FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES

9 Months Ended

Dec. 31, 2012

FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES

FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES

9. 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.  Deferred amounts 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 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.

The Company values available for sale investments using level 1 inputs which are active market trading 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 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 and due to its high credit quality and short term maturity their fair value approximates carrying value.  Significant increases in either of the significant unobservable inputs (credit spread, risk free interest rate) in isolation would result in lower fair value estimates, but is insignificant. The interrelationship between these inputs is also insignificant.  Refer to note 8 to the condensed consolidated financial statements for a reconciliation of the change in the deferred purchase price receivable during the nine-month periods ended December 31, 2012 and December 31, 2011.

The Company has warrants to purchase up to 1.35 million shares of the common stock of a certain supplier at a weighted-average price of $7.33 per share.  The warrants expire on May 18, 2018.  These fully vested warrants, which are derivative instruments, are to be fair valued at each reporting date with gains or losses from changes in fair value recognized in the condensed consolidated statements of operations.  The Company values these warrants based on the Black-Scholes option-valuation model using unobservable inputs classified as level 3 in the fair value hierarchy.  Significant changes in any of the significant unobservable inputs in isolation would result in a change in the fair value estimate, but in each case, the amount would be insignificant.  As of December 31, 2012, the Company used the following assumptions to fair value these warrants:

	As of December 31, 2012
Remaining life	5.4
Volatility	53	%
Dividend yield	0	%
Risk-free rate	0.81	%

The following table summarizes the changes in the fair value adjustment of these warrants:

	Amount
	(In thousands)
Balance, March 31, 2012	$	—
Fair value adjustment	23,000
Balance, September 28, 2012	23,000
Fair value adjustment	41,761
Balance, December 31, 2012	$	64,761

There were no transfers between levels in the fair value hierarchy during the three-month and nine-month periods ended December 31, 2012 and December 31, 2011.

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 December 31, 2012
	Level 1		Level 2			Level 3		Total
	(In thousands)
Assets:
Money market funds and time deposits (Note 2)	$	—	$	495,829		$	—	$	495,829
Deferred purchase price receivable (Note 8)	—		—			462,014		462,014
Foreign exchange forward contracts (Note 7)	—		24,789			—		24,789
Available for sale investments	1,775		—			—		1,775
Warrants to purchase common shares (Note 2)	—		—			64,761		64,761
Deferred compensation plan assets:
Mutual funds, money market accounts and equity securities	6,066		39,939			—		46,005
Liabilities:
Foreign exchange forward contracts (Note 7)	$	—	$	(15,294	)	$	—	$	(15,294	)

	Fair Value Measurements as of March 31, 2012
	Level 1		Level 2			Level 3		Total
	(In thousands)
Assets:
Money market funds and time deposits (Note 2)	$	—	$	343,906		$	—	$	343,906
Deferred purchase price receivable (Note 8)	—		—			514,895		514,895
Foreign exchange forward contracts (Note 7)	—		20,969			—		20,969
Available for sale investments	5,994		—			—		5,994
Deferred compensation plan assets:
Mutual funds, money market accounts and equity securities	3,411		54,241			—		57,652
Liabilities:
Foreign exchange forward contracts (Note 7)	$	—	$	(8,105	)	$	—	$	(8,105	)

Assets Measured at Fair Value on a Nonrecurring Basis

The Company has certain long-lived assets that are measured at fair value on a nonrecurring basis as these assets are recorded at the lesser of the carrying value or fair value, which is based on comparable sales from prevailing market data (level 2 inputs).  The following presents the Company’s long-lived assets measured at fair value on a nonrecurring basis:

	Fair Value Measurements as of December 31, 2012
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Assets held for sale	$	—	$	16,871	$	—	$	16,871
Property and equipment	—		18,367		—		18,367

	Fair Value Measurements as of March 31, 2012
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Assets held for sale	$	—	$	16,701	$	—	$	16,701

Assets held for sale

As of December 31, 2012 and March 31, 2012, no impairment charges were recorded for assets that were no longer in use and held for sale which exclude those assets that have been identified as relating to discontinued operations as discussed further in note 14 to the condensed consolidated financial statements.  The assets held for sale primarily represent manufacturing facilities that have been closed as part of the Company’s historical facility consolidations.

Property and equipment

During the three-month period December 31, 2012, the Company recognized impairment charges relating to certain held and used long-lived assets as a result of its restructuring activities as further discussed in note 10 to the condensed consolidated financial statements.

There were no material fair value adjustments or other transfers between levels in the fair value hierarchy for these long-lived assets during the three-month and nine-month periods ended December 31, 2012 and December 31, 2011.

Other financial instruments

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

	As of December 31, 2012				As of March 31, 2012
	Carrying		Fair		Carrying		Fair		Fair Value
	Amount		Value		Amount		Value		Hierarchy
	(In thousands)
Term loan dated October 1, 2007	$	1,170,340	$	1,180,580	$	1,179,595	$	1,171,959	Level 1
Term loan dated October 19, 2011	517,500		519,441		487,500		482,625		Level 1
Asia term loans	375,500		378,786		377,000		374,394		Level 2
Revolving credit facility	—		—		140,000		140,000		Level 2
Total	$	2,063,340	$	2,078,807	$	2,184,095	$	2,168,978

Revolving credit facility - The carrying amount, if any, approximates fair value due to the short term nature of the interest rates underlying any borrowings under this facility, though the facility itself is available to the Company on a long term basis.

Term loans dated October 1, 2007 and October 19, 2011 - The term loans are valued based on broker trading prices in active markets.

Asia term loans - The Company’s Asia Term Loans are not traded publicly; however, as the pricing, maturity and other pertinent terms of these loans closely approximate those of the Term Loan Agreements dated October 1, 2007, and October 19, 2011, management estimates the respective trading prices would be approximately the same.