Derivative instruments

12 Months Ended

Mar. 31, 2012

Derivative instruments [Abstract]

Derivative instruments

Note 18:  Derivative instruments

Modine uses derivative financial instruments in a limited way as a tool to manage certain financial risks.  Their use is restricted primarily to hedging assets and obligations already held by Modine, and they are used to protect cash flows rather than generate income or engage in speculative activity.  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 designed, and is effective, as a hedge and, if so, on the nature of the hedging activity.

Commodity Derivatives: The Company enters into future 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 purchase prices for future purchases of these commodities.  These contracts have been designated as cash flow hedges by the Company.  Accordingly, unrealized gains and losses on these contracts are deferred as a component of other comprehensive (loss) income, and recognized as a component of earnings at the same time that the underlying purchases of aluminum and copper impact earnings.

Interest rate derivative: On October 25, 2006, the Company entered into two forward starting swaps in anticipation of the $75,000 private placement debt offering that occurred on December 7, 2006.  On November 14, 2006, the fixed interest rate of the private placement borrowing was locked and, accordingly, the Company terminated and settled the forward starting swaps at a loss of $1,812.  These interest rate derivatives were treated as cash flow hedges of forecasted transactions.  Accordingly, the losses were reflected as a component of accumulated other comprehensive (loss) income, and were being amortized to interest expense over the respective lives of the borrowings.  In conjunction with the repayment of the 2015 and 2017 Notes on August 12, 2010, the remaining unamortized balance for these interest rate derivatives of $1,606 was reflected as a component of interest expense.  The Company amortized $462 of the interest rate derivatives in proportion with the mandatory prepayment of the Senior Notes on September 30, 2009 in connection with the Company's secondary public offering.

The fair value of the derivative financial instruments recorded in the consolidated balance sheets as of March 31, 2012 and March 31, 2011 are as follows:

	Balance Sheet Location	March 31, 2012		March 31, 2011
Derivative instruments designated as cash flow hedges:
Commodity derivatives	Deferred income taxes and other current assets	$	929	$	929
Commodity derivatives	Accrued expenses and other current liabilities		650		650

The amounts recorded in accumulated other comprehensive (loss) income (AOCI) and in the consolidated statement of operations for the year ended March 31, 2012 are as follows:

	Amount of Loss Recognized in AOCI		Location of Loss Reclassified from AOCI into Continuing Operations	Amount of Loss Reclassified from AOCI into Continuing Operations
Designated derivative instruments:
Commodity derivatives	$	2,020	Cost of sales	$	5,945
Total	$	2,020		$	5,945
			Location of Loss (Gain)   Recognized in Income	Amount of Loss (Gain) Recognized in Income
Derivatives not designated:
Foreign exchange contracts			Other expense (income) - net		-
Total				$	-

The amounts recorded in AOCI and in the consolidated statement of operations for the year ended March 31, 2011 are as follows:

	Amount of Gain Recognized in AOCI		Location of Loss Reclassified from AOCI into Continuing Operations	Amount of Loss Reclassified from AOCI into Continuing Operations
Designated derivative instruments:
Commodity derivatives	$	335	Cost of sales	$	(7	)
Interest rate derivative		-	Interest expense		(1,751	)
Total	$	335		$	(1,758	)