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Fair Value Measurements

3 Months Ended

Jun. 30, 2023

FAIR VALUE MEASUREMENTS

Universal measures certain financial and nonfinancial assets and liabilities at fair value based on applicable accounting guidance. The financial assets and liabilities measured at fair value include money market funds, trading securities associated with deferred compensation plans, interest rate swap agreements, forward foreign currency exchange contracts and acquisition-related contingent consideration obligations. The application of the fair value guidance to nonfinancial assets and liabilities primarily includes the determination of fair values for goodwill and long-lived assets when indicators of potential impairment are present.

Under the accounting guidance, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The framework for measuring fair value is based on a fair value hierarchy that distinguishes between observable inputs and unobservable inputs. Observable inputs are based on market data obtained from independent sources. Unobservable inputs require the Company to make its own assumptions about the value placed on an asset or liability by market participants because little or no market data exists.

There are three levels within the fair value hierarchy:


Level						Description

1						quoted prices in active markets for identical assets or liabilities that the Company has the ability to access as of the reporting date;

2						quoted prices in active markets for similar assets or liabilities, or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability; and

3						unobservable inputs for the asset or liability.

As permitted under the accounting guidance, the Company uses net asset value per share ("NAV") as a practical expedient to measure the fair value of its money market funds. The fair values for those funds are presented under the heading "NAV" in the tables that follow in this disclosure. In measuring the fair value of liabilities, the Company considers the risk of non-performance in determining fair value. Universal has not elected to report at fair value any financial instruments or any other assets or liabilities that are not required to be reported at fair value under current accounting guidance.

Recurring Fair Value Measurements

At June 30, 2023 and 2022, and at March 31, 2023, the Company had certain financial assets and financial liabilities that were required to be measured and reported at fair value on a recurring basis. These assets and liabilities are listed in the tables below and are classified based on how their values were determined under the fair value hierarchy or the NAV practical expedient:


	June 30, 2023
			Fair Value Hierarchy
(in thousands of dollars)	NAV		Level 1		Level 2		Level 3		Total

Assets
Money market funds	$	566	$	—	$	—	$	—	$	566
Trading securities associated with deferred compensation plans	—		11,884		—		—		11,884
Interest rate swap agreements	—		—		5,810		—		5,810
Foreign currency exchange contracts	—		—		3,014		—		3,014
Total financial assets measured and reported at fair value	$	566	$	11,884	$	8,824	$	—	$	21,274

Liabilities




Foreign currency exchange contracts	$	—	$	—	$	4,515	$	—	$	4,515
Total financial liabilities measured and reported at fair value	$	—	$	—	$	4,515	$	—	$	4,515


	June 30, 2022
			Fair Value Hierarchy
(in thousands of dollars)	NAV		Level 1		Level 2		Level 3		Total

Assets
Money market funds	$	334	$	—	$	—	$	—	$	334
Trading securities associated with deferred compensation plans	—		11,666		—		—		11,666
Interest rate swap agreements	—		—		4,345		—		4,345
Foreign currency exchange contracts	—		—		8,689		—		8,689
Total financial assets measured and reported at fair value	$	334	$	11,666	$	13,034	$	—	$	25,034

Liabilities




Foreign currency exchange contracts	$	—	$	—	$	405	$	—	$	405
Total financial liabilities measured and reported at fair value	$	—	$	—	$	405	$	—	$	405


	March 31, 2023
			Fair Value Hierarchy
(in thousands of dollars)	NAV		Level 1		Level 2		Level 3		Total

Assets
Money market funds	$	400	$	—	$	—	$	—	$	400
Trading securities associated with deferred compensation plans	—		11,698		—		—		11,698

Foreign currency exchange contracts	—		—		8,422		—		8,422
Total financial assets measured and reported at fair value	$	400	$	11,698	$	8,422	$	—	$	20,520

Liabilities



Interest rate swap agreements	$	—	$	—	$	3,077	$	—	$	3,077
Foreign currency exchange contracts	—		—		1,325		—		1,325
Total financial liabilities measured and reported at fair value	$	—	$	—	$	4,402	$	—	$	4,402

Money market funds

The fair value of money market funds, which are reported in cash and cash equivalents in the consolidated balance sheets, is based on NAV, which is the amount at which the funds are redeemable and is used as a practical expedient for fair value. These funds are not classified in the fair value hierarchy, but are disclosed as part of the fair value table above.

Trading securities associated with deferred compensation plans

Trading securities represent mutual fund investments that are matched to employee deferred compensation obligations. These investments are bought and sold as employees defer compensation, receive distributions, or make changes in the funds underlying their accounts. Quoted market prices (Level 1) are used to determine the fair values of the mutual funds.

Interest rate swap agreements

The fair values of interest rate swap agreements are determined based on dealer quotes using a discounted cash flow model matched to the contractual terms of each instrument. Since inputs to the model are observable and significant judgment is not required in determining the fair values, interest rate swaps are classified within Level 2 of the fair value hierarchy.

Foreign currency exchange contracts

The fair values of forward and option foreign currency exchange contracts are also determined based on dealer quotes using a discounted cash flow model matched to the contractual terms of each instrument. Since inputs to the model are observable and significant judgment is not required in determining the fair values, forward and option foreign currency exchange contracts are classified within Level 2 of the fair value hierarchy.

Long-term Debt

The following table summarizes the fair and carrying value of the Company’s long-term debt, and if applicable any current portion, at each of the balance sheet dates June 30, 2023, and 2022 and March 31, 2023:


(in millions of dollars)	June 30, 2023		June 30, 2022		March 31, 2023
Fair market value of long term obligations	$	620	$	517	$	621
Carrying value of long term obligations	$	620	$	520	$	620

The Company estimates the fair value of its long-term debt using Level 2 inputs which are based upon quoted market prices for the same or similar obligations or on calculations that are based on the current interest rates available to the Company for debt of similar terms and maturities.

Nonrecurring Fair Value Measurements

Assets and liabilities that are measured at fair value on a nonrecurring basis primarily relate to long-lived assets, right-of-use operating lease assets and liabilities, goodwill and intangibles, and other current and noncurrent assets. These assets and liabilities fair values are also evaluated for impairment when potential indicators of impairment exist. Accordingly, the nonrecurring measurement of the fair value of these assets and liabilities are classified within Level 3 of the fair value hierarchy.

Acquisition Accounting for Business Combinations

The Company accounts for acquisitions qualifying under ASC 805, "Business Combinations," which requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The fair values of consideration transferred and net assets acquired are determined using a combination of Level 2 and Level 3 inputs as specified in the fair value hierarchy in ASC 820, “Fair Value Measurements and Disclosures.” The Company believes that the fair values assigned to the assets acquired and liabilities assumed are based on reasonable assumptions.

Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events, changes in business conditions, or other circumstances provide an indication that such assets may be impaired.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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