CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES

3 Months Ended

Jun. 30, 2012

CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES

NOTE 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 June 30, 2012 and March 31, 2012.

Marketable Securities

The following is a summary of marketable securities held by NetScout at June 30, 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	$	26,711	$	14		$	26,725
Commercial paper		32,359		2			32,361
Corporate bonds		12,222		(4	)		12,218
Certificates of deposit		3,214		(1	)		3,213
Total short-term marketable securities		74,506		11			74,517
U.S. government and municipal obligations		28,161		(15	)		28,146
Corporate bonds		1,545		(1	)		1,544
Total long-term marketable securities		29,706		(16	)		29,690
Total marketable securities	$	104,212	$	(5	)	$	104,207

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

Contractual maturities of the Company’s marketable securities held at June 30, 2012 and March 31, 2012 were as follows (in thousands):

	June 30, 2012		March 31, 2012
Available-for-sale securities:
Due in 1 year or less	$	74,517	$	79,617
Due after 1 year through 5 years		29,690		15,183
Due after 10 years		0		1,461
	$	104,207	$	96,261

During the quarter ended June 30, 2012, redemptions by the issuers for the Company’s remaining auction rate securities totaling $19.3 million were settled at par, $17.6 million of which was classified under current marketable securities as of March 31, 2012 and another $1.7 million redeemed at par from long-term marketable securities. As a result of the settlements, during the three months ended June 30, 2012, the Company reversed the remaining valuation reserve of $190 thousand ($117 thousand, net of tax) previously recorded within accumulated other comprehensive income (loss) on the balance sheet. The Company held no investments in auction rate securities at June 30, 2012.

At March 31, 2012, the Company valued its long-term auction rate securities at fair value using a discounted cash flow model. The Company valued the portion of auction rate securities in short-term marketable securities scheduled for redemption at par which represented 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 discounted the estimated future interest income using a risk based discount rate that considered 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 had retained investment grade credit ratings with Standard and Poor’s, the Company had not applied a credit spread to its discount rate.