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FAIR VALUE
 12 Months Ended
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

)