Derivative Instruments

12 Months Ended

Mar. 31, 2013

Derivative Instruments [Abstract]

Derivative Instruments

Note 17: Derivative Instruments

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 impacted 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, third, or fourth 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 foreign currency gains and losses associated with the related assets and liabilities.

Interest rate derivative: In fiscal 2007, the Company entered into forward starting swaps related to a private placement debt offering. When the fixed interest rate of the private placement borrowing was locked, the Company terminated and settled the forward starting swaps at a loss. These interest rate derivatives were treated as cash flow hedges of forecasted transactions. Accordingly, the loss was reflected as a component of AOCI and was being amortized to interest expense over the life of the borrowings. In conjunction with the repayment of the then existing senior notes in fiscal 2011, the remaining unamortized balance for these interest rate derivatives of $1.6 million was reflected as a component of interest expense.

The fair values of the Company's derivative financial instruments recorded in the consolidated balance sheets were as follows:

	Balance Sheet Location	March 31, 2013		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
Foreign exchange contracts	Other current liabilities		0.1		-
Commodity derivatives	Other current liabilities		1.2		2.6
Commodity derivatives	Other noncurrent liabilities		0.1		-

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

	March 31, 2013
	Amount of Loss Recognized in AOCI		Statement of Operations Location	Loss Reclassified from AOCI into Continuing Operations		Total Loss (Gain) Recognized in Continuing Operations
Commodity derivatives	$	0.5	Cost of sales	$	2.6	$	4.6
Foreign exchange contracts		-	Other expense - net		-		(0.3	)
Total	$	0.5		$	2.6	$	4.3

	March 31, 2012
	Amount of Loss Recognized in AOCI		Statement of Operations Location	Loss Reclassified from AOCI into Continuing Operations		Total Loss Recognized in Continuing Operations
Commodity derivatives	$	3.1	Cost of sales	$	3.1	$	3.0
Foreign exchange contracts		-	Other expense - net		-		0.4
Total	$	3.1		$	3.1	$	3.4

	March 31, 2011
	Amount of Gain Recognized in AOCI			Statement of Operations Location	Loss Reclassified from AOCI into Continuing Operations		Total Loss Recognized in Continuing Operations
Commodity derivatives	$	(0.3	)	Cost of sales	$	-	$	-
Interest rate derivative		-		Interest expense		1.8		1.8
Total	$	(0.3	)		$	1.8	$	1.8

Approximately $0.4 million of loss recognized in AOCI is expected to be reclassified from AOCI to cost of sales during fiscal 2014.