Note 5 — Cash and Cash Equivalents and Investment Securities

Cash and cash equivalents consist of bank demand deposits and time deposits. The time deposits have original terms of less than 32 days. Cash and cash equivalents are carried at cost, which approximates fair value.

The Company's investment securities consist of marketable securities related to a management deferred compensation plan and auction rate securities collateralized by residential and commercial mortgages.

The marketable securities are classified as non-current trading investments and do not have maturity dates. Since participants in the management deferred compensation plan may select the mutual funds in which their compensation deferrals are invested, and may actively trade funds within the confines of the Rabbi Trust which holds the marketable securities, the Company has designated these marketable securities as trading investments. Management has classified the investments as non-current assets because final sale of the investments or realization of proceeds by plan participants is not expected within the Company's normal operating cycle of one year. The marketable securities are recorded at a fair value of $13.1 million as of March 31, 2011, based on quoted market prices. Quoted market prices are observable inputs that are classified as Level 1 within the fair value hierarchy. Earnings, gains and losses on trading investments are included in other income (expense), net.

The auction rate securities are classified as non-current available-for-sale securities. These securities are collateralized by residential and commercial mortgages, and are second-priority senior secured floating rate notes with maturity dates in excess of 10 years. Interest rates on these notes were intended to reset through an auction every 28 days, however auctions for these securities have failed since August 2007. Four of the securities with par value of $32.2 million and estimated fair value of $0.9 million have experienced events of default, and two of these four securities have declared acceleration. The auction rate securities are currently rated below investment grade. The Company does not expect to realize the proceeds, if any, from these securities until a future auction of these securities is successful or a buyer is found outside of the auction process. The auction rate securities are reported at estimated fair value at March 31, 2011 and 2010 of $1.7 million and $1.0 million. The estimated fair value was determined by estimating future cash flows through time according to each security's terms, including periodic consideration of overcollateralization and interest coverage tests, and incorporating estimates of default rate, loss severity, prepayment, and delinquency assumptions when available, for the underlying assets in the securities based on representative indices and various research reports. The estimated coupon and principal payments are discounted at the rate of return required by investors, based on the characteristics of each security as calculated from the indices. The par value of the auction rate securities at March 31, 2011 and 2010 was $47.5 million. Declines in fair value of the auction rate securities are deemed other-than-temporary and are included in other income (expense), net. Increases in fair value are deemed not-other-than-temporary and are included in accumulated other comprehensive income (loss).

The following table presents the changes in fair value of the Company's auction rate securities during fiscal years 2011 and 2010:


	March 31,
	2011			2010
Auction rate securities, beginning balance	$	994		$	1,637
Unrealized gain		744			—
Unrealized loss		(43	)		(643	)

Auction rate securities, ending balance	$	1,695		$	994