FAIR VALUE

Fair value measurements are classified under the following hierarchy:

Level 1 — Inputs based on quoted market prices for identical assets or liabilities in active markets at the measurement date.

Level 2 — Inputs based on quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs or significant value-drivers are observable in active markets.

Level 3 — Inputs reflect management’s best estimate of what market participants would use to price the asset or liability at the measurement date in model-driven valuations. The inputs are unobservable in the market and significant to the instrument’s valuation.

Fair value measurements are classified according to the lowest level input or value-driver that is significant to the valuation. A measurement may therefore be classified within Level 3 even though there may be other significant inputs that are readily observable.

Assets and liabilities measured at fair value in our Consolidated Balance Sheets as of February 24, 2017 and February 26, 2016 are summarized below:



Fair Value of Financial Instruments	February 24, 2017
Fair Value of Financial Instruments	Level 1		Level 2			Level 3		Total
Assets:
Cash and cash equivalents	$	197.1	$	—		$	—	$	197.1
Restricted cash	2.5		—			—		2.5
Managed investment portfolio and other investments
Corporate debt securities	—		33.6			—		33.6
U.S. agency debt securities	—		18.6			—		18.6
Municipal debt securities	—		15.1			—		15.1
Asset-backed securities	—		3.7			—		3.7
U.S. government debt securities	2.4		—			—		2.4
Foreign exchange forward contracts	—		3.5			—		3.5
Auction rate securities	—		—			3.5		3.5
	$	202.0	$	74.5		$	3.5	$	280.0
Liabilities:
Foreign exchange forward contracts	$	—	$	(0.9	)	$	—	$	(0.9	)
	$	—	$	(0.9	)	$	—	$	(0.9	)

Fair Value of Financial Instruments	February 26, 2016
Fair Value of Financial Instruments	Level 1		Level 2			Level 3		Total
Assets:
Cash and cash equivalents	$	181.9	$	—		$	—	$	181.9
Restricted cash	2.5		—			—		2.5
Managed investment portfolio and other investments
Corporate debt securities	—		31.7			—		31.7
U.S. agency debt securities	—		34.7			—		34.7
Municipal debt securities	—		0.3			—		0.3
Asset-backed securities	—		9.2			—		9.2
U.S. government debt securities	8.2		—			—		8.2
Foreign exchange forward contracts	—		1.8			—		1.8
Auction rate securities	—		—			4.4		4.4
Canadian asset-backed commercial paper restructuring notes	—		3.1			—		3.1
	$	192.6	$	80.8		$	4.4	$	277.8
Liabilities:
Foreign exchange forward contracts	$	—	$	(3.3	)	$	—	$	(3.3	)
	$	—	$	(3.3	)	$	—	$	(3.3	)

Managed Investment Portfolio and Other Investments

Our managed investment portfolio consists of U.S. agency debt securities, corporate debt securities, asset backed securities, U.S. government debt securities and municipal debt securities. Our investment manager operates under a mandate to keep the average duration of investments under two years. Our managed investment portfolio and other investments are considered available-for-sale. Fair values for these investments are based upon valuations for identical or similar instruments in active markets, with the resulting net unrealized holding gains or losses reflected net of tax as a component of Accumulated other comprehensive income (loss) on the Consolidated Balance Sheets.

The cost basis for these investments, determined using the specific identification method, was $73.4 and $84.1 as of February 24, 2017 and February 26, 2016, respectively. Net unrealized losses were $0.1 for 2017 and $0.0 for 2016. As of February 24, 2017, approximately 57% of the debt securities mature within one year, approximately 10% in two years, approximately 10% in three years and approximately 23% in four or more years.

Foreign Exchange Forward Contracts

From time to time, we enter into forward contracts to reduce the risk of translation into U.S. dollars of certain foreign-denominated transactions, assets and liabilities. We primarily hedge intercompany working capital loans and certain forecasted currency flows from foreign-denominated transactions. The fair value of foreign exchange forward contracts is based on a valuation model that calculates the differential between the contract price and the market-based forward rate.

Canadian Asset-Backed Commercial Paper Restructuring Notes

As of February 26, 2016, we held four floating-rate Canadian asset-backed commercial paper restructuring notes. These notes replaced an investment in Canadian asset-backed commercial paper, which, as a result of a lack of liquidity in the market in 2008, failed to settle on maturity and went into default. These assets were considered to be Level 2 investments due to increased market liquidity and price transparency since that time. All four notes have been liquidated as of February 24, 2017.

Auction Rate Securities

As of February 24, 2017, we held auction rate securities (“ARS”) with a total par value of $6.5. While there has been no payment default with respect to our ARS, these investments are not widely traded and therefore do not currently have a readily determinable market value. We receive higher penalty interest rates on the securities ranging from 30-Day LIBOR plus 2.0 to 2.5%. We have the intent and ability to hold these securities until recovery of market value or maturity, and we believe the current inability to easily liquidate these investments will have no impact on our ability to fund our ongoing operations.

To estimate fair value, we used an internally-developed discounted cash flow analysis. Our discounted cash flow analysis considers, among other factors, (i) the credit ratings of the ARS, (ii) the credit quality of the underlying securities or the credit rating of issuers, (iii) the estimated timing and amount of cash flows, (iv) the formula applicable to each security which defines the penalty interest rate and (v) discount rates equal to the sum of (a) the yield on U.S. Treasury securities with a term through the estimated workout date plus (b) a risk premium based on similarly rated observable securities. These assumptions are based on our current judgment and our view of current market conditions. Based upon these factors, ARS with an original par value of approximately $6.5 have been adjusted to an estimated fair value of $3.5 as of February 24, 2017. The difference between par value and fair value is comprised of other-than-temporary impairment losses and unrealized losses on our ARS investments of $2.5 and $0.5, respectively. The investments other-than-temporarily impaired were impaired due to general credit declines, and the impairments were recorded in Investment income in the Consolidated Statements of Income. Unrealized gains are recorded in Accumulated other comprehensive income (loss) on the Consolidated Balance Sheets. The unrealized gains are due to changes in interest rates and are expected to fluctuate over the contractual term of the instruments. A deterioration in market conditions or the use of different assumptions could result in a different valuation and additional impairments. For example, an increase to the discount rate of 100 basis points would reduce the estimated fair value of our investment in ARS by approximately $0.4.

Below is a roll-forward of assets and liabilities measured at estimated fair value using Level 3 inputs for the years ended February 24, 2017 and February 26, 2016:



Roll-forward of Fair Value Using Level 3 Inputs	Auction Rate Securities
Balance as of February 27, 2015	$	9.7
Unrealized gain on investments	(0.1		)
Redemption of auction rate securities at par	(5.2		)
Balance as of February 26, 2016	$	4.4
Unrealized loss on investments	$	(0.9	)
Balance as of February 24, 2017	$	3.5

There were no other-than-temporary impairments or transfers into or out of Level 3 during either 2017 or 2016. Our policy is to value any transfers between levels of the fair value hierarchy based on end of period fair values.