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 August 31, 2017:



				Fair Value Measurements at Reporting Date Using
	Total			Level 1		Level 2
Cash and cash equivalents:
Cash and money market funds	$	45,821		$	45,821	$	—
Derivatives
Designated for hedging	$	(1,057	)	$	—	$	(1,057	)
Investment securities:
Trading securities	$	3,749		$	3,749	$	—
Available-for-sale securities	3			3		—
Other investments at cost (a)	5,011			—		—
Total investment securities	$	8,763		$	3,752	$	—

The following table presents assets measured at fair value on a recurring basis at February 28, 2017:



			Fair Value Measurements at Reporting Date Using
	Total		Level 1		Level 2
Cash and cash equivalents:
Cash and money market funds	$	956	$	956	$	—
Derivatives
Designated for hedging	$	345	$	—	$	345
Investment securities:
Trading securities	$	4,094	$	4,094	$	—
Available-for-sale securities	6		6		—
Other investments at cost (a)	6,288		—		—
Total investment securities	$	10,388	$	4,100	$	—


(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 August 31, 2017 and February 28, 2017, 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 from 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. 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 ranges from 1 - 6 months and are classified in the balance sheet according to their terms. The Company also has an interest rate swap agreement as of August 31, 2017 that hedges interest rate exposure related to the forecasted outstanding balance of its Florida Mortgage, with monthly payments due through March 2026. The swap agreement locks the interest rate on the debt at 3.48% (inclusive of credit spread) through the maturity date of the loan. During the first quarter of Fiscal 2017, the Company unwound another interest rate swap agreement that hedged interest rate exposure related to one of its mortgage notes when that mortgage was paid in full. The fair value of that interest rate swap agreement on the date it was unwound was $(114), and was charged to interest expense in the Company's Consolidated Statements of Operations and Comprehensive Income (Loss) during the six months ended August 31, 2016. 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 $(52) and $(95) for the three and six months ended August 31, 2017, respectively, and $29 and $(21) for the three and six months ended August 31, 2016, respectively.

Financial Statement Classification

The following table discloses the fair value as of August 31, 2017 and February 28, 2017 of derivative instruments:



	Derivative Assets and Liabilities
		Fair Value
	Account	August 31, 2017			February 28, 2017
Designated derivative instruments
Foreign currency contracts	Prepaid expenses and other current assets	$	—		$	643
	Accrued expenses and other current liabilities	(690		)	—

Interest rate swap agreements	Other long-term liabilities	(367		)	(298		)

Total derivatives		$	(1,057	)	$	345

In connection with the sale of Hirschmann on August 31, 2017 (see Note 2), the Company entered into forward contracts totaling €148,500, which could be settled on dates ranging from August 31, 2017 through September 6, 2017. As the sale of Hirschmann closed on August 31, 2017, the Company settled all of the forward contracts on this date. The forward contracts were not designated for hedging and a total foreign currency loss of $(6,618) was recorded for the three and six months ended August 31, 2017, within continuing operations, when the contracts were settled.

Cash flow hedges

During Fiscal 2017, the Company entered into forward foreign currency contracts, which have a current outstanding notional value of $9,720 and are designated as cash flow hedges at August 31, 2017. The current outstanding notional value of the Company's interest rate swap at August 31, 2017 is $8,864. 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 pertaining to continuing operations recorded during the three and six months ended August 31, 2017 and 2016 was as follows:



	Three months ended								Six months ended
	August 31, 2017								August 31, 2017
	Pretax Gain(Loss) Recognized in Other Comprehensive Income			Pretax Gain (Loss) Reclassified from Accumulated Other Comprehensive Income		Gain (Loss)for Ineffectiveness in Other Income			Pretax Gain (Loss) Recognized in Other Comprehensive Income			Pretax Gain (Loss) Reclassified from Accumulated Other Comprehensive Income			Gain (Loss) for Ineffectiveness in Other Income
Cash flow hedges
Foreign currency contracts	$	(533	)	$	42	$	(52	)	$	(1,266	)	$	317		$	(95	)
Interest rate swaps	(25		)	—		—			(69		)	—			—

	Three months ended								Six months ended
	August 31, 2016								August 31, 2016
	Pretax Gain(Loss) Recognized in Other Comprehensive Income			Pretax Gain (Loss) Reclassified from Accumulated Other Comprehensive Income		Gain (Loss)for Ineffectiveness in Other Income			Pretax Gain (Loss) Recognized in Other Comprehensive Income			Pretax Gain (Loss) Reclassified from Accumulated Other Comprehensive Income			Gain (Loss) for Ineffectiveness in Other Income
Cash flow hedges
Foreign currency contracts	$	108		$	44	$	29		$	(536	)	$	259		$	(21	)
Interest rate swaps	(107		)	—		—			73			(114		)	—

The net income (loss) recognized in Other Comprehensive Income (Loss) for foreign currency contracts is expected to be recognized in cost of sales within the next nine months. No amounts were excluded from the assessment of hedge effectiveness during the respective periods. As of August 31, 2017, no foreign currency contracts originally designated for hedge accounting were de-designated or terminated. Refer to Note 6 for information regarding activity related to cash flow hedges pertaining to discontinued operations.