Note 5:  Stock-Based Compensation

The Company’s stock-based compensation programs consist of the following: (i) a long-term incentive plan (“LTIP”) for officers and other executives that authorizes grants of stock awards, stock options, and performance-based awards granted for retention and performance, (ii) a discretionary equity program for other management and key employees, and (iii) stock awards for non-employee directors. The Company’s Board of Directors and the Human Capital and Compensation Committee, as applicable, have discretionary authority to set the terms of the stock-based awards. Grants to employees during fiscal 2026 were issued under the Company’s Amended and Restated 2020 Incentive Compensation Plan. In fiscal 2026, 2025 and 2024, the Company granted performance-based stock awards and restricted stock awards. At present, the Company settles equity-based grants through newly issued shares of common stock. As of March 31, 2026, approximately 1.0 million shares authorized under the Amended and Restated 2020 Incentive Compensation Plan remain available for future grants. Employee participants have the opportunity to deliver back to the Company the number of shares from the vesting of stock awards sufficient to satisfy the individual’s minimum tax withholding obligations. These shares are held as treasury shares. The Company recorded stock-based compensation expense of $22.1 million, $26.4 million, and $10.8 million in fiscal 2026, 2025 and 2024, respectively. During fiscal 2026 and 2025, in connection with restructuring actions, the Company modified certain stock-based awards for a limited number of employees to permit accelerated vesting, resulting in $2.1 million and $6.0 million, respectively, of incremental stock-based compensation expense.

Restricted stock

The Company recorded $5.7 million, $8.0 million, and $5.3 million of compensation expense related to restricted stock in fiscal 2026, 2025 and 2024, respectively. The grant date fair value of restricted stock awards that vested during fiscal 2026, 2025 and 2024 was $6.6 million, $6.3 million, and $4.6 million, respectively. At March 31, 2026, the Company had $8.1 million of unrecognized compensation expense related to non-vested restricted stock, which it expects to recognize over a weighted-average period of 1.7 years. The Company values restricted stock awards using the closing market price of its common shares on the date of grant. Based upon the terms of the annual awards, restricted stock awards vest 33 percent, 33 percent, and 34 percent per year for three years, respectively. Restricted stock awards granted to non-employee directors vest one year from the date of grant.

A summary of restricted stock activity for fiscal 2026 was as follows:

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Stock options

The Company recorded $0.1 million, $1.7 million, and $1.0 million of compensation expense related to stock options in fiscal 2026, 2025 and 2024, respectively. The grant date fair value of stock options that vested during fiscal 2026, 2025 and 2024, was $0.7 million, $1.0 million, and $1.2 million, respectively. As of March 31, 2026, the Company has no unvested stock option awards.

Stock options expire no later than 10 years after the grant date and have an exercise price equal to the fair market value of Modine’s common stock on the date of grant. The Company did not grant options in fiscal 2026, 2025 or 2024.

A summary of stock option activity for fiscal 2026 was as follows:

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The aggregate intrinsic value represents the difference between the closing price of Modine’s common shares on the last trading day of fiscal 2026 over the exercise price of the stock options, multiplied by the number of options outstanding or exercisable. The aggregate intrinsic value is not recorded for financial statement purposes, and this value will change based upon daily changes in the price of Modine’s common shares.

Additional information related to stock options exercised is as follows:

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Restricted stock – performance-based stock awards

The Company granted performance-based stock awards in fiscal 2026, 2025 and 2024. For performance-based stock awards, the Company values the awards using the closing market price of its common shares on the date of grant. The Company recorded $16.3 million, $16.7 million, and $4.5 million of compensation expense related to performance-based stock awards in fiscal 2026, 2025 and 2024, respectively. At March 31, 2026, the Company had $20.4 million of unrecognized compensation expense related to non-vested performance-based stock awards, which it expects to recognize over a weighted-average period of 1.6 years.

Shares earned under the performance portion of the incentive program are based upon the attainment of certain financial targets over a three-year period and are issued after the end of that three-year performance period, if the performance targets have been achieved. The performance metrics for the performance-based awards granted in fiscal 2026, 2025 and 2024 are based upon both a target three-year average consolidated cash flow return on invested capital and a target three-year average growth in consolidated net earnings before interest, taxes, depreciation, amortization, and certain other adjustments (“Adjusted EBITDA”) at the end of the three-year performance period, commencing with the fiscal year of grant.

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