Gentherm Inc

Note 1 – Overview

Gentherm Incorporated, a Michigan corporation, and its consolidated subsidiaries (“Gentherm”, “we”, “us”, “our” or the “Company”) is a global market leader of innovative thermal management and pneumatic comfort technologies. Our automotive products include Climate Control Seats (CCS®), Climate Control Interiors (CCI™), Lumbar and Massage Comfort Solutions, Valve Systems, and Climate and Comfort Electronics. We operate in locations aligned with our major customers’ product strategies to provide locally enhanced design, integration and production capabilities. Our medical products include patient temperature management systems that can be found in hospitals throughout the world.

IME Acquisition

On July 1, 2026, the Company completed its acquisition of Innovative Medical Equipment, LLC (“IME”). IME, headquartered in Beachwood, Ohio, is a provider of the ThermaZone® thermal therapy device. ThermaZone is a non-opioid thermal therapy solution designed to support pain management and recovery through controlled hot-and-cold therapy. The Company acquired all of the membership interests in IME for $34,000, net of cash and debt, and subject to customary adjustments related to IME’s net working capital as of the closing date. The purchase price may be increased after closing by up to $1,000 upon the achievement of a specified performance milestone. The transaction was funded through a combination of the Company’s existing cash balances and borrowings under the Revolving Credit Facility, as defined below.

On January 29, 2026, the Company, entered into definitive agreements to combine the Performance Technologies business (“Performance Technologies”) of Modine Manufacturing Co., a Wisconsin corporation (“Modine”), with the Company (the “Modine Transaction”). The Modine Transaction is structured as a Reverse Morris Trust transaction, where a wholly owned subsidiary of Modine (“SpinCo”), owning Performance Technologies, will be spun off to Modine shareholders (the “Distribution”) and simultaneously merged with a wholly owned subsidiary of the Company (the “Merger”). The transaction was valued at approximately $1,000,000 as of the date of signing, based on specified assumptions. Shareholders of the Company immediately prior to the Merger are expected to own approximately 60.0% of the combined company and Modine shareholders are expected to own approximately 40.0% of the combined company, on a fully diluted basis, without taking into account any overlapping shareholder ownership and subject to adjustment.

Prior to and as a condition of, the Distribution, Modine will receive a cash distribution from SpinCo of $210,000, subject to adjustment for cash, working capital and indebtedness of SpinCo, and subject to decrease if additional shares of Common Stock will be issued to Modine shareholders to support the intended tax-free treatment of the Distribution to Modine shareholders for U.S. federal income tax purposes (the “SpinCo Cash Distribution”).

The transaction is expected to close by early fourth quarter of 2026, subject to various closing conditions, including specified approvals by the Company’s shareholders, a customary IRS tax ruling and the satisfaction of other customary closing conditions.

The Merger Agreement contains specified termination rights for the Company and Modine, including a right allowing the Company or Modine to terminate the Merger Agreement if the Merger has not been consummated on or prior to March 31, 2027 (which date may be extended to June 30, 2027 in the event that required regulatory approvals have not been received). Additionally, the Merger Agreement requires the Company to pay Modine a termination fee of $45,000 if the Merger Agreement is terminated under certain circumstances.

In connection with the Merger Agreement, the Company, SpinCo and a financial institution executed a 364-day bridge loan facility commitment letter, pursuant to which such financial institution committed (i) to provide bridge financing of $290,000 to fund dividends, fees and expenses related to the transactions contemplated by the Merger Agreement (“Bridge Facility”) and (ii) to provide the Company a backstop of the Company’s credit agreement (“Backstop Commitment”).

On February 24, 2026, the Company amended its credit agreement to permit the Modine Transaction, which terminated the Backstop Commitment. On June 29, 2026, SpinCo replaced the Bridge Facility with permanent financing by entering into a credit agreement, providing for a delayed-draw term loan facility with aggregate commitments of up to $250,000 (the "Senior Credit Facility"). Borrowings under the Senior Credit Facility are expected to be funded on the closing date of the Modine Transaction and used to fund the SpinCo Cash Distribution and to pay certain other amounts required under the Merger Agreement.

During the three and six months ended June 30, 2026, the Company incurred $2,145 and $5,135, respectively, of fees associated with the Bridge Facility, Backstop Commitment and Senior Credit Facility. Such fees are recorded in Selling, general and administrative expenses.

Basis of Presentation and Significant Accounting Policies

The unaudited consolidated condensed financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to those rules and regulations. The information furnished in the consolidated condensed financial statements include all adjustments (consisting of only normal, recurring adjustments) considered necessary to present fairly the results of operations, financial position and cash flows of the Company. These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. The operating results for interim periods are not necessarily indicative of results that may be expected for other interim periods or for the full year.

In preparing these financial statements, management was required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. These estimates and assumptions are based on our historical experience, the terms of existing contracts, our evaluation of trends in the industry, information provided by our customers and suppliers and information available from other third-party sources, as appropriate. These estimates and assumptions are subject to an inherent degree of uncertainty and may change as new events occur and additional information is obtained. As a result, actual results may differ significantly from our estimates, and any such differences may be material to our financial statements.

All amounts in these notes to the consolidated condensed financial statements are presented in thousands, except share and per share data.

Principles of Consolidation

The consolidated condensed financial statements include the accounts of the Company, its wholly owned subsidiaries and those entities in which it has a controlling financial interest. The Company evaluates its relationship with other entities for consolidation and to identify whether such entities are variable interest entities and to assess whether the Company is the primary beneficiary of such entities. Investments in affiliates in which Gentherm does not have control but does have the ability to exercise significant influence over operating and financial policies are accounted for under the equity method. When Gentherm does not have the ability to exercise significant influence (generally when ownership interest is less than 20%), investments in affiliates are measured at cost, less impairments, adjusted for observable price changes in orderly transactions for identical or similar investments of the same issuer.

Revenue Recognition - payments to customers

From time to time, the Company provides cash incentives to customers in exchange for new business awards. The Company evaluates the underlying economics of each amount of consideration payable to a customer to determine the proper accounting by understanding the reasons for the payment, the rights and obligations resulting from the payment, the nature of the promises in the contract, and other relevant facts and circumstances. When the Company concludes that the payment is incurred only if the new business is obtained and the Company expects to recover the amounts from the customer over the term of the new business arrangement, the Company recognizes these payments as an asset. The Company amortizes the asset as a reduction of revenue as products related to the payment are transferred to the customer, based on the total amount of products expected to be sold over the term of the arrangement (generally 5 to 10 years following start of production). The Company evaluates the amounts capitalized each reporting period for recoverability and recognizes a reduction of revenue for any amounts that are no longer expected to be recovered over the term of the business arrangement. Payments to customers that are not capitalized are recognized as a reduction to revenue at the time of the commitment to make such payments.

As of June 30, 2026 and December 31, 2025, total capitalized payments to customers were $22,142 and $18,168, respectively.

During the three and six months ended June 30, 2026, the Company recognized $541 and $975 as reductions of revenue due to amortization and write-off of previously capitalized payments. During thethree and six months ended June 30, 2025, the Company recognized $208 and $1,044 as reductions of revenue due to amortization and write-off of previously capitalized payments.

The Company had no other material contract assets or contract liabilities as of June 30, 2026.

Loss on Sale of Land and Building, net

In January 2025, we completed the sale of our former headquarters building in Northville, Michigan for cash proceeds of $3,740. As a result, the Company recognized a loss on sale of $2,311 during thesix months ended June 30, 2025.

Note 2 – Recently Issued Accounting Pronouncements

Disaggregation of Income Statement Expenses

In November 2024, the FASB issued ASU 2024-03, "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40)". ASU 2024-03 enhances disclosures around certain costs and expenses. Retrospective adoption is required for all periods presented in the financial statements and early adoption is permitted. This update is effective for annual reporting periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. We are currently in the process of determining the impact the implementation of ASU 2024-03 will have on the Company’s financial statement disclosures.

Internal-Use Software

In September 2025, the FASB issued ASU 2025-06, "Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40)". ASU 2025-06 modernizes the accounting for internal-use software costs. Retrospective, prospective, or a modified transition approach for adoption are all permitted, as well as early adoption at the beginning of an annual reporting period. This update is effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. We are currently in the process of determining the impact the implementation of ASU 2025-06 will have on the Company’s financial statement disclosures.

Environmental Credits and Environmental Credit Obligations

In May 2026, the FASB issued ASU 2026-02, “Environmental Credits and Environmental Credit Obligations (Topic 818)”. ASU 2026-02 provides recognition, measurement, presentation, and disclosure requirements for all entities that generate, purchase, or receive environmental credits or have a regulatory compliance obligation that may be settled with environmental credits. This update is effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. We are currently in the process of determining the impact the implementation of ASU 2026-02 will have on the Company’s financial statement disclosures.

Note 3 – Restructuring

The Company continuously monitors market developments, industry trends and changing customer needs and in response, has taken and may continue to undertake restructuring actions, as necessary, to execute management’s strategy, streamline operations and optimize the Company’s cost structure. Restructuring actions may include the realignment of existing manufacturing footprint, facility closures or similar actions, either in the normal course of business or pursuant to significant restructuring programs.

These actions may result in employees receiving voluntary or involuntary employee termination benefits, which are mainly statutory requirements or other contractual agreements. Voluntary termination benefits are accrued when an employee accepts the related offer. Involuntary termination benefits are accrued upon the commitment to a termination plan and when the benefit arrangement is communicated to affected employees, or when liabilities are determined to be probable and estimable, depending on the existence of a substantive plan for separation or termination.

2026 Plan

In February 2026, the Company committed to a restructuring plan to realign its operating model and organizational structure to deliver on its key financial and operational priorities (“2026 Plan”). The 2026 Plan is expected to result in structural cost reductions impacting the Company’s global salaried workforce.

The Company expects to incur cash restructuring costs of between $9,000 and $9,500 foremployee separation costs. The actions under the 2026 Plan are expected to be substantially completed by the end of 2026.

During the three and six months ended June 30, 2026, the Company recognized restructuring expense of $3,896 and $9,013, respectively, for employee separation costs.

2025 Manufacturing Footprint Plan

In July 2025, the Company committed to an additional restructuring plan to further optimize the Company’s manufacturing footprint by realigning its global manufacturing capacity (“2025 Manufacturing Footprint Plan”). As a result, the Company will relocate certain manufacturing activities between existing locations.

The Company expects to incur cash restructuring costs of between $3,000 and $4,000 for employee separation and retention costs and $1,000 of other transition costs primarily for machinery and equipment move and set up costs. Additionally, we expect to incur capital expenditures of between $1,000 and $2,000.

During the three and six months ended June 30, 2026, the Company recognized restructuring expense of $0.

Since the inception of this program, the Company has recorded $2,190 of restructuring expenses. The actions under the 2025 Manufacturing Footprint Plan are expected to be substantially completed by the end of 2027.

2025 EMEA Plan

In February 2025, the Company committed to a restructuring plan to further optimize the Company’s manufacturing footprint by realigning its manufacturing capacity in Europe (“2025 EMEA Plan”). As a result, the Company will close its facility in Plzeň, Czech Republic and relocate the manufacturing activities into other existing facilities within the region.

The Company expects to incur cash restructuring costs of between $4,000 and $6,000 for employee separation and retention costs and between $2,000 and $3,000 of other transition costs primarily for machinery and equipment move and set up costs. Additionally, we expect to incur capital expenditures of between $1,000 and $2,000.

During the three and six months ended June 30, 2026, the Company recognized restructuring expense of $332 and $710, respectively, for employee separation costs and $472 and $1,039, respectively, for other costs. During the three and six months ended June 30, 2025, the Company recognized restructuring expense of $367 and $2,773, respectively, for employee separation costs and $293 and $333, respectively, for other costs.

Since the inception of this program, the Company has recorded $6,531 of restructuring expenses. The remaining actions under the 2025 EMEA Plan are expected to be substantially completed by the end of 2026.

2025 Asia Plan

In February 2025, the Company committed to an additional restructuring plan to further optimize the Company’s manufacturing footprint by realigning its manufacturing capacity in Asia (“2025 Asia Plan”). As a result, the Company relocated certain manufacturing activities from its facility in Shanghai, China to its facility in Tianjin, China.

During the three and six months ended June 30, 2026, the Company recognized restructuring expense of $69 for employee separation costs and $294 and $327, respectively, for other costs. During the three and six months ended June 30, 2025, the Company recognized restructuring expense of $493 and $1,952, respectively, for employee separation costs and $89 and $117, respectively, for other costs.

Since the inception of this program, the Company has recorded $3,492 of restructuring expenses. The actions under the 2025 Asia Plan are substantially complete.

Other Restructuring Actions

The Company has undertaken several discrete restructuring actions in an effort to optimize its cost structure.

During the three and six months ended June 30, 2026, the Company recognized $25 and $58, for employee separation costs related to structural cost reductions impacting the Company’s global salaried workforce. During thethree and six months ended June 30, 2025, the Company recognized $695 and $1,216, for employee separation costs related to structural cost reductions impacting the Company’s global salaried workforce.

During the three and six months ended June 30, 2026, the Company’s Automotive segment recognized $876 and $1,439, respectively, for other costs, primarily related to the relocation of certain manufacturing to best cost locations. During thethree and six months ended June 30, 2025, the Company’s Automotive segment recognized $(106) and $(262), respectively, for employee separation costs and $277 and $493, respectively, for other costs, primarily related to the relocation of certain manufacturing to best cost locations.

Restructuring Expenses, Net By Reporting Segment

The following table summarizes restructuring expenses, net for thethree and six months ended June 30, 2026 and 2025 by reporting segment:

Restructuring Liability

Restructuring liabilities are classified as other current liabilities in the consolidated condensed balance sheets. The following table summarizes restructuring activity for all restructuring initiatives for the six months ended June 30, 2026:

Note 4 – Details of Certain Balance Sheet Components

Note 5 – Goodwill and Other Intangibles

Goodwill

Changes in the carrying amount of goodwill, by reportable segment, for thesix months ended June 30, 2026 were as follows:

The accumulated impairment losses of goodwill for Automotive and Medical were $0 and $19,509, respectively, as of June 30, 2026.

Other Intangible Assets

Other intangible assets and accumulated amortization balances as of June 30, 2026 and December 31, 2025 were as follows:

Note 6 – Debt

The following table summarizes the Company’s debt as of June 30, 2026 and December 31, 2025:

Credit Agreement

On June 29, 2026, the Company entered into a Third Amended and Restated Credit Agreement (amending and restating in its entirety the Second Amended and Restated Credit Agreement, dated as of June 10, 2022, as amended) described below, the “Credit Agreement”with a consortium of lenders and Bank of America, N.A., as administrative agent (the “Agent”). The amendment, among other things, extended the maturity date to June 29, 2031.

The Credit Agreement provides for a $550,000 secured revolving credit facility (the “Revolving Credit Facility”), with a $50,000 sublimit for swing line loans and a $30,000 sublimit for the issuance of letters of credit. Any amount of the facility utilized for swing line loans or letters of credit outstanding will reduce the amount available under the Credit Agreement. Gentherm can increase the Revolving Credit Facility or establish incremental facilities subject to specified conditions.

Under the Credit Agreement, all obligations are unconditionally guaranteed by certain of the Company’s subsidiaries and a security interest is granted in substantially all of the personal property of the Company and its U.S. subsidiaries designated as borrowers or guarantors, including the stock and membership interests of specified subsidiaries. The Credit Agreement contains covenants, that, among other things, (i) prohibit or limit the ability to incur additional indebtedness, create liens, pay dividends, make certain types of investments, enter into certain types of transactions with affiliates, prepay other indebtedness, sell assets or enter into certain other transactions outside the ordinary course of business, and (ii) require that Gentherm maintain a minimum Consolidated Interest Coverage Ratio and a maximum Consolidated Net Leverage Ratio (based on consolidated EBITDA for the applicable trailing four fiscal quarters) as of the end of any fiscal quarter. The Credit Agreement also contains customary events of default.

As of June 30, 2026, the Company was in compliance with the terms of the Credit Agreement.

Under the Credit Agreement, U.S. Dollar denominated loans bear interest at either a base rate (“Base Rate Loans”) or Term Secured Overnight Financing Rate (“Term SOFR Rate Loans”), plus a margin (“Applicable Rate”). The rate for Base Rate Loans is equal to the highest of the Federal Funds Rate plus 0.50%, Bank of America’s prime rate, or the Term SOFR rate plus 1.00%. The rate for Term SOFR Rate Loans denominated in U.S. Dollars is equal to the forward-looking Term SOFR rate administered by the Chicago Mercantile Exchange with a term of one month. All loans denominated in a currency other than the U.S. Dollar must use the term Canadian Overnight Repo Rate Average, Euro Interbank Offered Rate, or Sterling Overnight Index Average (depending on the currency of the borrowing), plus the Applicable rate. Additionally, a commitment fee of between 0.150% to 0.250% is payable on the daily unused amounts under the Revolving Credit Facility.

The Applicable Rate varies based on the Consolidated Net Leverage Ratio reported by the Company. As long as the Company is not in default of the terms and conditions of the Credit Agreement, the lowest and highest possible Applicable Rate is 1.125% and 2.000%, respectively, for Term SOFR Rate Loans and 0.125% and 1.000%, respectively, for Base Rate Loans.

Based upon consolidated EBITDA for the trailing four fiscal quarters calculated for purposes of the Consolidated Net Leverage Ratio,$289,137 remained available for additional borrowings as of June 30, 2026.

The Company had $4,591 and $3,574 of outstanding letters of credit and other guarantees issued as of June 30, 2026 and December 31, 2025, respectively.

In connection with the Third Amended and Restated Credit Agreement, the Company incurred debt issuance costs of $2,761, which have been capitalized and will be amortized into interest expense over the term of the credit facility. In addition, unamortized deferred debt issuance costs of $75 were written-off and recognized in Interest expense, net during thethree and six months ended June 30, 2026.

The scheduled maturities of our debt as of June 30, 2026 were as follows:

Note 7 – Commitments and Contingencies

Legal and Other Contingencies

The Company is subject to various legal actions and claims in the ordinary course of its business, which may include those arising out of breach of contracts, intellectual property rights, environmental matters, regulatory matters and employment-related matters. The Company establishes accruals for matters which it believes that losses are probable and can be reasonably estimated. Although it is not possible to predict with certainty the outcome of these matters, the Company is of the opinion that the ultimate resolution of these matters outstanding as of June 30, 2026 will not have a material adverse effect on its results of operations or financial position. Product liability and warranty reserves are recorded separately from legal reserves.

Product Liability and Warranty Matters

Our products subject us to warranty claims and, from time to time, product liability claims based on the Company’s products alleged failure to perform as expected or resulting in alleged bodily injury or property damage. If any of our products are or are alleged to be defective, we may be required to participate in a recall or other corrective action involving such products. The Company maintains warranty and product liability insurance coverage at levels based on commercial norms and historical claims experience. Such policies may not cover all costs associated with a claim. The Company can provide no assurances that it will not experience material warranty or product liability claims or liabilities in the future or that it will not incur significant costs to defend such claims.

The Company accrues warranty obligations for products sold based on management estimates of future failure rates and current claim cost experience, with support from the sales, engineering, quality and legal functions. Using historical information available to the Company, including any claims filed by customers, the warranty accrual is adjusted quarterly to reflect management’s estimate of future claims.

On February 14, 2024, the National Highway Traffic Safety Administration announced that Volkswagen Group of America, Inc. (“VW”) is recalling 261,257 vehicles from model years 2015-2020 to remedy an alleged problem with a suction jet pump seal inside the fuel tank system. VW informed Gentherm of its plan to conduct the recall on April 3, 2024. The suction jet pump is a product originally designed and manufactured by Alfmeier, the business Gentherm acquired in August 2022. The Company has not accepted any financial responsibility for the recall and is pursuing discussions with VW to advance its position and resolve this matter. No litigation has been threatened or filed as of the date of this report. If the Company is obligated to indemnify VW for the direct and indirect costs associated with the recall, such costs could be material. The Company's insurance policies are not expected to apply to this recall as the production period for the affected parts is outside of the insurance coverage period. The Company’s purchase agreement of Alfmeier includes indemnification provisions under which the Company believes it would have a claim against the sellers which would cover a portion of the potential costs. Given the uncertainty that exists concerning the resolution of this matter, as of the date of this report, the Company cannot reasonably estimate the amount and timing of possible costs that may be incurred by the Company.

In April 2025, NHTSA announced that VW and Porsche Cars North America, Inc. (“Porsche”) are each recalling vehicles from model years 2022-2023 to remedy a problem with their passenger occupant detection system that is alleged to be affected by the crimp connection of the seat cushion heating mat, which is produced by Gentherm. Total vehicles included in these recall campaigns are 13,508. No litigation has been threatened or filed as of the date of this report and the Company has not accepted any financial responsibility for the recalls. If the Company is obligated to indemnify VW and Porsche for the direct and indirect costs associated with the recall, such costs could be material. Insurance policies, noted above, are expected to apply. Given the uncertainty that exists concerning the resolution of this matter, as of the date of this report, the Company cannot reasonably estimate the amount and timing of possible costs that may be incurred by the Company.

The following is a reconciliation of the changes in accrued warranty costs:

Note 8 – Supplier Finance Program

The Company was previously party to a supplier finance program with a third-party service provider (“Service Provider”), pursuant to which the Company offered the opportunity to participate to certain of the Company's suppliers. The Company had no economic interest in a supplier’s participation and the Company has not pledged any assets to the Service Provider under this program.

During the three months ended June 30, 2026, such supplier finance program was terminated. As of June 30, 2026, the Company hadno supplier obligations confirmed under these arrangements.

Note 9 – Earnings Per Share

Basic earnings per share are computed by dividing net income by the weighted average number of shares of the Company’s Common Stock, nopar value (“Common Stock”), outstanding during the period. The Company’s diluted earnings per share give effect to all potential shares of Common Stock outstanding during a period that do not have an anti-dilutive impact to the calculation. There wereno potential shares with an anti-dilutive impact during thethree and six months ended June 30, 2026. In computing the diluted earnings per share, the treasury stock method is used in determining the number of shares assumed to be issued from the exercise of Common Stock equivalents.

The following table illustrates earnings per share and the weighted average shares outstanding used in calculating basic and diluted earnings per share:

Note 10 – Financial Instruments

Derivative Financial Instruments

The Company is exposed to various market risks including, but not limited to, changes in foreign currency exchange rates, changes in interest rates and price fluctuations of certain material commodities.

The Company regularly enters into derivative contracts with the objective of managing its financial and operational exposure arising from these risks by offsetting gains and losses on the underlying exposures with gains and losses on the financial instruments used to hedge them. The decision of whether and when to execute derivative financial instruments, along with the duration of the instrument, may vary from period to period depending on market conditions, the relative costs of the instruments and capacity to hedge. The duration is linked to the timing of the underlying exposure, with the connection between the two being regularly monitored. The Company does not enter into derivative financial instruments for speculative or trading purposes.

Information related to the recurring fair value measurement of derivative financial instruments in the consolidated condensed balance sheet as of June 30, 2026 is as follows:

Information related to the recurring fair value measurement of derivative instruments in the consolidated condensed balance sheet as of December 31, 2025 is as follows:

Information relating to the effect of derivative instruments on the consolidated condensed statements of income and the consolidated condensed statements of comprehensive income (loss) is as follows:

The Company didnot incur any hedge ineffectiveness during thethree and six months ended June 30, 2026 and 2025.

Note 11 – Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and also considers counterparty credit risk in its assessment of fair value.

Fair value measurements are classified under the following fair value hierarchy:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2: Inputs, other than quoted market prices included in Level 1, that are observable either directly or indirectly for the asset or liability.

Level 3: Unobservable inputs that are used when little or no market data is available. Unobservable inputs are used if there is little or no market data for the asset or liability at the measurement date.

Items Measured at Fair Value on a Recurring Basis

The Company uses an income approach to value derivatives instruments, analyzing quoted market prices to calculate the forward values and then discounting such forward values to the present value using benchmark rates at commonly quoted intervals for the instrument’s full term. The Company hadno other material financial assets and liabilities that were carried at fair value at June 30, 2026 and December 31, 2025.

Items Measured at Fair Value on a Nonrecurring Basis

The Company measures certain assets and liabilities at fair value on a non-recurring basis. During the six months ended June 30, 2025, there was a decrease in the fair value of an equity investment of$1,294 due to observable transactions (Level 2), which was recorded in other income (loss). As of June 30, 2026, and December 31, 2025, there wereno other significant assets or liabilities measured at fair value on a non-recurring basis.

Items Not Carried at Fair Value

The Company uses an income valuation technique to measure the fair values of its debt instruments by converting amounts of future cash flows to a single present value amount using rates based on current market expectations (Level 2 inputs). As of June 30, 2026, and December 31, 2025, the carrying values of the indebtedness under the Credit Agreement were not materially different than the estimated fair values because the interest rates on variable rate debt approximated rates currently available to the Company (see Note 6, “Debt”).

Note 12 – Equity

In June 2024, the Board of Directors (the “Board”) authorized a stock repurchase program (the “2024 Stock Repurchase Program”) to commence upon expiration of the Company’s prior stock repurchase program on June 30, 2024. Under the 2024 Stock Repurchase Program, the Company was authorized to repurchase up to $150,000 of its issued and outstanding Common Stock over athree-year period, expiring June 30, 2027.

In July 2026, the Board terminated the 2024 Stock Repurchase Program and authorized a new stock repurchase program (the “2026 Stock Repurchase Program”), pursuant to which the Company is authorized to repurchase up to $400,000 of its issued and outstanding Common Stock over athree-year period, expiring July 27, 2029. At the time of termination, the 2024 Stock Repurchase Program had $110,103 of share repurchase authorization remaining.

Repurchases may be made, from time to time, in amounts and at prices the Company deems appropriate, subject to market conditions, applicable legal requirements, debt covenants and other contractual restrictions and other considerations.

During the three and six months ended June 30, 2026, the Company didnot repurchase any shares. During the three and six months ended June 30, 2025, the Company repurchased $10,015 under the 2024 Stock Repurchase Program with an average price paid per share of $26.24. Stock repurchases are subject to excise tax, subject to specified exclusions and adjustments. Excise tax of $100 was charged to common stock for thethree and six months ended June 30, 2025.

Note 13 – Reclassifications Out of Accumulated Other Comprehensive Loss

Reclassification adjustments and other activities impacting accumulated other comprehensive loss during the three and six months ended June 30, 2026 and 2025 were as follows:

(a)

The amounts reclassified from accumulated other comprehensive lossof $(3,135) and $18 are included in cost of sales and interest expense, net, respectively, in the consolidated condensed statementsof income. Refer to Note 10 “Financial Instruments,” for additional information.

(a)

The amounts reclassified from accumulated other comprehensive income (loss)were included in cost of sales in the consolidated condensed statements of income. Refer to Note 10 “Financial Instruments,” for additional information.

(a)

The amounts reclassified from accumulated other comprehensive lossof $(6,187) and $25 are included in cost of sales and interest expense, net, respectively, in the consolidated condensed statements of income. Refer to Note 10 “Financial Instruments,” for additional information.

(a)

The amounts reclassified from accumulated other comprehensive income (loss)were included in cost of sales in the consolidated condensed statements of income. Refer to Note 10 “Financial Instruments,” for additional information.

The Company expects that substantially all of the existing gains and losses related to cash flow derivatives reported in accumulated other comprehensive loss as of June 30, 2026 to be reclassified into earnings during the next twelve months. See Note 10 for additional information about derivative financial instruments and the effects from reclassification to net income.

Note 14 – Income Taxes

At the end of each interim period, the Company makes an estimate of the annual expected effective income tax rate and applies that rate to its ordinary year-to-date earnings or loss. The income tax provision or benefit related to unusual or infrequent items, if applicable, that will be separately reported or reported net of their related tax effects are individually computed and recognized in the interim period in which those items occur. In addition, the effect of changes in enacted tax laws or rates, tax status, judgment on the realizability of a beginning-of-the-year deferred tax asset in future years or income tax contingencies is recognized in the interim period in which the change occurs.

The computation of the annual expected effective income tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected pre-tax income (or loss) for the year, projections of the proportion of income (and/or loss) earned and taxed in respective jurisdictions, permanent and temporary differences, and the likelihood of the realizability of deferred tax assets generated in the current year. Jurisdictions with a projected loss for the year for which no tax benefit can be recognized due to a valuation allowance are excluded from the estimated annual effective tax rate. The impact of such an exclusion could result in a higher or lower effective tax rate during a particular quarter, based upon the composition and timing of actual earnings compared to annual projections. The estimates used to compute the provision or benefit for income taxes may change as new events occur, additional information is obtained or as our tax environment changes. To the extent that the expected annual effective income tax rate changes, the effect of the change on prior interim periods is included in the income tax provision in the period in which the change in estimate occurs.

A summary of the provision for income taxes and the corresponding effective tax rate for thethree and six months ended June 30, 2026 and 2025, is shown below:

Income tax expense was$2,904 for the three months ended June 30, 2026 on earnings before income tax of$7,324, representing an effective tax rate of 39.7%. The effective tax rate differed from the U.S. Federal statutory rate of 21.0% primarily due tothe impact of income taxes on foreign earnings taxed at rates varying from the U.S. Federal statutory rate and the unfavorable impact of transactions costs incurred in connection with the Modine Transaction.

Income tax expense was$2,057 for the three months ended June 30, 2025 on earnings before income tax of$2,534, representing an effective tax rate of 81.2%. The effective tax rate differed from the U.S. Federal statutory rate of 21.0%primarily due to the impact of income taxes on foreign earnings taxed at rates varying from the U.S. Federal statutory rate and the unfavorable impact of global intangible low-tax income (“GILTI”).

Income tax expense was$6,300 for the six months ended June 30, 2026 on earnings before income tax of$14,938, representing an effective tax rate of 42.2%. The effective tax rate differed from the U.S. Federal statutory rate of 21.0% primarily due to the impact of income taxes on foreign earnings taxed at rates varying from the U.S. Federal statutory rate and the unfavorable impact of transactions costs incurred in connection with the Modine Transaction.

Income tax expense was$4,269 for the six months ended June 30, 2025 on earnings before income tax of$4,618, representing an effective tax rate of 92.4%. The effective tax rate differed from the U.S. Federal statutory rate of 21.0% primarily due to the unfavorable impact of GILTI, unfavorable tax effects of equity vesting and a valuation allowance established in the U.S. related to a capital loss carryforward.

Note 15 – Segment Reporting

The Company is organized undertwo reportable segments: Automotive and Medical.

The Automotive reporting segment is comprised of our global automotive businesses, including the design, development, manufacturing and sales of Automotive Climate and Comfort Solutions (including Climate Control Seats, Climate Control Interiors, Lumbar and Massage Comfort Solutions and Climate and Comfort Electronics), Valve Systems and other automotive products.

The Medical reporting segment is comprised of our patient temperature management business in the medical industry. Patient temperature management includes temperature management systems across multiple product categories addressing the needs of hyper-hypothermia therapy in intensive care, normothermia in surgical procedures and additional warming/cooling therapies utilized in acute and chronic care departments and non-hospital facilities.

The Corporate and other unallocated expenses category includes certain enterprise and governance activities resulting in unallocated corporate costs and other activity and net costs that the Company may choose not to allocate directly to its business segments.

A measure of assets has not been disclosed for each segment as it is not regularly reviewed by our chief operating decision maker.

The table below presents segment information about the reported product revenues, significant segment expenses, operating income (loss) and depreciation and amortization of the Company for the three and six months ended June 30, 2026 and 2025.

Automotive and Medical segment product revenues by product category for thethree and six months ended June 30, 2026 and 2025 were as follows:

Revenue (based on shipment destination) by geographic area for thethree and six months ended June 30, 2026 and 2025 is as follows:

Property and equipment, net, for each of the geographic areas in which the Company operates as of June 30, 2026 and December 31, 2025 is as follows: