Acquisitions and Dispositions

9 Months Ended

Dec. 31, 2025

Note 2: Acquisitions and Dispositions

The Company acquired three businesses during the first and second quarters of fiscal 2026: AbsolutAire, Inc. (“AbsolutAire”), LBW Holding Corp. (“L.B. White”), and Climate by Design International (“Climate by Design”). Since the date of each acquisition, the Company has reported the financial results of these businesses within the Climate Solutions segment. At the time the December 31, 2025 financial statements were finalized, the Company was continuing its review of the fair value estimates for certain assets acquired and liabilities assumed. As part of its purchase accounting and integration activities, the Company is in the process of assessing, refining and harmonizing the internal controls and accounting processes of the acquired businesses with those of the Company. As part of this process, the Company is reviewing the appropriateness of accruals and reserves, including those related to accounts receivable, inventory, and product warranties. As such, the allocations of the purchase prices presented below are considered preliminary. The Company expects to complete its accounting for the acquisitions of AbsolutAire, L.B. White, and Climate by Design by the end of fiscal 2026. During the first nine months of fiscal 2026, the operating results for the acquired companies were not material. The Company has not presented supplemental pro forma financial information for these acquisitions since they are not material, individually or in the aggregate, to the Company’s consolidated financial statements.

Acquisition of AbsolutAire

On April 1, 2025, the Company acquired substantially all of the net operating assets of AbsolutAire for consideration totaling $11.3 million. AbsolutAire is a Michigan-based manufacturer of direct-fired heating, ventilation, and make-up air systems. This acquisition supports the Company’s growth strategy by expanding its heating and indoor air quality product portfolios and also broadens its customer base in the commercial, industrial, food service, and warehousing sectors. For the three and nine months ended December 31, 2025, the Company included net sales of $7.0 million and $18.7 million, respectively, within its consolidated statements of operations attributable to AbsolutAire.

The Company’s preliminary allocation of the purchase price for its acquisition of AbsolutAire is as follows:


Trade accounts receivable	$	3.4
Inventories		3.9
Property, plant and equipment		2.8
Intangible assets		2.2
Goodwill		1.1
Accounts payable		(1.2)
Accrued compensation and employee benefits		(0.4)
Other liabilities		(0.5)
Purchase price	$	11.3

The Company recorded $2.2 million of intangible assets, including customer relationship and trade name assets. The Company is amortizing the acquired intangible assets using a weighted-average life of approximately eleven years. The Company allocated the excess of the purchase price over the net assets recognized to goodwill in the amount of $1.1 million, which is expected to be deductible for income tax purposes.

Acquisition of L.B. White

On May 31, 2025, the Company acquired all of the issued and outstanding shares of L.B. White for consideration totaling $110.5 million ($107.7 million net of cash acquired). The Company primarily utilized its revolving credit facility to fund the purchase price.

Headquartered in Wisconsin, with additional manufacturing and distribution operations in Georgia, L.B. White is a leading provider of specialty heating solutions, including direct-fired forced air, radiant, indirect-fired, and electric heating solutions, for the agriculture, construction, and special event industries. L.B. White holds a leading position in the swine and poultry agricultural heating markets in North America and is a market leader in portables heating. This acquisition expands the Company’s product portfolio and also broadens its network into adjacent heating markets. For the three and nine months ended December 31, 2025, the Company included net sales of $25.6 million and $44.7 million, respectively, within its consolidated statements of operations attributable to L.B. White.

During the third quarter of fiscal 2026 and in connection with harmonizing internal controls and accounting processes at L.B. White, the Company identified and recorded measurement period adjustments, primarily related to inventory and associated reserves. These adjustments, including the impact on deferred income taxes, resulted in an increase to goodwill of $1.4 million.

The Company’s preliminary allocation of the purchase price for its acquisition of L.B. White is as follows:


Cash and cash equivalents	$	2.8
Trade accounts receivable		10.2
Inventories		17.1
Property, plant and equipment		15.9
Intangible assets		50.1
Goodwill		27.1
Other assets		1.0
Accounts payable		(1.8)
Accrued compensation and employee benefits		(1.9)
Deferred income taxes		(8.3)
Other liabilities		(1.7)
Purchase price	$	110.5

The Company engaged third-party valuation specialists to assist in estimating the fair value of assets acquired. The third-party valuations utilized assumptions developed by management and other information compiled by management, including, but not limited to, future expected cash flows. The Company allocated the excess of the purchase price over the net assets recognized to goodwill in the amount of $27.1 million, none of which is expected to be deductible for income tax purposes. Goodwill represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The goodwill recorded as part of the acquisition includes L.B. White’s workforce and anticipated future revenue and cost synergies.

Below is a summary of the methodologies and significant assumptions used within the third-party valuations for estimating the fair value of certain classes of acquired assets. The fair values were primarily based upon significant inputs that are not observable in the market and thus represent Level 3 measurements. See Note 4 for information regarding Level 3 fair value measurements.

Inventories: The Company determined the fair value of acquired work-in-process and finished goods inventory using both the comparative sales and cost of reproduction valuation methods. For raw materials acquired, the Company estimated the cost of replacement. In total, the Company wrote-up acquired inventory by $1.0 million. The Company charged $0.2 million and $0.8 million to cost of sales during the first and second quarters of fiscal 2026, respectively, as the underlying inventory was sold.

Property, plant and equipment: The Company valued the land and facilities acquired using the cost approach. The cost approach included consideration of recent sales of comparable land parcels and estimated replacement costs for structures and site improvements, adjusting such values for estimated depreciation as of the acquisition date. The cost approach relies on assumptions regarding replacement costs and the age and estimated remaining useful lives of the assets. For personal property, which primarily consists of machinery and equipment assets, the Company utilized the market valuation approach that considers values for similar assets on secondary equipment markets. The fair value of property, plant and equipment will be recognized as depreciation expense in the Company’s results of operations over the expected remaining useful lives of the assets.

Intangible assets: The Company determined the fair value of acquired intangible assets by using variations of the income approach. These methods generally forecast expected future net cash flows associated with each of the identified intangible assets and adjust the forecasts to present value by applying a discount rate intended to reflect risk factors associated with the cash flows and the time value of money. Acquired intangible assets were as follows:


	Gross Carrying Value		Weighted- Average Useful Life
Customer relationships	$	38.5	14 years
Trade name		11.6	20 years
Total intangible assets acquired	$	50.1

Customer relationships represent the estimated fair value of L.B. White’s business relationships with existing customers, the majority of which are dealers and/or distributors in the agriculture and portable heating markets. The fair value of customer relationships was determined using the multi-period excess earnings method, in which the value is derived by projecting the future anticipated after-tax cash flows attributable to the customer relationships. Key inputs used in the valuation included future revenue growth rates, customer attrition rates, and discount rates.

The Company determined the estimated fair value of the acquired L.B. White trade name using the relief-from-royalty method, which applies an assumed royalty rate to revenue expected to be derived under the acquired trade name. The fair value was estimated to be the present value of the royalties saved because the Company owns the trade name.

Acquisition of Climate by Design

On July 1, 2025, the Company acquired Climate by Design for $64.4 million ($63.4 million net of cash acquired). The Company paid $64.1 million upon closing and the remaining $0.3 million in October 2025. The Company primarily utilized its revolving credit facility to fund the purchase price.

Based in Minnesota, Climate by Design specializes in desiccant dehumidification technology and critical process air handlers. This acquisition supports the Company’s growth strategy by expanding its commercial indoor air quality product portfolio. For the three and nine months ended December 31, 2025, the Company included $10.2 million and $17.5 million, respectively, of net sales within its consolidated statements of operations attributable to Climate by Design.

The Company’s preliminary allocation of the purchase price for its acquisition of Climate by Design is as follows:


Cash and cash equivalents	$	1.0
Trade accounts receivable		7.3
Inventories		10.1
Property, plant and equipment		10.5
Intangible assets		15.0
Goodwill		23.6
Other assets		10.4
Accounts payable		(1.8)
Accrued compensation and employee benefits		(1.0)
Other liabilities		(10.7)
Purchase price	$	64.4

The Company engaged third-party valuation specialists to assist in estimating the fair value of assets acquired. The third-party valuations utilized assumptions developed by management and other information compiled by management, including, but not limited to, future expected cash flows. The Company allocated the excess of the purchase price over the net assets recognized to goodwill in the amount of $23.6 million. Goodwill represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The goodwill recorded as part of the acquisition includes Climate by Design’s workforce and anticipated future revenue and cost synergies. Goodwill is expected to be deductible for income tax purposes.

Inventories: The Company estimated the fair value of acquired work-in-process and finished goods inventory using both the comparative sales and cost of reproduction valuation methods. For raw materials acquired, the Company estimated the cost of replacement. The Company wrote-up acquired inventory by $0.3 million. The Company charged the write-up to cost of sales during the second quarter of fiscal 2026 as the underlying inventory was sold.

Intangible assets: The Company estimated the fair value of acquired intangible assets by using variations of the income approach. These methods generally forecast expected future net cash flows associated with each of the identified intangible assets and adjust the forecasts to present value by applying a discount rate intended to reflect risk factors associated with the cash flows and the time value of money. Acquired intangible assets were as follows:


	Gross Carrying Value		Weighted- Average Useful Life
Customer relationships	$	8.3	10 years
Acquired technology		3.5	10 years
Trade name		3.2	10 years
Total intangible assets acquired	$	15.0

Customer relationships represent the estimated fair value of Climate by Design’s business relationships with existing customers. The fair value of customer relationships was estimated using the multi-period excess earnings method, in which the value is derived by projecting the future anticipated after-tax cash flows attributable to the customer relationships. Key inputs used in the valuation included future revenue growth rates, customer attrition rates, and discount rates.

The Company estimated the fair value of the acquired Climate by Design technology using the relief-from-royalty method, considering estimated royalties that would hypothetically be paid to use the technology.

The Company estimated the fair value of the acquired Climate by Design trade name using the relief-from-royalty method, which applies an assumed royalty rate to revenue expected to be derived under the acquired trade name. The fair value was estimated to be the present value of the royalties saved because the Company owns the trade name.

Pending disposition of facilities in Germany

In fiscal 2025, the Company signed a definitive agreement to sell its technical service center and administrative support facility in Germany to a real estate investment firm. The Company closed the technical service center earlier in fiscal 2025 and reduced headcount in light of the sale of three automotive businesses in Germany during fiscal 2024. During the second quarter of fiscal 2026 and based upon a lower expected selling price of approximately $5.0 million in light of market and other transaction-specific factors, the Company estimated an implied loss in excess of the building and related assets’ carrying value. As a result, the Company recorded a non-cash impairment charge of $4.1 million during the second quarter of fiscal 2026. As of December 31, 2025 and March 31, 2025, the Company classified $4.6 million and $8.2 million, respectively, of building and related assets as held for sale and presented them within other current assets on its consolidated balance sheets. The Company expects the sale transaction will close during the fourth quarter of fiscal 2026 or the first quarter of fiscal 2027.

MODINE MANUFACTURING CO 10-Q