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 at its fair value.

The following table summarizes the assets as of September 30, 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 September 30, 2015		Total Loss for the Three Months Ended September 30, 2015			Total Loss for the Six Months Ended September 30, 2015
Inventories	$	—	$	12,118	$	—	$	12,118	$	—		$	(5,439	)
Assets held for sale	—		33,647		—		33,647		(12,169		)	(22,031		)
Goodwill	—		—		52,404		52,404		(22,274		)	(22,274		)
Total assets	$	—	$	45,765	$	52,404	$	98,169	$	(34,443	)	$	(49,744	)

The following table summarizes the assets as of September 30, 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 September 30, 2014		Total Loss for the Three Months Ended September 30, 2014			Total Loss for the Six Months Ended September 30, 2014
Inventories	$	—	$	19,446	$	—	$	19,446	$	(3,362	)	$	(3,362	)
Assets held for sale	—		4,650		—		4,650		(558		)	(3,137		)
Total assets	$	—	$	24,096	$	—	$	24,096	$	(3,920	)	$	(6,499	)

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.

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 loss for the three and six months ended September 30, 2015 related to 10 and 11 aircraft held for sale, respectively, and the loss for the three and six months ended September 30, 2014 related to two and six aircraft held for sale, respectively.

The fair value of goodwill and other intangible assets is estimated using a variety of valuation methods, including the income and market approaches. These estimates of fair value include unobservable inputs, representative of Level 3 fair value measurement, including assumptions related to future performance, such as projected demand for our services and rates. For further details on our goodwill and other intangible assets, see Note 1.

Recurring Fair Value Measurements

The following table summarizes the financial instruments we had as of September 30, 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 September 30, 2015		Balance Sheet Classification
Rabbi Trust investments	$	2,219	$	—	$	—	$	2,219	Other assets
Total assets	$	2,219	$	—	$	—	$	2,219

Contingent consideration: ⁽¹⁾
Current	$	—	$	—	$	28,727	$	28,727	Other accrued liabilities
Long-term	—		—		2,444		2,444		Other liabilities and deferred credits
Total liabilities	$	—	$	—	$	31,171	$	31,171

______________


⁽¹⁾	Relates to our investment in Cougar Helicopters Inc. (“Cougar”) totaling $25.0 million and the acquisition of Airnorth totaling $6.2 million. For further details on Cougar and Airnorth, see Notes 2 and 3 to the fiscal year 2015 Financial Statements.

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 investment in Cougar totaling $32.5 million and Airnorth totaling $6.4 million. For further details on Cougar and Airnorth, see Notes 2 and 3 to the fiscal year 2015 Financial Statements.

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.

The following table provides a rollforward of the contingent consideration liability Level 3 fair value measurements during the six months ended September 30, 2015 (in thousands):



	Significant Unobservable Inputs (Level 3)
Balance as of March 31, 2015	$	38,905
Change in fair value of contingent consideration	266
Payment of Cougar second year earn-out	(8,000		)
Balance as of September 30, 2015	$	31,171

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 condensed consolidated statements of operations. 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 September 30 and March 31, 2015, the discount rate approximated 4% for the contingent consideration related to Cougar and 2% for the contingent consideration related to Airnorth.

Fair Value of Debt

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):



	September 30, 2015				March 31, 2015
	Carrying Value		Fair Value		Carrying Value		Fair Value
6¼% Senior Notes	$	401,535	$	345,320	$	401,535	$	381,458
Term Loan	342,611		342,611		222,179		222,179
Revolving Credit Facility	223,800		223,800		83,800		83,800
Airnorth debt	20,839		20,839		23,119		23,119
Eastern Airways debt	14,595		14,595		19,680		19,680
3% Convertible Senior Notes	—		—		114,109		115,288
	$	1,003,380	$	947,165	$	864,422	$	845,524

Other

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