Fair Value of Financial Instruments

9 Months Ended

Dec. 31, 2012

Fair Value of Financial Instruments

Fair Value of Financial Instruments

(5) Fair Value of Financial Instruments

The Company uses a framework for measuring fair value under U.S. generally accepted accounting principles and enhanced disclosures about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The Company’s financial assets and liabilities reflected in the consolidated financial statements at carrying value include marketable securities and other financial instruments which approximate fair value. Fair value for marketable securities is determined using a market approach based on quoted market prices at period end in active markets. The fair value hierarchy consists of the following three levels:

· Level 1—Quoted prices in active markets for identical assets or liabilities.

· Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

· Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis at December 31, 2012:

	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market mutual funds	$	2,520	$	—	$	—	$	2,520
Investments:
Available-for-sale securities—current	26,378		—		—		26,378
Available-for-sale securities—non-current	7,115		—		891		8,006
Derivative instruments—current	—		131		—		131
Derivative instruments—non-current	—		60		—		60
Total assets	$	36,013	$	191	$	891	$	37,095
Liabilities:
Derivative instruments —current	$	—	$	4,438	$	—	$	4,438
Derivative instruments —non-current	—		1,332		—		1,332
Total liabilities	$	—	$	5,770	$	—	$	5,770

The Company’s investments in auction-rate securities (see Note 4), which are listed in the table above under the column “Level 3” under “Investments: Available-for-sale securities—non-current”, are classified within Level 3 because there are currently no active markets or observable market prices. Therefore, the auction-rate securities were valued primarily based on an income approach using an estimate of future cash flows. The Company has estimated the fair value using a discounted cash flow analysis which considered the following key inputs: (i) the underlying structure and maturity of each security; (ii) the timing of expected future principal and interest payments; and (iii) discount rates that are believed to reflect current market conditions and the relevant risk associated with each security. The underlying assets of these auction-rate securities are generally student loans which are substantially backed by the U.S. federal government. In February 2008, auctions began to fail for these securities and each auction since then has failed. The Company classifies its investment in auction-rate securities as long-term investments, reflecting the fact that the Company’s auction-rate securities have underlying final maturities of greater than one year.

The following table provides a summary of changes in fair value of the Company’s Level 3 financial assets at December 31, 2012:

	Level 3 Assets
Balance at April 1, 2012	$	880
Total unrealized gains:
Included in accumulated other comprehensive income	11
Balance at December 31, 2012	$	891