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Significant accounting policies | 12 Months Ended
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Mar. 31, 2012
Significant accounting policies [Abstract] |
Significant accounting policies | Note 1: Significant accounting policies Nature of operations: Modine Manufacturing Company (Modine or the Company) specializes in thermal management systems and components, bringing heating and cooling technology and solutions to diversified global markets. The Company is a leading global developer, manufacturer and marketer of heat exchangers and systems for use in on-highway and off-highway original equipment manufacturer (OEM) vehicular applications, and to a wide array of building, industrial and refrigeration markets. Product lines include radiators and radiator cores, vehicular air conditioning, oil coolers, charge air coolers, heat-transfer packages and modules, building heating, ventilating and air conditioning (HVAC) equipment and exhaust gas recirculation (EGR) coolers. Basis of presentation: The consolidated financial statements are prepared in conformity with generally accepted accounting principles (GAAP) in the United States. These principles require management to make certain estimates and assumptions in determining Modine's assets, liabilities, revenue, expenses and related disclosures. Actual amounts could differ from those estimates. Consolidation principles: The consolidated financial statements include the accounts of Modine Manufacturing Company and its majority-owned or Modine-controlled subsidiaries. Material inter-company transactions and balances are eliminated in consolidation. During the first quarter of fiscal 2012, the Company completed the formation of its joint venture with OneGene, Inc. to form Modine OneGene Corporation in South Korea. The Company and OneGene, Inc. each made initial capital contributions of 1,000,000 Korean won ($936 U.S. equivalent) during the first quarter of fiscal 2012. Modine is considered the primary beneficiary of the joint venture in accordance with applicable consolidation guidance. Accordingly, the results of Modine OneGene Corporation are consolidated by the Company. Investments in non-consolidated affiliated companies in which ownership is 20 percent or more are accounted for by the equity method. The investments are stated at cost plus or minus a proportionate share of the undistributed net income (loss). Modine's share of the affiliates' net income (loss) is reflected in other income - net. See Note 11 for further discussion. Discontinued operations: The Company considers businesses to be held for sale when management approves and commits to a formal plan to actively market the business for sale at a price reasonable in relation to its fair value, the business is available for immediate sale in its present condition, the sale of the business is probable and expected to be completed within one year and it is unlikely that significant changes will be made to the plan. Upon designation as held for sale, the carrying value of the assets of the business are recorded at the lower of their carrying value or their estimated fair value, less costs to sell. The Company ceases to record depreciation expense at the time of designation as held for sale. Results of operations of a business classified as held for sale are reported as discontinued operations when (a) the operations and cash flows of the business will be eliminated from ongoing operations as a result of the sale and (b) the Company will not have any significant continuing involvement in the operations of the business after the sale. See Note 12 for further discussion. Revenue recognition: Sales revenue, including agreed upon commodity price increases, is recognized at the time of product shipment to customers when title and risk of loss pass to customers, selling prices are fixed or determinable and collectability from the customer is reasonably assured. Appropriate provisions are made for uncollectible accounts based on historical data or specific customer economic data, and for estimated commodity price increases which ultimately may not be collected. Sales discounts: Sales discounts, which are allowed for prompt payment of invoices by customers, are recorded as a reduction to net sales. Tooling costs: Modine accounts for pre-production tooling costs as a component of property, plant and equipment - net when the Company owns title to the tooling, and amortizes the capitalized cost to cost of sales over a three year period. At March 31, 2012 and 2011, Company-owned tooling totaled $27,449 and $24,799, respectively. In certain instances, the Company makes an upfront payment for customer-owned tooling costs, and subsequently receives a reimbursement from the customer for the upfront payment. The Company accounts for unbilled customer-owned tooling costs as a receivable within other current assets when the customer has guaranteed reimbursement to the Company. No significant arrangements exist where customer-owned tooling costs were not accompanied by guaranteed reimbursement. At March 31, 2012 and 2011, the cost reimbursement receivable related to customer-owned tooling totaled $14,166 and $10,564, respectively. Warranty: Modine provides product warranties for specific product lines and accrues for estimated future warranty costs in the period in which the sale is recorded. Warranty expense is generally provided based upon historical and current claim data. Accrual balances are monitored and adjusted when it becomes probable that expected claims will differ from existing estimates. Accruals are recorded as current liabilities under the caption accrued expenses and other current liabilities. See Note 20 for further discussion. Shipping and handling costs: Shipping costs for inbound freight are treated as product cost. Shipping and handling costs incurred upon the shipment of products to our OEM customers are recorded as a component of cost of sales, and related amounts billed to these customers are recorded as a component of net sales. Shipping and handling costs incurred upon the shipment of products to our HVAC customers are recorded as a component of selling, general and administrative (SG&A) expenses. For the years ended March 31, 2012, 2011 and 2010, these shipping and handling costs recorded as a component of SG&A expenses were $5,361, $4,815 and $2,987, respectively. Revenue recognition under licensing arrangements (royalty payments): Revenues under various licensing agreements are recognized when earned except in those cases where collection is uncertain, or the amount cannot reasonably be estimated until formal accounting reports are received from the licensee as provided for under the provisions of the licensing agreement. For the years ended March 31, 2012, 2011 and 2010, licensing revenue totaled $1,213, $1,607 and $5,562, respectively, and are recorded as a component of net sales. Translation of foreign currencies: Assets and liabilities of foreign subsidiaries and equity investments are translated into U.S. dollars at the period-end exchange rates, and income and expense items are translated at the monthly average exchange rate for the period in which the items occur. Resulting translation adjustments are reported as a component of accumulated other comprehensive (loss) income included in shareholders' equity. Foreign currency transaction gains or losses are included in the statement of operations under the caption other expense (income) - net. Derivative instruments: The Company enters into derivative financial instruments from time to time to manage certain financial risks. Futures contracts are entered into by the Company to reduce exposure to changing future purchase prices for aluminum and copper. These instruments are used to protect cash flows and are not speculative. The Company generally designates these derivative instruments as cash flow hedges. Accordingly, unrealized gains and losses on these contracts are deferred as a component of accumulated other comprehensive (loss) income and recognized as a component of earnings at the same time that the underlying transactions impact earnings. See Note 18 for further discussion. Income taxes: Deferred tax assets and liabilities are determined based on the difference between the amounts reported in the financial statements and the tax bases of assets and liabilities, using enacted tax rates in effect in the years in which the differences are expected to reverse. A valuation allowance is established if it is more likely than not that some portion or all of a deferred tax asset will not be realized. See Note 6 for further discussion. Earnings per share: Basic earnings per share is calculated based on the weighted average number of common shares outstanding during the year, while diluted earnings per share is calculated based on the dilutive effect of common shares that could be issued. The calculation of diluted earnings per share excludes all potentially dilutive shares in which their inclusion would have the effect of decreasing the loss per share amount. See Note 7 for further discussion. Cash equivalents: Modine considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Deferred compensation trust: The Company maintains a deferred compensation trust to fund future obligations under its non-qualified deferred compensation plan. The trust's investments in third-party debt and equity securities are reflected as short-term investments in the consolidated balance sheet and are treated as trading securities with changes in fair value reflected as a component of earnings. Trade receivables and allowance for doubtful accounts: Trade receivables are recorded at the invoiced amount and do not bear interest if paid according to the original terms. The allowance for doubtful accounts is Modine's best estimate of the uncollectible amount contained in the existing trade receivables balance. The allowance is based on historical write-off experience and specific customer economic data. The allowance for doubtful accounts is reviewed periodically and adjusted as necessary. Utilizing age- and size-based criteria, certain individual accounts are reviewed for collectability, while all other accounts are reviewed on a pooled basis. Receivables are charged off against the allowance when it is probable that funds will not be collected. The Company enters into supply chain financing programs from time to time to sell or otherwise negotiate accounts receivables without recourse to third-party financial institutions. Sales of accounts receivable are reflected as a reduction of accounts receivable on the consolidated balance sheets and the proceeds are included in the cash flows from operating activities in the consolidated statements of cash flows. During the years ended March 31, 2012 and 2011, the Company sold, without recourse, $113,521 and $47,778 of accounts receivable to accelerate cash receipts. During the years ended March 31, 2012 and 2011, a loss on the sale of accounts receivables of $485 and $225 was recorded in the consolidated statements of operations. This loss represented implicit interest on the transactions and is included in interest expense. Inventories: Inventories are valued at the lower of cost on a first-in, first-out basis, or market value. Property, plant and equipment: Property, plant and equipment are stated at cost. For financial reporting purposes, depreciation is principally computed using the straight-line method over the expected useful life of the asset. Maintenance and repair costs are charged to operations as incurred. Costs of improvements are capitalized. Upon the sale or other disposition of an asset, the cost and related accumulated depreciation are removed from the accounts and the gain or loss is included in the statement of operations. Goodwill and intangible assets: Purchased goodwill and other intangible assets with indefinite lives, primarily tradenames, are not amortized; rather they are tested for impairment annually unless conditions exist that would require a more frequent evaluation. An assessment of the fair value of the Company's reporting units for its goodwill valuation and its other intangible assets with indefinite lives is required and is based upon, among other things, the present value of the expected future cash flows. An impairment loss is recognized when the book value of goodwill or intangible assets exceeds the fair value. The Company performed impairment tests as of March 31, 2012, which resulted in no impairment charge. See Note 14 for further discussion. Impairment of long-lived assets: Long-lived assets, including property, plant and equipment and intangible assets with finite lives are reviewed for impairment and written down to fair value when facts and circumstances indicate that the carrying value of long-lived assets may not be recoverable through estimated future undiscounted cash flows. If an impairment has occurred, a write-down to estimated fair value is made and the impairment loss is recognized as a charge against current operations. Fair value is estimated using a variety of valuation techniques including discounted cash flows, market values and comparison values for similar assets. Investments are reviewed for impairments and written down to fair value when facts and circumstances indicate that a decline in value is other than temporary. See Note 10 for further discussion. Restricted cash: At March 31, 2012 and 2011, the Company had long-term restricted cash of $3,721 and $4,682, respectively, included in other noncurrent assets. The balance at March 31, 2012 contains two components, $1,371 secures long-term employee compensation arrangements for certain employees in Europe and $2,350 collateralizes insurance liabilities with an insurance carrier in North America. The balance at March 31, 2011 contains two components, $2,332 secures long-term employee compensation arrangements for certain employees in Europe and $2,350 collateralizes insurance liabilities with an insurance carrier in North America. Environmental expenditures: The Company capitalizes environmental expenditures related to current operations that qualify as property, plant and equipment or substantially increase the economic value or extend the useful life of an asset. All other expenditures are expensed as incurred. Environmental expenditures that relate to an existing condition caused by past operations are expensed. If a loss arising from environmental matters is probable and can be reasonably estimated, the Company records the amount of the estimated loss, or the minimum estimated liability when the loss is estimated using a range, and no point within the range is more likely than another. Self-insurance reserves: The Company retains some of the financial risk for various insurance coverage including property, general liability, workers compensation and employee healthcare and therefore maintains reserves that estimate the impact of unreported and under-reported claims that fall below various stop-loss limits and deductibles under its insurance policies. The insurance reserves include settlement cost estimates for known claims, as well as estimates, some of which are actuarially determined, of incurred but not reported claims. Costs of claims, including the impact of changes in reserves due to claim experience and severity, are charged to operations based on claim incurrence. The evaluation of insurance claims and the reasonableness of the related liability accruals are reviewed and updated on a quarterly basis. Stock-based compensation: The Company recognizes stock-based compensation using the fair-value-based method. Accordingly, compensation cost for stock options, stock awards and restricted stock is calculated based on the fair value of the instrument at the time of grant, and is recognized as expense over the vesting period of the stock-based instrument. The majority of this expense is reflected in corporate as administrative expense, and has not been allocated to various segments. See Note 23 for further discussion. Revision of prior period financial statements: During the three months ended March 31, 2012, the Company identified the following items requiring adjustment:
| ● | The Company determined that value added tax (VAT) had been improperly applied for numerous cross border transactions throughout the Original Equipment - Europe segment. At March 31, 2012, an estimated liability for the VAT exposure of $10,683 was identified, of which $10,281 related to periods prior to fiscal 2012.
| ● | The Company determined that certain past import and export duties related to goods at the Nuevo Laredo, Mexico and Laredo, Texas facilities within the Original Equipment - North America segment were incorrect, which resulted in increased past duties owed.
| ● | The Company determined that the expense related to an annual business tax assessed to Modine's Hungary locations within the Original Equipment - Europe segment was misclassified in the consolidated statements of operations.
These adjustments were not considered to be material individually or in the aggregate to previously issued financial statements. However, because of the cumulative significance of these adjustments to the year ended March 31, 2012 ($11,008 decrease to earnings from continuing operations before income taxes), the Company revised its fiscal 2010 and fiscal 2011 results in this report. In addition, the quarterly results for fiscal 2011 and fiscal 2012 have been revised. See Note 26 for further discussion of the quarterly revisions. The following table summarizes the effects of revising prior years' financial statements for these errors.
|  | Period in which the errors originated |
|  | Year Ended March 31, |
|  | 2010 |  |  | 2011 |
VAT liability (2) |  | $ | (3,344 | ) |  | $ | (759 | )
Trade compliance liability (3) |  |  | (256 | ) |  |  | (232 | )
Hungary business tax (4) |  |  | 693 |  |  |  | 1,119 |
Impact on pre-tax earnings (loss) |  |  | (2,907 | ) |  |  | 128 |
Tax effect of VAT liability (2) |  |  | 450 |  |  |  | 44 |
Hungary business tax (4) |  |  | (693 | ) |  |  | (1,119 | )
Impact on net earnings (loss) (5) |  | $ | (3,150 | ) |  | $ | (947 | )
(1) The Company has concluded that these errors were immaterial, individually and in the aggregate, to all periods presented. (2) The Company had been applying VAT on numerous complex cross border transactions based on the incorrect tax jurisdiction over the past several years, resulting in the underpayment of VAT in various tax jurisdictions within the Original Equipment - Europe segment. As a result, SG&A expenses were understated by $3,334 and $759 in fiscal 2010 and fiscal 2011, respectively, for unpaid VAT, estimated interest and penalties. In addition, provision for income taxes was overstated by $450 and $44 in fiscal 2010 and fiscal 2011, respectively. Net earnings were overstated by $5,983 (cumulatively) in fiscal years prior to fiscal 2010 for unpaid VAT, interest and penalties, and has been recorded as an adjustment to retained earnings as of April 1, 2009. The Company recorded a liability for these obligations in accrued expenses and other current liabilities at March 31, 2011 and March 31, 2012. (3) The Company determined that certain past duty classifications related to goods at the Nuevo Laredo, Mexico and Laredo, Texas facilities within the Original Equipment - North America segment were incorrect, resulting in increased past duties owed. As a result, cost of sales was understated by $256 and $232 in fiscal 2010 and fiscal 2011, respectively, for unpaid duties, estimated interest and penalties. Net earnings were overstated by $239 (cumulatively) in fiscal years prior to fiscal 2010 for unpaid duties, interest and penalties, and has been recorded as an adjustment to retained earnings as of April 1, 2009. The Company recorded a liability for these obligations in accrued expenses and other current liabilities at March 31, 2011 and March 31, 2012. (4) Modine's Hungary locations within the Original Equipment - Europe segment are subject to an annual business tax based on a computation of gross receipts less certain components of cost of sales. Historically, this business tax has been recorded as a component of cost of sales. The Company determined that the tax is more properly classified as a component of income tax expense as the tax is computed based on certain aspects of profit. There is no impact on the consolidated balance sheet or net earnings. However the misclassification as cost of sales versus provision for income taxes represented an understatement of pretax earnings and provision for income taxes of $693 and $1,119 for fiscal 2010 and fiscal 2011, respectively. (5) The aggregate impact of these errors was an overstatement of diluted earnings per share (EPS) from continuing operations and diluted EPS attributable to Modine of $0.08 for fiscal 2010 and $0.02 for fiscal 2011. (6) Accrued expenses and other current liabilities increased $11,443 at March 31, 2011 as a result of these revisions. Accounting standards changes and new accounting pronouncements: In May 2011, the Financial Accounting Standards Board (FASB) issued guidance to improve consistency in application of existing fair value measurement and disclosure requirements. The standard requires the Company to report the level in the fair value hierarchy of assets and liabilities not measured at fair value in the balance sheet but for which the fair value is disclosed, and to expand existing disclosures. The guidance was effective for the Company on a prospective basis on or after January 1, 2012. Refer to Note 16 for further discussion of the fair value of debt. In June 2011, the FASB issued an amendment to the accounting guidance for the presentation of comprehensive income. This amendment removes one of the three presentation options for presenting the components of other comprehensive income as part of the statement of changes in shareholders' equity and requires either a single continuous statement of net income and other comprehensive income or a two consecutive statement approach. This amendment shall be applied retrospectively and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011. This amendment is effective for the first quarter of fiscal 2013 and only impacts the presentation of the Company's comprehensive income. In September 2011, the FASB issued an amendment to the accounting guidance for testing goodwill for impairment. The amendment provides an option for companies to first use a qualitative approach to test goodwill for impairment if certain conditions are met. If it is determined to be more likely than not that the fair value of the reporting unit is less than its carrying amount, entities must perform the quantitative analysis of the goodwill impairment test. The amendments are effective for goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company is assessing this new guidance and currently does not anticipate any impact on the consolidated financial statements from the adoption of this amendment.

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- Definition The entire disclosure for all significant accounting policies of the reporting entity. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18743-107790 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18854-107790 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 22 -Paragraph 8 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18861-107790 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18780-107790 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18726-107790 + Details
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