Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.21.2
Fair Value Measurements
 6 Months Ended
Sep. 30, 2021
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
Fair Value
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 use 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 and cash equivalents, 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 September 30, 2021 and March 31, 2021, no assets or liabilities were valued using Level 3 criteria. 
Information about our long-term debt that is not measured at fair value is as follows:
  September 30, 2021 March 31, 2021  
  Carrying
Value		 Fair Value Carrying
Value		 Fair Value Valuation Technique
Financial Liabilities          
Outstanding principal amount of senior secured credit facility $ 139,793  $ 139,094  $ 148,500  $ 148,871  Level 2 - Market Approach
 At September 30, 2021 and March 31, 2021, 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.
Cross Currency Swap
On September 29, 2021, we terminated a long-term cross currency swap we previously entered into through transactions related to the amendment to our term loan and revolving credit facility. The previous intercompany receivable, for which we had the swap, was settled with us by our wholly-owned Canadian subsidiary, Thermon Canada Inc. Refer to Note 8. Long-Term Debt for more information regarding our debt transactions.    
Before the termination mentioned above, the Company entered into the long-term cross currency swap to hedge the currency rate fluctuations related to an intercompany receivable. We did not designate the cross currency swap as a cash flow hedge under ASC 815, Derivatives and Hedging ("ASC 815"). We recorded $851 and $441 realized mark-to-market gains on the cross currency swap, which are reported as "Other income and expense" in the condensed consolidated statements of operations and comprehensive income for the three and six months ended September 30, 2021, respectively. Cross currency swap contracts are measured on a recurring basis at fair value and are classified as Level 2 measurements. Hedge liabilities of $483 were included in "Other long-term liabilities" as September 30, 2021 and hedge assets of $1,265 were included in "Other long-term assets" in the consolidated balance sheet at March 31, 2021, respectively. The September 30, 2021 liability was settled in cash the following day to terminate the contract. For the six months ended September 30, 2021, the gain on the long-term cross currency swap derivative contract was offset by realized losses on the intercompany note of $418 for a net gain of $22.
Deferred Compensation Plan
    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. Included in “Other long-term assets” in the condensed consolidated balance sheets at September 30, 2021 and March 31, 2021 were $5,381 and $5,047, respectively, of deferred compensation plan assets held by the Company. Deferred compensation plan assets (mutual funds) are measured at fair value on a recurring basis based on quoted market prices in active markets (Level 1). The Company has a corresponding liability to participants of $4,951 and $4,608 included in “Other long-term liabilities” in the condensed consolidated balance sheets at September 30, 2021 and March 31, 2021, respectively. In fiscal 2022, deferred compensation plan expense/(income) is included as such in the condensed consolidated statement of operations, and therefore is excluded from "Selling, general and administrative expenses." Deferred compensation expense/(income) was $(14) and $251 for the three months ended September 30, 2021 and 2020, respectively, and $318 and $781 for the six months ended September 30, 2021 and 2020, respectively. Expenses and income from our deferred compensation plan were offset by unrealized gains and losses for the deferred compensation plan included in "Other income and expense" on our condensed consolidated statements of operations and comprehensive income. Our unrealized losses and gains on investments were $(20) and $318, respectively, for the three months
ended September 30, 2021 and 2020, respectively, and gains of $306 and $840 for the six months ended September 30, 2021 and 2020, respectively.
    
Trade Related Foreign Currency Forward Contracts
We transact business in various foreign currencies and have established a program that primarily utilizes foreign currency forward contracts to address the risk associated with the effects of certain foreign currency exposures. 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 arise from intercompany transactions as well as third party accounts receivable or payable that are denominated in foreign currencies. 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 "Other income and expense" on our condensed consolidated statements of operations and comprehensive income. These gains and losses are designed to offset gains and losses resulting from settlement of receivables or payables by our foreign operations which are settled in currency other than the local transactional currency. The fair value is determined by quoted prices from active foreign currency markets (Level 2). Fair value amounts for such forward contracts on our condensed consolidated balance sheets are either classified as accounts receivable, net or accrued liabilities depending on whether the forward contract is in a gain (accounts receivable, net) or loss (accrued liabilities) position. 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 September 30, 2021 and March 31, 2021, the notional amounts of forward contracts were as follows:
Notional amount of foreign currency forward contracts by currency
September 30, 2021 March 31, 2021
Russian Ruble $ —  $ 3,000 
Canadian Dollar 11,500  5,500 
South Korean Won 1,500  5,000 
Mexican Peso 1,850  1,500 
Australian Dollar 1,500  900 
Great Britain Pound 400  500 
Total notional amounts $ 16,750  $ 16,400 

The following table represents the fair value of our foreign currency forward contracts:
September 30, 2021 March 31, 2021
Fair Value Fair Value
Assets Liabilities Assets Liabilities
Foreign currency forward contracts $ 51  $ 45  $ 61  $ 32 
Foreign currency gains or losses related to our forward contracts in the accompanying condensed consolidated statements of operations and comprehensive income were gains of $41 and losses of $(145) in the three months ended September 30, 2021 and 2020, respectively, and losses of $(225) and $(49) for the six months ended September 30, 2021 and 2020, respectively. Gains and losses from our forward contracts were offset by transaction gains or losses incurred with the settlement of transactions denominated in foreign currencies. For the three months ended September 30, 2021 and 2020, our net foreign currency transactions resulted in losses of $(350) and gains of $150, respectively, and losses of $(686) and gains of $331 for the six months ended September 30, 2021 and 2020, respectively.