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Significant Accounting Policies | 12 Months Ended
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Mar. 31, 2014
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 a wide array of building, industrial and refrigeration markets. Product lines include radiators and radiator cores, condensers, oil coolers, charge air coolers, heat-transfer modules and assemblies, exhaust gas recirculation (“EGR”) coolers, building heating, and ventilating and air conditioning (“HVAC”) equipment. Basis of presentation: We prepare the consolidated financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States. These principles require management to make certain estimates and assumptions in determining 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. We eliminate intercompany transactions and balances in consolidation. During fiscal 2012, the Company completed the formation of a 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 million Korean won ($0.9 million) during fiscal 2012. Modine is considered the primary beneficiary of the joint venture in accordance with applicable consolidation guidance. Accordingly, we consolidate the results of Modine OneGene Corporation within the Asia segment. We account for investments in non-consolidated affiliated companies in which our ownership is 20 percent or more under the equity method. We state these investments at cost plus or minus a proportionate share of undistributed net income (loss). We include Modine’s share of the affiliates’ net income (loss) in other income and expense. See Note 12 for further discussion. Discontinued operations: Discontinued operations primarily consist of environmental remediation activities at a former manufacturing facility in the Netherlands. See Note 19 for further discussion. Assets held for sale: The Company considers assets to be held for sale when management approves and commits to a formal plan to actively market the assets for sale at a price reasonable in relation to its fair value, the asset is available for immediate sale in its present condition, an active program to locate a buyer and other actions required to complete the sale have been initiated, the sale of the asset 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, we record the carrying value of the assets at the lower of its carrying value or its estimated fair value, less cost to sell. The Company ceases to record depreciation expense at the time of designation as held for sale. Revenue recognition: We recognize sales revenue, including agreed upon commodity price increases or decreases, when it is both earned and realized or realizable. It is our policy to recognize revenue when title to the product and risk of loss have transferred to the customer, persuasive evidence of an arrangement exists, and collection of the sales proceeds is reasonably assured, all of which generally occur upon shipment of goods to customers. We make appropriate provisions for uncollectible accounts based on historical data or specific customer economic data. We record sales discounts, which are offered for prompt payment by certain customers, as a reduction to net sales. Tooling costs: Modine accounts for production tooling costs as a component of property, plant and equipment when the Company owns title to the tooling and amortizes the capitalized cost to cost of sales over the estimated life of the asset, which is generally three years. At March 31, 2014 and 2013, Company-owned tooling totaled $28.6 million and $30.5 million, respectively. In certain instances, the Company makes upfront payments for customer-owned tooling costs, and subsequently receives reimbursement from customers for the upfront payments. 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, 2014 and 2013, cost reimbursement receivables related to customer-owned tooling totaled $10.3 million and $20.9 million, 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. We record warranty expense based upon historical and current claims data or based on estimated future claims. Accrual balances, which are recorded within other current liabilities, are monitored and adjusted if it is probable that expected claims will differ from previous estimates. See Note 15 for further discussion. Shipping and handling costs: We record shipping and handling costs incurred upon the shipment of products to our OEM customers in cost of sales, and related amounts billed to these customers in net sales. We record shipping and handling costs incurred upon the shipment of products to our HVAC customers in selling, general and administrative (“SG&A”) expenses. For the years ended March 31, 2014, 2013, and 2012, these shipping and handling costs recorded in SG&A expenses were $4.0 million, $4.3 million, and $5.4 million, respectively. Research and development: We expense research and development costs as incurred within SG&A expenses. For the years ended March 31, 2014, 2013, and 2012, research and development costs charged to operations totaled $61.7 million, $68.4 million, and $70.2 million, respectively. Translation of foreign currencies: We translate assets and liabilities of foreign subsidiaries and equity investments into U.S. dollars at the period-end exchange rates, and we translate income and expense items at the monthly average exchange rate for the period in which the transactions occur. We report resulting translation adjustments within accumulated other comprehensive income (loss) within shareholders' equity. We include foreign currency transaction gains or losses in the statement of operations within other income and expense. Derivative instruments: The Company enters into derivative financial instruments from time to time to manage certain financial risks. The Company enters into futures contracts to reduce exposure to changing future purchase prices for aluminum and copper. These instruments are used to protect cash flows and are not speculative. See Note 18 for further discussion. Income taxes: We determine deferred tax assets and liabilities based on the difference between the amounts reported in the financial statements and the tax basis of assets and liabilities, using enacted tax rates in effect in the years in which the differences are expected to reverse. We establish a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset will not be realized. See Note 8 for further discussion. Earnings per share: We calculate basic earnings per share based on the weighted average number of common shares outstanding during the period, while the calculation of diluted earnings per share includes the dilutive effect of potential common shares outstanding during the period. The calculation of diluted earnings per share excludes all potential common shares if their inclusion would have an anti-dilutive effect. Recipients of the Company’s restricted stock awards have non-forfeitable rights to receive any dividends declared by the Company. Therefore, these restricted stock awards are included in computing earnings per share pursuant to the two-class method. See Note 9 for further discussion. Cash and cash equivalents: Modine considers all highly liquid investments with original maturities of three months or less to be cash equivalent. Under Modine’s cash management system, cash balances at certain banks are funded when checks are presented for payment. To the extent that checks issued, but not yet presented for payment, exceed the balance on hand at the specific bank against which they were written, the amount of those un-presented checks is included in accounts payable. 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 long-term investments in the consolidated balance sheet. Trade accounts receivable and allowance for doubtful accounts: We record trade receivables at the invoiced amount. Trade receivables do not bear interest if paid according to the original terms. The allowance for doubtful accounts, $1.1 million and $0.8 million at March 31, 2014 and 2013, respectively, represents estimated uncollectible receivables. The allowance is based upon historical write-off experience and specific customer economic data. We review the allowance for doubtful accounts periodically and adjust as necessary. We enter into supply chain financing programs from time to time to sell accounts receivable 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 cash flows from operating activities in the consolidated statements of cash flows. During the years ended March 31, 2014, 2013, and 2012, the Company sold, without recourse, $82.4 million, $99.1 million, and $113.5 million of accounts receivable to accelerate cash receipts. During the years ended March 31, 2014, 2013, and 2012, we recorded a loss on the sale of accounts receivables of $0.3 million, $0.3 million, and $0.5 million in the consolidated statements of operations. Inventories: We value inventories at the lower of cost, on a first-in, first-out basis or weighted average basis, or market value. Property, plant and equipment: We state property, plant and equipment at cost. For financial reporting purposes, we compute depreciation principally using the straight-line method over the expected useful life of the asset. We charge maintenance and repair costs to operations as incurred. We capitalize costs of improvements. Upon the sale or other disposition of an asset, we remove the cost and related accumulated depreciation from the accounts and include the gain or loss in the statement of operations. Goodwill: We do not amortize goodwill; rather we test for impairment annually unless conditions exist that would require a more frequent evaluation. We perform an assessment of the fair value of the Company’s reporting units for our goodwill impairment testing based upon, among other things, the present value of expected future cash flows. We recognize an impairment loss if the book value of goodwill exceeds the fair value. We performed our goodwill impairment test as of March 31, 2014, which did not result in an impairment charge. See Note 14 for further discussion. Impairment of long-lived assets: We review long-lived assets, including property, plant and equipment and intangible assets for impairment and write them down to fair value when facts and circumstances indicate that the carrying value of the assets may not be recoverable through estimated future undiscounted cash flows. If an impairment has occurred, we write-down the asset to its estimated fair value and recognize the impairment loss as a charge against current operations. We estimate fair value using a variety of valuation techniques, including discounted cash flows, market values and comparison values for similar assets. We review investments for impairment and write them down to fair value when facts and circumstances indicate that a decline in value is other than temporary. See Note 6 for further discussion. Environmental expenditures: We capitalize environmental expenditures that qualify as property, plant and equipment or substantially increase the economic value or extend the useful life of an asset. We expense all other expenditures as incurred. We expense environmental expenditures that relate to an existing condition caused by past operations. If a loss arising from environmental matters is probable and can be reasonably estimated, we record an accrual for the amount of the estimated loss. See Note 19 for further discussion. Self-insurance reserves: We retain some of the financial risk for various insurance coverage, including property, general liability, workers compensation, and employee healthcare, and therefore maintain reserves that estimate the impact of unreported and under-reported claims that fall below various stop-loss limits and deductibles under its insurance policies. We maintain reserves for the estimated settlement cost of known claims, as well as estimates of incurred but not reported claims. We charge costs of claims, including the impact of changes in reserves due to claim experience and severity, to operations based on claim incurrence. We review and update the evaluation of insurance claims and the reasonableness of the related liability accruals on a quarterly basis. Stock-based compensation: The Company recognizes stock-based compensation using the fair-value method. Accordingly, compensation cost for stock options, stock awards and restricted stock is calculated based upon 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. See Note 5 for further discussion. Out of period adjustments: During the second quarter of fiscal 2014, the Company recorded a customer pricing adjustment that related to prior fiscal years. The impact of this error to the second quarter of fiscal 2014 decreased pre-tax earnings by $0.6 million ($0.5 million after-tax). During the first quarter of fiscal 2013, the Company identified an error related to certain commodity hedges that should have been deemed ineffective in the fourth quarter of fiscal 2012, which overstated pre-tax earnings by $0.5 million in the first quarter of fiscal 2013. The Company does not believe that the impact of these errors is material to its financial statements for fiscal 2014, 2013, or 2012. New accounting pronouncements: In February 2013, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update that requires entities to present reclassifications by component when reporting changes in accumulated other comprehensive income. In addition, the Company is required to present, either on the face of the statement where net income is presented or in the notes, certain significant amounts reclassified out of accumulated other comprehensive income within the respective line items of the consolidated statement of operations. The Company adopted this guidance in the first quarter of fiscal 2014. See Note 20 for additional information. Supplemental cash flow information:
|  | Years ended March 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
Interest paid |  | $ | 12.6 |  |  | $ | 11.6 |  |  | $ | 12.8 |
Income taxes paid |  |  | 11.4 |  |  |  | 12.4 |  |  |  | 13.0 |

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