XML 60 R21.htm IDEA: XBRL DOCUMENT v2.4.0.6
Derivatives and Hedging Activities
 9 Months Ended
Dec. 31, 2012
Derivatives and Hedging Activities [Abstract]  
Derivatives and Hedging Activities
Note 15: Derivatives and Hedging Activities

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 has, from time to time, entered into futures contracts related to certain forecasted purchases of aluminum and copper.  The Company's strategy in entering into these contracts was 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 contracts used for aluminum and copper hedging became ineffective and the Company began recording the unrealized gains and losses within cost of sales.  The amounts recorded in AOCI will remain there until the underlying purchases of aluminum and copper impact earnings.  The Company did not enter into any futures contracts during the second or third quarter of fiscal 2013.

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 these contracts for hedge accounting.  Accordingly, unrealized gains and losses related to the change in fair value are recorded in other income and expense.  Gains and losses on these foreign currency contracts are offset by gains and losses recorded within the related assets and liabilities.

The fair values of the Company's derivative financial instruments recorded in the consolidated balance sheets were as follows:
 
 
 
Balance Sheet Location
 
December 31, 2012
  
March 31, 2012
 
Derivative instruments designated as cash flow hedges:
        
Commodity derivatives
Other current assets
 $-  $0.2 
Commodity derivatives
Other current liabilities
  -   0.9 
            
Derivative instruments not designated as hedges:
          
Foreign exchange contracts
Other current assets
 $-  $0.2 
Commodity derivatives
Other current liabilities
  0.9   2.6 
Commodity derivatives
Other noncurrent liabilities
  0.2   - 

The amounts recorded in AOCI and in the consolidated statements of operations for all of the Company's derivative financial instruments were as follows:

        
Three months ended
  
Nine months ended
 
        
December 31, 2012
  
December 31, 2012
 
   
Amount of Loss Recognized in AOCI
 
Statement of Operations Location
 
Loss Reclassified from AOCI into Continuing Operations
  
Total Loss (Gain) Recognized in Continuing Operations
  
Loss Reclassified from AOCI into Continuing Operations
  
Total Loss (Gain) Recognized in Continuing Operations
 
Commodity derivatives
 $0.7 
Cost of sales
 $0.7  $1.1  $2.4  $3.8 
Foreign exchange contracts
  - 
Other expense - net
  -   (0.2)  -   (0.3)
Total
 $0.7    $0.7  $0.9  $2.4  $3.5 
 
         
Three months ended
  
Nine months ended
 
         
December 31, 2011
  
December 31, 2011
 
   
Amount of Loss Recognized in AOCI
 
Statement of Operations Location
 
Loss Reclassified from AOCI into Continuing Operations
  
Total Loss (Gain) Recognized in Continuing Operations
  
Loss Reclassified from AOCI into Continuing Operations
  
Total Loss (Gain) Recognized in Continuing Operations
 
Commodity derivatives
 $5.2 
Cost of sales
 $1.3  $1.3  $1.7  $1.7 
Foreign exchange contracts
  - 
Other expense - net
  -   (0.3)  -   (0.3)
Total
 $5.2    $1.3  $1.0  $1.7  $1.4