Note 15: Product Warranties, Operating Leases, and Other Commitments

Product warranties: Modine provides product warranties for various product lines, with warranty periods generally ranging from one to five years. The Company accrues for estimated future warranty costs in the period in which the sale is recorded. The Company bases warranty expense estimates on the best information available using analytical and statistical analysis of both historical and current claim data. The Company adjusts these expenses if it becomes probable that expected claims will differ from initial estimates recorded at the time of sale.

Changes in accrued warranty costs were as follows:

	Years ended March 31,
	2015			2014
Beginning balance	$	14.0		$	12.6
Accruals for warranties issued		5.8			6.0
Accruals related to pre-existing warranties		1.5			8.3
Settlements		(9.2	)		(13.0	)
Effect of exchange rate changes		(1.7	)		0.1
Ending balance	$	10.4		$	14.0

Operating leases: The Company leases various facilities and equipment under operating leases. Rental expense for these leases totaled $11.5 million in both fiscal 2015 and 2014, and $11.3 million in fiscal 2013.

Future minimum rental commitments at March 31, 2015 under non-cancelable operating leases were as follows:

Fiscal Year
2016	$	8.2
2017		5.7
2018		4.3
2019		3.8
2020		4.0
2021 and beyond		23.9
Total	$	49.9

Indemnification agreements: From time to time, the Company provides indemnification agreements related to the sale or purchase of an entity or facility. These indemnification agreements cover customary representations and warranties typically provided in conjunction with such transactions, including income, sales, excise or other tax matters, environmental matters and other third-party claims. The indemnification periods provided generally range from less than one year to fifteen years. In addition, standard indemnification provisions reside in many commercial agreements to which the Company is a party and relate to responsibility in the event of potential third-party claims. The fair value of the Company’s outstanding indemnification obligations at March 31, 2015 is not material.

Commitments: At March 31, 2015, the Company had capital expenditure commitments of $15.5 million. Significant commitments include tooling and equipment expenditures for new and renewal programs with customers in North America and Europe. The Company utilizes inventory arrangements with certain vendors in the normal course of business under which the vendors maintain inventory stock at the Company’s facilities or at outside facilities. Title passes to the Company at the time goods are withdrawn for use in production. The Company has agreements with the vendors to use the material within a specific period of time. In some cases, the Company bears the risk of loss for the inventory because Modine is required to insure the inventory against damage and/or theft. This inventory is included within the Company’s consolidated balance sheets as raw materials inventory.

The Company has a commitment to rebuild the leased Airedale facility, which suffered significant destruction from a fire during fiscal 2014. The Company maintains insurance coverage and believes reimbursement for substantially all losses and costs directly attributable to the fire is probable. See Note 2 for additional information.