Marketable Securities and Fair Value Measurements

12 Months Ended

Mar. 31, 2013

Marketable Securities and Fair Value Measurements

Note 3. Marketable Securities and Fair Value Measurements

Marketable Securities

The Company’s marketable securities are classified as available-for-sale securities and, accordingly, are recorded at fair value. The difference between amortized cost and fair value is included in stockholders’ equity.

The Company’s marketable securities at March 31, 2013 and 2012 are classified on the balance sheet as follows (in thousands):

	March 31,
	2013		2012
	(in $000’s)
Short-term marketable securities	$	67,256	$	71,233
Long-term marketable securities		11,406		—
	$	78,662	$	71,233

The Company’s marketable securities at March 31, 2013 and 2012 are invested in the following (in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Market Value
	(in $000’s)
At March 31, 2013:
US Treasury securities	$	59,002	$	—	$	—		$	59,002
Short-term government-backed securities		8,126		1		—			8,127
Long-term government-backed securities		11,405		3		(2	)		11,406
Accrued interest		127		—		—			127
	$	78,660	$	4	$	(2	)	$	78,662

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Market Value
	(in $000’s)
At March 31, 2012:
US Treasury securities	$	71,233	$	—	$	—	$	71,233

Fair Value Hierarchy

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange-traded instruments and listed equities.

Level 2 includes financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including time value, yield curve, volatility factors, prepayment speeds, default rates, loss severity, current market and contractual prices for the underlying financial instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.

Level 3 is comprised of unobservable inputs that are supported by little or no market activity. Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable.

The following table presents the Company’s fair value hierarchy for its financial instruments measured at fair value as of March 31, 2013 and 2012:

	Level 1		Level 2		Level 3		Total
At March 31, 2013:
U.S. Treasury securities	$	—	$	59,020	$	—	$	59,020
Short-term government-backed securities		—		8,236		—		8,236
Long-term government-backed securities		—		11,406		—		11,406
	$	—	$	78,662	$	—	$	78,662

	Level 1		Level 2		Level 3		Total
	(in $000’s)
At March 31, 2012:
U.S. Treasury securities	$	—	$	71,233	$	—	$	71,233

During fiscal 2013, the Company reevaluated the methodologies used by third-party brokers in determining the estimated fair value of its investments in U.S. Treasury securities. After this analysis, the Company determined that the fair value of U.S. Treasuries should be reported as Level 2. In prior years, U.S. Treasury securities were incorrectly classified as Level 1. The Company has corrected the prior year presentation of these amounts, which conforms with the current year presentation. These corrections in the disclosed classification had no effect on the reported fair values of these instruments.