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Derivatives/Hedges
 3 Months Ended
Jun. 30, 2012
Derivatives/Hedges [Abstract]  
Derivatives/Hedges
Note 14: Derivatives/Hedges

Modine uses derivative financial instruments from time to time as a tool to manage certain financial risks.  Leveraged derivatives are prohibited by Company policy.

Accounting for derivatives and hedging activities requires derivative financial instruments to be measured at fair value and recognized as assets or liabilities in the consolidated balance sheets.  Accounting for the gain or loss resulting from the change in the fair value of the derivative financial instruments depends on whether it has been designated, and is effective, as a hedge and, if so, on the nature of the hedging activity.

Commodity Derivatives:  The Company enters into futures contracts related to certain of the Company's forecasted purchases of aluminum and copper.  The Company's strategy in entering into these contracts is to reduce its exposure to changing market prices for future purchases of these commodities.  Until the fourth quarter of fiscal 2012, these contracts were designated as cash flow hedges by the Company.  Accordingly, unrealized gains and losses on these contracts were deferred as a component of accumulated other comprehensive (loss) income (AOCI), and recognized as a component of earnings at the same time that the underlying purchases of aluminum and copper impact earnings.  During the fourth quarter of fiscal 2012, the future contracts used for aluminum and copper hedging became ineffective.  Accordingly, the Company de-designated the hedges and began recording the unrealized gains and losses within cost of goods sold (see "Out of period adjustments" within Note 2). The amounts recorded in AOCI prior to the de-designation will remain in AOCI until the underlying purchases of aluminum and copper impact earnings.

Foreign exchange contracts:  The Company's foreign exchange risk management strategy uses derivative financial instruments in a limited way to mitigate foreign currency exchange risk.  The Company periodically enters into foreign currency exchange contracts to hedge specific foreign currency-denominated assets and liabilities.  The Company has not designated its forward contracts as hedges.  Accordingly, unrealized gains and losses related to the change in fair value are recorded in other income - net.  Gains and losses on these foreign currency forward contracts are offset by gains and losses recorded on the underlying assets and liabilities.

The fair value of the derivative financial instruments recorded in the consolidated balance sheets as of June 30, 2012 and March 31, 2012 are as follows:

Balance Sheet Location
June 30, 2012
March 31, 2012
Derivative instruments designated as cash flow hedges:
Commodity derivatives
Deferred income taxes and other current assets
$
-
$
156
Commodity derivatives
Accrued expenses and other current liabilities
-
924
Derivatives not designated as hedges:
Foreign exchange contracts
Deferred income taxes and other current assets
$
463
$
205
Commodity derivatives
Accrued expenses and other current liabilities
4,265
2,606
 

 
The amounts recorded in AOCI and in the consolidated statement of operations for the three months ended June 30, 2012 are as follows:

 
Amount of Loss Recognized in AOCI
 
Location of Loss (Gain)  Recognized in Income
 
Amount of Loss Reclassified from AOCI into Continuing Operations
 
 
Amount of Loss (Gain) Recognized in Income
 
Derivatives not designated:
 
 
 
 
 
 
 
 
 
Commodity derivatives
 
$
2,366
 
Cost of sales
 
$
780
 
 
$
1,959
 
Foreign exchange contracts
 
 
-
 
Other income - net
 
 
-
 
 
 
(436
)
Total
 
$
2,366
 
 
$
780
 
 
$
1,523
 

 
The amounts recorded in AOCI and in the consolidated statement of operations for the three months ended June 30, 2011 is as follows:

 
Amount of Loss Recognized in AOCI
 
Location of Gain Reclassified from  AOCI into Continuing Operations
 
Amount of Gain Reclassified from AOCI into Continuing Operations
 
Designated derivative instruments:
 
 
 
 
 
 
Commodity derivatives
 
$
1,777
Cost of sales
 
$
(269
)
Total
 
$
1,777
 
$
(269
)