OPNT » Topics » 3. Marketable Securities

These excerpts taken from the OPNT 10-K filed Jun 9, 2008.

3. Marketable Securities

Marketable securities as of March 31, 2008 and 2007 consisted of the following:

 

     March 31, 2008
     Amortized
Cost
   Gross
Unrealized
Gain
   Gross
Unrealized
Loss
    Market
Value

Municipal securities

   $ 6,000    $ —      $ —       $ 6,000

ARS

     8,800      —        (381 )     8,419
                            

Marketable securities

   $ 14,800    $ —      $ (381 )   $ 14,419
                            
     March 31, 2007

Corporate bonds and notes

   $ 46,615    $ —      $ —       $ 46,615

United States government agencies

     10,000      —        —         10,000
                            

Marketable securities

   $ 56,615    $ —      $ —       $ 56,615
                            

As of March 31, 2008, the Company held ARS totaling $8,800 at par value, which are classified as available for sale securities and short-term and long-term marketable securities on the Company’s consolidated balance sheet. Contractual maturities for these ARS extend through November 2047 with an interest rate reset date approximately every 28 days. The ARS are primarily collateralized by United States government-backed student loans and were rated AAA at March 31, 2008. Historically, the carrying value of ARS approximated fair value due to the frequent resetting of the interest rates. With the liquidity issues experienced in the global credit and capital markets, the Company’s ARS have experienced failed auctions. While the Company continues to earn and receive interest on these marketable securities at the maximum contractual rate, the estimated fair value of these ARS no longer approximate par value.

Since there is little or no active market data for the Company’s ARS the Company developed its own assumptions to determine the fair value of the securities. The Company assumed that the fair value is an exit price, representing the amount that would be received if it sold the ARS in an orderly transaction between market participants. The Company prepared its fair value analysis to determine the exit price by focusing on the structure of each ARS, the collateral underlying each ARS, the cash flow characteristics, and the current trading environment of such securities. The Company also considered the valuation prepared for it by a third-party valuation firm. With regard to the structure of each ARS, the Company charted the cash flows pertaining to the ARS and modeled the net present value. While the Company believes that the estimates it used are reasonable, should any of these factors change; its estimates may also change, which could affect the valuation of its ARS. In addition, the Company performed extensive research on the collateral underlying the ARS and the trading environment for such financial products. It is the Company’s view that a number of factors have contributed to the recent market disruption: real and perceived decline in value of collateralized assets and other financial instruments; increased defaults on home mortgages and bankruptcies; tightening of credit among lenders; increasing commodity prices and the weakening of the United States dollar, and fears of a United States recession. Based on its analysis and the Company’s belief that the ARS are of high credit quality, the Company determined that the fair value of the ARS at March 31, 2008 was $8,419 and recorded a temporary impairment charge of $381. The Company believes that the impairment charge is temporary because it has the intent and ability to hold the ARS for a period of time sufficient to allow for a recovery in the market. Accordingly, the

 

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OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar and share amounts in thousands, except per share data)

March 31, 2008, 2007 and 2006

 

temporary impairment was recorded to other comprehensive income on the Company’s consolidated balance sheet. The Company also classified $6,968 of the ARS as long-term marketable securities on its consolidated balance sheet as of March 31, 2008.

3. Marketable Securities

FACE="Times New Roman" SIZE="2">Marketable securities as of March 31, 2008 and 2007 consisted of the following:

 































































































































































































   March 31, 2008
   Amortized
Cost
  Gross
Unrealized
Gain
  Gross
Unrealized
Loss
  Market
Value

Municipal securities

  $6,000  $—    $—    $6,000

ARS

   8,800   —     (381)  8,419
                

Marketable securities

  $14,800  $—    $(381) $14,419
                
   March 31, 2007

Corporate bonds and notes

  $46,615  $—    $—    $46,615

United States government agencies

   10,000   —     —     10,000
                

Marketable securities

  $56,615  $—    $—    $56,615
                

As of March 31, 2008, the Company held ARS totaling $8,800 at par value, which are classified
as available for sale securities and short-term and long-term marketable securities on the Company’s consolidated balance sheet. Contractual maturities for these ARS extend through November 2047 with an interest rate reset date approximately
every 28 days. The ARS are primarily collateralized by United States government-backed student loans and were rated AAA at March 31, 2008. Historically, the carrying value of ARS approximated fair value due to the frequent resetting of the
interest rates. With the liquidity issues experienced in the global credit and capital markets, the Company’s ARS have experienced failed auctions. While the Company continues to earn and receive interest on these marketable securities at the
maximum contractual rate, the estimated fair value of these ARS no longer approximate par value.

Since there is little or no active market
data for the Company’s ARS the Company developed its own assumptions to determine the fair value of the securities. The Company assumed that the fair value is an exit price, representing the amount that would be received if it sold the ARS in
an orderly transaction between market participants. The Company prepared its fair value analysis to determine the exit price by focusing on the structure of each ARS, the collateral underlying each ARS, the cash flow characteristics, and the current
trading environment of such securities. The Company also considered the valuation prepared for it by a third-party valuation firm. With regard to the structure of each ARS, the Company charted the cash flows pertaining to the ARS and modeled the net
present value. While the Company believes that the estimates it used are reasonable, should any of these factors change; its estimates may also change, which could affect the valuation of its ARS. In addition, the Company performed extensive
research on the collateral underlying the ARS and the trading environment for such financial products. It is the Company’s view that a number of factors have contributed to the recent market disruption: real and perceived decline in value of
collateralized assets and other financial instruments; increased defaults on home mortgages and bankruptcies; tightening of credit among lenders; increasing commodity prices and the weakening of the United States dollar, and fears of a United States
recession. Based on its analysis and the Company’s belief that the ARS are of high credit quality, the Company determined that the fair value of the ARS at March 31, 2008 was $8,419 and recorded a temporary impairment charge of $381. The
Company believes that the impairment charge is temporary because it has the intent and ability to hold the ARS for a period of time sufficient to allow for a recovery in the market. Accordingly, the

 


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OPNET TECHNOLOGIES, INC.

ALIGN="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar and share
amounts in thousands, except per share data)

March 31, 2008, 2007 and 2006

STYLE="margin-top:0px;margin-bottom:0px"> 



temporary impairment was recorded to other comprehensive income on the Company’s consolidated balance sheet. The Company also classified $6,968 of the
ARS as long-term marketable securities on its consolidated balance sheet as of March 31, 2008.

This excerpt taken from the OPNT 10-K filed Jun 11, 2007.

3. Marketable Securities

Marketable securities as of March 31, 2007 and 2006, consisted of the following:

 

     Amortized
Cost
   Gross
Unrealized
Gain
   Gross
Unrealized
Loss
    Market
Value
     March 31, 2007

Municipal securities

   $ 46,615    $ —      $ —       $ 46,615

Auction rate securities

     10,000      —        —         10,000
                            

Marketable securities

   $ 56,615    $ —      $ —       $ 56,615
                            
     March 31, 2006

Corporate bonds and notes

   $ 6,747    $ 2    $ (10 )   $ 6,739

United States government agencies

     12,423      —        (11 )     12,412
                            

Marketable securities

   $ 19,170    $ 2    $ (21 )   $ 19,151
                            

With the exception of the auction rate securities, all of the Company’s marketable securities have maturity dates of less than one year. The auction rate securities have maturities extending through May 2046, with interest rate resets every 28 days.

 

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Table of Contents

OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar and share amounts in thousands, except per share data)

 

This excerpt taken from the OPNT 10-K filed Jun 14, 2006.

2. Marketable Securities

Marketable securities as of March 31, 2006 and 2005, consisted of the following:

 

    

Amortized

Cost

  

Gross

Unrealized

Gain

  

Gross

Unrealized

Loss

   

Market

Value

     March 31, 2006

Corporate bonds and notes

   $ 6,747    $ 2    $ (10 )   $ 6,739

United States government agencies

     12,423      —        (11 )     12,412
                            

Marketable securities

   $ 19,170    $ 2    $ (21 )   $ 19,151
                            
     March 31, 2005

Corporate bonds and notes

   $ 20,447    $ —      $ (26 )   $ 20,421

United States government agencies

     23,634      1      (42 )     23,593
                            

Marketable securities

   $ 44,081    $ 1    $ (68 )   $ 44,014
                            

Our marketable securities have maturity dates of less than one year.

This excerpt taken from the OPNT 10-K filed Jun 9, 2005.

3. Marketable Securities

 

Marketable securities as of March 31, 2005 and 2004, consisted of the following:

 

     Amortized
Cost


   Gross
Unrealized
Gain


   Gross
Unrealized
Loss


    Market
Value


     March 31, 2005

Corporate bonds and notes

   $ 20,447    $  —    $ (26 )   $ 20,421

United States government agencies

     23,634      1      (42 )     23,593
    

  

  


 

Marketable securities

   $ 44,081    $ 1    $ (68 )   $ 44,014
    

  

  


 

     March 31, 2004

Corporate bonds and notes

   $ 10,915    $ 3    $ (1 )   $ 10,917

United States government agencies

     29,067      18      (1 )     29,084
    

  

  


 

Marketable securities

   $ 39,982    $ 21    $ (2 )   $ 40,001
    

  

  


 

 

Our marketable securities have maturity dates of less than one year.

 

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