Fair Value Measurements

9 Months Ended

Aug. 30, 2014

FAIR VALUE MEASUREMENTS

Fair Value Measurements

The Company measures certain assets and liabilities at fair value as discussed throughout the notes to its quarterly and annual financial statements. Fair value is the exchange price that would be received for 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. Fair value measurements are categorized in a hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs are the highest level and reflect market data obtained from independent sources, while unobservable inputs are the lowest level and reflect internally developed market assumptions. The Company classifies fair value measurements by the following hierarchy:


•	Level 1 – Quoted active market prices for identical assets


•	Level 2 – Significant other observable inputs, such as quoted prices for similar (but not identical) instruments in active markets, quoted prices for identical or similar instruments in markets which are not active and model determined valuations in which all significant inputs or significant value-drivers are observable in active markets


•	Level 3 – Significant unobservable inputs, such as model determined valuations in which one or more significant inputs or significant value-drivers are unobservable

Assets or liabilities that have recurring fair value measurements are shown below:



	Fair Value Measurements at Reporting Date
	Total		Level 1		Level 2		Level 3
August 30, 2014
Restricted trust, included in Other noncurrent assets
Mutual fund investments - equities	$	444	$	444	$	—	$	—
Mutual fund investments - bonds	454		454		—		—
Cash and equivalents	16		16		—		—
Total restricted trust	$	914	$	914	$	—	$	—

Foreign currency forward contracts	$	812	$	—	$	812	$	—



	Fair Value Measurements at Reporting Date
	Total		Level 1		Level 2		Level 3
November 30, 2013
Restricted trust, included in Other noncurrent assets
Mutual fund investments - equities	$	593	$	593	$	—	$	—
Mutual fund investments - bonds	400		400		—		—
Cash and equivalents	31		31		—		—
Total restricted trust	$	1,024	$	1,024	$	—	$	—

There were no changes in the fair value determination methods or significant assumptions used in those methods during the nine months ended August 30, 2014. There were no transfers between Level 1 and Level 2 and there were no transfers into or out of Level 3 during the nine months ended August 30, 2014. The Company's policy is to recognize transfers on the actual date of transfer. The restricted trust, which is used to fund certain payments for the Company’s U.S. combined nonqualified pension plans, consists of actively traded equity and bond funds.

The Company is liable for a contingent earn-out established in connection with the acquisition of TransWeb on December 29, 2010. This earn-out, which is payable to one of the former owners of TransWeb, had an acquisition-date estimated fair value of $1,018, which was recorded as an other long-term liability at that time. The contingent liability for the earn-out payment will continue to be accounted for and measured at fair value until the contingency is settled during fiscal year 2016. The fair value measurement of the contingent earn-out payment is based primarily on projected 2014 and 2015 TransWeb adjusted earnings, which represent significant inputs not observed in the market and thus represents a Level 3 measurement. The contingent consideration payment is revalued to its current fair value at each reporting date. Any increase or decrease in the fair value, as a result of changes in significant inputs such as the discount rate, the discount period or other factors used in the calculation, is recognized in Selling and administrative expenses in the Consolidated Condensed Statements of Earnings in the period the estimated fair value changes. The fair value of the contingent consideration was estimated using a probability-weighted discounted cash flow model with a discount rate of 13.2%. The fair value of the TransWeb contingent earn-out payment was $0 at August 30, 2014 and at November 30, 2013, based on the projected adjusted earnings of TransWeb.

Fair Values of Financial Instruments

The fair values of the Company’s financial instruments, which are cash and cash equivalents, restricted cash, accounts receivable, the restricted trust and accounts payable and accrued liabilities, approximated the carrying values of those financial instruments at both August 30, 2014 and November 30, 2013. An expected present value technique is used to estimate the fair value of long-term debt, using a model that discounts future principal and interest payments at interest rates available to the Company at the end of the period for similar debt of the same maturity. Long-term debt had a fair value estimate of $423,601 and $166,288 at August 30, 2014 and November 30, 2013, respectively. The Company's fair value estimate of its long-term debt represents a Level 2 measurement as it is based on the current interest rates available to the Company for debt with similar remaining maturities. The carrying value for the long-term debt at August 30, 2014 and November 30, 2013 is $425,501 and $166,636, respectively.

Fair Value of Hedging Instruments

When the Company acquired CLARCOR Industrial Air, approximately $50,000 of the $260,312 purchase price was paid through a U.K. subsidiary of the Company, using funds advanced from one of the Company's U.S. subsidiaries through a European holding company. The Company intends to settle the underlying inter-company advances in cash, therefore gains and losses on translation of the inter-company advances are recognized in Other, net income on the Consolidated Condensed Statements of Earnings. The Company has entered into foreign currency forward contracts to manage its exposure to translational foreign exchange risk related to these inter-company advances. The forward contracts have a three-month duration, which the Company anticipates rolling forward until such time as the underlying inter-company advances have been settled. Hedge accounting was not applied to the forward contracts and therefore unrealized gains or losses are recorded in Other, net income in the Consolidated Condensed Statements of Earnings. In the third quarter of 2014 the Company recorded unrealized losses of $39 on the forward contracts as well as a loss of $149 on the translation of the underlying inter-company advances. In the first nine months of 2014 the Company recorded unrealized gains of $195 on the forward contracts, as well as a gain of $1,174 on the translation of the underlying inter-company advances. As of August 30, 2014 forward contracts are recorded at their estimated fair value of $812 within Prepaid expenses and other current assets on the Consolidated Condensed Balance Sheets.

- 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.

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