Fair Value

12 Months Ended

Feb. 26, 2021

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 26, 2021 and February 28, 2020 are summarized below:


Fair Value of Financial Instruments	February 26, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents	$	489.8	$	—	$	—	$	489.8
Restricted cash	5.8		—		—		5.8







Foreign exchange forward contracts	—		1.1		—		1.1
Auction rate security	—		—		2.6		2.6

	$	495.6	$	1.1	$	2.6	$	499.3
Liabilities:
Foreign exchange forward contracts	$	—	$	(0.8)	$	—	$	(0.8)
	$	—	$	(0.8)	$	—	$	(0.8)

Fair Value of Financial Instruments	February 28, 2020
	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents	$	541.0	$	—	$	—	$	541.0
Restricted cash	6.1		—		—		6.1







Foreign exchange forward contracts	—		1.2		—		1.2
Auction rate security	—		—		2.1		2.1

	$	547.1	$	1.2	$	2.1	$	550.4
Liabilities:
Foreign exchange forward contracts	$	—	$	(0.5)	$	—	$	(0.5)
	$	—	$	(0.5)	$	—	$	(0.5)

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 use derivatives for intercompany transactions (including 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 Security

As of February 26, 2021, we held an auction rate security (“ARS”) investment with a total par value of $3.2 and an adjusted fair value of $2.6. The difference between par value and fair value is comprised of other-than-temporary impairment losses and unrealized gains on our ARS investment of $0.9 and $0.3, respectively. The ARS was impaired due to general credit declines, and the impairments were recorded in Investment income in the Consolidated Statements of Income. The unrealized gains are due to changes in interest rates and are expected to fluctuate over the contractual term of the instruments. Unrealized gains are recorded in Accumulated other comprehensive income (loss) on the Consolidated Balance Sheets.

While there has been no payment default with respect to our ARS, this investment is not widely traded and therefore does 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 ARS investment 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 26, 2021 and February 28, 2020:


Roll-forward of Fair Value Using Level 3 Inputs	Auction Rate Security
Balance as of February 22, 2019	$	3.9
Unrealized loss on investments	(0.1)
Realized gain on investment	0.5
Redemption of auction rate security	(2.2)
Balance as of February 28, 2020	$	2.1
Unrealized gain on investment	0.5
Balance as of February 26, 2021	$	2.6

There were no other-than-temporary impairments or transfers into or out of Level 3 during either 2021 or 2020. Our policy is to value any transfers between levels of the fair value hierarchy based on end of period fair values.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details