FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact, and it considers assumptions that market participants would use when pricing the asset or liability. The accounting guidance for fair value establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is as follows:

Level 1 - Applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

The Company has deferred compensation plans for its officers and certain other employees. Amounts deferred under the plans are invested in hypothetical investments selected by the participant or the participant’s investment manager. The Company’s deferred compensation plan assets are for the most part included in other noncurrent assets on the condensed consolidated balance sheets and primarily include investments in equity securities that are valued using active market prices.

Level 2 - Applies to assets or liabilities for which there are inputs other than quoted prices included within level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets) such as cash and cash equivalents and money market funds; or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

The Company values foreign exchange forward contracts using level 2 observable inputs which primarily consist of an income approach based on the present value of the forward rate less the contract rate multiplied by the notional amount.

The Company’s cash equivalents are comprised of bank deposits and money market funds, which are valued using level 2 inputs, such as interest rates and maturity periods. Due to their short-term nature, their carrying amount approximates fair value.

The Company’s deferred compensation plan assets also include money market funds, mutual funds, corporate and government bonds and certain convertible securities that are valued using prices obtained from various pricing sources. These sources price these investments using certain market indices and the performance of these investments in relation to these indices. As a result, the Company has classified these investments as level 2 in the fair value hierarchy.

Level 3 - Applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company has accrued for contingent consideration in connection with its business acquisitions as applicable, which is measured at fair value based on certain internal models and unobservable inputs.

The significant inputs in the fair value measurement not supported by market activity included the Company's probability assessments of expected future revenue during the earn-out period and associated volatility, appropriately discounted considering the uncertainties associated with the obligation, and calculated in accordance with the terms of the merger agreement. Significant decreases in expected revenue during the earn-out period, or significant increases in the discount rate or volatility in isolation would result in lower fair value estimates. The interrelationship between these inputs is not considered significant.

The following table summarizes the activities related to contingent consideration payable for historic acquisitions:



	Three-Month Periods Ended
	June 30, 2017			July 1, 2016
	(In thousands)
Beginning balance	$	22,426		$	73,423
Additions to accrual	—			—
Payments	—			—
Fair value adjustments	(7,000		)	1,835
Ending balance	$	15,426		$	75,258

In connection with the acquisition of NEXTracker, Inc. in fiscal year 2016, the Company has an obligation to pay additional cash consideration to the former shareholders contingent upon NEXTracker, Inc.'s achievement of revenue targets during the two years after acquisition (ending on September 30, 2017). During the quarter ended June 30, 2017, the Company adjusted the estimated remaining amount to be paid based on current revenue forecasts for the quarter ending September 29, 2017 resulting in a $7.0 million credit to the condensed consolidated statement of operations.

The Company values deferred purchase price receivables relating to its asset-backed securitization program based on a discounted cash flow analysis using unobservable inputs (i.e., level 3 inputs), which are primarily risk free interest rates adjusted for the credit quality of the underlying creditor. Due to its high credit quality and short term maturity, the fair value approximates carrying value. Significant increases in either of the major unobservable inputs (credit spread, risk free interest rate) in isolation would result in lower fair value estimates, however the impact is not material. The interrelationship between these inputs is also insignificant. Refer to note 10 for a reconciliation of the change in the deferred purchase price receivable during the three-month periods ended June 30, 2017 and July 1, 2016.

There were no transfers between levels in the fair value hierarchy during the three-month periods ended June 30, 2017 and July 1, 2016.

Financial Instruments Measured at Fair Value on a Recurring Basis

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis:



	Fair Value Measurements as of June 30, 2017
	Level 1		Level 2			Level 3			Total
	(In thousands)
Assets:
Money market funds and time deposits (included in cash and cash equivalents of the condensed consolidated balance sheet)	$	—	$	576,460		$	—		$	576,460
Deferred purchase price receivable (Note 10)	—		—			547,492			547,492
Foreign exchange contracts (Note 8)	—		22,079			—			22,079
Deferred compensation plan assets:									0
Mutual funds, money market accounts and equity securities	7,806		56,041			—			63,847
Liabilities:									0
Foreign exchange contracts (Note 8)	$	—	$	(11,035	)	$	—		$	(11,035	)
Contingent consideration in connection with business acquisitions	—		—			(15,426		)	(15,426		)

	Fair Value Measurements as of March 31, 2017
	Level 1		Level 2			Level 3			Total
	(In thousands)
Assets:
Money market funds and time deposits (included in cash and cash equivalents of the condensed consolidated balance sheet)	$	—	$	1,066,841		$	—		$	1,066,841
Deferred purchase price receivable (Note 10)	—		—			506,522			506,522
Foreign exchange contracts (Note 8)	—		22,022			—			22,022
Deferred compensation plan assets:									0
Mutual funds, money market accounts and equity securities	7,062		52,680			—			59,742
Liabilities:									0
Foreign exchange contracts (Note 8)	$	—	$	(11,742	)	$	—		$	(11,742	)
Contingent consideration in connection with business acquisitions	—		—			(22,426		)	(22,426		)

Other financial instruments

The following table presents the Company’s major debts not carried at fair value:



	As of June 30, 2017				As of March 31, 2017
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Fair Value Hierarchy
	(In thousands)
4.625% Notes due February 2020	$	500,000	$	526,370	$	500,000	$	526,255	Level 1
Term Loan, including current portion, due in installments through November 2021	700,000		699,125		700,000		699,566		Level 1
Term Loan, including current portion, due in installments through June 2022 (1)	502,500		503,405		502,500		503,756		Level 1
5.000% Notes due February 2023	500,000		546,820		500,000		534,820		Level 1
4.750% Notes due June 2025	596,078		639,876		595,979		633,114		Level 1
Euro Term Loan due September 2020	55,977		55,977		53,075		53,075		Level 1
Euro Term Loan due January 2022	114,093		114,093		107,357		107,357		Level 1
Total	$	2,968,648	$	3,085,666	$	2,958,911	$	3,057,943

(1) On June 30, 2017, the Company entered into a new arrangement and extended the maturity date of the agreement from March 31, 2019 to June 30, 2022. Refer to note 6 for further details of the arrangement.

The Company values its Euro Term Loans due September 2020 and January 2022 based on the current market rate, and as of June 30, 2017, the carrying amounts approximates fair values.

The Term Loans due November 2021 and June 2022, and the Notes due February 2020, February 2023 and June 2025 are valued based on broker trading prices in active markets.