Annual report pursuant to Section 13 and 15(d)

Fair Value Measurements

v3.21.1
Fair Value Measurements
 12 Months Ended
Mar. 31, 2021
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
We measure fair value based on authoritative accounting guidance, which defines fair value, establishes a framework for measuring fair value and expands on required disclosures regarding fair value measurements.
Inputs are referred to as assumptions that market participants would use in pricing the asset or liability. The uses of inputs in the valuation process are categorized into a three-level fair value hierarchy.
•Level 1 — uses quoted prices in active markets for identical assets or liabilities we have the ability to access.
•Level 2 — uses observable inputs other than quoted prices in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
•Level 3 — uses one or more significant inputs that are unobservable and supported by little or no market activity, and that reflect the use of significant management judgment. 
Financial assets and liabilities with carrying amounts approximating fair value include cash, trade accounts receivable, accounts payable, accrued expenses and other current liabilities. The carrying amount of these financial assets and liabilities approximates fair value because of their short maturities. At March 31, 2021 and 2020, no assets or liabilities were valued using Level 3 criteria. 
    Information about our short-term debt and long-term debt that is not measured at fair value follows:
  March 31, 2021 March 31, 2020  
  Carrying
Value		 Fair Value Carrying
Value		 Fair Value Valuation Technique
Financial Liabilities          
Outstanding principal amount of senior secured credit facility $ 148,500  $ 148,871  $ 176,000  $ 150,480  Level 2 - Market Approach
 
At March 31, 2021 and 2020, the fair value of our long-term debt is based on market quotes available for issuance of debt with similar terms. As the quoted price is only available for similar financial assets, the Company concluded the pricing is indirectly observable through dealers and has been classified as Level 2. The Company believes the decline in fair value as of March 31, 2020 was attributable to the economic effects of the COVID-19 pandemic.
Cross Currency Swap
The Company has entered into a long-term cross currency swap to hedge the currency rate fluctuations related to a $54,603 intercompany receivable at March 31, 2021 from our wholly-owned Canadian subsidiary, Thermon Canada Inc., maturing on October 30, 2022. Periodic principal payments are to be settled twice annually with interest payments settled
quarterly through the cross currency derivative contract. We do not designate the cross currency swap as a cash flow hedge under ASC 815, Derivatives and Hedging ("ASC 815"). At March 31, 2021, we recorded $5,842 of unrealized mark-to-market losses on the cross-currency swap which is reported as "Other income and expense," in the consolidated statements of operations and comprehensive income. Cross currency swap contracts are measured on a recurring basis at fair value and are classified as Level 2 measurements. Hedge assets in the amount of $1,265 and $4,011 were included in "Other long-term assets" in the consolidated balance sheet at March 31, 2021 and 2020, respectively. For the twelve months ended March 31, 2021, the loss on the long-term cross currency swap derivative contract was more than offset by unrealized gains on the intercompany note of $6,400, resulting in a net gain of $558.

Deferred Compensation Plan Assets
The Company provides a non-qualified deferred compensation plan for certain highly compensated employees where payroll contributions are made by the employees on a pre-tax basis. Please refer to Note 13 "Employee Benefits" for further discussion.
Foreign Currency Forward Contracts
We transact business in various foreign currencies and have established a program that primarily utilizes foreign currency forward contracts to offset the risk associated with fluctuations of certain foreign currencies. Under this program, increases or decreases in our foreign currency exposures are offset by gains or losses on the forward contracts to mitigate foreign currency transaction gains or losses. These foreign currency exposures typically arise from intercompany transactions. Our forward contracts generally have terms of 30 days. We do not use forward contracts for trading purposes or designate these forward contracts as hedging instruments pursuant to ASC 815. We adjust the carrying amount of all contracts to their fair value at the end of each reporting period and unrealized gains and losses are included in our results of operations for that period. These gains and losses are intended to offset gains and losses resulting from settlement of payments received from our foreign operations which are settled in U.S. dollars. All outstanding foreign currency forward contracts are marked to market at the end of the period with unrealized gains and losses included in other expense. The fair value is determined by quoted prices from active foreign currency markets (Level 2). The consolidated balance sheets reflect unrealized gains within accounts receivable, net and unrealized losses within accrued liabilities. Our ultimate realized gain or loss with respect to currency fluctuations will depend on the currency exchange rates and other factors in effect as the contracts mature. As of March 31, 2021 and 2020, the notional amounts of forward contracts as well as the related fair values were as follows:
March 31, 2021 March 31, 2020
Russian Ruble $ 3,000  $ 1,103 
Euro —  500 
Canadian Dollar 5,500  1,500 
South Korean Won 5,000  3,500 
Mexican Peso 1,500  2,000 
Australian Dollar 900  700 
Great Britain Pound 500  500 
Total notional amounts $ 16,400  $ 9,803 
March 31, 2021 March 31, 2020
Fair Value Fair Value
Assets Liabilities Assets Liabilities
Foreign exchange contract forwards $ 61  $ 32  $ 140  $ 49 
    Recognized foreign currency gains or losses related to our forward contracts in the accompanying consolidated statements of operations and comprehensive income were losses of $811, $437 and $125 for fiscal 2021, fiscal 2020 and fiscal 2019, respectively. Gains and losses from our forward contracts are intended to be offset by transaction gains and losses from the settlement of transactions denominated in foreign currencies. The Company realized net foreign currency gains and (losses) of $283, $(580), and $(228) for fiscal 2021, 2020, and 2019, respectively. Foreign currency gains and losses are recorded within other expense in our consolidated statements of operations and comprehensive income.