Financial Instruments

6 Months Ended

Aug. 31, 2019

Marketable securities

Through our wholly-owned insurance subsidiary, Prism Assurance, Ltd. (Prism), we hold the following available-for-sale marketable securities, made up of municipal and corporate bonds:



In thousands	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
August 31, 2019	$	11,796	$	192	$	3	$	11,985
March 2, 2019	12,481		59		108		12,432

Prism insures a portion of our general liability, workers’ compensation and automobile liability risks using reinsurance agreements to meet statutory requirements. The reinsurance carrier requires Prism to maintain fixed-maturity investments for the purpose of providing collateral for Prism’s obligations under the reinsurance agreements.

The amortized cost and estimated fair values of these bonds at August 31, 2019, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities, as borrowers may have the right to call or prepay obligations with or without penalty.



In thousands	Amortized Cost		Estimated Fair Value
Due within one year	$	251	$	251
Due after one year through five years	9,124		9,289
Due after five years through 10 years	2,015		2,037
Due after 10 years through 15 years	—		—
Due beyond 15 years	406		408
Total	$	11,796	$	11,985

Derivative instruments

In August 2019, we entered into an interest rate swap to hedge exposure to variability in cash flows from interest payments on our floating-rate revolving credit facility. As of August 31, 2019, the interest rate swap contract had a notional value of $85 million.

We periodically enter into forward purchase foreign currency cash flow hedge contracts, generally with an original maturity date of less than one year, to hedge foreign currency exchange rate risk. As of August 31, 2019, we held foreign exchange forward contracts with a U.S. dollar notional value of $27.8 million, with the objective of reducing the exposure to fluctuations in the Canadian dollar and the Euro.

These derivative instruments are recorded within our consolidated balance sheets within other current assets and liabilities. Gains or losses associated with these instruments are recorded as a component of accumulated other comprehensive income.

Fair value measurements

Financial assets and liabilities are classified in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement: Level 1 (unadjusted quoted prices in active markets for identical assets or liabilities); Level 2 (observable market inputs, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data). We do not have any Level 3 financial assets or liabilities.



In thousands	Quoted Prices in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Total Fair Value
August 31, 2019
Assets:
Money market funds	$	3,589	$	—	$	3,589
Commercial paper	—		1,250		1,250
Municipal and corporate bonds	—		11,985		11,985
Liabilities:
Foreign currency forward/option contract	—		299		299
Interest rate swap contract	—		179		179

March 2, 2019
Assets:
Money market funds	$	2,015	$	—	$	2,015
Commercial paper	—		300		300
Municipal and corporate bonds	—		12,432		12,432
Liabilities:
Foreign currency forward/option contract	—		470		470

Money market funds and commercial paper

Fair value of money market funds was determined based on quoted prices for identical assets in active markets. Commercial paper was measured at fair value using inputs based on quoted prices for similar securities in active markets. These assets are included within cash and cash equivalents on our consolidated balance sheets.

Municipal and corporate bonds

Municipal and corporate bonds were measured at fair value based on market prices from recent trades of similar securities and are classified within our consolidated balance sheets as other current or other non-current assets based on maturity date.

Derivative instruments

The interest rate swap is measured at fair value using unobservable market inputs, based off of benchmark interest rates. Forward foreign exchange contracts are measured at fair value using unobservable market inputs, such as quotations on forward foreign exchange points and foreign currency exchange rates. Derivative positions are primarily valued using standard calculations and models that use as their basis readily observable market parameters. Industry standard data providers are our primary source for forward and spot rate information for both interest and currency rates.