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FAIR VALUE | 12 Months Ended
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Feb. 29, 2012
FAIR VALUE |
FAIR VALUE |
NOTE 11 – FAIR VALUE The following tables present the fair value hierarchy of our financial assets and liabilities carried at fair value and measured on a recurring basis as of the last day of February 2012 and 2011:
FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES
(in thousands)
|  |  |  | Quoted Prices in |  | Significant Other |  | Significant |
|  |  |  | Active Markets |  | Observable |  | Unobservable |
|  | Fair Values at |  | for Identical Assets |  | Market Inputs |  | Inputs |
Description |  | February 29, 2012 |  | (Level 1) |  | (Level 2) |  | (Level 3) |
Assets: |  |  |  |  |  |  |  |  |
Money market accounts |  | $ | 801 |  | $ | 801 |  | $ | - |  | $ | - |
Note receivable (1) |  | 737 |  | - |  | 737 |  | - |
Total assets |  | $ | 1,538 |  | $ | 801 |  | $ | 737 |  | $ | - |
Liabilities: |  |  |  |  |  |  |  |  |
Long-term debt - fixed rate (1) |  | $ | 104,450 |  | $ | - |  | $ | 104,450 |  | $ | - |
Long-term debt - floating rate |  | 75,000 |  | - |  | 75,000 |  | - |
Interest rate swaps |  | 8,553 |  | - |  | 8,553 |  | - |
Foreign currency contracts |  | 163 |  | - |  | 163 |  | - |
Total liabilities |  | $ | 188,166 |  | $ | - |  | $ | 188,166 |  | $ | - |
|  |  |  | Quoted Prices in |  | Significant Other |  | Significant |
|  |  |  | Active Markets |  | Observable |  | Unobservable |
|  | Fair Values at |  | for Identical Assets |  | Market Inputs |  | Inputs |
Description |  | February 28, 2011 |  | (Level 1) |  | (Level 2) |  | (Level 3) |
Assets: |  |  |  |  |  |  |  |  |
Money market accounts |  | $ | 6,435 |  | $ | 6,435 |  | $ | - |  | $ | - |
Commercial paper |  | 1,560 |  | 1,560 |  | - |  | - |
Mutual funds |  | 1,233 |  | 1,233 |  | - |  | - |
Auction rate securities |  | 20,711 |  | - |  | - |  | 20,711 |
Total assets |  | $ | 29,939 |  | $ | 9,228 |  | $ | - |  | $ | 20,711 |
Liabilities: |  |  |  |  |  |  |  |  |
Long-term debt - fixed rate (1) |  | $ | 104,650 |  | $ | - |  | $ | 104,650 |  | $ | - |
Long-term debt - floating rate |  | 125,000 |  | - |  | 125,000 |  | - |
Interest rate swaps |  | 9,625 |  | - |  | 9,625 |  | - |
Foreign currency contracts |  | 970 |  | - |  | 970 |  | - |
Total liabilities |  | $ | 240,245 |  | $ | - |  | $ | 240,245 |  | $ | - |
(1) Note receivable and debt values are reported at estimated fair value in this table, but are recorded in the accompanying consolidated balance sheets at the undiscounted value of remaining principal payments due. Money market accounts and commercial paper are included in cash and cash equivalents in the accompanying consolidated balance sheets and are classified as Level 1 assets. Mutual funds are classified as Level 1 assets and were stated in the February 28, 2011 consolidated balance sheet at market value, as determined by the most recent trading price of each fund as of the balance sheet date. At February 28, 2011, we recorded auction rate securities (“ARS”) at their estimated fair values. ARS were classified as Level 3 assets because we determined their estimated fair values with discounted cash flow models. Some of the inputs factored into the discounted cash flow models we used are unobservable in the market and have a significant effect on valuation. The assumptions used in preparing the models include, but are not limited to, periodic coupon rates, market required rates of return and the expected term of each security. The coupon rate was estimated using implied forward rate data on interest rate swaps and U.S. treasuries, limited where necessary by any contractual maximum rate paid under a scenario of continuing auction failures. We believe implied forward rates inherently account for a lack of liquidity. In making assumptions of the required rates of return, we considered risk-free interest rates and credit spreads for investments of similar credit quality. The expected term was based on a weighted probability-based estimate of the timing of principal receipts. In November 2011, we settled the sale of the then remaining portfolio of $18.80 million par value ARS for approximately 96 percent of par, or $18.05 million. We classify our note receivable, fixed and floating rate debt as Level 2 liabilities because the estimation of the fair market value of these financial assets requires the use of a discount rate based upon current market rates of interest for debt with comparable remaining terms. Such comparable rates are considered significant other observable market inputs. The fair market value of the note receivable was computed using a discounted cash flow analysis and a discount rate of 6.95 percent at February 29, 2012. The fair market value of the fixed rate debt was computed using a discounted cash flow analysis and discount rates, ranging from 0.54 to 3.54 percent at February 29, 2012 and 1.86 to 4.36 percent at February 28, 2011, depending on the term of the loan. All other long-term debt has floating interest rates, and its book value approximates its fair value as of the reporting date. We use derivatives for hedging purposes and our derivatives are primarily foreign currency contracts and interest rate swaps. We determine the fair value of our derivative instruments based on Level 2 inputs in the fair value hierarchy. See Notes (1) and (12) to these consolidated financial statements for more information on our hedging activities. The Company’s other non-financial assets include goodwill and other intangible assets, which we classify as Level 3 assets. These assets are measured at fair value on a non-recurring basis as part of the Company’s impairment assessments and as circumstances require. The table below presents a reconciliation of our ARS measured and recorded at fair value on a recurring basis and other non-financial assets measured on a non-recurring basis using significant unobservable inputs (Level 3) for the fiscal years 2012 and 2011:
FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS (Level 3)
(in thousands)
|  |  | Fiscal Years Ended |
|  |  | 2012 |  |  |  | 2011 |
|  |  |  |  | Other |  |  |  |  |  | Other |
|  |  |  |  | Non-Financial |  |  |  |  |  | Non-Financial |
|  |  | ARS |  | Assets |  |  |  | ARS |  | Assets |
Beginning balances |  |  | $ | 20,711 |  | $ | 660,947 |  |  |  | $ | 20,534 |  | $ | 363,061 |
Total gains (losses): |  |  |  |  |  |  |  |  |  |  |  |
Included in net income - realized |  |  | (626 | ) | (20,069 | ) |  |  | - |  | (11,858 | )
Included in other comprehensive income - unrealized |  |  | 1,213 |  | - |  |  |  | 527 |  | - |
Acquired during the period |  |  | - |  | 178,676 |  |  |  | - |  | 309,984 |
Acquisition adjustments during the period |  |  | - |  | 9,946 |  |  |  | - |  | (240 | )
Sales at par |  |  | (3,250 | ) | - |  |  |  | (350 | ) | - |
Sales at fair value |  |  | (18,048 | ) | - |  |  |  | - |  | - |
Ending balances |  |  | $ | - |  | $ | 829,500 |  |  |  | $ | 20,711 |  | $ | 660,947 |
Cumulative unrealized losses relating to assets still held at each reporting date, net of taxes |  |  | $ | - |  |  |  |  |  | $ | (884 | ) |

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19296-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 159 -Paragraph 17-22, 27, 28 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. 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