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Risks, Uncertainties, Contingencies and Litigation | 12 Months Ended
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Mar. 31, 2022
Risks, Uncertainties, Contingencies and Litigation [Abstract] |
Risks, Uncertainties, Contingencies and Litigation | Note 20: Risks, Uncertainties, Contingencies and Litigation COVID-19 Pandemic and Supply Chain Disruptions The COVID-19 pandemic and other market and economic dynamics have contributed to global supply chain challenges and inflationary market conditions. Since the fourth quarter of fiscal 2022, the military conflict between Russia and Ukraine and the related sanctions imposed by governments in the U.S. and abroad have further aggravated these market conditions, particularly driving higher oil and gas prices. The Company is focused on mitigating the negative impacts of labor shortages and supply chain challenges, including rising raw material and logistic prices as well as delays and shortages in certain purchased commodities and components. Since February 2022, COVID-19 cases have increased in many areas in China. As a result of government-required lock-downs, the Company suspended production at its manufacturing facilities in China for portions of March and April 2022. While these plants have since reopened, they are currently manufacturing at reduced levels and customer demand has been negatively impacted by the lock-downs and supply chain challenges, including component shortages. At this time, the Company cannot reasonably estimate the full impact of the COVID-19 pandemic or the ongoing supply chain challenges. If the Company, its suppliers, or its customers experience prolonged shutdowns or other significant business disruptions, it is possible that the Company’s ability to conduct business in the manner and on the timelines presently planned could be materially and negatively impacted, which could have a material adverse effect on the Company’s business, financial position, results of operations and cash flows. Credit Risk The Company invests excess cash primarily in investment quality, short-term liquid debt instruments. Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of accounts receivable. The Company sells a broad range of products that provide thermal solutions to customers operating throughout the world. In fiscal 2022, no customers accounted for more than ten percent of the Company’s total sales. In fiscal 2021 and 2020, one vehicular customer accounted for more than ten percent of the Company’s total sales. Sales to the Company’s top ten customers were 39 percent, 43 percent, and 45 percent of total sales in fiscal 2022, 2021, and 2020, respectively. At March 31, 2022 and 2021, 29 percent and 35 percent, respectively, of the Company’s trade accounts receivable were due from the Company’s top ten customers. These customers operate primarily in the automotive and light vehicle, commercial vehicle, off-highway, and commercial air conditioning markets. The Company generally does not require collateral or advanced payments from its customers. The Company has not experienced significant credit losses to customers in the markets served nor has experienced a significant increase in credit losses in connection with the COVID-19 pandemic. The Company manages credit risk through its focus on the following:
| • | Cash and investments – reviewing cash deposits and short-term investments to ensure banks have credit ratings acceptable to the Company and that short-term investments are maintained in secured or guaranteed instruments;
| • | Accounts receivable – performing periodic customer credit evaluations and actively monitoring their financial condition and applicable business news;
| • | Pension assets – ensuring that investments within pension plans provide appropriate diversification, monitoring of investment teams, ensuring that portfolio managers adhere to the Company’s investment policies and directives, and ensuring that exposure to high risk investments is limited; and
| • | Insurance – ensuring that insurance providers maintain financial ratings that are acceptable to the Company.
Counterparty Risk The Company manages counterparty risk through its focus on the following:
| • | Customers – performing thorough reviews of customer credit reports and accounts receivable aging reports by internal credit committees;
| • | Suppliers – maintaining a supplier risk management program and utilizing industry sources to identify and mitigate high risk situations; and
| • | Derivatives – ensuring that counterparties to derivative instruments maintain credit ratings that are acceptable to the Company.
Environmental The Company has recorded environmental investigation and remediation accruals related to manufacturing facilities in the U.S., one of which the Company currently owns and operates, and at its former manufacturing facility in the Netherlands. These accruals primarily relate to soil and groundwater contamination at facilities where past operations followed practices and procedures that were considered acceptable under then-existing regulations, or where the Company is a successor to the obligations of prior owners, and current laws and regulations require investigative and/or remedial work to ensure sufficient environmental compliance. In instances where a range of loss can be reasonably estimated for a probable environmental liability, but no amount within the range is a better estimate than any other amount, the Company accrues the minimum of the range. The Company’s accruals for environmental matters totaled $18.2 million and $16.0 million at March 31, 2022 and 2021, respectively. During fiscal 2022, the Company increased its remediation accrual related to a former manufacturing facility in the U.S. by $3.4 million. As additional information becomes available regarding environmental matters, the Company will re-assess the liabilities and revise the estimated accruals, if necessary. While it is possible that the ultimate environmental remediation costs may be in excess of amounts accrued, the Company believes, based upon currently available information, that the ultimate outcome of these matters, individually and in the aggregate, will not have a material adverse effect on its financial position. However, these matters are subject to inherent uncertainties, and unfavorable outcomes could occur, including significant monetary damages. Other Litigation In the normal course of business, the Company and its subsidiaries are named as defendants in various lawsuits and enforcement proceedings by private parties, governmental agencies and/or others in which claims are asserted against Modine. The Company believes that any additional loss in excess of amounts already accrued would not have a material effect on the Company’s consolidated balance sheet, results of operations, and cash flows. In addition, management expects that the liabilities which may ultimately result from such lawsuits or proceedings, if any, would not have a material adverse effect on the Company’s financial position.

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