Income Taxes |
3 Months Ended |
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Jun. 30, 2026 | |
| Income Taxes | |
| Income Taxes | Note 9: Income Taxes The Company’s effective tax rate for the three months ended June 30, 2026 and 2025 was (8.3) percent and 21.3 percent, respectively. The effective tax rate for the first quarter of fiscal 2027 was positively impacted by $26.5 million of tax benefits related to stock-based compensation awards. The tax benefits were primarily driven by performance-based stock awards granted in fiscal 2024, for which shares were issued to participants during the first quarter of fiscal 2027. Modine’s share price appreciated significantly from the grant date of the stock awards to the share issuance date, which increased the value of the awards and the Company’s corresponding tax benefit. The tax benefits related to stock-based compensation awards were partially offset by a $3.8 million income tax detriment related to nondeductible compensation in the first quarter of fiscal 2027 and changes in the mix and amount of foreign and U.S. earnings. As of June 30, 2026 and March 31, 2026, income tax liabilities included within other current liabilities on the Company’s consolidated balance sheets totaled $20.0 million and $37.0 million, respectively. The Company records valuation allowances against its net deferred tax assets to the extent it determines it is more likely than not that such assets will not be realized in the future. Each quarter, the Company evaluates the probability that its deferred tax assets will be realized and determines whether valuation allowances or adjustments thereto are needed. This determination involves judgment and the use of significant estimates and assumptions, including expectations of future taxable income and tax planning strategies. In addition, the Company considers the duration of statutory carryforward periods and historical financial results. At June 30, 2026, valuation allowances against deferred tax assets in the U.S. and in certain foreign jurisdictions totaled $41.8 million and $27.1 million, respectively. The Company will maintain the valuation allowances in each applicable tax jurisdiction until it determines it is more likely than not the deferred tax assets will be realized, thereby eliminating the need for a valuation allowance. Future events or circumstances, such as lower taxable income or unfavorable changes in the financial outlook of the Company’s operations in the U.S. and certain foreign jurisdictions, could necessitate the establishment of further valuation allowances. Accounting policies for interim reporting require the Company to adjust its effective tax rate each quarter to be consistent with its estimated annual effective tax rate. Under this methodology, the Company applies its estimated annual income tax rate to its year-to-date ordinary earnings to derive its income tax provision each quarter. The Company records the tax impacts of certain significant, unusual or infrequently occurring items in the period in which they occur. In addition, the Company excludes the impact of operations anticipated to generate net operating losses for the full fiscal year from the overall effective tax rate calculation and instead records them discretely based upon year-to-date results.
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