FAIR VALUE DISCLOSURES

Assets and liabilities subject to fair value measurement are categorized into one of three different levels depending on the observability of the inputs employed in the measurement, as follows:


•	Level 1 – observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.


•	Level 2 – inputs that reflect quoted prices for identical assets or liabilities in markets which are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the asset or liability; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.


•	Level 3 – unobservable inputs reflecting the Company’s own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

Non-recurring Fair Value Measurements

The majority of our non-financial assets, which include inventories, property and equipment, assets held for sale, goodwill and other intangible assets, are not required to be carried at fair value on a recurring basis. However, if certain triggering events occur such that a non-financial asset is required to be evaluated for impairment and deemed to be impaired, the impaired non-financial asset is recorded as its fair value.

See Note 2 for details on the fair values related to the Airnorth and Eastern Airways acquisition.

The following table summarizes the assets as of March 31, 2015, valued at fair value on a non-recurring basis (in thousands):



	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of March 31, 2015		Total Loss for Fiscal Year 2015
Inventories	$	—	$	3,139	$	—	$	3,139	$	(7,167	)
Assets held for sale	—		54,310		—		54,310		(36,057		)
Total assets	$	—	$	57,449	$	—	$	57,449	$	(43,224	)

The following table summarizes the assets as of March 31, 2014, valued at fair value on a non-recurring basis (in thousands):



	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of March 31, 2014		Total Loss for Fiscal Year 2014
Inventories	$	—	$	50,505	$	—	$	50,505	$	(12,669	)
Assets held for sale	—		16,050		—		16,050		(6,814		)
Total assets	$	—	$	66,555	$	—	$	66,555	$	(19,483	)

The fair value of inventories using Level 2 inputs is determined by evaluating the current economic conditions for sale and disposal of spare parts, which includes estimates as to the recoverability of the carrying value of the parts based on historical experience with sales and disposal of similar spare parts, the expected timeframe of sales or disposals, the location of the spare parts to be sold and the condition of the spare parts to be sold or otherwise disposed of. See Note 1 for further discussion of the impairment of inventories. The fair value of assets held for sale using Level 2 inputs is determined through evaluation of expected sales proceeds for aircraft. This analysis includes estimates based on historical experience with sales, recent transactions involving similar assets, quoted market prices for similar assets and condition and location of aircraft to be sold or otherwise disposed of. The $36.1 million loss on assets held for sale for fiscal year 2015 related to 27 aircraft and the $6.8 million loss on assets held for sale for fiscal year 2014 related to 11 aircraft.

Recurring Fair Value Measurements

The following table summarizes the financial instruments we had as of March 31, 2015, valued at fair value on a recurring basis (in thousands):



	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of March 31, 2015		Balance Sheet Classification
Rabbi Trust investments	$	2,379	$	—	$	—	$	2,379	Other assets
Total assets	$	2,379	$	—	$	—	$	2,379
Contingent consideration ⁽¹⁾:
Current	$	—	$	—	$	33,938	$	33,938	Other accrued liabilities
Long-term	$	—	$	—	$	4,967	$	4,967	Other liabilities and deferred credits
Total liabilities	$	—	$	—	$	38,905	$	38,905

_____________


⁽¹⁾	Relates to our investments in Cougar totaling $32.5 million and Airnorth totaling $6.4 million (see Note 3).

The following table summarizes the financial instruments we had as of March 31, 2014, valued at fair value on a recurring basis (in thousands):



	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of March 31, 2014		Balance Sheet Classification
Rabbi Trust investments	$	6,599	$	—	$	—	$	6,599	Other assets
Total assets	$	6,599	$	—	$	—	$	6,599
Contingent consideration ⁽¹⁾:
Current	$	—	$	—	$	7,652	$	7,652	Other accrued liabilities
Long-term	$	—	$	—	$	23,670	$	23,670	Other liabilities and deferred credits
Total liabilities	$	—	$	—	$	31,322	$	31,322

_____________


⁽¹⁾	Relates to an investment in Cougar (see Note 3).

The rabbi trust investments consist of cash and mutual funds whose fair value are based on quoted prices in active markets for identical assets, and are designated as Level 1 within the valuation hierarchy. The rabbi trust holds investments related to our non-qualified deferred compensation plan for our senior executives as discussed in Note 9.

The following table provides a rollforward of the contingent consideration liability Level 3 fair value measurements during fiscal year 2015 (in thousands):



	Significant Unobservable Inputs (Level 3)
Contingent consideration:
Balance as of March 31, 2014	$	31,322
Change in fair value of contingent consideration	1,177
Airnorth acquisition	6,406
Balance as of March 31, 2015	$	38,905

We assess the estimated fair value of the contractual obligation to pay the contingent consideration on a quarterly basis and any changes in estimated fair value are recorded as accretion expense included in depreciation and amortization on our consolidated statements of income. Fluctuations in the fair value of contingent consideration are impacted by two unobservable inputs, management’s estimate of the probability of Cougar or Airnorth achieving certain agreed performance targets and the estimated discount rate. As of March 31, 2015 and 2014, the discount rate approximated 4% for the contingent consideration related to Cougar. As of March 31, 2015, the discount rate approximated 2% for the contingent consideration related to Airnorth.

The fair value of our debt has been estimated in accordance with the accounting standard regarding fair value. The fair value of our fixed rate long-term debt is estimated based on quoted market prices. The carrying and fair value of our long-term debt, including the current portion, are as follows (in thousands):



	March 31,
	2015				2014
	Carrying Value		Fair Value		Carrying Value		Fair Value
6 ¼% Senior Notes	$	401,535	$	381,458	$	450,000	$	477,000
Term Loan	222,179		222,179		226,604		226,604
3% Convertible Senior Notes	114,109		115,288		109,904		142,382
Revolving Credit Facility	83,800		83,800		24,000		24,000
Airnorth debt	23,119		23,119		—		—
Eastern Airways debt	19,680		19,680		29,911		29,911
Other debt	—		—		883		883
	$	864,422	$	845,524	$	841,302	$	900,780

Other

The fair values of our cash and cash equivalents, accounts receivable and accounts payable approximate their carrying value due to the short-term nature of these items.