Fair Value Measurements and Derivatives

The Company applies the authoritative guidance on “Fair Value Measurements," which among other things, requires enhanced disclosures about investments that are measured and reported at fair value. This guidance establishes a hierarchal disclosure framework that prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices, or for which fair value can be measured from actively quoted prices, generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

Investments measured and reported at fair value are classified and disclosed in one of the following categories:

Level 1 - Quoted market prices in active markets for identical assets or liabilities.

Level 2 - Inputs other than Level 1 inputs that are either directly or indirectly observable.

Level 3 - Unobservable inputs developed using the Company's estimates and assumptions, which reflect those that market participants would use.

The following table presents assets measured at fair value on a recurring basis at May 31, 2016:



				Fair Value Measurements at Reporting Date Using
	Total			Level 1		Level 2
Cash and cash equivalents:
Cash and money market funds	$	8,558		$	8,558	$	—
Derivatives
Designated for hedging	$	(536	)	$	—	$	(536	)
Investment securities:
Trading securities	$	3,739		$	3,739	$	—
Available-for-sale securities	15			15		—
Other investments at amortized cost (a)	6,300			—		—
Total investment securities	$	10,054		$	3,754	$	—

The following table presents assets measured at fair value on a recurring basis at February 29, 2016:



			Fair Value Measurements at Reporting Date Using
	Total		Level 1		Level 2
Cash and cash equivalents:
Cash and money market funds	$	11,767	$	11,767	$	—
Derivatives
Designated for hedging	$	30	$	—	$	30
Investment securities:
Trading securities	$	3,917	$	3,917	$	—
Available-for-sale securities	18		18		—
Other investments at amortized cost (a)	6,271		—		—
Total investment securities	$	10,206	$	3,935	$	—


(a)	Included in this balance are investments in two non-controlled corporations accounted for at cost (see Note 5). The fair values of these investments would be based upon Level 3 inputs. At May 31, 2016 and February 29, 2016, it is not practicable to estimate the fair values of these items.

The carrying amount of the Company's accounts receivable, short-term debt, accounts payable, accrued expenses, bank obligations and long-term debt approximates fair value because of (i) the short-term nature of the financial instrument; (ii) the interest rate on the financial instrument being reset every quarter to reflect current market rates, and (iii) the stated or implicit interest rate approximates the current market rates or are not materially different than market rates.

Derivative Instruments

The Company's derivative instruments include forward foreign currency contracts utilized to hedge a portion of its foreign currency inventory purchases, local operating expenses, as well as its general economic exposure to foreign currency fluctuations created in the normal course of business. The Company also has two interest rate swap agreements as of May 31, 2016, one of which hedges interest rate exposure related to the forecasted outstanding borrowings on a portion of its senior secured credit facility ("the Amended Credit Facility"), and a second that hedges interest rate exposure related to the forecasted outstanding balance of its construction mortgage, with monthly payments due through March 2026. A third interest rate swap agreement that also hedged interest rate exposure related the Amended Credit Facility, expired in April 2016 with a fair value of $0 on the date of expiration, and a fourth agreement, which hedged interest rate exposure related to the forecasted outstanding balance of one of its mortgage notes, was unwound in April 2016 when that mortgage was paid in full (see Note 14). The fair value of this interest rate swap agreement on the date it was unwound was $(114), which was charged to interest expense in the Company's Consolidated Statements of Operations and Comprehensive Income (Loss). The remaining swap agreement related to the Amended Credit Facility locks the Company's LIBOR rate at 0.515% (exclusive of credit spread) through the swap's maturity date of February 28, 2017. The swap agreement related to the Company's construction loan locks the interest rate on the debt at 3.48% (inclusive of credit spread) through the maturity date of the loan. The forward foreign currency derivatives qualifying for hedge accounting are designated as cash flow hedges and valued using observable forward rates for the same or similar instruments (Level 2). The duration of open forward foreign currency contracts range from 1 - 9 months and are classified in the balance sheet according to their terms. Interest rate swap agreements qualifying for hedge accounting are designated as cash flow hedges and valued based on a comparison of the change in fair value of the actual swap contracts designated as the hedging instruments and the change in fair value of a hypothetical swap contract (Level 2). We calculate the fair value of interest rate swap agreements quarterly based on the quoted market price for the same or similar financial instruments. Interest rate swaps are classified in the balance sheet as either assets or liabilities based on the fair value of the instruments at the end of the period.

It is the Company's policy to enter into derivative instrument contracts with terms that coincide with the underlying exposure being hedged. As such, the Company's derivative instruments are expected to be highly effective. Hedge ineffectiveness, if any, is recognized as incurred through Other Income (Expense) in the Company's Consolidated Statements of Operations and Comprehensive Income (Loss) and amounted to $(50) for the three months ended May 31, 2016, respectively, and $52 for the three months ended May 31, 2015, respectively.

Financial Statement Classification

The Company holds derivative instruments that are designated as hedging instruments. The following table discloses the fair value as of May 31, 2016 and February 29, 2016 of derivative instruments:



	Derivative Assets and Liabilities
		Fair Value
	Account	May 31, 2016			February 29, 2016
Designated derivative instruments
Foreign currency contracts	Accrued expenses and other current liabilities	$	(159	)	$	(98	)
	Prepaid expenses and other current assets	190			989
Interest rate swap agreements	Other long term liabilities	(572		)	(862		)
	Prepaid expenses and other current assets	5			1

Total derivatives		$	(536	)	$	30

Cash flow hedges

During Fiscal 2016, the Company entered into forward foreign currency contracts, which have a current outstanding notional value of $30,333 and are designated as cash flow hedges at May 31, 2016. The current outstanding notional values of the Company's two interest rate swaps at May 31, 2016 are $15,000 and $9,488. For cash flow hedges, the effective portion of the gain or loss is reported as a component of Other Comprehensive Income (Loss) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

Activity related to cash flow hedges recorded during the three months ended May 31, 2016 and 2015 was as follows:



	Three months ended									Three months ended
	May 31, 2016									May 31, 2015
	Pretax Gain(Loss) Recognized in Other Comprehensive Income			Pretax Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (a)			Gain (Loss)for Ineffectiveness in Other Income			Pretax Gain (Loss) Recognized in Other Comprehensive Income			Pretax Gain Reclassified from Accumulated Other Comprehensive Income (a)		Gain (Loss) for Ineffectiveness in Other Income
Cash flow hedges
Foreign currency contracts	$	(818	)	$	324		$	(50	)	$	491		$	1,287	$	52
Interest rate swaps	$	180		$	(114	)	$	—		$	(48	)	$	—	$	—

(a) Gains and losses related to foreign currency contracts are reclassified to cost of sales. Gains and losses related to interest rate swaps are reclassified to interest expense.

The net loss recognized in Other Comprehensive Income (Loss) for foreign currency contracts is expected to be recognized in cost of sales within the next twenty-one months. No amounts were excluded from the assessment of hedge effectiveness during the respective periods. As of May 31, 2016, no foreign currency contracts originally designated for hedge accounting were de-designated or terminated.