Risks, Uncertainties, Contingencies and Litigation

9 Months Ended

Dec. 31, 2021

Risks, Uncertainties, Contingencies and Litigation [Abstract]

Risks, Uncertainties, Contingencies and Litigation

Note 18: Risks, Uncertainties, Contingencies and Litigation

COVID-19 Pandemic and Supply Chain Disruptions

The COVID-19 pandemic has broadly impacted the global economy and the Company’s key end markets, which were most severely impacted during the first quarter of fiscal 2021.  During fiscal 2022, the direct effects on the Company from the COVID-19 pandemic have lessened.  Although the Company’s manufacturing locations are open and operating, production has been negatively affected at times by employee absences due to COVID-19.

The COVID-19 pandemic and other market and economic dynamics have contributed to global supply chain challenges and inflationary market conditions.  The Company is focused on mitigating the negative impacts of labor shortages and supply chain challenges, which have included rising raw material and logistic prices as well as delays and shortages in certain purchased commodities and components.  The Company has implemented selling price increases for its products in response to raw material and other price increases and is engaged with suppliers to ensure availability of purchased commodities and components.  In addition, the Company’s Automotive segment has been impacted by lower order volume associated with semiconductor shortages, which have caused lower global automotive production.

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.

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 a 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 $18.7 million and $16.0 million as of December 31, 2021 and March 31, 2021, respectively.  During the first quarter of 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 the 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.