UNIVERSAL CORP /VA/UVV
UNIVERSAL CORP /VA/ Fair Value Disclosure
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 guarantees of bank loans to tobacco growers. 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 March 31, 2026 and 2025, 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:
| March 31, 2026 | ||||||||||||||||||||||||||||||||
| Fair Value Hierarchy | ||||||||||||||||||||||||||||||||
| NAV | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||
| Money market funds | $ | 10 | $ | — | $ | — | $ | — | $ | 10 | ||||||||||||||||||||||
| Trading securities associated with deferred compensation plans | — | 11,630 | — | — | 11,630 | |||||||||||||||||||||||||||
| Interest rate swap agreements | — | — | 953 | — | 953 | |||||||||||||||||||||||||||
| Forward foreign currency exchange contracts | — | — | 765 | — | 765 | |||||||||||||||||||||||||||
| Total financial assets measured and reported at fair value | $ | 10 | $ | 11,630 | $ | 1,718 | $ | — | $ | 13,358 | ||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||||||||
| Forward foreign currency exchange contracts | $ | — | $ | — | $ | 594 | $ | — | $ | 594 | ||||||||||||||||||||||
| Total financial liabilities measured and reported at fair value | $ | — | $ | — | $ | 594 | $ | — | $ | 594 | ||||||||||||||||||||||
| March 31, 2025 | ||||||||||||||||||||||||||||||||
| Fair Value Hierarchy | ||||||||||||||||||||||||||||||||
| NAV | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||
| Money market funds | $ | 149 | $ | — | $ | — | $ | — | $ | 149 | ||||||||||||||||||||||
| Trading securities associated with deferred compensation plans | — | 11,313 | — | — | 11,313 | |||||||||||||||||||||||||||
| Interest rate swap agreements | — | — | 1,783 | — | 1,783 | |||||||||||||||||||||||||||
| Forward foreign currency exchange contracts | — | — | 302 | — | 302 | |||||||||||||||||||||||||||
| Total financial assets measured and reported at fair value | $ | 149 | $ | 11,313 | $ | 2,085 | $ | — | $ | 13,547 | ||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||||||||
| Forward foreign currency exchange contracts | $ | — | $ | — | $ | 6,668 | $ | — | $ | 6,668 | ||||||||||||||||||||||
| Total financial liabilities measured and reported at fair value | $ | — | $ | — | $ | 6,668 | $ | — | $ | 6,668 | ||||||||||||||||||||||
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.
Forward foreign currency exchange contracts
The fair values of forward 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 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, including the current portion at each of the balance sheet dates March 31, 2026 and 2025:
| Fiscal Year Ended March 31, | |||||||||||
| (in millions of dollars) | 2026 | 2025 | |||||||||
| Fair market value of long-term obligations | $ | 615 | $ | 616 | |||||||
| Carrying value of long-term obligations | $ | 620 | $ | 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. See Note 8 for more information regarding long-term debt.
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 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. See Note 1 for discussion of the goodwill impairment at Universal Ingredients–Shank’s.
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. The significant assumptions used in determining the fair value include the discount rate and forecasted results (e.g., revenue growth rates and operating profit margins).
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.
Consolidation of tobacco sheet operations
As discussed in Note 3, during fiscal year 2025, the Company initiated a plan to consolidate the European Sheet tobacco operations into the Company’s facility in the Netherlands. The Company is in the process of winding down its operations in Germany, resulting in an impairment charge of $4.9 million for the long-lived assets for the fiscal year ended March 31, 2025, to reduce their carrying value to fair value. The long-lived assets primarily consist of a processing facility, machinery and equipment, and administrative offices. As part of the wind-down, the Company also recognized other impairment charges associated with inventory, certain accounts receivable and other assets in fiscal year 2025. After reassessing the fair value of the
long-lived assets associated with the operations in Germany, an additional $1.0 million impairment charge was recognized in fiscal year 2026.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Jun 1, 2026 | Showing above |
| 2025 | May 30, 2025 | |
| 2024 | May 29, 2024 | |
| 2023 | May 25, 2023 | |
| 2022 | May 27, 2022 | |
| 2021 | May 28, 2021 | |
| 2020 | May 28, 2020 | |
| 2019 | May 24, 2019 | |
| 2018 | May 25, 2018 | |
| 2017 | May 26, 2017 | |
| 2016 | May 27, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.