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☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
						FOR THE QUARTERLY PERIOD ENDED			SEPTEMBER 30, 2021
						OR
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
			FOR THE TRANSITION PERIOD FROM ______________TO_______________

Virginia									54-0414210
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification Number)
9201 Forest Hill Avenue,			Richmond,			Virginia			23235
(Address of principal executive offices)									(Zip Code)

Title of each class			Trading Symbol(s)			Name of Exchange on which registered
Common Stock, no par value			UVV			New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yesþ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o

Large Accelerated Filer

þ

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Item No.						Page
			PART I - FINANCIAL INFORMATION
1.			Financial Statements			3
2.			Management's Discussion and Analysis of Financial Condition and Results of Operations			30
3.			Quantitative and Qualitative Disclosures About Market Risk			38
4.			Controls and Procedures			39
			PART II - OTHER INFORMATION
1.			Legal Proceedings			40
1A.			Risk Factors			40
2.			Unregistered Sales of Equity Securities and Use of Proceeds			40
6.			Exhibits			41
			Signatures			42

						Three Months Ended September 30,												Six Months Ended September 30,
						2021						2020						2021						2020
						(Unaudited)												(Unaudited)
Sales and other operating revenues						$	453,955					$	377,025					$	803,984					$	692,836
Costs and expenses
Cost of goods sold						361,272						308,267						648,828						570,313
Selling, general and administrative expenses						65,402						52,407						115,246						101,817
Other income						(2,532)						—						(2,532)						(4,173)
Restructuring and impairment costs						—						—						2,024						—
Operating income						29,813						16,351						40,418						24,879
Equity in pretax earnings (loss) of unconsolidated affiliates						2,363						590						2,972						583
Other non-operating income (expense)						54						(20)						102						(38)
Interest income						517						101						590						260
Interest expense						7,130						5,595						13,338						12,405
Income before income taxes and other items						25,617						11,427						30,744						13,279
Income taxes						3,862						3,178						5,077						(1,870)
Net income						21,755						8,249						25,667						15,149
Less: net loss (income) attributable to noncontrolling interests in subsidiaries						(2,245)						(747)						200						(373)
Net income attributable to Universal Corporation						$	19,510					$	7,502					$	25,867					$	14,776
Earnings per share:
Basic						$	0.79					$	0.30					$	1.05					$	0.60
Diluted						$	0.78					$	0.30					$	1.04					$	0.60
Weighted average common shares outstanding:
Basic						24,776,930						24,658,895						24,745,827						24,630,886
Diluted						24,916,346						24,770,421						24,894,366						24,737,134
Total comprehensive income, net of income taxes						$	13,669					$	22,060					$	26,415					$	29,269
Less: comprehensive (income) loss attributable to noncontrolling interests						(2,060)						(982)						356						(452)
Comprehensive income (loss) attributable to Universal Corporation						$	11,609					$	21,078					$	26,771					$	28,817
Dividends declared per common share						$	0.78					$	0.77					$	1.56					$	1.54

						September 30,						September 30,						March 31,
						2021						2020						2021
						(Unaudited)						(Unaudited)
ASSETS
Current assets
Cash and cash equivalents						$	100,682					$	57,084					$	197,221
Accounts receivable, net						297,442						329,332						367,482
Advances to suppliers, net						82,192						65,643						121,618
Accounts receivable—unconsolidated affiliates						63,112						47,807						584
Inventories—at lower of cost or net realizable value:
Tobacco						854,331						888,213						640,653
Other						161,001						116,299						145,965
Prepaid income taxes						23,112						20,712						15,029
Other current assets						76,050						69,564						66,806
Total current assets						1,657,922						1,594,654						1,555,358
Property, plant and equipment
Land						22,502						21,515						22,400
Buildings						289,939						259,875						284,430
Machinery and equipment						653,789						657,435						658,826
						966,230						938,825						965,656
Less accumulated depreciation						(630,766)						(617,553)						(616,146)
						335,464						321,272						349,510
Other assets
Operating lease right-of-use assets						33,790						35,665						31,230
Goodwill, net						172,964						126,910						173,051
Other intangibles, net						67,510						16,309						72,304
Investments in unconsolidated affiliates						84,517						82,628						84,218
Deferred income taxes						17,193						22,615						12,149
Pension asset						13,381						—						11,950
Other noncurrent assets						43,057						42,239						52,154
						432,412						326,366						437,056
Total assets						$	2,425,798					$	2,242,292					$	2,341,924

						September 30,						September 30,						March 31,
						2021						2020						2021
						(Unaudited)						(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Notes payable and overdrafts						$	184,982					$	235,413					$	101,294
Accounts payable and accrued expenses						157,082						133,034						139,484
Accounts payable—unconsolidated affiliates						2,414						117						1,282
Customer advances and deposits						25,219						8,049						8,765
Accrued compensation						19,591						19,499						29,918
Income taxes payable						1,136						2,947						4,516
Current portion of operating lease liabilities						8,985						9,105						7,898
Current portion of long-term debt						—						—						—
Total current liabilities						399,409						408,164						293,157
Long-term debt						518,422						368,894						518,172
Pensions and other postretirement benefits						54,598						64,947						57,637
Long-term operating lease liabilities						22,530						22,813						19,725
Other long-term liabilities						55,174						72,657						59,814
Deferred income taxes						42,239						25,941						44,994
Total liabilities						1,092,372						963,416						993,499
Shareholders’ equity
Universal Corporation:
Preferred stock:
Series A Junior Participating Preferred Stock, no par value, 500,000 shares authorized, none issued or outstanding						—						—						—
Common stock, no par value, 100,000,000 shares authorized 24,607,384 shares issued and outstanding at September 30, 2021 (24,514,867 at September 30, 2020 and 24,514,867 at March 31, 2021)						328,836						323,761						326,673
Retained earnings						1,074,629						1,053,295						1,087,663
Accumulated other comprehensive loss						(106,133)						(137,556)						(107,037)
Total Universal Corporation shareholders' equity						1,297,332						1,239,500						1,307,299
Noncontrolling interests in subsidiaries						36,094						39,376						41,126
Total shareholders' equity						1,333,426						1,278,876						1,348,425
Total liabilities and shareholders' equity						$	2,425,798					$	2,242,292					$	2,341,924

						Six Months Ended September 30,
						2021						2020
						(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income						$	25,667					$	15,149
Adjustments to reconcile net income to net cash used by operating activities:
Depreciation and amortization						25,096						20,381
Net provision for losses (recoveries) on advances to suppliers						(44)						348
Foreign currency remeasurement (gain) loss, net						6,955						(5,105)
Foreign currency exchange contracts						2,486						(8,169)
Restructuring and impairment costs						2,024						—
Restructuring payments						(3,203)						(2,937)
Change in estimated fair value of contingent consideration for FruitSmart acquisition						(2,532)						(4,173)
Other, net						(4,916)						3,049
Changes in operating assets and liabilities, net						(172,304)						(168,502)
Net cash provided (used) by operating activities						(120,771)						(149,959)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment						(18,645)						(22,751)
Proceeds from sale of property, plant and equipment						6,767						1,780
Net cash used by investing activities						(11,878)						(20,971)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of short-term debt, net						82,250						162,646
Dividends paid to noncontrolling interests						(4,676)						(3,695)
Dividends paid on common stock						(38,047)						(37,424)
Other						(2,996)						(1,949)
Net cash provided (used) by financing activities						36,531						119,578
Effect of exchange rate changes on cash, restricted cash and cash equivalents						(421)						1,006
Net decrease in cash, restricted cash and cash equivalents						(96,539)						(50,346)
Cash, restricted cash and cash equivalents at beginning of year						203,221						107,430
Cash, restricted cash and cash equivalents at end of period						$	106,682					$	57,084
Supplemental Information:
Cash and cash equivalents						$	100,682					$	57,084
Restricted cash (Other noncurrent assets)						6,000						—
Total cash, restricted cash and cash equivalents						$	106,682					$	57,084

In December 2019, the FASB issued Accounting Standards Update No. 2019-12, “Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). ASU 2019-12 eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences related to changes in ownership of equity method investments and foreign subsidiaries. The updated guidance also simplifies aspects of accounting for franchise taxes and enacted changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The guidance in ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, although early adoption is permitted. The Company adopted the new standard effective April 1, 2021, which was the beginning of its fiscal year ending March 31, 2022. There was no material impact to the consolidated financial statements from the adoption of ASU 2019-12.

In March 2020, the FASB issued Accounting Standards Update No. 2020-04, "Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting" ("ASU 2020-04"). ASU 2020-04 provides optional expedients and exceptions related to contract modifications and hedge accounting to address the transitions from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. The guidance permits an entity to consider contract modification due to reference rate reform to be an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination. ASU 2020-04 also temporarily allows hedge relationships to continue without de-designation upon changes due to reference rate reform. The standard is effective upon issuance and can be applied as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact that the guidance will have on its consolidated financial statements.

On October 1, 2020 the Company acquired 100% of the capital stock of Silva International, Inc. (“Silva”), a natural, specialty dehydrated vegetable, fruit, and herb processing company serving global markets, for approximately $164 million in cash and $5.9 million of additional working capital on-hand at the date of acquisition. The acquisition of Silva diversifies the Company's product offerings and generates new opportunities for its plant-based ingredients platform.

The Company continues to employ one of Silva's selling shareholders and as stipulated in the Silva purchase agreement has transferred $6 million to a third-party escrow account that may ultimately be earned by the selling shareholder upon completion of a post-combination service period. Since the compensation agreement for the selling shareholder who remains employed with the Company includes a post-combination service period, the Company has excluded the entire $6 million in the

The following table summarizes the final purchase price allocation of the assets acquired and liabilities assumed on October 1, 2020.

(in thousands of dollars)
Assets
Cash and cash equivalents			$	8,126
Accounts receivable, net			17,885
Advances to suppliers, net			3,011
Inventory			33,162
Other current assets			833
Property, plant and equipment (net)			24,437
Intangibles
Customer relationships			53,000
Trade names			7,800
Goodwill			46,144
Total assets acquired			194,398
Liabilities
Accounts payable and accrued expenses			11,683
Accrued compensation			3,350
Income taxes payable			946
Deferred income taxes			14,419
Total liabilities assumed			30,398
Total assets acquired and liabilities assumed			$	164,000

Universal continually reviews its business for opportunities to realize efficiencies, reduce costs, and realign its operations in response to business changes. Restructuring and impairment costs are periodically incurred in connection with those activities.

In the six months ended September 30, 2021, the Company incurred and paid $1.5 million of termination costs associated with restructuring of tobacco processing and administrative operations in Africa.

In the six months ended September 30, 2021, the Company incurred $0.5 million of impairment costs on property, plant, and equipment associated with the wind-down of the Carolina Innovative Food Ingredients, Inc. ("CIFI") operations that was announced in fiscal year 2021.

There were zero restructuring and impairment costs incurred for the three and six months ended September 30, 2020.

The majority of the Company’s consolidated revenue consists of sales of processed leaf tobacco to customers. The Company also earns revenue from processing leaf tobacco owned by customers and from various other services provided to customers. Additionally, the Company has fruit and vegetable processing operations that provide customers with a range of food ingredient products. Payment terms with customers vary depending on customer creditworthiness, product types, services provided, and other factors. Contract durations and payment terms for all revenue categories generally do not exceed one year. Therefore, the Company has applied a practical expedient to not adjust the transaction price for the effects of financing components, as the Company expects that the period from the time the revenue for a transaction is recognized to the time the customer pays for the related good or service transferred will be one year or less. Below is a description of the major revenue-generating categories from contracts with customers.

The majority of the Company’s business involves purchasing leaf tobacco from farmers in the origins where it is grown, processing and packing the tobacco in its factories, and then transferring ownership and control of the tobacco to customers. On a much smaller basis, the Company also sources processed tobacco from third-party suppliers for resale to customers. The contracts for tobacco sales with customers create a performance obligation to transfer tobacco to the customer. Transaction prices for the sale of tobaccos are primarily based on negotiated fixed prices, but the Company does have a small number of cost-plus contracts with certain customers. Cost-plus arrangements provide the Company reimbursement of the cost to purchase and process the tobacco, plus a contractually agreed-upon profit margin. The Company utilizes the most likely amount methodology under the accounting guidance to recognize revenue for cost-plus arrangements with customers. Shipping and handling costs under tobacco sales contracts with customers are treated as fulfillment costs and included in the transaction price. Taxes assessed by government authorities on the sale of leaf tobacco products are excluded from the transaction price. At the point in time that the customer obtains control over the tobacco, which is typically aligned with physical shipment under the contractual terms with the customer, the Company completes its performance obligation and recognizes the revenue for the sale.

In recent fiscal years, the Company has diversified operations through acquisition of established companies that offer customers a wide range of both liquid and dehydrated fruit and vegetable ingredient products. These operations procure raw materials from domestic and international growers and suppliers and through a variety of processing steps including sorting, cleaning, pressing, mixing, and blending to manufacture finished goods utilized in both human and pet food. The contracts for food ingredients with customers create a performance obligation to transfer the manufactured finished goods to the customer. Transaction prices for the sale of food ingredients are primarily based on negotiated fixed prices. At the point in time that the customer obtains control over the finished product, which is typically aligned with physical shipment under the contractual terms with the customer, the Company completes its performance obligation and recognizes the revenue for the sale.

Processing and packing of customer-owned tobacco and ingredients is a short-duration process. Processing charges are primarily based on negotiated fixed prices per unit of weight processed. Under normal operating conditions, customer-owned raw materials that are placed into the production line exits as processed and packed product and is then later transported to customer-designated transfer locations. The revenue for these services is recognized when the performance obligation is satisfied, which is generally when processing is completed. The Company’s operating history and contract analyses indicate that customer requirements for processed tobacco and food ingredients products are consistently met upon completion of processing.

From time to time, the Company enters into various arrangements with customers to provide other value-added services that may include blending, chemical and physical testing of products, storage, and tobacco cutting services for select manufacturers. These other arrangements and operations are a much smaller portion of the Company’s business, and are separate and distinct contractual agreements from the Company’s tobacco and food ingredients sales or third-party processing arrangements with customers. The transaction prices and timing of revenue recognition of these items are determined by the specifics of each contract.

The following table disaggregates the Company’s revenue by significant revenue-generating category:

						Three Months Ended September 30,												Six Months Ended September 30,
(in thousands of dollars)						2021						2020						2021						2020
Tobacco sales						$	370,702					$	334,545					$	640,966					$	609,687
Ingredient sales						52,517						19,127						104,405						35,483
Processing revenue						16,048						12,474						32,744						28,774
Other sales and revenue from contracts with customers						13,980						10,202						24,745						17,804
Total revenue from contracts with customers						453,247						376,348						802,860						691,748
Other operating sales and revenues						708						677						1,124						1,088
Consolidated sales and other operating revenues						$	453,955					$	377,025					$	803,984					$	692,836

As further discussed below, the Company’s local operating subsidiaries pay significant amounts of value-added tax (“VAT”) in connection with their operations, which generate tax credits that they normally are entitled to recover through offset, refund, or sale to third parties. In Brazil, VAT is assessed at the state level when green tobacco is transferred between states. The Company’s operating subsidiary there pays VAT when tobaccos grown in the states of Santa Catarina and Parana are transferred to its factory in the state of Rio Grande do Sul for processing. The subsidiary has received assessments for additional VAT plus interest and penalties from tax authorities for the states of Santa Catarina and Parana based on audits of the subsidiary’s VAT filings for specified periods. In June 2011, tax authorities for the state of Santa Catarina issued assessments for tax, interest, and penalties for periods from 2006 through 2009 totaling approximately $9 million. In September 2014, tax authorities for the state of Parana issued an assessment for tax, interest, and penalties for periods from 2009 through 2014 totaling approximately $10 million. Those amounts are based on the exchange rate for the Brazilian currency at September 30, 2021. Management of the operating subsidiary and outside counsel believe that errors were made by the tax authorities for both states in determining all or significant portions of these assessments and that various defenses support the subsidiary’s positions.

With respect to the Santa Catarina assessments, the subsidiary took appropriate steps to contest the full amount of the claims. As of September 30, 2021, a portion of the subsidiary’s arguments had been accepted, and the outstanding assessment had been reduced. The reduced assessment, together with the related accumulated interest through the end of the current reporting period, totaled approximately $9 million (at the September 30, 2021 exchange rate). The subsidiary is continuing to contest the full remaining amount of the assessment. While the range of reasonably possible loss is zero up to the full $9 million remaining assessment with interest, based on the strength of the subsidiary’s defenses, no loss within that range is considered probable at this time and no liability has been recorded at September 30, 2021.

With respect to the Parana assessment, management of the subsidiary and outside counsel challenged the full amount of the claim. A significant portion of the Parana assessment was based on positions taken by the tax authorities that management and outside counsel believe deviate significantly from the underlying statutes and relevant case law. In addition, under the law, the subsidiary’s tax filings for certain periods covered in the assessment were no longer open to any challenge by the tax authorities. In December 2015, the Parana tax authorities withdrew the initial claim and subsequently issued a new assessment covering the same tax periods, reflecting a substantial reduction from the original assessment. In fiscal year 2020, the Parana tax authorities acknowledged the statute of limitations related to claims prior to December 2010 had expired and reduced the assessment to $3 million (at the September 30, 2021 exchange rate). Notwithstanding the reduced assessment, management and outside counsel continue to believe that the new assessment is not supported by the underlying statutes and relevant case law and have challenged the full amount of the claim. The range of reasonably possible loss is considered to be zero up to the full $3

						Three Months Ended September 30,												Six Months Ended September 30,
(in thousands, except share and per share data)						2021						2020						2021						2020
Basic Earnings Per Share
Numerator for basic earnings per share
Net income attributable to Universal Corporation						$	19,510					$	7,502					$	25,867					$	14,776
Denominator for basic earnings per share
Weighted average shares outstanding						24,776,930						24,658,895						24,745,827						24,630,886
Basic earnings per share						$	0.79					$	0.30					$	1.05					$	0.60
Diluted Earnings Per Share
Numerator for diluted earnings per share
Net income attributable to Universal Corporation						$	19,510					$	7,502					$	25,867					$	14,776
Denominator for diluted earnings per share:
Weighted average shares outstanding						24,776,930						24,658,895						24,745,827						24,630,886
Effect of dilutive securities
Employee and outside director share-based awards						139,416						111,526						148,539						106,248
Denominator for diluted earnings per share						24,916,346						24,770,421						24,894,366						24,737,134
Diluted earnings per share						$	0.78					$	0.30					$	1.04					$	0.60

(in thousands of dollars)			Six Months Ended September 30,
			2021						2020
Balance at beginning of fiscal year			$	173,051					$	126,826
Foreign currency translation adjustment			(87)						84
Balance at end of period			$	172,964					$	126,910

(in thousands, except useful life)															September 30, 2021
			Useful Life (years)												Gross Carrying Value						Accumulated Amortization						Net Carrying Value
Customer relationships(1)			11			—			13						$	62,500					$	(6,097)					$	56,403
Trade names(1)						5									11,100						(2,715)						8,385
Developed technology(1)						3									4,800						(2,800)						2,000
Noncompetition agreements(1)						5									1,000						(350)						650
Other						5									764						(692)						72
Total intangible assets															$	80,164					$	(12,654)					$	67,510

															September 30, 2020
			Useful Life (years)												Gross Carrying Value						Accumulated Amortization						Net Carrying Value
Customer relationships						13									$	9,500					$	(548)					$	8,952
Trade names						5									3,300						$	(495)					2,805
Developed technology						3									4,800						$	(1,200)					3,600
Noncompetition agreements						5									1,000						$	(150)					850
Other						5									762						$	(660)					102
Total intangible assets															$	19,362					$	(3,053)					$	16,309

															March 31, 2021
			Useful Life (years)												Gross Carrying Value						Accumulated Amortization						Net Carrying Value
Customer relationships(1)			11			—			13						$	62,500					$	(3,323)					$	59,177
Trade names(1)						5									11,100						(1,605)						9,495
Developed technology(1)						3									4,800						(2,000)						2,800
Noncompetition agreements(1)						5									1,000						(250)						750
Other						5									760						(678)						82
Total intangible assets															$	80,160					$	(7,856)					$	72,304

(1)On October 1, 2020 the Company acquired 100% of the capital stock of Silva for approximately $164.0 million in cash and $5.9 million of working capital on-hand at the date of acquisition. The Silva acquisition resulted in $60.8 million of intangibles. See Note 3 for additional information.

Intangible assets are amortized on a straight-line basis over the asset's estimated useful economic life as noted above.

The Company's amortization expense for intangible assets for the three and six months ended September 30, 2021 and 2020 was:

(in thousands of dollars)			Three Months Ended September 30,												Six Months Ended September 30,
			2021						2020						2021						2020
Amortization Expense			$	2,853					$	809					$	5,256					$	1,617

Amortization expense for the developed technology intangible asset is recorded in cost of goods sold in the consolidated income statements of income. The amortization expense for other intangible assets is recorded in selling, general, and administrative expenses in the consolidated statements of income.

Fiscal Year (in thousands of dollars)
2022 (excluding the six months ended September 30, 2021)			$	4,822
2023			9,204
2024			7,969
2025			8,534
2026 and thereafter			36,981
Total expected future amortization expense			$	67,510

The Company, as a lessee, enters into operating leases for land, buildings, equipment, and vehicles. For all operating leases with terms greater than 12 months and with fixed payment arrangements, a lease liability and corresponding right-of-use asset are recognized in the balance sheet for the term of the lease by calculating the net present value of future lease payments. On the date of lease commencement, the present value of lease liabilities is determined by discounting the future lease payments by the Company’s collateralized incremental borrowing rate, adjusted for the lease term and currency of the lease payments. If a lease contains a renewal option that the Company is reasonably certain to exercise, the Company accounts for the original lease term and expected renewal term in the calculation of the lease liability and right-of-use asset.

(in thousands of dollars)						September 30, 2021						September 30, 2020						March 31, 2021
Assets
Operating lease right-of-use assets						$	33,790					$	35,665					$	31,230
Liabilities
Current portion of operating lease liabilities						$	8,985					$	9,105					$	7,898
Long-term operating lease liabilities						22,530						22,813						19,725
Total operating lease liabilities						$	31,515					$	31,918					$	27,623

						Three Months Ended September 30,												Six Months Ended September 30,
(in thousands of dollars)						2021						2020						2021						2020
Income Statement Location
Cost of goods sold						$	2,721					$	3,219					$	5,299					$	6,130
Selling, general, and administrative expenses						2,261						2,466						4,566						4,656
Total operating lease costs(1)						$	4,982					$	5,685					$	9,865					$	10,786

(1)Includes variable operating lease costs.

(in thousands of dollars)						September 30, 2021
Maturity of Operating Lease Liabilities
2022 (excluding the six months ended September 30, 2021)						$	5,287
2023						8,752
2024						6,765
2025						4,856
2026						2,719
2027 and thereafter						7,592
Total undiscounted cash flows for operating leases						$	35,971
Less: Imputed interest						(4,456)
Total operating lease liabilities						$	31,515

As of September 30, 2021, the Company had no leases that did not yet commence.

						Three Months Ended September 30,												Six Months Ended September 30,
(in thousands, except lease term and incremental borrowing rate)						2021						2020						2021									2020
Supplemental Cash Flow Information
Cash paid for amounts included in the measurement of operating lease liabilities						$	2,840					$	3,159					$	5,617								$	6,187
Right-of-use assets obtained in exchange for new operating leases						6,310						567						9,051									1,590
Weighted Average Remaining Lease Term (years)																		5.51									5.55
Weighted Average Collateralized Incremental Borrowing Rate																		4.02			%						4.02			%

Universal is exposed to various risks in its worldwide operations and uses derivative financial instruments to manage two specific types of risks – interest rate risk and foreign currency exchange rate risk. Interest rate risk has been managed by entering into interest rate swap agreements, and foreign currency exchange rate risk has been managed by entering into forward and option foreign currency exchange contracts. However, the Company’s policy also permits other types of derivative instruments. In addition, foreign currency exchange rate risk is also managed through strategies that do not involve derivative instruments, such as using local borrowings and other approaches to minimize net monetary positions in non-functional currencies. The disclosures below provide additional information about the Company’s hedging strategies, the derivative instruments used, and the effects of these activities on the consolidated statements of income and comprehensive income and the consolidated balance sheets. In the consolidated statements of cash flows, the cash flows associated with all of these activities are reported in net cash provided by operating activities.

In February 2019, the Company entered into receive-floating/pay-fixed interest rate swap agreements that were designated and qualify as hedges of the exposure to changes in interest payment cash flows created by fluctuations in variable interest rates on two outstanding non-amortizing bank term loans that were funded as part of a new bank credit facility in December 2018. Although no significant ineffectiveness is expected with this hedging strategy, the effectiveness of the interest rate swaps is evaluated on a quarterly basis. At September 30, 2021, the total notional amount of the interest rate swaps was $370 million, which corresponded with the former original outstanding balance of the term loans. During the third quarter of fiscal year 2021, the Company converted $150 million from the balance in its revolving credit line into the existing term loans, splitting the balance equally between them. At September 30, 2021, the Company is not hedging the interest payments on the additional $150 million of term loans. The increase to the principal balance of the term loans does not have an impact to the effectiveness analysis of the interest rate swap agreements.

Previously, the Company had receive-floating/pay-fixed interest rate swap agreements that were designated and qualified as cash flow hedges for two outstanding non-amortizing bank loans that were repaid concurrent with closing on the new bank credit facility. Those swap agreements were subsequently terminated in February 2019 concurrent with the inception of the new swap agreements. The fair value of the previous swap agreements, approximately $5.4 million, was received from the counterparties upon termination and is being amortized from accumulated other comprehensive loss into earnings as a reduction of interest expense through the original maturity dates of those agreements. As of September 30, 2021, $0.4 million remained in accumulated other comprehensive loss to be amortized through December 31, 2021.

The majority of the tobacco production in most countries outside the United States where Universal operates is sold in export markets at prices denominated in U.S. dollars. However, sales of crop inputs (such as seeds and fertilizers) to farmers, purchases of tobacco from farmers, and most processing costs (such as labor and energy) in those countries are usually denominated in the local currency. Changes in exchange rates between the U.S. dollar and the local currencies where tobacco is grown and processed affect the ultimate U.S. dollar sales of crop inputs and cost of processed tobacco. From time to time, the Company enters into forward and option contracts to buy U.S. dollars and sell the local currency at future dates that coincide with the sale of crop inputs to farmers. In the case of forecast purchases of tobacco and the related processing costs, the Company enters into forward and option contracts to sell U.S. dollars and buy the local currency at future dates that coincide with the expected timing of a portion of the tobacco purchases and processing costs. These strategies offset the variability of future U.S. dollar cash flows for sales of crop inputs, tobacco purchases, and processing costs for the foreign currency notional amount

						Six Months Ended September 30,
(in millions of dollars)						2021						2020
Tobacco purchases						$	99.7					$	39.5
Processing costs						18.7						10.5
Crop input sales						20.8						23.5
Total						$	139.2					$	73.5

Fluctuations in exchange rates and in the amount and timing of fixed-price orders from customers for their purchases from individual crop years routinely cause variations in the U.S. dollar notional amount of forward contracts entered into from one year to the next. All contracts related to tobacco purchases and crop input sales were designated and qualified as hedges of the future cash flows associated with the forecast purchases of tobacco. As a result, changes in fair values of the forward contracts have been recognized in comprehensive income as they occurred, but only recognized in earnings as a component of cost of goods sold upon sale of the related tobacco to third-party customers. In fiscal year 2022, only non-deliverable forward contracts were utilized for the sale of 2022 crop year inputs. Premium payments for option contracts entered into for the sale of crop inputs in fiscal year 2021 were expensed into earnings as incurred.

The table below presents the expected timing of when the remaining accumulated other comprehensive gains and losses as of September 30, 2021 for cash flows hedges of tobacco purchases and crop input sales will be recognized in earnings.

Hedging Program			Crop Year			Geographic Location(s)			Fiscal Year Earnings
Tobacco purchases			2023			Brazil			2024
Tobacco purchases			2022			Brazil			2023
Tobacco purchases			2021			Brazil, Africa			2022
Tobacco purchases			2020			Brazil			2022
Crop input sales			2022			Brazil			2023
Crop input sales			2021			Brazil			2022

Forward contracts related to processing costs have not been designated as hedges, and gains and losses on those contracts have been recognized in earnings on a mark-to-market basis.

Most of the Company’s foreign subsidiaries transact the majority of their sales in U.S. dollars and finance the majority of their operating requirements with U.S. dollar borrowings, and therefore use the U.S. dollar as their functional currency. These subsidiaries normally have certain monetary assets and liabilities on their balance sheets that are denominated in the local currency. Those assets and liabilities can include cash and cash equivalents, accounts receivable and accounts payable, advances to farmers and suppliers, deferred income tax assets and liabilities, recoverable value-added taxes, operating lease liabilities, and other items. Net monetary assets and liabilities denominated in the local currency are remeasured into U.S. dollars each reporting period, generating gains and losses that the Company records in earnings as a component of selling, general, and administrative expenses. The level of net monetary assets or liabilities denominated in the local currency normally fluctuates throughout the year based on the operating cycle, but it is most common for monetary assets to exceed monetary liabilities, sometimes by a significant amount. When this situation exists and the local currency weakens against the U.S. dollar, remeasurement losses are generated. Conversely, remeasurement gains are generated on a net monetary asset position when the local currency strengthens against the U.S. dollar. To manage a portion of its exposure to currency remeasurement gains and losses, the Company enters into forward contracts to buy or sell the local currency at future dates coinciding with expected changes in the overall net local currency monetary asset position of the subsidiary. Gains and losses on the forward contracts are recorded in earnings as a component of selling, general, and administrative expenses for each reporting period as they occur, and thus directly offset the related remeasurement losses or gains in the consolidated statements of income for the notional amount hedged. The Company does not designate these contracts as hedges for accounting purposes. The contracts are generally arranged to hedge the subsidiary's projected exposure to currency remeasurement risk for specified periods of time, and new contracts are entered as necessary

Several of the Company’s foreign subsidiaries transact the majority of their sales and finance the majority of their operating requirements in their local currency, and therefore use their respective local currencies as the functional currency for reporting purposes. From time to time, these subsidiaries sell tobacco to customers in transactions that are not denominated in the functional currency. In those situations, the subsidiaries routinely enter into forward exchange contracts to offset currency risk for the period of time that a fixed-price order and the related trade account receivable are outstanding with the customer. The contracts are not designated as hedges for accounting purposes.

						Three Months Ended September 30,												Six Months Ended September 30,
(in thousands of dollars)						2021						2020						2021						2020
Cash Flow Hedges - Interest Rate Swap Agreements
Derivative
Effective Portion of Hedge
Gain (loss) recorded in accumulated other comprehensive loss						$	(253)					$	(276)					$	(1,649)					$	(3,973)
Gain (loss) reclassified from accumulated other comprehensive loss into earnings						$	(2,257)					$	(2,189)					$	(4,480)					$	(4,027)
Gain on terminated interest rate swaps amortized from accumulated other comprehensive loss into earnings						$	355					$	354					$	708					$	708
Location of gain (loss) reclassified from accumulated other comprehensive loss into earnings																		Interest expense
Ineffective Portion of Hedge
Gain (loss) recognized in earnings						$	—					$	—					$	—					$	—
Location of gain (loss) recognized in earnings																		Selling, general and administrative expenses
Hedged Item
Description of hedged item																		Floating rate interest payments on term loan
Cash Flow Hedges - Foreign Currency Exchange Contracts
Derivative
Effective Portion of Hedge
Gain (loss) recorded in accumulated other comprehensive loss						$	(5,234)					$	(337)					$	2,999					$	(1,784)
Gain (loss) reclassified from accumulated other comprehensive loss into earnings						$	1,805					$	(6,479)					$	1,289					$	(7,213)
Location of gain (loss) reclassified from accumulated other comprehensive loss into earnings																		Cost of goods sold
Ineffective Portion and Early De-designation of Hedges
Gain (loss) recognized in earnings						$	(217)					$	—					$	451					$	—
Location of gain (loss) recognized in earnings																		Selling, general and administrative expenses
Hedged Item
Description of hedged item																		Forecast purchases of tobacco in Brazil and Africa
Derivatives Not Designated as Hedges - Foreign Currency Exchange Contracts
Gain (loss) recognized in earnings						$	(839)					$	(272)					$	3,765					$	(416)
Location of gain (loss) recognized in earnings																		Selling, general and administrative expenses

For the interest rate swap agreements, the effective portion of the gain or loss on the derivative is recorded in accumulated other comprehensive loss and any ineffective portion is recorded in selling, general and administrative expenses.

For the forward foreign currency exchange contracts designated as cash flow hedges of tobacco purchases in Brazil and Africa and the crop input sales in Brazil, a net hedge gain of approximately $0.5 million remained in accumulated other comprehensive loss at September 30, 2021. That balance reflects gains and losses on contracts related to the 2023, 2022, 2021, and 2020 Brazil crops, the 2021 Africa crop, and the 2022 and 2021 Brazil crop input sales, less the amounts reclassified to earnings related to tobacco sold through September 30, 2021. Based on the hedging strategy, as the gain or loss is recognized in

						Derivatives in a Fair Value Asset Position																								Derivatives in a Fair Value Liability Position
						Balance Sheet Location						Fair Value as of																		Balance Sheet Location						Fair Value as of
(in thousands of dollars)												September 30, 2021						September 30, 2020						March 31, 2021												September 30, 2021						September 30, 2020						March 31, 2021
Derivatives Designated as Hedging Instruments
Interest rate swap agreements						Other non-current assets						$	—					$	—					$	—					Other long-term liabilities						$	22,888					$	37,109					$	25,719
Foreign currency exchange contracts						Other current assets						889						1						1,137						Accounts payable and accrued expenses						3,152						982						1,031
Total												$	889					$	1					$	1,137											$	26,040					$	38,091					$	26,750
Derivatives Not Designated as Hedging Instruments
Foreign currency exchange contracts						Other current assets						$	1,028					$	290					$	435					Accounts payable and accrued expenses						$	639					$	418					$	791
Total												$	1,028					$	290					$	435											$	639					$	418					$	791

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.

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.

						September 30, 2021
												Fair Value Hierarchy
(in thousands of dollars)						NAV						Level 1						Level 2						Level 3						Total
Assets
Money market funds						$	335					$	—					$	—					$	—					$	335
Trading securities associated with deferred compensation plans						—						14,557						—						—						14,557
Interest rate swap agreements						—						—						—						—						—
Foreign currency exchange contracts						—						—						1,917						—						1,917
Total financial assets measured and reported at fair value						$	335					$	14,557					$	1,917					$	—					$	16,809
Liabilities
Interest rate swap agreements						—						—						22,888						—						22,888
Foreign currency exchange contracts						—						—						3,791						—						3,791
Total financial liabilities measured and reported at fair value						$	—					$	—					$	26,679					$	—					$	26,679

						September 30, 2020
												Fair Value Hierarchy
(in thousands of dollars)						NAV						Level 1						Level 2						Level 3						Total
Assets
Money market funds						$	1,991					$	—					$	—					$	—					$	1,991
Trading securities associated with deferred compensation plans						—						14,495						—						—						14,495
Foreign currency exchange contracts						—						—						291						—						291
Total financial assets measured and reported at fair value						$	1,991					$	14,495					$	291					$	—					$	16,777
Liabilities
Acquisition-related contingent consideration obligations - long term						$	—					$	—					$	—					$	2,532					2,532
Interest rate swap agreements						—						—						37,109						—						37,109
Foreign currency exchange contracts						—						—						1,400						—						1,400
Total financial liabilities measured and reported at fair value						$	—					$	—					$	38,509					$	2,532					$	41,041

						March 31, 2021
												Fair Value Hierarchy
(in thousands of dollars)						NAV						Level 1						Level 2						Level 3						Total
Assets
Money market funds						$	1,992					$	—					$	—					$	—					$	1,992
Trading securities associated with deferred compensation plans						—						15,735						—						—						15,735
Foreign currency exchange contracts						—						—						1,572						—						1,572
Total financial assets measured and reported at fair value						$	1,992					$	15,735					$	1,572					$	—					$	19,299
Liabilities
Acquisition-related contingent consideration obligations - long-term						$	—					$	—					$	—					$	2,532					$	2,532
Interest rate swap agreements						—						—						25,719						—						25,719
Foreign currency exchange contracts						—						—						1,822						—						1,822
Total financial liabilities measured and reported at fair value						$	—					$	—					$	27,541					$	2,532					$	30,073

The Company estimates the fair value of acquisition-related contingent consideration obligations by applying an income approach model that utilizes probability-weighted discounted cash flows. The Company acquired FruitSmart, Inc. in fiscal year 2020 and recognized a contingent consideration liability of $6.7 million on the date of acquisition. Each period the Company evaluates the fair value of the acquisition-related contingent consideration obligations. During the year ended March 31, 2021, the evaluation resulted in a reduction of $4.2 million of contingent consideration of the original $6.7 million liability recorded. During the quarter ended September 30, 2021, an evaluation of the contingent liability resulted in a reduction of the remaining $2.5 million contingent consideration recorded. Significant judgment is applied to this model and therefore the acquisition-related contingent consideration obligation is classified within Level 3 of the fair value hierarchy.

(in thousands of dollars)			Six Months Ended September 30,
			2021						2020
Balance beginning of year			$	2,532					$	6,705
Change in fair value of contingent consideration liability			(2,532)						(4,173)
Balance at end of period			$	—					$	2,532

(in millions of dollars)			September 30, 2021						September 30, 2020						March 31, 2021
Fair market value of long term obligations			$	518					$	370					$	517
Carrying value of long term obligations			$	520					$	370					$	520