Note 1:  Organization and Basis of Presentation

Organization

On January 29, 2026, Modine Manufacturing Company (“Modine” or “Parent”) entered into definitive agreements with Gentherm Incorporated (“Gentherm”) whereby Modine will spin-off and simultaneously combine its Performance Technologies business (referred to as “Performance Technologies”, the “Company”, or “SpinCo”), with Gentherm in a Reverse Morris Trust (“RMT”) transaction. The RMT transaction is structured to be generally tax-free for Modine and Modine shareholders for U.S. federal income tax purposes. Modine will retain its Data Centers and Commercial HVAC segment businesses (“RemainCo”). Modine anticipates this transaction will close by the end of calendar year 2026, subject to approval by Gentherm’s shareholders and other customary closing conditions.

The spin-off transaction (the “Spin-Off”) will consist of Modine making a pro-rata distribution of shares in the Company, which will hold the Performance Technologies business prior to the Spin-Off, to its shareholders in a transaction that will be accounted for as a forward spin. The RMT transaction, occurring concurrently with the Spin-Off, consists of SpinCo merging with Gentherm. Following the Spin-Off, Modine shareholders will own approximately 40% of the combined company and Gentherm shareholders will own approximately 60% of the combined company. The approval of the shareholders of Gentherm is required to consummate the transaction. A vote by Modine shareholders is not required.

Performance Technologies provides products and solutions that enhance the performance of customer applications and develops solutions that provide mission-critical energy for a variety of end market applications, including solutions that increase fuel economy, reduce harmful emissions and maximize range in zero emission applications. Performance Technologies designs and manufactures products and solutions for vehicular, stationary power, and industrial applications. In addition, Performance Technologies provides advanced thermal solutions to zero-emission and hybrid commercial vehicle, bus and specialty vehicle customers.

Basis of Presentation

The unaudited condensed combined financial statements have been prepared on a “carve–out” basis. For the three months ended June 30, 2026 and 2025, the Company operated as part of the Parent, and consisted of several entities for which separate financial statements have not historically been prepared. As such, the periods presented have been derived from the consolidated financial statements and accounting records of the Parent, including the historical cost basis of assets and liabilities comprising the Company, as well as the historical revenues, direct costs, and allocations of indirect costs attributable to the operations of the Company, using the historical accounting policies applied by the Parent. The condensed combined financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC.

The condensed combined financial statements include all revenues and costs directly attributable to Performance Technologies, along with a portion of Modine’s corporate costs. These expenses are comprised of an allocation to Performance Technologies based on direct usage or benefit where specifically identifiable, along with a portion of the corporate expenses applied on a pro rata basis. Performance Technologies considers these allocations to be a reasonable reflection of the utilization of services or the benefit received. However, the allocations may not be indicative of the actual expense that would have been incurred had Performance Technologies operated as an independent, standalone entity, nor are they indicative of Performance Technologies future expenses. Actual costs that may have been incurred if Performance Technologies had been a standalone company would depend on a number of factors, including the chosen organization structure and strategic decisions made in various areas, including information technology (“IT”), infrastructure and outsourcing of corporate functions. Refer to Note 15 for further information.

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Note 2: Revenue Recognition

The Company sells thermal management systems and engineered heat transfer components for vehicular, stationary power, and industrial applications. The Company’s products are primarily used in heavy-duty equipment, commercial vehicle, automotive, and advanced thermal applications, including solutions that support fuel efficiency, emissions reduction, and zero-emission technologies.

Disaggregation of revenue

The tables below present revenue for each of the Company’s operating segments; Heavy-Duty Equipment, Commercial Vehicle, and Automotive. Each segment’s revenue is disaggregated by geographic location.

See Note 19 for additional segment financial information.

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Note 3: Fair Value Measurements

Fair value is defined as the price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. Fair value measurements are classified under the following hierarchy:

When available, the Company uses quoted market prices to determine fair value and classifies such measurements as Level 1. In some cases, where market prices are not available, the Company uses observable market-based inputs to calculate fair value, in which case the measurements are classified as Level 2. If quoted or observable market prices are not available, the Company determines fair value based upon valuation models that use, where possible, market-based data such as interest rates, yield curves or currency rates. These measurements are classified as Level 3.

The carrying values of cash, cash equivalents, restricted cash, trade accounts receivable, due from related party, accounts payable, due to related party, and short-term debt approximate fair value due to the short-term nature of these instruments.

Note 4: Pensions

Certain U.S. employees of the Company participate in a defined benefit pension plan sponsored by Modine that covers employees across multiple Modine businesses. For purposes of these condensed combined financial statements, participation in this plan has been reported under the multiemployer approach. During fiscal 2026, Modine completed the termination of this pension plan. The Company’s net periodic benefit cost associated with this plan was based on participation of Performance Technologies employees and is included within other expense in the combined statements of operations. The allocated expense was $0.7 million for the three months ended June 30, 2025.

Note 5: Stock-Based Compensation

The Company does not maintain its own stock-based incentive plans. Certain employees of the Company participate in Modine’s stock-based incentive programs, which 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 to incentivize performance, (ii) a discretionary equity program for other management and key employees, and (iii) stock awards for non-employee directors. The Parent’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.

The Company calculates compensation expense based upon the fair value of the awards at the time of grant and subsequently recognizes expense ratably over the respective vesting periods of the stock-based awards. The Company recorded stock-based compensation expense of $2.6 million and $1.2 million for the three months ended June 30, 2026 and 2025, respectively.

The Company’s condensed combined financial statements include stock-based compensation expense directly attributable to employees of the Company, as well as an allocation of stock-based compensation expense. Stock-based compensation expense directly attributable to Company employees was specifically identified based on awards granted to those employees. Stock-based compensation expense associated with corporate and shared employees was allocated to the Company in an amount that management believes reflects the benefit received by the Company. For the combined statements of cash flows, stock-based compensation expense directly attributable to Company employees is reported as stock-based compensation expense.

Stock-based compensation expense was as follows:

Note 6: Restructuring Activities

Restructuring and repositioning expenses were as follows:

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During the first three months of fiscal 2027, restructuring and repositioning expenses primarily consisted of costs associated with transferring product lines among its facilities and severance expenses. As part of Modine’s transformational initiatives supported by 80/20 principles, the Company is taking steps to optimize its supply chain and manufacturing footprint. The severance expenses were primarily recorded in Europe and North America and include severance related to targeted headcount reductions intended to reduce selling, general and administrative (“SG&A”) and operational expenses.

During the first three months of fiscal 2026, restructuring and repositioning expenses primarily consisted of severance expenses in Europe and North America and included targeted headcount reductions.

The Company accrues severance in accordance with its written plans, procedures, and relevant statutory requirements. Changes in accrued severance were as follows:

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Note 7: Other Income and Expense

Other income and expense consisted of the following:

Note 8: Income Taxes

The Company’s domestic operations have historically been included in the consolidated U.S. federal, certain state and local tax returns filed by the Parent. Additionally, through its foreign subsidiaries, the Company’s foreign operations have historically been filed as separate foreign income tax returns. The Company has calculated its provision for income taxes using a separate return method as if the Company was a separate group of companies under common ownership. Under this method, for jurisdictions in which it did not already have an actual separate tax filing, the Company is assumed to file hypothetical separate returns with the tax authorities. The Company has recorded tax expense or benefit based on taxable income or loss for these hypothetical returns, although the liability for any current tax has been deemed to be settled by the Parent. Deferred tax items, including carryforward attributes computed under the separate return method, may not be available for the Company in future periods as they may remain with the Parent.

The Company’s effective tax rate for the three months ended June 30, 2026 and 2025 was 20.8 percent and 39.1 percent, respectively. The effective tax rate for the first quarter of fiscal 2027 is lower than the first quarter of the prior year, primarily due to changes in the mix and amount of foreign and U.S. earnings.

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 $16.8 million and $26.0 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.

Note 9: Cash, Cash Equivalents, and Restricted Cash

Cash, cash equivalents and restricted cash consisted of the following:

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Restricted cash, which is reported within other current assets in the combined balance sheets, consists primarily of deposits for contractual guarantees or commitments required for rents, import and export duties, and commercial agreements.

Note 10: Inventories

Inventories consisted of the following:

Note 11: Property, Plant, and Equipment

Property, plant and equipment, including depreciable lives, consisted of the following:

Note 12: Product Warranties

Changes in accrued warranty costs were as follows:

Note 13: Leases

Lease assets and liabilities

The following table provides a summary of leases recorded on the combined balance sheets.

Components of lease expense

The components of lease expense were as follows:

Note 14: Indebtedness

As of June 30, 2026, the Company had bank overdrafts of $8.1 million recorded as short-term debt on the combined balance sheet. The overdrafts relate to short-term borrowings under foreign subsidiary credit agreements. There were no overdrafts related to these agreements at March 31, 2026.

In June 2026, the Company executed a credit agreement with a syndicate of banks that provides for a term loan of $250.0 million. Borrowings under this agreement are to occur in connection with, and substantially at the same time as, the Spin-Off.

Note 15: Related Party Transactions

Related-party transactions

Performance Technologies occasionally provides services to other Modine businesses. The nature of services provided is similar to the services that Performance Technologies provides to its third party customers.

All significant intercompany transactions between Performance Technologies and Modine have been included in the condensed combined financial statements and are considered to have been effectively settled at the time the transactions were recorded or are expected to be settled for cash. Sales to Modine and cost of sale for purchases from Modine during the three months ended June 30, 2026 and 2025 were each not significant. Selling, general and administrative expenses for services received from Modine were not significant during the three months ended June 30, 2026, and were $0.4 million during the three months ended June 30, 2025. Receivables and payables, between the Company and Parent are cash settled and have been presented on the combined balance sheets as due from related party and due to related party, respectively. In the combined statement of cash flows, this related party activity is reported within cash flows from operating activities. During the three months ended June 30, 2026, the Company transferred $9.5 million of net assets to the Parent in a non-cash transaction as part of an internal reorganization associated with the Spin-Off.

Cash pooling arrangements

Modine utilizes a centralized approach by region for the purposes of cash management and financing its operations. The Company participates in and manages certain of these cash pooling arrangements. Cash is swept daily to the cash pool owner who funds the businesses’ operating and investing activities as needed. This mechanism optimizes cash management and is used to ensure all of the Parent’s businesses have the working capital needed to run their day-to-day activities.

Amounts due from or to Modine under this arrangement are presented as related party notes receivable or related party notes payable, respectively, on the combined balance sheets. Interest income and interest expense associated with these balances are reflected within the combined statements of operations. As of June 30, 2026 and March 31, 2026, related party notes receivable included $3.8 million and $46.4 million, respectively, classified as current assets because the related amounts are either due on demand or within one year of the balance sheet date. As of March 31, 2026, related party notes receivable of $69.4 million was classified as noncurrent assets. There were no related party notes receivable classified as noncurrent as of June 30, 2026. Related party notes payable totaled $10.5 million and $91.1 million as of June 30, 2026 and March 31, 2026, respectively. The $112.0 million decrease in related party notes receivable and the $80.6 million decrease in related party notes payable were primarily due to the settlement of intercompany financing arrangements between the Company and Modine, which have been recorded within net parent investment. The settlements were the result of pre-separation activities associated with the Spin-Off. For the combined statements of cash flows, related party notes receivable activity is presented within cash flows from investing activities and related party notes payable activity is presented within cash flows from financing activities.