FAIR VALUE MEASUREMENTS

6 Months Ended

Sep. 30, 2012

FAIR VALUE MEASUREMENTS

NOTE 5 – FAIR VALUE MEASUREMENTS

The following tables present the Company’s financial assets and liabilities measured on a recurring basis using the fair value hierarchy as of September 30, 2012 and March 31, 2012. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs, and Level 3 includes fair values estimated using significant non-observable inputs.

	Fair Value Measurements at September 30, 2012
	Level 1		Level 2			Level 3			Total
ASSETS:
Cash and cash equivalents	$	160,386	$	0		$	0		$	160,386
U.S. government and municipal obligations		29,817		0			0			29,817
Commercial paper		0		26,671			0			26,671
Corporate bonds		13,209		0			0			13,209
Certificate of deposits		0		5,522			0			5,522
Derivative financial instruments		0		313			0			313
	$	203,412	$	32,506		$	0		$	235,918
LIABILITIES:
Contingent consideration	$	0	$	0		$	(6,488	)	$	(6,488	)
Contingent contractual non-compliance liability		0		0			(565	)		(565	)
Derivative financial instruments		0		(22	)		0			(22	)
	$	0	$	(22	)	$	(7,053	)	$	(7,075	)

	Fair Value Measurements at March 31, 2012
	Level 1		Level 2			Level 3			Total
ASSETS:
Cash and cash equivalents	$	117,255	$	0		$	0		$	117,255
U.S. government and municipal obligations		31,635		0			0			31,635
Commercial paper		0		22,469			0			22,469
Corporate bonds		19,877		0			0			19,877
Certificate of deposits		0		3,207			0			3,207
Auction rate securities		0		17,612			1,461			19,073
Derivative financial instruments		0		150			0			150
	$	168,767	$	43,438		$	1,461		$	213,666
LIABILITIES:
Contingent consideration	$	0	$	0		$	(8,213	)	$	(8,213	)
Contingent contractual non-compliance liability		0		0			(700	)		(700	)
Derivative financial instruments		0		(166	)		0			(166	)
	$	0	$	(166	)	$	(8,913	)	$	(9,079	)

This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. On a recurring basis, the Company measures certain financial assets and liabilities at fair value, including marketable securities and derivative financial instruments.

The Company’s Level 1 investments are classified as such because they are valued using quoted market prices or alternative pricing sources with reasonable levels of price transparency.

The Company’s Level 2 investments are classified as such because fair value is being calculated using data from similar but not identical sources, or a discounted cash flow model using the contractual interest rate as compared to the underlying interest yield curve. The Company’s short-term auction rate securities at March 31, 2012 were classified as Level 2 since the amounts were based upon redemption notices for an inactive market. The Company’s derivative financial instruments consist of forward foreign exchange contracts and are classified as Level 2 because the fair values of these derivatives are determined using models based on market observable inputs, including spot prices for foreign currencies, as well as an interest rate factor. Commercial paper and certificate of deposits are classified as Level 2 because the Company uses market information from similar but not identical instruments and discounted cash flow models based on interest rate yield curves to determine fair value. For further information on the Company’s derivative instruments refer to Note 9.

The Company’s long-term auction rate securities at March 31, 2012 were classified as Level 3 in the fair value hierarchy due to the limited market data for pricing these securities and the subjective factors considered to create a liquidity discount. The Company’s contingent purchase consideration and contingent contractual non-compliance liability are valued by probability weighting expected payment scenarios and then applying a discount based on the present value of the future cash flow streams. The Company has elected to account for the contractual non-compliance liability at fair value. This election has been made as both contingent liabilities are related. The fair value election created parity between the two items during the settlement period. These liabilities are classified as Level 3 because the probability weighting of future payment scenarios is based on assumptions developed by management.

The following table sets forth a reconciliation of changes in the fair value of the Company’s Level 3 financial assets for the six months ended September 30, 2012 (in thousands):

	Auction Rate Securities			Contingent Purchase Consideration			Contingent Contractual Non-compliance Liability
Balance at beginning of period	$	1,461		$	(8,213	)	$	(700	)
Change in fair value (included within research and development expense)		0			(631	)		135
ARSs redeemed by issuers		(1,650	)		0			0
Unrealized gains included in accumulated other comprehensive income (loss)		190			0			0
Unrealized gain (loss) included in earnings		(1	)		0			0
Payments		0			2,356			0
Balance at end of period	$	0		$	(6,488	)	$	(565	)

The Company has updated the probabilities used in the fair value calculation of the contingent liability at September 30, 2012 which resulted in an additional liability of $356 thousand included as part of earnings for the six months ended September 30, 2012. The fair value of the contingent consideration was estimated by applying a probability based model, which utilizes significant inputs that are unobservable in the market. Key assumptions include a 3.3% discount rate, a stay period of two or three years and a percent weighted-probability of settlement of the contingent contractual non-compliance liability. Deal related compensation expense and accretion charges for the six months ended September 30, 2012 was $140 thousand and was included as part of earnings.

During the quarter ended June 30, 2012, the Level 3 liabilities were adjusted by $135 thousand related to the contractual non-compliance liability. This adjustment increased the contingent purchase consideration and decreased the contingent contractual non-compliance liability. All amounts were accurately reflected in purchase accounting and there was no impact to earnings in the post-acquisition period.