Fair Value Measurements

12 Months Ended

Feb. 29, 2012

Fair Value Measurements [Abstract]

FAIR VALUE MEASUREMENTS

7. FAIR VALUE MEASUREMENTS

As defined in ASC Topic 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).

Recurring Fair Value Measurements

The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of February 28 (29), 2011 and 2012. The financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.

	As of February 29, 2012
	Level 1		Level 2		Level 3
	Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs		Total
Available for sale securities	$	—	$	—	$	160	$	160
Total assets measured at fair value on a recurring basis	$	—	$	—	$	160	$	160

	As of February 28, 2011
	Level 1		Level 2		Level 3
	Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs		Total
Available for sale securities	$	—	$	—	$	189	$	189
Total assets measured at fair value on a recurring basis	$	—	$	—	$	189	$	189
Interest rate swap agreements		—		—		297		297
Total liabilities measured at fair value on a recurring basis	$	—	$	—	$	297	$	297

Available for sale securities — Emmis’ available for sale security is an investment in preferred stock of a company that is not traded in active markets. The investment is recorded at fair value, which is generally estimated using significant unobservable market parameters, resulting in Level 3 categorization.

Swap agreements — Emmis’ derivative financial instruments consisted solely of interest rate cash flow hedges in which the Company paid a fixed rate and receives a variable interest rate that was observable based upon a forward interest rate curve, as adjusted for the CVA discussed in Note 6. Because a more than insignificant portion of the valuation was based upon unobservable inputs, these interest rate swaps were considered a Level 3 input.

The following table shows a reconciliation of the beginning and ending balances for fair value measurements using significant unobservable inputs:

	For the Year Ended February 28, 2011						For the Year Ended February 29, 2012
	Available For Sale Securities			Derivative Instruments			Available For Sale Securities			Derivative Instruments
Beginning Balance	$	452		$	4,068		$	189		$	297
Other than temporary impairment loss		(263	)		—			(29	)		—
Realized losses included in earnings		—			(4,333	)		—			(297	)
Changes in other comprehensive income		—			562			—			—
Ending Balance	$	189		$	297		$	160		$	—

Non-Recurring Fair Value Measurements

The Company has certain assets that are measured at fair value on a non-recurring basis under circumstances and events that include those described in Note 10, Intangible Assets and Goodwill, and are adjusted to fair value only when the carrying values are more than the fair values. The categorization of the framework used to price the assets is considered a Level 3, due to the subjective nature of the unobservable inputs used to determine the fair value (see Note 10 for more discussion).

Fair Value Of Other Financial Instruments

The estimated fair value of financial instruments is determined using the best available market information and appropriate valuation methodologies. Considerable judgment is necessary, however, in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented are not necessarily indicative of the amounts that the Company could realize in a current market exchange, or the value that ultimately will be realized upon maturity or disposition. The use of different market assumptions may have a material effect on the estimated fair value amounts.

The following methods and assumptions were used to estimate the fair value of financial instruments:

Ÿ Cash and cash equivalents, accounts receivable and accounts payable, including accrued liabilities: The carrying amount of these assets and liabilities approximates fair value because of the short maturity of these instruments.

Ÿ Credit Agreement debt: As of February 28 (29), 2011 and 2012, the fair value of the Company’s Credit Agreement debt as of those dates was $311.1 million and $198.0 million, respectively, while the carrying value was $331.0 million and $203.8 million, respectively. The Company’s assessment of the fair value of the Credit Agreement debt is based on bid prices for the portion of debt that is actively traded and is considered a level 1 measurement. The Extended Term Loans are not actively traded and is considered a level 3 measurement (see Note 5 for more discussion of the Extended Term Loans). The Company believes that the current carrying value of the Extended Term Loans approximates its fair value.

Ÿ 6.25% Series A cumulative convertible preferred stock: As of February 28 (29), 2011 and 2012, the fair value of the Company’s 6.25% Series A cumulative convertible preferred stock based on quoted market prices was $49.2 million and $20.2 million, respectively, while the carrying value was $140.5 million and $46.9 million, respectively. The carrying value of preferred stock excludes undeclared dividends in arrears for shares outstanding in which the Company has no economic rights through total return swaps of $21.0 million and $10.5 million as of February 28 (29), 2011 and 2012, respectively. All amounts exclude shares outstanding in which Emmis has acquired economic rights through total return swaps. As quoted market prices are available, this is considered a level 1 measurement.

Ÿ Senior unsecured notes: The senior unsecured notes are not actively traded and are considered a level 3 measurement (see Note 5 for more discussion of the senior unsecured notes). The Company believes that the current carrying value of the senior unsecured notes approximates its fair value.