Note 3 – Cash and Cash Equivalents and Investments

The Company’s cash equivalents consist primarily of investments in money market funds as follows (in thousands):



	June 30, 2012		March 31, 2012
Cash	$	5,410	$	3,407
Cash equivalents:
Money market funds		8,005		16,453
Total cash and cash equivalents	$	13,415	$	19,860

The Company’s portfolio of short-term and long-term investments is as follows (in thousands):



	June 30, 2012
		Amortized		Unrealized		Unrealized		Carrying
		Cost		Gain		Loss		Value
Short-term investments:
Trading securities:
Equity mutual funds related to NQDCP	$	8,616	$	-	$	-	$	8,616
Available-for-sale securities:
Municipal bonds		46,438		60		(55)		46,443
Corporate bonds		41,364		68		(57)		41,375
Government agency bonds		29,633		36		(12)		29,657
Certificates of deposits		8,177		3		(13)		8,167
Total short-term investments	$	134,228	$	167	$	(137)	$	134,258

Long-term investments:
Available-for sale securities	$	15,300	$	-	$	(1,700)	$	13,600

	March 31, 2012
		Amortized		Unrealized		Unrealized		Carrying
		Cost		Gain		Loss		Value
Short-term investments:
Trading securities
Equity mutual funds related to NQDCP	$	8,650	$	-	$	-	$	8,650
Available-for-sale securities:
Municipal bonds		32,250		39		(21)		32,268
Corporate bonds		36,912		68		(33)		36,947
Government agency bonds		25,984		33		(7)		26,010
Certificates of deposits		7,267		4		(9)		7,262
Total short-term investments	$	111,063	$	144	$	(70)	$	111,137

Long-term investments:
Available-for sale securities	$	28,050	$	-	$	(2,150)	$	25,900

The Company’s short-term and long-term investments by contractual maturity are as follows (in thousands):



	June 30, 2012		March 31, 2012
Short-term investment:
Trading securities:
Due in one year or less	$	8,616	$	8,650
Available-for-sale securities:
Due in 12 months or less		58,873		62,504
Due in 12 to 24 months		27,394		29,903
Due in 24 to 36 months		15,033		2,682
Due in 36 to 49 months		24,342		7,398
Total short-term investments	$	134,258	$	111,137
Long-term investment:
Available-for-sale securities at fair value:
Due after ten years	$	13,600	$	25,900
Total long-term investments	$	13,600	$	25,900

Short-term investments classified as trading securities consisted entirely of investments in mutual funds held by the Company’s Non-Qualified Deferred Compensation Plan (“NQDCP”). Unrealized gains (losses) on trading securities are recorded in the Condensed Consolidated Statement of Income. Unrealized loss on trading securities was $97,000 for the three months ended June 30, 2012 compared to a gain of $99,000 for the same period of the prior fiscal year.

The Company’s available-for-sale portfolio as of June 30, 2012 was comprised of municipal bonds, corporate bonds, government agency bonds, certificates of deposits and ARS. Unrealized gains (losses) on available-for-sale securities are recorded in other comprehensive income as increases (declines) in fair values and are considered to be temporary.

During the three months ended June 30, 2012, the Company disposed of short-term available-for-sale securities totaling $25,765,000 at par, compared to $67,347,000 for the same period of the prior fiscal year. The realized gains and losses of these transactions were immaterial.

The Company’s ARS have contractual maturities between 25 and 29 years. They are in the form of auction rate bonds whose interest rates had historically been reset every thirty-five days through an auction process. At the end of each reset period, investors could sell or continue to hold the securities at par. These ARS held by the Company are backed by pools of student loans and are primarily guaranteed by the U.S. Department of Education, although the credit rating of one ARS with a par value of $12,800,000 was reduced to AA+ by S&P in February 2012 and to A with a negative outlook by Fitch in June 2012.

ARS with a par value of $15,300,000, whose carrying value was $13,600,000, were classified as non-current assets and were presented as long-term investments on the Company’s balance sheet as of June 30, 2012.

The Company has concluded that the decline in fair value of the ARS investments as of June 30, 2012 is considered to be temporary in part due to the following:

· these investments are of investment grade credit quality and a significant portion of them are collateralized and are guaranteed by the U.S. Department of Education;

as of June 30, 2012, there have been no defaults on the ARS held by the Company;

of the two ARS holdings, the credit rating of one with a par value of $12,800,000 was reduced to AA+ by S&P in February 2012 and to A with a negative outlook by Fitch in June 2012. The other ARS investment still holds a AAA or Aaa credit rating, which has not been reduced as of or subsequent to June 30, 2012.

the Company has the intent and ability to hold these investments until the anticipated recovery in market value occurs or they are redeemed at par value; and

to the extent the Company’s ARS have been redeemed, they were redeemed at par value. The Company received ARS redemptions at par value of $4,700,000, $36,450,000 and $19,250,000, all at par value in fiscal years 2012, 2011 and 2010, respectively. Additionally, during the three months ended June 30, 2012, two of its ARS were fully or partially redeemed at par value for $12,750,000.

If uncertainties in the credit and capital markets continue or these markets deteriorate further, the Company may incur additional temporary impairment to its ARS holdings. The Company will continue to monitor its ARS holdings and may be required to record an impairment charge through the income statement if the decline in fair value is determined to be other-than-temporary or the credit quality of its ARS holdings declines.