Fair Value Measurements

9 Months Ended

Nov. 30, 2011

Fair Value Measurements [Abstract]

Fair Value Measurements

3. Fair Value Measurements

The Company's financial assets and liabilities are measured and recorded at fair value. The Company's non-financial assets (including: goodwill, intangible assets, property, plant and equipment) are measured at fair value when initially recorded for purchase accounting allocation and when an impairment charge is recognized. Contingent consideration on acquisitions is measured at fair value at each reporting period. Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value, management considers the principal or most advantageous market in which the Company would transact, and also considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of non-performance.

The following table details the recurring fair value measurements within the three levels of fair value hierarchy under U.S. GAAP of the Company's financial assets, including investments, cash surrender value of life insurance policies and cash equivalents, and non-financial liabilities, contingent consideration, at November 30, 2011:

	Total Fair Value		Level 1		Level 2		Level 3
	(in thousands)
Assets:
Auction rate securities	$	26,812	$	-	$	550	$	26,262
Money market funds		21,117		21,117		-		-
Other assets-cash surrender value		1,674		-		1,674		-
Total Assets	$	49,603	$	21,117	$	2,224	$	26,262
Liabilities:
Contingent consideration	$	8,632	$	-	$	-	$	8,632
Total Liabilities	$	8,632	$	-	$	-	$	8,632

The following table details the recurring fair value measurements within the three levels of fair value hierarchy of the Company's financial assets, including investments, cash surrender value of life insurance policies and cash equivalents and non-financial liabilities, contingent consideration at February 28, 2011:

	Total Fair Value		Level 1		Level 2		Level 3
	(in thousands)
Assets:
Auction rate securities	$	29,490	$	-	$	-	$	29,490
Money market funds		134,007		134,007		-		-
Other assets-cash surrender value		1,666		-		1,666		-
Total Assets	$	165,163	$	134,007	$	1,666	$	29,490
Liabilities:
Contingent consideration	$	2,778	$	-	$	-	$	2,778
Total Liabilities	$	2,778	$	-	$	-	$	2,778

At February 28, 2011 and November 30, 2011, the Company grouped money market funds using a Level 1 valuation because market prices were readily available. Level 2 financial assets and liabilities represent the fair value of cash surrender value of life insurance and those auction rate securities that were liquidated at par subsequent to November 30, 2011.

The assets grouped for Level 3 valuation included auction rate securities consisting of AAA rated securities mainly collateralized by student loans guaranteed by the U.S. Department of Education under the Federal Family Education Loan Program (“FFELP”), as well as auction rate preferred securities ($6.1 million at par) which are AAA rated and part of a closed end fund that must maintain an asset ratio of 2 to 1. Level 3 liabilities consist of contingent consideration from acquisitions. See Note 15 - Commitments and Contingencies, for further discussion on contingent consideration arrangements, including fair value disclosures.

When a determination is made to classify a financial instrument within Level 3, the determination is based upon the lack of significance of the observable parameters to the overall fair value measurement. However, the fair value determination for Level 3 financial instruments may consider some observable market inputs.

The following tables reflect the activity for the Company's major classes of assets and liabilities measured at fair value using Level 3 inputs (in thousands):

Assets:	Three Months Ended 11/30/2011			Nine Months Ended 11/30/2011
Balance at beginning of period	$	28,199		$	29,490
Transfers out to Level 2 (Auction Rate Securities with market inputs)		(550	)		(1,100	)
Sales of Level 3 investments		(1,325	)		(2,050	)
Total losses:
Unrealized losses included in accumulated other comprehensive income		(62	)		(78	)
Balance as of November 30, 2011	$	26,262		$	26,262

Liabilities:	Three Months Ended 11/30/2011			Nine Months Ended 11/30/2011
Balance at beginning of period	$	9,825		$	2,778
Level 3 liabilities acquired		-			8,800
Level 3 liabilities settled		-			(1,390	)
Total gains:
Included in earnings		(1,110	)		(1,491	)
Unrealized foreign currency translation gains included in accumulated other comprehensive income		(83	)		(65	)
Balance as of November 30, 2011	$	8,632		$	8,632

The following tables summarize the composition of the Company's investments (in thousands):

								Classification on Balance Sheet
November 30, 2011	Cost		Gross Unrealized Losses			Aggregate Fair Value		Cash and Cash Equivalents		Long-Term Investments
Auction rate securities	$	28,800	$	(1,988	)	$	26,812	$	-	$	26,812
Money market funds		21,117		-			21,117		21,117		-
	$	49,917	$	(1,988	)	$	47,929	$	21,117	$	26,812

								Classification on Balance Sheet
February 28, 2011	Cost		Gross Unrealized Losses			Aggregate Fair Value		Cash and Cash Equivalents		Long-Term Investments
Auction rate securities	$	31,400	$	(1,910	)	$	29,490	$	-	$	29,490
Money market funds		134,007		-			134,007		134,007		-
	$	165,407	$	(1,910	)	$	163,497	$	134,007	$	29,490

The Company classifies all marketable debt and equity securities with remaining contractual maturities of greater than one year as long-term investments. As of November 30, 2011 the Company held approximately $26.8 million of investments in auction rate securities (net of $2.0 million in gross unrealized losses) with maturities ranging from 10 years to 30 years, all classified as available-for-sale. Auction rate securities are long-term variable rate bonds tied to short-term interest rates that were, until February 2008, reset through a “Dutch auction” process. As of November 30, 2011, all of the Company's auction rate securities were “AAA” rated by one or more of the major credit rating agencies.

Historically, the carrying value (par value) of the auction rate securities approximated fair market value due to the frequent resetting of variable interest rates. Beginning in February 2008, however, the auctions for auction rate securities began to fail and were largely unsuccessful. As a result, the interest rates on the investments reset to the maximum rate per the applicable investment offering statements. The types of auction rate securities generally held by the Company have historically traded at par and are callable at par at the option of the issuer.

The par (invested principal) value of the auction rate securities associated with these failed auctions will not be accessible to the Company until a successful auction occurs, a buyer is found outside of the auction process, the securities are called or the underlying securities have matured. In light of these liquidity constraints, the Company performed a valuation analysis to determine the estimated fair value of these investments. The fair value of these investments was based on a trinomial discount model. This model considers the probability of three potential occurrences for each auction event through the maturity date of the security. The three potential outcomes for each auction are (i) successful auction/early redemption, (ii) failed auction and (iii) issuer default. Inputs in determining the probabilities of the potential outcomes include, but are not limited to, the security's collateral, credit rating, insurance, issuer's financial standing, contractual restrictions on disposition and the liquidity in the market. The fair value of each security was then determined by summing the present value of the probability weighted future principal and interest payments determined by the model. The discount rate was determined using a proxy based upon the current market rates for successful auctions within the AAA rated auction rate securities market. The expected term was based on management's estimate of future liquidity. The illiquidity discount was based on the levels of federal insurance or FFELP backing for each security as well as considering similar preferred stock securities ratings and asset backed ratio requirements for each security.

As a result, as of November 30, 2011, the Company recorded an estimated cumulative unrealized loss of $1.9 million (net of tax) related to the temporary impairment of the auction rate securities, which was included in accumulated other comprehensive income within shareholders' equity. The Company deemed the loss to be temporary because the Company does not plan to sell any of the auction rate securities prior to maturity at an amount below the original purchase value and, at this time, does not deem it probable that it will receive less than 100% of the principal and accrued interest from the issuer. Further, the auction rate securities held by the Company are AAA rated, and the Company considers the credit risk to be negligible. The Company continues to liquidate investments in auction rate securities as opportunities arise. In the nine-month period ended November 30, 2011, $2.6 million in auction rate securities were liquidated at par in connection with issuer calls. Subsequent to November 30, 2011, an additional $0.6 million in auction rate securities were also liquidated at par, also as a consequence of issuer calls.

The Company does not believe it will be necessary to access these investments to support current working capital requirements. However, the Company may be required to record additional unrealized losses in accumulated other comprehensive income or through income in future periods based on then current facts and circumstances. Specifically, if the credit rating of the security issuers deteriorates, or if active markets for such securities are not reestablished, the Company may be required to adjust the carrying value of these investments through impairment charges recorded in the consolidated statements of operations, and any such impairment adjustments may be material.