Fair Value Measurements

12 Months Ended

Mar. 31, 2012

Fair Value Disclosures [Abstract]

Fair Value Measurements

(3)           Fair Value Measurements

Effective April 1, 2008, the Company adopted ASC Topic 820 (“Fair Value Measurements”), except as it applies to non-financial assets and non-financial liabilities subject to ASC Topic 320.  ASC Topic 320 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.  As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. ASC Topic 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - Include other inputs that are directly or indirectly observable in the marketplace.

Level 3 - Unobservable inputs which are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company’s cash equivalents are classified within Level 1, with the exception of the investments in ARS. The Company’s investments in ARS are classified within Level 3 because they are valued using a discounted cash flow model.  Some of the inputs to this model are unobservable in the market and are significant.

Assets and liabilities measured at fair value are summarized below (in thousands):

			Fair Value Measurement at March 31, 2012 Using
			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
	March 31,		Identical Assets		Inputs		Inputs
	2012		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash and Cash equivalents - money markets funds	$	46,801	$	46,801	$	-	$	-
Short term investments - bond mutual funds		10,347		10,347		-		-
	$	57,148	$	57,148	$	-	$	-

The following table is a reconciliation of financial assets measured at fair value using unobservable inputs (Level 3) during the year ended March 31, 2012 (in thousands):

	Auction Rate Securities
	Ended March 31,
	2012			2011
Balance, beginning of year	$	12,390		$	12,392
Redemption of securities		(12,500	)		-
Recovery of valuation		110			-
Total unrealized loss included in other comprehensive income		-			(2	)
Balance, end of year	$	-		$	12,390

Long term investments measured at fair value using Level 3 inputs are comprised of ARS. Although ARS would typically be measured using Level 2 inputs, the recent failure of auctions and the lack of market activity and liquidity required that these securities be measured using Level 3 inputs.  The Company’s ARS consisted of closed-end fund preferred ARS, with interest rates that reset, typically every seven to twenty-eight days. The fair value of our ARS investments was assessed by management with the assistance of an outside third party appraisal firm, which was conducted during fiscal 2011.  The fair value was calculated using a discounted cash flow valuation model.  The three inputs used in determining the fair values of the ARS were:

(1) Forecasted interest payments cash flows - In failed ARS auctions interest rates are set by the terms of the prospectus. For almost all of the securities the terms are a combination of two components: the determination of a base rate which is based on the maximum of two indexes, or a single index as defined in the prospectus. Base rates are adjusted through either a multiplication factor or an addition of a spread factor as defined in the prospectus which is dependent on the credit rating of the security.  Our ARS were rated AAA, the highest rating available by a rating agency.

(2) Discount rate calculation - The discount rates were calculated from the applicable forward curve plus a credit risk/liquidity spread. The credit risk spread was estimated via the credit spreads for 1-3 year term, AAA rated, debt over US Treasury notes and bonds which were determined to be 50 basis points (0.50%).  To address the continued illiquidity of the Company’s ARS portfolio, an additional spread of 0.30% was added to the credit risk spread.  This spread is based on the required yield attributable to liquidity for AAA rated debt, as determined by empirical studies.  Specifically, research on municipal bond yields indicate that for AAA rated securities, the liquidity component represents approximately 7-10% of the required yield. In total, a credit risk/liquidity spread of 0.80% was utilized.

(3) A present value calculation was performed utilizing the cash flow of the forecasted interest payments combined with the discount rate determined above.

At March 31, 2012, the Company had liquidated its entire ARS balance, and recorded an unrealized recovery of $110,000 within accumulated other comprehensive gain (loss) account, based upon receiving full par value for these ARS.  As of March 31, 2011, the Company held $12.5 million in ARS, at par, which were classified as long term investments and the Company recorded an unrealized impairment loss of approximately $2,000 for the year then ended.  As of March 31, 2011, cumulative losses of $110,000 were recognized within the accumulated other comprehensive loss account, based upon an assessment by the outside third party appraisal firm.  The $110,000 impairment was recorded as temporary due to the fact that the Company had the intent and the ability to hold these securities until anticipated recovery or maturity, and did expect to fully recover the cost basis of the investment.