Cash, Cash Equivalents And Marketable Securities

6 Months Ended

Sep. 30, 2011

Cash, Cash Equivalents And Marketable Securities [Abstract]

Cash, Cash Equivalents And Marketable Securities

4. Cash, Cash Equivalents and Marketable Securities

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents and those investments with original maturities greater than three months to be marketable securities. Cash and cash equivalents consisted of money market instruments and cash maintained with various financial institutions at September 30, 2011 and March 31, 2011.

Marketable Securities

The following is a summary of marketable securities held by NetScout at September 30, 2011 classified as short-term and long-term (in thousands):

	Amortized Cost		Unrealized Gains  (Losses)			Fair Value
Type of security:
U.S. government and municipal obligations	$	16,768	$	(3	)	$	16,765
Commercial paper		25,083		(1	)		25,082
Corporate bonds		25,404		14			25,418
Certificates of deposit		1,257		(2	)		1,255
Total short-term marketable securities		68,512		8			68,520
Auction rate securities		19,517		(2,145	)		17,372
U.S. government and municipal obligations		8,833		(17	)		8,816
Corporate bonds		339		1			340
Total long-term marketable securities		28,689		(2,161	)		26,528
Total marketable securities	$	97,201	$	(2,153	)	$	95,048

The following is a summary of marketable securities held by NetScout at March 31, 2011, classified as short-term and long-term (in thousands):

	Amortized Cost		Unrealized Gains  (Losses)			Fair Value
Type of security:
U.S. government and municipal obligations	$	86,670	$	(1	)	$	86,669
Commercial paper		24,111		(1	)		24,110
Corporate bonds		13,364		17			13,381
Certificates of deposit		5,251		12			5,263
Auction rate securities		4,007		0			4,007
Total short-term marketable securities		133,403		27			133,430
Auction rate securities		19,784		(2,302	)		17,482
U.S. government and municipal obligations		8,716		3			8,719
Corporate bonds		1,678		1			1,679
Total long-term marketable securities		30,178		(2,298	)		27,880
Total marketable securities	$	163,581	$	(2,271	)	$	161,310

 Contractual maturities of the Company's marketable securities held at September 30, 2011 and March 31, 2011 were as follows (in thousands):

	September 30, 2011		March 31, 2011
Available-for-sale securities:
Due in 1 year or less	$	68,520	$	133,430
Due after 1 year through 5 years		9,156		10,398
Due after 10 years		17,372		17,482
	$	95,048	$	161,310

The Company's long-term marketable securities include investments in auction rate securities. Beginning in February 2008 and continuing through September 30, 2011, auctions have failed resulting in a lack of short-term liquidity for these securities, which has caused the Company to classify $17.4 million as long-term on its consolidated balance sheet. As of September 30, 2011, the Company's auction rate securities consisted of three positions issued by municipal agencies with a total par value of $19.5 million and a current estimated market value totaling $17.4 million. As of September 30, 2011, these marketable securities were AAA rated. The securities are collateralized by student loans with underlying support by the federal government through the Federal Family Education Loan Program and by monoline insurance companies.

At September 30, 2011, the Company valued its outstanding long-term auction rate securities at fair value using a discounted cash flow model. This model estimated future interest income using maximum rate formulas applicable to each of these securities which consider historical spreads for benchmark rates included in these formulas as well as rates for U.S. Treasuries. The model then discounts the estimated future interest income using a risk based discount rate that considers known U.S. Treasury yields as of September 30, 2011, historical spreads in comparison to U.S. Treasuries, and a liquidity risk premium. As these securities have retained investment grade credit ratings, the Company has not applied a credit spread to its discount rate. The valuation also includes assumptions as to when these securities will return to liquidity, of which the weighted average period is estimated at between 51 and 55 months depending on the security being valued. This valuation resulted in a cumulative temporary decline in value of $2.1 million ($1.3 million, net of tax) as of September 30, 2011 recorded within accumulated other comprehensive income (loss) on the balance sheet. This represents a reduction in the valuation reserve of $112 thousand ($71 thousand, net of tax) during the three months ended September 30, 2011 reflecting changes in market interest rates used to value the securities. To the extent the Company determines that any impairment is other-than-temporary, the Company would record a charge to earnings.

The Company has the ability and intent to hold these securities until a recovery in the auction process or other liquidity event occurs. Based on the Company's current cash position, expected operating cash flows and the Company's other sources of cash, the Company does not believe that it is more likely than not that it will be required to sell the securities before a recovery in the auction process or other liquidity event occurs. Additionally, the Company believes that the present value of expected future cash flows consisting of interest payments and the return of principal is sufficient to recover the amortized cost basis of the securities and expects to collect these cash flows. Therefore, the Company does not believe that the decline in value of its auction rate securities is other than temporary, or that any portion of the temporary decline is the result of a credit loss.