MODINE MANUFACTURING CO Fair Value Disclosure
Note 4: 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:
| ● | Level 1 – Quoted prices for identical instruments in active markets. |
| ● | Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets. |
| ● | Level 3 – Model-derived valuations in which one or more significant inputs are not observable. |
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, accounts payable, and short-term debt approximate fair value due to the short-term nature of these instruments. In addition, the Company assesses the fair value of a disposal group for each reporting period it is held for sale. See Note 2 for additional information regarding assets held for sale. The fair value of the Company’s long-term debt is disclosed in Note 17.
The Company holds investments in deferred compensation trusts to fund obligations under certain non-qualified deferred compensation plans. The Company records the fair value of these investments within other noncurrent assets on its consolidated balance sheets. The Company classifies money market investments held by the trusts within Level 2 of the valuation hierarchy. The Company classifies all other investments held by the trusts within Level 1 of the valuation hierarchy, as it uses quoted market prices to determine the investments’ fair value. The Company’s deferred compensation obligations, which are recorded as other noncurrent liabilities, are recorded at the fair values of the investments held by the trust. At March 31, 2025 and 2024, the fair values of the investments and obligations for the Company’s deferred compensation plans each totaled $6.1 million and $4.1 million, respectively.
Plan assets related to the Company’s pension plans were classified as follows:
| March 31, 2025 | ||||||||
| Level 1 |
| Level 2 |
| Total | ||||
Money market investments | $ | — | $ | 2.7 | $ | 2.7 | |||
Fixed income securities |
| — |
| 51.3 |
| 51.3 | |||
U.S. government and agency securities |
| — |
| 87.0 |
| 87.0 | |||
Other |
| 1.4 |
| 8.4 |
| 9.8 | |||
Fair value excluding investments measured at net asset value |
| 1.4 |
| 149.4 |
| 150.8 | |||
Investments measured at net asset value |
|
|
| — | |||||
Total fair value |
|
| $ | 150.8 | |||||
| March 31, 2024 | ||||||||
| Level 1 |
| Level 2 |
| Total | ||||
Money market investments | $ | — | $ | 6.7 | $ | 6.7 | |||
Fixed income securities |
| — |
| 45.3 |
| 45.3 | |||
Pooled equity funds |
| 7.0 |
| — |
| 7.0 | |||
U.S. government and agency securities |
| — |
| 57.0 |
| 57.0 | |||
Other |
| 1.1 |
| 5.7 |
| 6.8 | |||
Fair value excluding investment measured at net asset value |
| 8.1 |
| 114.7 |
| 122.8 | |||
Investments measured at net asset value |
|
|
| 27.7 | |||||
Total fair value |
|
| $ | 150.5 | |||||
The Company determined the fair value of money market investments to approximate their net asset values, without discounts for credit quality or liquidity restrictions, and classified them within Level 2 of the valuation hierarchy. The Company determined the fair value of pooled equity funds based upon quoted prices from active markets and classified them within Level 1 of the valuation hierarchy. The Company determined the fair value of fixed income securities and U.S. government and agency securities based upon recent bid prices or the average of recent bid and asking prices when available and, if not available, the Company valued them through matrix pricing models developed by sources considered by management to be reliable. The Company classified these assets within Level 2 of the valuation hierarchy. As of March 31, 2025 and 2024, the Company held no Level 3 assets within its pension plans.
As a practical expedient, the Company valued certain investments, including pooled equity, fixed income and real estate funds, using their net asset value (“NAV”) per unit, and therefore, has not classified these investments within the fair value hierarchy. As of March 31, 2025 the Company no longer has investments valued at NAV.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | May 21, 2025 | Showing above |
| 2024 | May 22, 2024 | |
| 2023 | May 25, 2023 | |
| 2022 | May 26, 2022 | |
| 2021 | May 27, 2021 | |
| 2020 | May 29, 2020 | |
| 2019 | May 23, 2019 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.