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 23, 2018 and February 24, 2017 are summarized below:



Fair Value of Financial Instruments	February 23, 2018
Fair Value of Financial Instruments	Level 1		Level 2			Level 3		Total
Assets:
Cash and cash equivalents	$	283.1	$	—		$	—	$	283.1
Restricted cash	2.5		—			—		2.5
Foreign exchange forward contracts	—		2.1			—		2.1
Auction rate securities	—		—			3.5		3.5
	$	285.6	$	2.1		$	3.5	$	291.2
Liabilities:
Foreign exchange forward contracts	$	—	$	(1.4	)	$	—	$	(1.4	)
	$	—	$	(1.4	)	$	—	$	(1.4	)

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	)

Managed Investment Portfolio and Other Investments

Our managed investment portfolio has historically consisted of U.S. agency debt securities, corporate debt securities, asset backed securities, U.S. government debt securities and municipal debt securities. As we converted the balance of our portfolio to cash in Q3 2018, there is no cost basis for our investments on February 23, 2018. The cost basis for these investments was $73.4 on February 24, 2017. There were no net unrealized losses for 2018 and $0.1 for 2017.

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.

Auction Rate Securities

As of February 23, 2018, we held auction rate securities (“ARS”) with a total par value of $6.5 and an adjusted fair value of $3.5. 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 prior to 2016. Unrealized losses are recorded in Accumulated other comprehensive income (loss) on the Consolidated Balance Sheets. The unrealized losses are due to changes in interest rates and are expected to fluctuate over the contractual term of the instruments.

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. 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.

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 23, 2018 and February 24, 2017:



Roll-forward of Fair Value Using Level 3 Inputs	Auction Rate Securities
Balance as of February 26, 2016	$	4.4
Unrealized loss on investments	(0.9		)
Balance as of February 24, 2017	$	3.5
Unrealized loss on investments	—
Balance as of February 23, 2018	$	3.5

There were no other-than-temporary impairments or transfers into or out of Level 3 during either 2018 or 2017. Our policy is to value any transfers between levels of the fair value hierarchy based on end of period fair values.