MODINE MANUFACTURING CO

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 September 30, 2024 was the second quarter of fiscal 2025.

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 December 31, 2024 was the third quarter of fiscal 2025.

Previous wording

Net sales in the second quarter of fiscal 2025 increased $37.5 million, or 6 percent, from the second 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 $53.4 million of incremental sales from the acquired Scott Springfield Manufacturing business. The lower Performance Technologies segment sales included a $21.9 million impact of the disposition of three automotive businesses in Germany during the third quarter of fiscal 2024. Cost of sales increased $7.0 million, or 1 percent. Gross profit increased $30.5 million and gross margin improved 340 basis points to 25.2 percent. Selling, general and administrative (“SG&A”) expenses increased $16.9 million and included higher compensation-related expenses and incremental expenses from Scott Springfield Manufacturing, including amortization expense for acquired intangible assets. Operating income of $75.3 million during the second quarter of fiscal 2025 increased $9.6 million from the prior year, primarily due to higher earnings in our operating segments, partially offset by higher SG&A and restructuring expenses.

Current wording

Net sales in the third quarter of fiscal 2025 increased $55.4 million, or 10 percent, from the third 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 $73.6 million of incremental sales from the acquired Scott Springfield Manufacturing business. The lower Performance Technologies segment sales included an $8.0 million impact of the disposition of three automotive businesses in Germany during the third quarter of fiscal 2024. Cost of sales increased $33.1 million, or 8 percent. Gross profit increased $22.3 million and gross margin improved 160 basis points to 24.3 percent. Selling, general and administrative (“SG&A”) expenses increased $14.0 million and included higher compensation-related expenses and incremental expenses from Scott Springfield Manufacturing, including amortization expense for acquired intangible assets. Operating income of $59.3 million during the third quarter of fiscal 2025 decreased $2.4 million from the prior year, primarily due to higher SG&A and restructuring expenses and the absence of a $4.0 million gain on sale of three automotive businesses in Germany in the third quarter of fiscal 2024, partially offset by higher gross profit.

Previous wording

Net sales in the first six months of fiscal 2025 increased $76.6 million, or 6 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. The higher Climate Solutions segment sales included $94.5 million of incremental sales from the acquired Scott Springfield Manufacturing and Napps businesses. The lower Performance Technologies segment sales were largely driven by the $46.2 million impact of the disposition of three automotive businesses in Germany during the third quarter of fiscal 2024. Cost of sales increased $11.4 million, or 1 percent, from the same period last year. Gross profit increased $65.2 million and gross margin improved 370 basis points to 24.9 percent. SG&A expenses increased $38.3 million and included higher compensation-related expenses and incremental expenses from Scott Springfield Manufacturing, including amortization expense for acquired intangible assets. Operating income of $149.7 million during the first six months of fiscal 2025 increased $17.5 million from the prior year, primarily due to higher earnings in our operating segments, partially offset by higher SG&A and restructuring expenses.

Current wording

Net sales in the first nine months of fiscal 2025 increased $132.0 million, or 7 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. The higher Climate Solutions segment sales included $168.1 million of incremental sales from the acquired Scott Springfield Manufacturing and Napps businesses. The lower Performance Technologies segment sales included a $54.2 million impact of the disposition of three automotive businesses in Germany during the third quarter of fiscal 2024. Cost of sales increased $44.5 million, or 3 percent, from the same period last year. Gross profit increased $87.5 million and gross margin improved 310 basis points to 24.7 percent. SG&A expenses increased $52.3 million and included higher compensation-related expenses and incremental expenses from Scott Springfield Manufacturing, including amortization expense for acquired intangible assets. Operating income of $209.0 million during the first nine months of fiscal 2025 increased $15.1 million from the prior year, primarily due to higher gross profit, partially offset by higher SG&A and restructuring expenses and the absence of a $4.0 million gain on sale of three automotive businesses in Germany in fiscal 2024.

Previous wording

The following table presents our consolidated financial results on a comparative basis for the three and six months ended September 30, 2024 and 2023:

Current wording

The following table presents our consolidated financial results on a comparative basis for the three and nine months ended December 31, 2024 and 2023:

Previous wording

Second quarter net sales of $658.0 million were $37.5 million, or 6 percent, higher than the second quarter of the prior year, primarily due to $77.2 million of higher sales in our Climate Solutions segment, driven by $53.4 million of incremental sales from the acquired Scott Springfield Manufacturing business and organic sales growth to hyperscale and colocation data center customers. The higher sales in Climate Solutions were partially offset by lower sales in our Performance Technologies segment, which decreased $39.8 million, including a $21.9 million impact from the disposition of three automotive businesses in Germany during the third quarter of fiscal 2024.

Current wording

Third quarter net sales of $616.8 million were $55.4 million, or 10 percent, higher than the third quarter of the prior year, primarily due to $106.8 million of higher sales in our Climate Solutions segment, driven by $73.6 million of incremental sales from the acquired Scott Springfield Manufacturing business and organic sales growth to hyperscale and colocation data center customers. The higher sales in Climate Solutions were partially offset by lower sales in our Performance Technologies segment, which decreased $48.7 million, largely due to market weakness and an $8.0 million impact from the disposition of three automotive businesses in Germany during the third quarter of fiscal 2024.

Previous wording

Second quarter cost of sales increased $7.0 million, or 1 percent, primarily due to higher labor and inflationary costs, higher sales volume, and higher raw material costs, which increased approximately $3.0 million, partially offset by improved operating efficiencies. As a percentage of sales, cost of sales decreased 340 basis points to 74.8 percent, primarily due to favorable sales mix, higher average selling prices, and the favorable impact of commercial pricing settlements and the recognition of sales tax credits in Brazil within the Climate Solutions and Performance Technologies segments, respectively.

Current wording

Third quarter cost of sales increased $33.1 million, or 8 percent, primarily due to higher sales volume and, to a lesser extent, higher raw material costs, which increased approximately $4.0 million, and higher labor and inflationary costs. These drivers, which increased cost of sales, were partially offset by improved operating efficiencies. As a percentage of sales, cost of sales decreased 160 basis points to 75.7 percent, primarily due to favorable sales mix.

Previous wording

As a result of higher sales and lower cost of sales as a percentage of sales, second quarter gross profit increased $30.5 million and gross margin improved 340 basis points to 25.2 percent.

Current wording

As a result of higher sales and lower cost of sales as a percentage of sales, third quarter gross profit increased $22.3 million and gross margin improved 160 basis points to 24.3 percent.

Previous wording

Second quarter SG&A expenses increased $16.9 million, or 25 percent. 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 $13.0 million and included incremental expenses from the acquired Scott Springfield Manufacturing business and increased incentive compensation resulting from improved financial results. In addition, SG&A expenses in the second quarter of fiscal 2025 included $4.7 million of incremental amortization expense for acquired intangible assets. These increases were partially offset by lower environmental charges related to previously-owned facilities in the U.S., which decreased $1.0 million.

Current wording

Third quarter SG&A expenses increased $14.0 million, or 21 percent. As a percentage of sales, SG&A expenses increased by 120 basis points. The increase in SG&A expenses includes higher compensation-related expenses, which increased approximately $11.0 million and included incremental expenses from the acquired Scott Springfield Manufacturing business and increased incentive compensation resulting from improved financial results. In addition, SG&A expenses in the third quarter of fiscal 2025 included $4.6 million of incremental amortization expense for acquired intangible assets. These increases were partially offset by lower environmental charges related to previously-owned facilities in the U.S., which decreased $1.0 million.

Previous wording

Restructuring expenses increased $4.0 million compared with the second quarter of fiscal 2024, primarily due to higher severance expenses and product line transfer costs in the Performance Technologies and Climate Solutions segments, respectively.

Current wording

Restructuring expenses increased $6.7 million compared with the third quarter of fiscal 2024, primarily due to higher severance expenses in the Performance Technologies segment.

Previous wording

Interest expense during the second quarter of fiscal 2025 increased $1.3 million compared with the second 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 wording

Interest expense during the third quarter of fiscal 2025 increased $0.4 million compared with the third 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, partially offset by favorable changes in interest rates.

Previous wording

Fiscal 2025 year-to-date net sales of $1,319.5 million were $76.6 million, or 6 percent, higher than the same period last year, primarily due to $147.8 million of higher sales in our Climate Solutions segment, including $94.5 million of incremental sales from the acquired Scott Springfield Manufacturing and Napps businesses, partially offset by $73.9 million of lower sales in our Performance Technologies segment, including a $46.2 million impact from the disposition of three automotive businesses in Germany during the third quarter of fiscal 2024. From a product group perspective, compared with the same period last year, sales of data center cooling products increased $174.5 million, while sales of liquid-cooled and heat transfer products decreased $58.0 million and $44.8 million, respectively.

Current wording

Fiscal 2025 year-to-date net sales of $1,936.3 million were $132.0 million, or 7 percent, higher than the same period last year, primarily due to $254.6 million of higher sales in our Climate Solutions segment, including $168.1 million of incremental sales from the acquired Scott Springfield Manufacturing and Napps businesses and organic sales growth to hyperscale and colocation data center customers. The higher sales in Climate Solutions were partially offset by $122.6 million of lower sales in our Performance Technologies segment, including a $54.2 million impact from the disposition of three automotive businesses in Germany during the third quarter of fiscal 2024.

Previous wording

Fiscal 2025 year-to-date cost of sales of $991.3 million increased $11.4 million, or 1 percent, primarily due to higher sales volume, higher labor and inflationary costs, partially offset by lower raw material costs, which decreased approximately $6.0 million, and improved operating efficiencies. In addition, we recorded $1.6 million of cost of sales at Corporate during the first quarter of fiscal 2025 related to an inventory purchase accounting adjustment for the acquisition of Scott Springfield Manufacturing. As a percentage of sales, cost of sales decreased 370 basis points to 75.1 percent, primarily due to favorable sales mix, higher average selling prices, improved operating efficiencies, and the favorable impact of commercial pricing settlements and the recognition of sales tax credits in Brazil within the Climate Solutions and Performance Technologies segments, respectively.

Current wording

Fiscal 2025 year-to-date cost of sales of $1,458.5 million increased $44.5 million, or 3 percent, primarily due to higher sales volume and higher labor and inflationary costs, partially offset by lower raw material costs, which decreased approximately $2.0 million, and improved operating efficiencies. In addition, we recorded $1.6 million of cost of sales at Corporate during the first quarter of fiscal 2025 related to an inventory purchase accounting adjustment for the acquisition of Scott Springfield Manufacturing. As a percentage of sales, cost of sales decreased 310 basis points to 75.3 percent, primarily due to favorable sales mix, higher average selling prices, improved operating efficiencies, and the favorable impact of commercial pricing settlements and the recognition of sales tax credits in Brazil within the Climate Solutions and Performance Technologies segments, respectively.

Previous wording

Fiscal 2025 year-to-date SG&A expenses increased $38.3 million, or 29 percent. As a percentage of sales, SG&A expenses increased by 230 basis points. The increase in SG&A expenses includes higher compensation-related expenses, which increased approximately $26.0 million and included incremental expenses from the acquired businesses and increased incentive compensation resulting from improved financial results. In addition, SG&A expenses in the first six months of fiscal 2025 included $9.3 million of incremental amortization expense for acquired intangible assets.

Current wording

Fiscal 2025 year-to-date SG&A expenses increased $52.3 million, or 26 percent. 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 $37.0 million and included incremental expenses from the acquired businesses and increased incentive compensation resulting from improved financial results. In addition, SG&A expenses in the first nine months of fiscal 2025 included $13.9 million of incremental amortization expense for acquired intangible assets.

Previous wording

Restructuring expenses during the first six months of fiscal 2025 increased $9.4 million compared with the same period last year, primarily due to higher severance expenses and product line transfer costs in the Performance Technologies and Climate Solutions segments, respectively.

Current wording

Restructuring expenses during the first nine months of fiscal 2025 increased $16.1 million compared with the same period last year, primarily due to higher severance expenses and product line transfer costs in the Performance Technologies and Climate Solutions segments, respectively.

Previous wording

Interest expense during the first six months of fiscal 2025 increased $2.9 million compared with the same period last year, 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 wording

Interest expense during the first nine months of fiscal 2025 increased $3.3 million compared with the same period last year, 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.

Previous wording

The provision for income taxes was $38.8 million and $27.5 million during the first six months of fiscal 2025 and 2024, respectively. The $11.3 million increase was primarily due to higher earnings and changes in the mix and amount of foreign and U.S. earnings in the current year, as compared with the same period in the prior year. In addition, the provision for income taxes in the prior year was favorably impacted by the release of a $1.8 million unrecognized tax benefit during the second quarter of fiscal 2024.

Current wording

The provision for income taxes was $51.8 million and $37.8 million during the first nine months of fiscal 2025 and 2024, respectively. The $14.0 million increase was primarily due to higher earnings and changes in the mix and amount of foreign and U.S. earnings in the current year, as compared with the same period in the prior year. In addition, the provision for income taxes in the prior year was favorably impacted by both the release of a $1.8 million unrecognized tax benefit during the second quarter as well as a $3.1 million tax benefit related to the sale of the automotive businesses in Germany during the third quarter.

Previous wording

The following is a discussion of our segment results of operations for the three and six months ended September 30, 2024 and 2023:

Current wording

The following is a discussion of our segment results of operations for the three and nine months ended December 31, 2024 and 2023:

Previous wording

Climate Solutions net sales increased $77.2 million, or 27 percent, from the second quarter of fiscal 2024 to the second quarter of fiscal 2025, primarily due to higher sales volume, and, to a lesser extent, higher average selling prices. The higher sales volume includes$53.4 million of incremental sales from the acquired Scott Springfield Manufacturing business. Compared with the second quarter of the prior year, sales of data center cooling and HVAC&R products increased $80.1 million and $12.9 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 $15.8 million. The decrease in heat transfer products largely resulted from lower sales of heat transfer coils for heat pumps and other commercial and residential applications, partially offset by commercial pricing settlements with heat pump customers in Europe.

Current wording

Climate Solutions net sales increased $106.8 million, or 42 percent, from the third quarter of fiscal 2024 to the third quarter of fiscal 2025, primarily due to higher sales volume. The higher sales volume includes$73.6 million of incremental sales from the acquired Scott Springfield Manufacturing business. Compared with the third quarter of the prior year, sales of data center cooling and HVAC&R products increased $106.4 million and $13.7 million, respectively. The increase in sales of data center cooling products includes sales from Scott Springfield Manufacturing and organic sales growth to hyperscale and colocation customers. Sales of heat transfer products decreased $13.4 million, largely due to lower sales of heat transfer coils for heat pumps and other commercial and residential applications.

Previous wording

Climate Solutions cost of sales increased $47.8 million, or 23 percent, from the second quarter of fiscal 2024 to the second quarter of fiscal 2025, primarily due to higher sales volume, higher raw material costs, which increased approximately $5.0 million, and, to a lesser extent, higher labor and inflationary costs. These increases were partially offset by lower warranty expense, which decreased approximately $3.0 million. As a percentage of sales, cost of sales decreased 240 basis points to 71.0 percent, primarily due to favorable sales mix and the favorable impact of the commercial pricing settlements during the quarter.

Current wording

Climate Solutions cost of sales increased $73.8 million, or 40 percent, from the third quarter of fiscal 2024 to the third quarter of fiscal 2025, primarily due to higher sales volume and, to a lesser extent, higher raw material costs, which increased approximately $4.0 million. As a percentage of sales, cost of sales decreased 100 basis points to 71.4 percent, primarily due to favorable sales mix and the impact of higher sales volume.

Previous wording

As a result of the higher sales and lower cost of sales as a percentage of sales, gross profit increased $54.4 million and gross margin improved 210 basis points to 28.6 percent.

Current wording

As a result of the higher sales and lower cost of sales as a percentage of sales, gross profit increased $33.0 million and gross margin improved 100 basis points to 28.6 percent.

Previous wording

Climate Solutions SG&A expenses increased $10.6 million compared with the second quarter of the prior year. As apercentage of sales, SG&A expenses increased by 80 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 Scott Springfield Manufacturing business, and $4.7 million of incremental amortization expense related to acquired intangible assets.

Current wording

Climate Solutions SG&A expenses increased $11.3 million compared with the third 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 and included expenses from the acquired Scott Springfield Manufacturing business, and $4.6 million of incremental amortization expense related to acquired intangible assets.

Previous wording

Climate Solutions year-to-date net sales increased $147.8 million, or 26 percent, from the same period last year, primarily due to higher sales volume, including $94.5 million of incremental sales from the acquired Scott Springfield Manufacturing and Napps businesses. Compared with the same period in the prior year, sales of data center cooling and HVAC&R products increased $174.5 million and $18.0 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 $44.8 million, largely due to lower sales of heat transfer coils for heat pumps and other commercial and residential applications, partially offset by commercial pricing settlements with heat pump customers in Europe.

Current wording

Climate Solutions year-to-date net sales increased $254.6 million, or 31 percent, from the same period last year, primarily due to higher sales volume, including $168.1 million of incremental sales from the acquired Scott Springfield Manufacturing and Napps businesses. Compared with the same period in the prior year, sales of data center cooling and HVAC&R products increased $280.9 million and $31.7 million, respectively. The increase in sales of data center cooling 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 $58.2 million, largely due to lower sales of heat transfer coils for heat pumps and other commercial and residential applications, partially offset by commercial pricing settlements with heat pump customers in Europe.

Previous wording

Climate Solutions year-to-date cost of sales increased $93.4 million, or 22 percent, from the same period last year, primarily due to higher sales volume, and, to a lesser extent, higher raw material costs, which increased approximately $3.0 million and higher labor and inflationary costs. These increases were partially offset by lower warranty expense, which decreased approximately $3.0 million, and improved operating efficiencies. As a percentage of sales, cost of sales decreased 210 basis points to 71.4 percent, primarily due to favorable sales mix and the favorable impact of the commercial pricing settlements during the second quarter.

Current wording

Climate Solutions year-to-date cost of sales increased $167.2 million, or 28 percent, from the same period last year, primarily due to higher sales volume, and, to a lesser extent, higher raw material costs, which increased approximately $7.0 million and higher labor and inflationary costs. These increases were partially offset by lower warranty expense, which decreased approximately $3.0 million, and improved operating efficiencies. As a percentage of sales, cost of sales decreased 180 basis points to 71.4 percent, primarily due to favorable sales mix and the favorable impact of the commercial pricing settlements during the second quarter.

Previous wording

Climate Solutions year-to-date SG&A expenses increased $24.2 million and increased 140 basis points as a percentage of sales. The increase in SG&A expenses includes higher compensation-related expenses, which increased approximately $10.0 million, and $9.3 million of incremental amortization expense related to acquired intangibles assets.

Current wording

Climate Solutions year-to-date SG&A expenses increased $35.5 million and increased 90 basis points as a percentage of sales. The increase in SG&A expenses includes higher compensation-related expenses, which increased approximately $16.0 million, and $13.9 million of incremental amortization expense related to acquired intangibles assets.

Previous wording

Restructuring expenses during the first six months of fiscal 2025 increased $1.4 million compared with the same period last year, primarily due to higher costs related to transferring production and warehousing for certain product lines.

Current wording

Restructuring expenses during the first nine months of fiscal 2025 increased $1.1 million compared with the same period last year, primarily due to higher costs related to transferring production and warehousing for certain product lines.

Previous wording

Performance Technologies cost of sales decreased $42.3 million, or 15 percent, from the second quarter of fiscal 2024 to the second quarter of fiscal 2025, primarily due to lower sales volume and, to a lesser extent, improved operating efficiencies and lower raw material costs, which decreased approximately $2.0 million. These favorable drivers were partially offset by higher labor and inflationary costs. As a percentage of sales, cost of sales decreased 310 basis points to 79.8 percent, primarily due to higher average selling prices, the favorable impact of the sales tax credits recognized in Brazil, and improved operating efficiencies.

Current wording

Performance Technologies cost of sales decreased $38.4 million, or 15 percent, from the third quarter of fiscal 2024 to the third quarter of fiscal 2025, 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 labor and inflationary costs. As a percentage of sales, cost of sales increased 50 basis points to 82.2 percent, primarily due to the impact of lower sales volume.

Previous wording

As a result of the lower sales and lower cost of sales as a percentage of sales, gross profit increased $14.1 million and gross margin improved 430 basis points to 20.4 percent.

Current wording

As a result of the lower sales and higher cost of sales as a percentage of sales, gross profit decreased $10.3 million and gross margin declined 50 basis points to 17.8 percent.

Previous wording

Performance Technologies SG&A expenses increased $0.1 million compared with the second quarter of the prior year. As a percentage of sales, SG&A expenses increased by 100 basis points. The increase in SG&A expenses was primarily due to higher compensation-related expenses, which increased approximately $2.0 million, partially offset by decreases across other general and administrative expenses.

Current wording

Performance Technologies SG&A expenses decreased $1.9 million compared with the third quarter of the prior year. As apercentage of sales, SG&A expenses increased by 90 basis points. The decrease in SG&A expenses was primarily due to lower compensation-related expenses, which decreased approximately $1.0 million, and decreases across other general and administrative expenses.

Previous wording

Operating income of $30.8 million decreased $0.4 million from the second quarter of fiscal 2024 to the second quarter of fiscal 2025, primarily due to higher restructuring expenses, partially offset by higher gross profit.

Current wording

Operating income of $15.8 million decreased $13.7 million from the third quarter of fiscal 2024 to the third quarter of fiscal 2025, primarily due to lower gross profit and higher restructuring expenses, partially offset by lower SG&A expenses.

Previous wording

Performance Technologies year-to-date net sales decreased $73.9 million, or 11 percent, from the same period last year, primarily due tolower sales volume, including $46.2 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 and, to a lesser extent, the recognition of sales tax credits in Brazil. Compared with the same period in the prior year, sales of liquid-cooled and air-cooled products decreased $58.0 million and $22.2 million, respectively. Sales of advanced solutions products increased $9.1 million.

Current wording

Performance Technologies year-to-date net sales decreased $122.6 million, or 12 percent, from the same period last year, primarily due tolower sales volume, including a $54.2 million impact from the disposition of three automotive businesses in Germany during the third quarter of fiscal 2024. These decreases were partially offset by higher average selling prices and, to a lesser extent, the recognition of sales tax credits in Brazil. Compared with the same period in the prior year, sales of liquid-cooled and air-cooled products decreased $78.8 million and $50.3 million, respectively. Sales of advanced solutions products increased $6.7 million.

Previous wording

Performance Technologies year-to-date cost of sales decreased $88.0 million, or 15 percent, from the same period last year, primarily due to lower sales volume and, to a lesser extent, improved operating efficiencies and lower raw material costs, which decreased approximately $9.0 million. These favorable drivers were partially offset by higher labor and inflationary costs. As a percentage of sales, cost of sales decreased 430 basis points to 79.6 percent, primarily due to higher average selling prices, improved operating efficiencies, lower material costs, and the favorable impact of the sales tax credits recognized in Brazil, partially offset by higher labor and inflationary costs.

Current wording

Performance Technologies year-to-date cost of sales decreased $126.4 million, or 15 percent, from the same period last year, primarily due to lower sales volume and, to a lesser extent, improved operating efficiencies and lower raw material costs, which decreased approximately $9.0 million. These drivers, which decreased cost of sales, were partially offset by higher labor and inflationary costs. As a percentage of sales, cost of sales decreased 280 basis points to 80.4 percent, primarily due to higher average selling prices, improved operating efficiencies, lower material costs, and the favorable impact of the sales tax credits recognized in Brazil, 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 $2.5 million and gross margin improved 310 basis points to 20.2 percent.

Current wording

As a result of the lower sales and lower cost of sales as a percentage of sales, gross profit increased $3.8 million and gross margin improved 280 basis points to 19.6 percent.

Previous wording

Performance Technologies year-to-date SG&A expenses increased $2.6 million, or 5 percent, compared with the same period last year. As a percentage of sales, year-to-date SG&A expenses increased by 130 basis points. The increase in SG&A expenses was primarily due to higher compensation-related expenses, which increased approximately $5.0 million. This increase was partially offset by decreases across other general and administrative expenses.

Current wording

Performance Technologies year-to-date SG&A expenses increased $0.7 million, or 1 percent, compared with the same period last year. As a percentage of sales, year-to-date SG&A expenses increased by 110 basis points. The increase in SG&A expenses was primarily due to higher compensation-related expenses, which increased approximately $4.0 million. This increase was partially offset by decreases across other general and administrative expenses.

Previous wording

Restructuring expenses during the first six months of fiscal 2025 increased $8.0 million compared with the same period last year, primarily due to higher severance expenses in Europe and product line transfer costs.

Current wording

Restructuring expenses during the first nine months of fiscal 2025 increased $13.3 million compared with the same period last year, primarily due to higher severance expenses in Europe and North America and product line transfer costs.

Previous wording

Our primary sources of liquidity are cash flow from operating activities, our cash and cash equivalents as of September 30,2024 of $78.6 million, and available borrowing capacity of $190.8 million under our revolving credit facility. Given our extensive international operations, approximately $74.0 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 December 31,2024 of $83.8 million, and available borrowing capacity of $210.8 million under our revolving credit facility. Given our extensive international operations, approximately $80.0 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 six months ended September 30, 2024 was $97.8 million, which represents a $13.0 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.

Current wording

Net cash provided by operating activities for the nine months ended December 31, 2024 was $158.5 million, which represents a $16.5 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 operating 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. These unfavorable changes in working capital were partially offset by the favorable impact of lower inventory levels.

Previous wording

Capital expenditures of $40.3 million during the first six months of fiscal 2025 increased $14.1 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.

Current wording

Capital expenditures of $56.3 million during the first nine months of fiscal 2025 increased $12.5 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

The leverage ratio covenant within our primary credit agreements requires us to limit our consolidated indebtedness, less a portion of our cash balance, both as defined by the credit agreements, to no more than three and one-quarter times consolidated net earnings before interest, taxes, depreciation, amortization, and certain other adjustments (“Adjusted EBITDA”). We are also subject to an interest expense coverage ratio covenant, which requires us to maintain Adjusted EBITDA of at least three times consolidated interest expense. As of September 30,2024, we were in compliance with our debt covenants. We expect to remain in compliance with our debt covenants during the remainder of fiscal 2025 and beyond.

Current wording

The leverage ratio covenant within our primary credit agreements requires us to limit our consolidated indebtedness, less a portion of our cash balance, both as defined by the credit agreements, to no more than three and one-quarter times consolidated net earnings before interest, taxes, depreciation, amortization, and certain other adjustments (“Adjusted EBITDA”). We are also subject to an interest expense coverage ratio covenant, which requires us to maintain Adjusted EBITDA of at least three times consolidated interest expense. As of December 31,2024, we were in compliance with our debt covenants. We expect to remain in compliance with our debt covenants during the remainder of fiscal 2025 and beyond.

Previous wording

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 additional cash contributions in the range of $10.0 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 $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.

Current wording

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 additional cash contributions in the range of $10.0 million to $20.0 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 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

During the first six months of fiscal 2025, we did not repurchase any of our common stock under our share repurchase program. During the first six months of fiscal 2024, we repurchased $9.0 million of our common stock under our share repurchase program. As of September 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.

Current wording

Our share repurchase program expired in November 2024. We did not repurchase any common stock under the program during fiscal 2025. During the first nine months of fiscal 2024, we repurchased $13.3 million of our common stock under the share repurchase program.