Acquisitions and Dispositions

3 Months Ended

Jun. 30, 2025

Acquisitions and Dispositions

Acquisitions and Dispositions

Note 2: Acquisitions and Dispositions

The Company acquired two businesses during the first quarter of fiscal 2026, as summarized below. At the time the June 30, 2025 financial statements were finalized, the Company was continuing its review of the fair value estimates for certain assets acquired and liabilities assumed. As part of its purchase accounting and integration activities, the Company is in the process of assessing, refining and harmonizing the internal controls and accounting processes of the acquired businesses with those of the Company. As part of this process, the Company is reviewing the appropriateness of accruals and reserves, including those related to accounts receivable, inventory, and product warranties. As such, the allocations of the purchase prices presented below are considered preliminary. The Company expects to complete its accounting for the acquisitions of AbsolutAire, Inc. (“AbsolutAire”) and LBW Holding Corp. (“L.B. White”) during the second or third quarter of fiscal 2026. The Company has not presented supplemental pro forma financial information for these acquisitions since they are not material, individually or in the aggregate, to the Company’s consolidated financial statements.

Acquisition of AbsolutAire

On April 1, 2025, the Company acquired substantially all of the net operating assets of AbsolutAire for consideration totaling $11.3 million. AbsolutAire is a Michigan-based manufacturer of direct-fired heating, ventilation, and make-up air systems. This acquisition supports the Company’s growth strategy by expanding its heating and indoor air quality product portfolios and also broadens its customer base in the commercial, industrial, food service, and warehousing sectors. Since the date of the acquisition, the Company has reported the financial results of the AbsolutAire business within the Climate Solutions segment. For the three months ended June 30, 2025, the Company included $6.8 million of net sales and $0.8 million of operating income within its consolidated statement of operations attributable to AbsolutAire.

For the June 30, 2025 condensed consolidated financial statements, the Company has preliminarily allocated the purchase price to the identifiable tangible and intangible assets acquired and the liabilities assumed based upon their estimated fair values as of the acquisition date. The Company recorded $2.2 million of intangible assets, including customer relationship and trade name assets. The Company is amortizing the acquired intangible assets using a weighted-average life of approximately eleven years. The Company allocated the excess of the purchase price over the net assets recognized to goodwill in the amount of $1.1 million, which is deductible for income tax purposes.

The Company’s preliminary allocation of the purchase price for its acquisition of AbsolutAire was as follows:

Trade accounts receivable	$	3.4
Inventories		3.9
Property, plant and equipment		2.8
Intangible assets		2.2
Goodwill		1.1
Accounts payable		(1.2)
Accrued compensation and employee benefits		(0.4)
Other liabilities		(0.5)
Purchase price	$	11.3

Acquisition of L.B. White

On May 31, 2025, the Company acquired all of the issued and outstanding shares of L.B. White for consideration totaling $110.5 million ($107.7 million net of cash acquired). The Company primarily utilized its revolving credit facility to fund the purchase price.

Headquartered in Onalaska, Wisconsin with additional manufacturing and distribution operations in Georgia, L.B. White is a leading provider of specialty heating solutions, including direct-fired forced air, radiant, indirect-fired, and electric heating solutions, for the agriculture, construction, and special event industries. L.B. White holds a leading position in the swine and poultry agricultural heating markets in North America and is a market leader in portables heating. This acquisition expands the Company’s product portfolio and also broadens its network into adjacent heating markets. Since the date of the acquisition, the Company has reported the financial results of the L.B. White business within the Climate Solutions segment. For the one month during the first quarter of fiscal 2026 that the Company owned L.B. White, it included $3.2 million of net sales of the acquired business within its consolidated statement of operations. Operating income attributable to the acquired business during the first quarter of fiscal 2026 was not significant.

The Company has preliminarily allocated the purchase price of L.B. White to the identifiable tangible and intangible assets acquired and the liabilities assumed based upon their estimated fair values as of the acquisition date, as follows:

Cash and cash equivalents	$	2.8
Trade accounts receivable		10.2
Inventories		17.9
Property, plant and equipment		15.9
Intangible assets		50.1
Goodwill		25.7
Other assets		1.0
Accounts payable		(1.8)
Accrued compensation and employee benefits		(1.9)
Deferred income taxes		(7.7)
Other liabilities		(1.7)
Purchase price	$	110.5

The Company engaged third-party valuation specialists to assist in estimating the fair value of assets acquired. The third-party valuations utilized assumptions developed by management and other information compiled by management, including, but not limited to, future expected cash flows. The Company allocated the excess of the purchase price over the net assets recognized to goodwill in the amount of $25.7 million, none of which is expected to be deductible for income tax purposes. Goodwill represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The goodwill recorded as part of the acquisition includes L.B. White’s workforce and anticipated future revenue and cost synergies.

Below is a summary of the methodologies and significant assumptions used within the third-party valuations for estimating the fair value of certain classes of acquired assets. The fair values were primarily based upon significant inputs that are not observable in the market and thus represent Level 3 measurements. See Note 4 for information regarding Level 3 fair value measurements.

Inventories: The Company determined the fair value of acquired work-in-process and finished goods inventory using both the comparative sales and cost of reproduction valuation methods. For raw materials acquired, the Company estimated the cost of replacement. In total, the Company wrote-up acquired inventory by $1.0 million. The Company charged $0.2 million of this write-up to cost of sales in June 2025 and expects to charge the remaining $0.8 million to cost of sales during the second quarter of fiscal 2026, as the remaining underlying inventory is sold.

Property, plant and equipment: The Company valued the land and facilities acquired using the cost approach. The cost approach included consideration of recent sales of comparable land parcels and estimated replacement costs for structures and site improvements, adjusting such values for estimated depreciation as of the acquisition date. The cost approach relies on assumptions regarding replacement costs and the age and estimated remaining useful lives of the assets. For personal property, which primarily consists of machinery and equipment assets, the Company utilized the market valuation approach that considers values for similar assets on secondary equipment markets. The fair value of property, plant and equipment will be recognized as depreciation expense in the Company’s results of operations over the expected remaining useful lives of the assets.

Intangible assets: The Company determined the fair value of acquired intangible assets by using variations of the income approach. These methods generally forecast expected future net cash flows discretely associated with each of the identified intangible assets and adjust the forecasts to present value by applying a discount rate intended to reflect risk factors associated with the cash flows and the time value of money. Acquired intangible assets were as follows:

	Gross Carrying Value		Weighted- Average Useful Life
Customer relationships	$	38.5	14 years
Trade name		11.6	20 years
Total intangible assets acquired	$	50.1

Customer relationships represent the estimated fair value of L.B. White’s business relationships with existing customers, the majority of which are dealers and/or distributors in the agriculture and portables heating markets. The fair value of customer relationships was determined using the multi-period excess earnings method, in which the value is derived by projecting the future anticipated after-tax cash flows attributable to the customer relationships. Key inputs used in the valuation included future revenue growth rates, customer attrition rates, and discount rates.

The Company determined the value of the acquired L.B. White trade name using the relief-from-royalty method, which applies an assumed royalty rate to revenue expected to be derived under the acquired trade name. The fair value was estimated to be the present value of the royalties saved because the Company owns the trade name.

Pending disposition of facilities in Germany

In December 2024, the Company signed a definitive agreement to sell its technical service center and administrative support facility in Germany to a real estate investment firm for €11.5 million ($13.5 million). The Company closed the technical service center earlier in fiscal 2025 and reduced headcount in light of the sale of three automotive businesses in Germany during fiscal 2024. The Company expects the sale transaction will close during the second or third quarter of fiscal 2026, subject to remaining closing conditions. The Company expects to record a gain on sale, net of costs to sell, of approximately $4.0 million when the transaction is completed. As of June 30, 2025 and March 31, 2025, the Company classified $8.9 million and $8.2 million, respectively, of building and related assets expected to transfer to the buyer as held for sale and presented them within other current assets on its consolidated balance sheets.

Q2 acquisition of Climate by Design International

On July 1, 2025, the Company acquired Climate by Design International (“Climate by Design”). The Company paid $64.1 million upon transaction closing. The final purchase price is pending and may be adjusted for net working capital. Based in Minnesota, Climate by Design specializes in desiccant dehumidification technology and critical process air handlers and has annual sales of approximately $45.0 million. This acquisition supports the Company’s growth strategy by expanding its commercial indoor air quality product portfolio. The financial results for Climate by Design will be reported within the Company’s Climate Solutions segment beginning for the second quarter of fiscal 2026.