Junior subordinated convertible debentures

12 Months Ended

Mar. 31, 2011

Notes to Financial Statements [Abstract]

Junior subordinated convertible debentures

14.           2.125% JUNIOR SUBORDINATED CONVERTIBLE DEBENTURES

The Company's $1.15 billion principal amount of 2.125% junior subordinated convertible debentures due December 15, 2037, are subordinated in right of payment to any future senior debt of the Company and are effectively subordinated in right of payment to the liabilities of the Company's subsidiaries.  The debentures are convertible, subject to certain conditions, into shares of the Company's common stock at an initial conversion rate of 29.2783 shares of common stock per $1,000 principal amount of debentures, representing an initial conversion price of approximately $34.16 per share of common stock.  As of March 31, 2011, none of the conditions allowing holders of the debentures to convert had been met.  As a result of cash dividends paid since the issuance of the debentures, the conversion rate has been adjusted to 34.4383 shares of common stock per $1,000 of principal amount of debentures, representing a conversion price of approximately $29.04 per share of common stock.

As the debentures can be settled in cash upon conversion, for accounting purposes, the debentures were bifurcated into a liability component and an equity component, which are initially recorded at fair value.  The carrying value of the equity component at March 31, 2011 and at March 31, 2010 was $822.4 million.  The estimated fair value of the liability component of the debentures at the issuance date was $327.6 million, resulting in a debt discount of $822.4 million.  The unamortized debt discount was $801.9 million at March 31, 2011 and $808.7 million at March 31, 2010.  The carrying value of the debentures was $347.3 million at March 31, 2011 and $340.7 million at March 31, 2010.  The remaining period over which the unamortized debt discount will be recognized as non-cash interest expense is 26.75 years.  In the year ended March 31, 2011, the Company recognized $6.8 million in non-cash interest expense related to the amortization of the debt discount.  In the year ended March 31, 2010, the Company recognized $6.3 million in non-cash interest expense related to the amortization of the debt discount.  In the year ended March 31, 2009, the Company recognized $5.2 million in non-cash interest expense related to the amortization of the debt discount.  The Company recognized $24.4 million of interest expense related to the 2.125% coupon on the debentures in each of fiscal 2011, fiscal 2010 and fiscal 2009.

The debentures also include certain embedded features related to the contingent interest payments, the Company making specific types of distributions (e.g., extraordinary dividends), the redemption feature in the event of changes in tax law, and penalty interest in the event of a failure to maintain an effective registration statement. These features qualify as derivatives and are bundled as a compound embedded derivative that is measured at fair value.  The fair value of the derivative as of March 31, 2011 was $0.4 million, compared to the value at March 31, 2010 of $0.7 million, resulting in a reduction of interest expense in fiscal 2011 of $0.2million.  The balance of the debentures on the Company's condensed consolidated balance sheet at March 31, 2011 of $347.3 millionincludes the fair value of the embedded derivative.