Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v2.4.0.8
Fair Value Measurements
 9 Months Ended
Dec. 31, 2013
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements
Fair Value. We measure fair value based on authoritative accounting guidance, which defines fair value, establishes a framework for measuring fair value and expands on required disclosures regarding fair value measurements.
Inputs are referred to as assumptions that market participants would use in pricing the asset or liability. The uses of inputs in the valuation process are categorized into a three-level fair value hierarchy.
•
Level 1 — uses quoted prices in active markets for identical assets or liabilities we have the ability to access.
•
Level 2 — uses observable inputs other than quoted prices in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
•
Level 3 — uses one or more significant inputs that are unobservable and supported by little or no market activity, and that reflect the use of significant management judgment. 
Financial assets and liabilities with carrying amounts approximating fair value include cash, trade accounts receivable, accounts payable, accrued expenses and other current liabilities. The carrying amount of these financial assets and liabilities approximates fair value because of their short maturities.  At December 31, 2013 and March 31, 2013, no assets or liabilities were valued using Level 3 criteria. 
Information about our long-term debt that is not measured at fair value is as follows:
 
December 31, 2013
 
March 31, 2013
 
 
 
Carrying
Value
 
Fair Value
 
Carrying
Value
 
Fair Value
 
Valuation Technique
Financial Liabilities
 

 
 

 
 

 
 

 
 
Long-term debt
$
124,875

 
$
124,875

 
$
118,145

 
$
131,436

 
Level 2 - Market Approach
 
At December 31, 2013, the fair value of our variable rate term loan approximates its carrying value as we pay interest based on the current market rate.  As the quoted price is only available for similar financial assets, the Company concluded the pricing is indirectly observable through dealers and has been classified as Level 2.  Differences between the fair value and the carrying value for the senior secured notes as of March 31, 2013 are primarily due to the instruments' fixed interest rate. Inherently, such instruments are subject to fluctuations in fair value due to movements in interest rates.
Foreign Currency Forward Contracts
We transact business in various foreign currencies and have established a program that primarily utilizes foreign currency forward contracts to offset the risk associated with the effects of certain foreign currency exposures. Under this program, increases or decreases in our foreign currency exposures are offset by gains or losses on the forward contracts to mitigate foreign currency transaction gains or losses. These foreign currency exposures typically arise from intercompany transactions. Our forward contracts generally have terms of 30 days. We do not use forward contracts for trading purposes or designate these forward contracts as hedging instruments pursuant to ASC 815. We adjust the carrying amount of all contracts to their fair value at the end of each reporting period and unrealized gains and losses are included in our results of operations for that period. These gains and losses largely offset gains and losses resulting from settlement of payments received from our foreign operations which are settled in U.S. dollars. The fair value is determined by quoted prices from active foreign currency markets (Level 2 fair value).  The condensed consolidated balance sheets reflect unrealized gains within accounts receivable, net and unrealized losses within accrued liabilities. Our ultimate realized gain or loss with respect to currency fluctuations will depend on the currency exchange rates and other factors in effect as the contracts mature. As of December 31, 2013 and March 31, 2013, the notional amounts of forward contracts we held to buy U.S. Dollars in exchange for other major international currencies were as follows:
Notional amount of foreign currency forward contracts by currency
 
December 31, 2013
 
March 31, 2013
Russian Ruble
$
544

 
$
4,233

Euro
7,077

 
2,510

Canadian Dollar
2,034

 
2,134

South Korean Won
—

 
919

Other
—

 
329

Total notional amounts
$
9,655

 
$
10,125




The following table represents the fair value of our foreign currency forward contracts:
 
 
December 31, 2013
 
March 31, 2013
 
 
Fair Value
 
Fair Value
 
 
Assets
Liabilities
 
Assets
Liabilities
Foreign currency forward contracts
 
$
2

$
16

 
$
87

$
32


Foreign currency gains or losses related to our forward contracts in the accompanying condensed consolidated statements of comprehensive income were losses of $144 and $350 for the three and nine months ended December 31, 2013, respectively, and losses of $425 and $164 for the three and nine months ended December 31, 2012, respectively. Gains and losses from our forward contracts were offset by transaction gains or losses incurred with the settlement of transactions denominated in foreign currencies. Our net foreign currency losses were $117 and $353 for the three and nine months ended December 31, 2013, respectively, and losses of $242 and $181 for the three and nine months ended December 31, 2012, respectively.
Interest Rate Swap
On June 13, 2013, the Company entered into an interest rate swap contract to reduce the exposure to interest rate fluctuations associated with its variable rate term loan. Under the agreement we will pay a fixed amount and receive or make payments based on a variable rate. Effective July 1, 2013, the Company designated the interest rate swap contract as a cash flow hedge pursuant to ASC 815. The Company formally documents all relationships between the hedging instrument and hedged item, its risk management objective and strategy, as well as counter-party creditworthiness. At each reporting period our interest rate swap contract is adjusted to fair value based on dealer quotes, which consider forward curves and volatility levels (Level 2 Fair Value). Unrealized gains, representing derivative assets, are reported within accounts receivable, net and unrealized losses, representing derivative liabilities, are reported within accrued liabilities on the accompanying condensed consolidated balance sheets. As of December 31, 2013, the fair value of the interest rate swap contract was an unrealized gain of $90. The change in fair value of the derivative instruments is recorded in accumulated other comprehensive income to the extent the derivative instruments are deemed effective. Ineffectiveness is measured based on the changes in fair value of the interest rate swap contract and the change in fair value of the hypothetical derivative and is recognized in earnings in the period in which ineffectiveness is realized. Based on the criteria established by ASC 815, the interest rate swap contract is deemed to be highly effective. Any realized gains or losses resulting from the interest rate swap contract are recognized within interest expense. Gains and losses from our interest rate swap contract are offset by changes in the variable interest rate on our term loan. Since the effective date of our interest rate swap contract, interest expense on outstanding principal was 3.62%. We have hedged 100% of the outstanding principal on our variable rate term loan through its maturity date.
The following table summarizes the aggregate unrealized gain in accumulated other comprehensive loss, and the losses reclassified into earnings for the three and nine months ended December 31, 2013 (amounts in thousands):
 
 Three Months Ended December 31, 2013
 
 Nine Months Ended December 31, 2013
Unrealized gain/(loss) at beginning of the period
$
(304
)
 
$
—

Add: gain/(loss) from change in fair value of cash flow hedge
91

 
(418
)
Less: Loss reclassified to earnings from effective hedge
(303
)
 
(508
)
Unrealized gain at end of the period
$
90

 
$
90


We did not have any interest rate swaps during the three and nine months ended December 31, 2012.

Transfers out of accumulated other comprehensive loss
During the three and nine months ended December 31, 2013 and 2012, there were no transfers out of accumulated other comprehensive loss except for realized losses from our interest rate swap contract presented in the preceding table, which were recorded within interest expense. During the three and nine months ended December 31, 2013, there were no reclassifications out of other comprehensive loss due to hedge ineffectiveness.