MODINE MANUFACTURING CO Stock Compensation Disclosure
Note 5: Stock-Based Compensation
The Company’s stock-based incentive 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 2025 were issued under the Company’s Amended and Restated 2020 Incentive Compensation Plan. In fiscal 2025 and 2024, the Company granted performance-based stock awards and restricted stock awards. In fiscal 2023, the Company granted performance cash awards, restricted stock awards, and stock options. At present, the Company settles equity-based grants through newly issued shares of common stock. As of March 31, 2025, approximately 1.3 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 $26.4 million, $10.8 million, and $6.6 million in fiscal 2025, 2024, and 2023, respectively. During fiscal 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 $6.0 million of incremental stock-based compensation expense.
Restricted stock
The Company recorded $8.0 million, $5.3 million, and $5.4 million of compensation expense related to restricted stock in fiscal 2025, 2024, and 2023, respectively. The grant date fair value of restricted stock awards that vested during fiscal 2025, 2024, and 2023 was $6.3 million, $4.6 million, and $4.7 million, respectively. At March 31, 2025, the Company had $6.0 million of unrecognized compensation expense related to non-vested restricted stock, which it expects to recognize over a weighted-average period of 1.5 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 in fiscal 2025 vest one year from the date of grant.
A summary of restricted stock activity for fiscal 2025 was as follows:
|
| Weighted-average | |||
| Shares |
| price | ||
Non-vested balance, beginning of year | 0.5 | $ | 21.08 | ||
Granted | 0.1 |
| 111.02 | ||
Vested | (0.3) |
| 19.02 | ||
Forfeited | — |
| 35.71 | ||
Non-vested balance, end of year | 0.3 | $ | 42.90 | ||
Stock options
The Company recorded $1.7 million, $1.0 million, and $1.2 million of compensation expense related to stock options in fiscal 2025, 2024, and 2023, respectively. The grant date fair value of stock options that vested during fiscal 2025, 2024, and 2023, was $1.0 million, $1.2 million, and $1.0 million, respectively. As of March 31, 2025, the total compensation expense not yet recognized related to non-vested stock options was $0.1 million and the weighted-average period in which the remaining expense is expected to be recognized was 0.2 years.
The Company estimated the fair value of option awards on the date of grant using the Black-Scholes option valuation model and the following assumptions:
| Year ended March 31, 2023 |
| ||
Fair value of options | $ | 6.99 | ||
Expected life of awards in years |
| 6.0 | ||
Risk-free interest rate |
| 3.0 | % | |
Expected volatility of the Company’s stock |
| 57.8 | % | |
Expected dividend yield on the Company’s stock |
| 0.0 | % | |
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 2025 or 2024. Based upon the terms of the fiscal 2023 awards, stock options vest 33 percent, 33 percent, and 34 percent per year for three years, respectively.
A summary of stock option activity for fiscal 2025 was as follows:
|
|
| Weighted-average |
| ||||||
Weighted-average | remaining contractual | Aggregate | ||||||||
Shares | exercise price | term (years) | intrinsic value | |||||||
Outstanding, beginning of year |
| 0.6 | $ | 12.78 |
|
|
|
| ||
Granted |
| — |
| — |
|
|
|
| ||
Exercised |
| (0.1) |
| 11.79 |
|
|
|
| ||
Forfeited or expired |
| — |
| 12.85 |
|
|
|
| ||
Outstanding, end of year |
| 0.5 | $ | 12.94 |
| 5.9 | $ | 31.8 | ||
Exercisable, March 31, 2025 |
| 0.4 | $ | 12.80 |
| 5.7 | $ | 25.5 | ||
The aggregate intrinsic value represents the difference between the closing price of Modine’s common shares on the last trading day of fiscal 2025 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:
| Years ended March 31, | ||||||||
| 2025 |
| 2024 |
| 2023 | ||||
Intrinsic value of stock options exercised | $ | 8.1 | $ | 12.4 | $ | 1.5 | |||
Proceeds from stock options exercised |
| 1.0 |
| 2.6 |
| 2.9 | |||
Restricted stock – performance-based stock awards
The Company granted performance-based stock awards in fiscal 2025 and 2024. The Company granted performance-based cash awards in fiscal 2023 in lieu of performance-based stock awards. 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 $16.7 million and $4.5 million of compensation expense related to performance-based stock awards in fiscal 2025 and 2024, respectively. During fiscal 2023 all performance-based awards were cash-based, therefore, the Company did not recognize compensation expense related to performance-based stock awards. At March 31, 2025, the Company had $21.6 million of total unrecognized compensation expense related to non-vested performance-based stock awards, which is expected to be recognized over a weighted-average period of 1.7 years.
Shares earned under the performance portion of the incentive program are based upon the attainment of certain financial targets over a -year period and are issued after the end of that -year performance period, if the performance targets have been achieved. The performance metrics for the performance-based awards granted in fiscal 2025, 2024, and 2023 are based upon both a target -year average consolidated cash flow return on invested capital and a target -year average growth in consolidated net earnings before interest, taxes, depreciation, amortization, and certain other adjustments (“Adjusted EBITDA”) at the end of the -year performance period, commencing with the fiscal year of grant.
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 Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.