FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2013

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

5. FAIR VALUE MEASUREMENTS

The Company adopted ASC 820, “Fair Value Measurements and Disclosures”, which provides a framework for measuring fair value under U.S. GAAP, and expanded disclosure requirements about assets and liabilities measured at fair value. The Company utilizes a hierarchy for inputs used in measuring fair value that gives the highest priority to observable inputs and the lowest priority to unobservable inputs as follows:

· Level 1—Observable unadjusted quoted prices in active markets for identical assets or liabilities.

· Level 2—Observable inputs other than quoted prices in active markets for identical assets or liabilities, for which all significant inputs are observable, either directly or indirectly.

· Level 3—Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

Assets and liabilities carried at fair value as of June 30, 2013 are classified in the categories described above based on the lowest level input that is significant to the fair value measurement in its entirety.

Recurring basis

The following table displays assets and liabilities measured on the Company’s consolidated balance sheet at fair value on a recurring basis subsequent to initial recognition:

	As of June 30, 2013
	Fair Value Measurements at Reporting Date Using
			Quoted Prices
	Total Fair		in Active		Significant
	Value and		Markets for		Other		Significant
	Carrying		Identical		Observable		Unobservable
	Value on the		Assets		Inputs		Inputs
	Balance Sheet		(Level 1)		(Level 2)		(Level 3)
Cross currency forward exchange contracts -recorded as derivative assets	1,933		—		1,933		—
Cross currency forward exchange contracts -recorded as derivative liabilities	—		—		—		—
	$	1,933	$	—	$	1,933	$	—

	As of December 31, 2012
	Fair Value Measurements at Reporting Date Using
				Quoted Prices
	Total Fair			in Active		Significant
	Value and			Markets for		Other			Significant
	Carrying			Identical		Observable			Unobservable
	Value on the			Assets		Inputs			Inputs
	Balance Sheet			(Level 1)		(Level 2)			(Level 3)
Cross currency forward exchange contracts -recorded as derivative assets	660			—		660			—
Cross currency forward exchange contracts -recorded as derivative liabilities	(975		)	—		(975		)	—
	$	(315	)	$	—	$	(315	)	$	—

Derivatives—The Company’s use of derivatives primarily consists of foreign currency forward contracts. As quoted prices in active markets for identical assets are not available, the Company uses quotes obtained from professional pricing sources. The Company performs internal validation procedures on quotes from pricing sources using valuation techniques commonly used in the industry, and also considers the credit ratings of respective counterparties in determining the impact of risk of defaults on the valuation of derivative assets. These fair value measurements are classified as level 2.

Cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accounts due to and from related parties, and short-term borrowings are carried at cost on the consolidated balance sheets and the carrying amount approximates their fair value because of the short-term nature of these financial instruments.

The carrying amount of the Company’s outstanding convertible notes as of December 31, 2012 and June 30, 2013 was $111.6 million and $111.6 million, respectively. The estimated fair value of those debts was $59.2 million and $60.3 million, as of December 31, 2012 and June 30, 2013, respectively. The fair value was measured based on observable market quotes and is therefore considered a level 1 fair value measurement.

The Company’s long-term bank borrowing consists of floating rate loans that are reset annually. The carrying amount of long-term borrowings (including the current portions) was $193.6 million and $239.0 million as of December 31, 2012 and June 30, 2013, respectively. The estimated fair value of long-term borrowings (including the current portions) was $184 million and $240.3 million as of December 31, 2012 and June 30, 2013, respectively. The fair value is measured using discounted cash flow technique based on current rates for comparable loans on the respective valuation date and it therefore considered a level 2 input.