremental expenses from Scott Springfield Manufacturing, including amortization expense of acquired intangible assets. Operating income of $74.4 million during the first quarter of fiscal 2025 increased $7.9 million from the prior year, primarily due to higher earnings in our operating segments, partially offset by higher SG&A and restructuring expenses.
Previous wording
The following table presents our consolidated financial results on a comparative basis for the three and nine months ended December 31, 2023 and 2022:
Current wording
The following table presents our consolidated financial results on a comparative basis for the three months ended June 30, 2024 and 2023:
Previous wording
As a result of higher sales and lower cost of sales as a percentage of sales, third quarter gross profit increased $29.7 million and gross margin improved 530 basis points to 22.7 percent.
Current wording
As a result of higher sales and lower cost of sales as a percentage of sales, first quarter gross profit increased $34.7 million and gross margin improved 400 basis points to 24.6 percent.
Previous wording
Third quarter SG&A expenses increased $10.0 million, or 17 percent. As a percentage of sales, SG&A expenses increased by 180 basis points. The increase in SG&A expenses was primarily due to higher compensation-related expenses, which increased approximately $7.0 million, and included higher incentive compensation expenses driven by improved financial results, as compared with the prior year. In addition, environmental charges related to a previously-closed manufacturing facility in the U.S. increased $0.9 million.
Current wording
First quarter SG&A expenses increased $21.4 million, or 35 percent. As a percentage of sales, SG&A expenses increased by 260 basis points. The increase in SG&A expenses includes higher compensation-related expenses, which increased approximately $13.0 million and included incremental expenses from the acquired businesses. The higher compensation-related expenses include higher incentive compensation expenses driven by improved financial results. In addition, SG&A expenses in the first quarter of fiscal 2025 included $4.6 million of incremental amortization expense of acquired intangible assets.
Previous wording
Operating income of $61.7 million in the third quarter of fiscal 2024 increased $22.2 million compared with the third quarter of fiscal 2023, primarily due to higher gross profit in our operating segments and the gain on sale of the Germany automotive businesses, partially offset by higher SG&A expenses.
Current wording
Operating income of $74.4 million in the first quarter of fiscal 2025 increased $7.9 million compared with the first quarter of fiscal 2024, primarily due to higher gross profit in our operating segments, partially offset by higher SG&A and restructuring expenses.
Previous wording
The provision for income taxes was $10.3 million and $8.5 million in the third quarter of fiscal 2024 and 2023, respectively. The $1.8 million increase was primarily due to higher earnings in the current year as compared with the same period in the prior year, partially offset by a $3.1 million tax benefit related to the sale of the Germany automotive businesses during the third quarter of fiscal 2024.
Current wording
The provision for income taxes was $18.8 million and $14.7 million in the first quarter of fiscal 2025 and 2024, respectively. The $4.1 million increase was primarily due to higher earnings in the current year, partially offset by changes in the mix and amount of foreign and U.S. earnings, as compared with the same period in the prior year.
Previous wording
The following is a discussion of our segment results of operations for the three and nine months ended December 31, 2023 and 2022:
Current wording
The following is a discussion of our segment results of operations for the three months ended June 30, 2024 and 2023:
Previous wording
Climate Solutions net sales decreased $6.1 million, or 2 percent, from the third quarter of fiscal 2023 to the third quarter of fiscal 2024, primarily due to lower sales volume, partially offset by a $4.4 million favorable impact of foreign currency exchange rates. Compared with the third quarter of the prior year, sales of data center cooling products increased $15.4 million, with higher sales to both hyperscale and colocation customers, and sales of HVAC & refrigeration products increased $2.2 million. Sales of heat transfer products decreased $23.7 million, largely due to market weakness and lower customer demand compared with the prior year and the strategic exit from lower-margin business in connection with 80/20 product rationalization initiatives.
Current wording
Climate Solutions net sales increased $70.6 million, or 25 percent, from the first quarter of fiscal 2024 to the first quarter of fiscal 2025, primarily due to higher sales volume, including $41.1 million of incremental sales from the acquired Scott Springfield Manufacturing and Napps businesses. Compared with the first quarter of the prior year, sales of data center cooling and HVAC&R products increased $94.4 million and $5.1 million, respectively. The increase in sales of data center products includes sales from the acquired Scott Springfield Manufacturing business and organic sales growth to hyperscale and colocation customers. Sales of heat transfer products decreased $29.0 million, largely due to lower sales to heat pump customers in Europe.
Previous wording
Climate Solutions cost of sales decreased $17.4 million, or 9 percent, from the third quarter of fiscal 2023 to the third quarter of fiscal 2024, primarily due to lower sales volume and improved operating efficiencies. In addition, raw material prices decreased approximately $2.0 million. These decreases were partially offset by a $3.1 million unfavorable impact of foreign currency exchange rates and, to a lesser extent higher labor and inflationary costs. As a percentage of sales, cost of sales decreased 530 basis points to 72.7 percent, primarily due to favorable sales mix and improved operating efficiencies.
Current wording
Climate Solutions cost of sales increased $45.6 million, or 22 percent, from the first quarter of fiscal 2024 to the first quarter of fiscal 2025, primarily due to higher sales volume and, to a lesser extent, higher labor and inflationary costs. These increases were partially offset by improved operating efficiencies and lower raw material costs, which decreased approximately $2.0 million. As a percentage of sales, cost of sales decreased 180 basis points to 71.8 percent, primarily due to favorable sales mix.
Previous wording
Climate Solutions year-to-date SG&A expenses increased $5.2 million. As a percentage of sales, SG&A expenses increased by 10 basis points. The increase in SG&A expenses includes higher compensation-related expenses and increases across other general and administrative expenses.
Current wording
SG&A expenses increased $13.6 million compared with the first quarter of the prior year. As a percentage of sales, SG&A expenses increased by 190 basis points. The increase in SG&A expenses includes higher compensation-related expenses, which increased approximately $5.0 million and included expenses from the acquired businesses, and $4.6 million of incremental amortization expense of acquired intangible assets.
Previous wording
Performance Technologies net sales increased $5.2 million, or 2 percent, from the third quarter of fiscal 2023 to the third quarter of fiscal 2024, primarily due to favorable commercial pricing and a $5.6 million favorable impact of foreign currency exchange rates. These increases were partially offset by lower sales volume, including $10.2 million of lower sales from the three Germany automotive businesses that we sold on October 31, 2023. Compared with the third quarter of the prior year, sales of advanced solutions, and air-cooled products increased $9.6 million and $3.1 million, respectively. Sales of liquid-cooled products decreased $5.2 million.
Current wording
Performance Technologies net sales decreased $34.1 million, or 10 percent, from the first quarter of fiscal 2024 to the first quarter of fiscal 2025, primarily due to lower sales volume, including $24.3 million of lower sales from three automotive businesses in Germany that we sold during the third quarter of fiscal 2024. These decreases were partially offset by higher average selling prices. Compared with the first quarter of the prior year, sales of liquid-cooled and air-cooled products decreased $30.7 million and $4.1 million, respectively. Sales of advanced solutions products increased $3.4 million.
Previous wording
Performance Technologies year-to-date cost of sales increased $14.3 million, or 2 percent, from the same period last year, primarily due to higher labor and inflationary costs, an $11.2 million unfavorable impact of foreign currency exchange rates, and higher sales volume. These increases were partially offset by lower raw material prices, which decreased approximately $17.0 million. As a percentage of sales, cost of sales decreased 550 basis points to 82.4 percent, primarily due to the favorable impact of higher sales, partially offset by higher labor and inflationary costs.
Current wording
Performance Technologies cost of sales decreased $45.7 million, or 16 percent, from the first quarter of fiscal 2024 to the first quarter of fiscal 2025, primarily due to lower sales volume, lower raw material costs, which decreased approximately $7.0 million, and improved operating efficiencies. These favorable drivers were partially offset by higher labor and inflationary costs. As a percentage of sales, cost of sales decreased 550 basis points to 79.4 percent, primarily due to higher average selling prices, lower material costs and improved operating efficiencies, partially offset by higher labor and inflationary costs.
Previous wording
As a result of the lower sales and lower cost of sales as a percentage of sales, gross profit increased $11.3 million and gross margin improved 530 basis points to 27.3 percent.
Current wording
As a result of the lower sales and lower cost of sales as a percentage of sales, gross profit increased $11.6 million and gross margin improved 550 basis points to 20.6 percent.
Previous wording
SG&A expenses increased $4.1 million, or 16 percent, compared with the third quarter of the prior year. As a percentage of sales, SG&A expenses increased by 120 basis points. The increase in SG&A expenses was primarily due to higher compensation-related expenses, which increased approximately $3.0 million, and higher product development costs.
Current wording
SG&A expenses increased $2.5 million, or 10 percent, compared with the first quarter of the prior year. As a percentage of sales, SG&A expenses increased by 160 basis points. The increase in SG&A expenses was primarily due to higher compensation-related expenses, which increased approximately $3.0 million.
Previous wording
Operating income of $38.8 million increased $8.6 million from the third quarter of fiscal 2023 to the third quarter of fiscal 2024, primarily due to higher gross profit, partially offset by higher restructuring and SG&A expenses.
Current wording
Operating income of $31.5 million increased $3.9 million from the first quarter of fiscal 2024 to the first quarter of fiscal 2025, primarily due to higher gross profit, partially offset by higher restructuring and SG&A expenses.
Previous wording
Our primary sources of liquidity are cash flow from operating activities, our cash and cash equivalents as of December 31, 2023 of $149.7 million, and available borrowing capacity of $269.4 million under our revolving credit facility. Given our extensive international operations, approximately $103.0 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 June 30, 2024 of $72.9 million, and available borrowing capacity of $163.8 million under our revolving credit facility. Given our extensive international operations, approximately $69.0 million of our cash and cash equivalents are held by our non-U.S. subsidiaries. Amounts held by non-U.S. subsidiaries are available for general corporate use; however, these funds may be subject to foreign withholding taxes if repatriated. We believe our sources of liquidity will provide sufficient cash flow to adequately cover our funding needs on both a short-term and long-term basis.
Previous wording
Net cash provided by operating activities for the nine months ended December 31, 2023 was $175.0 million, which represents a $107.1 million increase compared with the same period in the prior year. This increase in operating cash flow was primarily due to the favorable impact of higher earnings and, to a lesser extent, favorable net changes in working capital as compared with the same period in the prior year. The favorable net changes in working capital include an increase in customer deposits received in connection with sales contracts with long inventory lead times.
Current wording
Net cash provided by operating activities for the three months ended June 30, 2024 was $40.5 million, which represents a $1.2 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, partially offset by the favorable impact of higher earnings. The unfavorable changes in working capital include a decrease in customer deposits associated with sales contracts with long inventory lead times and higher payments for incentive compensation, as compared with the same period in the prior year.
Previous wording
Capital expenditures of $43.8 million during the first nine months of fiscal 2024 increased $8.6 million compared with the same period in the prior year. The fiscal 2024 capital expenditures include investments supporting our strategic growth initiatives across several of our business units.
Current wording
Capital expenditures of $26.8 million during the first three months of fiscal 2025 increased $11.7 million compared with the same period in the prior year. The fiscal 2025 capital expenditures include investments supporting several of our strategic growth initiatives, including increasing production capacity for data center products.
Previous wording
During the first nine months of fiscal 2024, we repurchased $13.3 million of our common stock. As of December 31, 2023, we had $32.1 million of share repurchase authorization remaining under the current repurchase program, which expires in November 2024. Our decision whether and to what extent to repurchase additional shares will depend on a number of factors, including business conditions, other cash priorities, and stock price.
Current wording
As of June 30, 2024, we had $32.1 million of share repurchase authorization remaining under the current repurchase program, which expires in November 2024. Our decision whether and to what extent to repurchase additional shares will depend on a number of factors, including business conditions, other cash priorities, and stock price.