Cash, Cash Equivalents And Marketable Securities

12 Months Ended

Mar. 31, 2012

Cash, Cash Equivalents And Marketable Securities [Abstract]

Cash, Cash Equivalents And Marketable Securities

NOTE 3 – CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES

Cash and cash equivalents consisted of money market instruments and cash maintained with various financial institutions at March 31, 2012 and 2011.

The following is a summary of marketable securities held by NetScout at March 31, 2012 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	$	17,779	$	20		$	17,799
Commercial paper		22,469		0			22,469
Corporate bonds		18,531		(1	)		18,530
Certificates of deposit		3,208		(1	)		3,207
Auction rate securities		17,612		0			17,612
Total short-term marketable securities		79,599		18			79,617
Auction rate securities		1,651		(190	)		1,461
U.S. government and municipal obligations		13,828		8			13,836
Corporate bonds		1,345		2			1,347
Total long-term marketable securities		16,824		(180	)		16,644
Total marketable securities	$	96,423	$	(162	)	$	96,261

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 March 31, 2012 and March 31, 2011 were as follows (in thousands):

	March 31, 2012		March 31, 2011
Available-for-sale securities:
Due in 1 year or less	$	79,617	$	133,430
Due after 1 year through 5 years		15,183		10,398
Due after 10 years		1,461		17,482
	$	96,261	$	161,310

During the year ended March 31, 2012, redemptions by the issuers for certain of the Company's auction rate securities totaling $4.5 million were settled at par. In addition, subsequent to our fiscal year ended March 31, 2012, the Company was notified that a total of $17.6 million would be settled at par on June 1, 2012. As a result, the Company has classified $17.6 million under short-term marketable securities on its consolidated balance sheet. The remaining auction rate securities are classified as long-term marketable securities.

The Company's long-term marketable securities include investments in auction rate securities. Beginning in February 2008 and continuing through March 31, 2012, auctions have failed resulting in a lack of short-term liquidity for these securities, which has caused the Company to classify $1.5 million as long-term on its consolidated balance sheet. As of March 31, 2012, the Company's auction rate securities consisted of three positions issued by municipal agencies with a total par value of $19.3 million and a current estimated market value totaling $19.1 million. As of March 31, 2012, the portion of these investments reported under long-term 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 March 31, 2012 and 2011, the Company valued its long-term auction rate securities at fair value using a discounted cash flow model. At March 31, 2012, the Company valued the portion of auction rate securities in short-term marketable securities scheduled for redemption at par which represents fair value. The discounted cash flow 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 March 31, 2012, historical spreads in comparison to U.S. Treasuries, and a liquidity risk premium. As these securities have retained investment grade credit ratings with Standard and Poor's, 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 $190 thousand ($117 thousand, net of tax) as of March 31, 2012 recorded within accumulated other comprehensive income (loss) on the balance sheet. This represents a reduction in the valuation reserve of $2.1 million ($1.3 million, net of tax) during the fiscal year ended March 31, 2012 reflecting scheduled redemptions at par. The valuation is also impacted by 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.