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Fair Value Measurements
 9 Months Ended
Mar. 04, 2017
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements

The company's financial instruments consist of cash equivalents, marketable securities, accounts and notes receivable, deferred compensation plan, accounts payable, debt, redeemable noncontrolling interests, an interest rate swap agreement and foreign currency exchange contracts. The company's financial instruments, other than long-term debt, are recorded at fair value. The carrying value and fair value of the company's long-term debt, including current maturities, is as follows for the periods indicated:
(In millions)
 
March 4, 2017
 
May 28, 2016
Carrying value
 
$
234.5

 
$
221.9

Fair value
 
$
246.1

 
$
241.7



The following describes the methods the company uses to estimate the fair value of financial assets and liabilities, which have not significantly changed in the current period:

Available-for-sale securities — The company's available-for-sale marketable securities primarily include equity and fixed income mutual funds and government obligations. These investments are recorded at fair value using quoted prices for similar securities.

Foreign currency exchange contracts — The company's foreign currency exchange contracts are valued using an approach based on foreign currency exchange rates obtained from active markets. The estimated fair value of forward currency exchange contracts is based on month-end spot rates as adjusted by market-based current activity. These forward contracts are not designated as hedging instruments.

Interest rate swap agreement — The company's interest rate swap agreement value is determined using a market approach based on rates obtained from active markets. The interest rate swap agreement is designated as a cash flow hedging instrument.

Deferred compensation plan — The company's deferred compensation plan primarily includes various domestic and international mutual funds that are recorded at fair value using quoted prices for similar securities.

The following tables set forth financial assets and liabilities measured at fair value in the Condensed Consolidated Balance Sheets and the respective pricing levels to which the fair value measurements are classified within the fair value hierarchy as of March 4, 2017 and May 28, 2016.
(In millions)
Fair Value Measurements
 
March 4, 2017
 
May 28, 2016


Financial Assets
Quoted Prices with
Other Observable Inputs (Level 2)
Management Estimate (Level 3)
 
Quoted Prices with
Other Observable Inputs (Level 2)
Management Estimate (Level 3)
Available-for-sale marketable securities:
 
 
 
 
 
Government obligations
$
—

$
—

 
$
0.4

$
—

Mutual funds - fixed income
7.2

—

 
6.4

—

Mutual funds - equity
0.8

—

 
0.7

—

Foreign currency forward contracts
0.7

—

 
0.5

—

Interest rate swap agreement
8.2

—

 
—

—

Deferred compensation plan
9.7

—

 
7.9

—

Total
$
26.6

$
—

 
$
15.9

$
—

 
 
 
 
 
 
Financial Liabilities
 
 
 
 
 
Foreign currency forward contracts
$
0.3

$
—

 
$
0.8

$
—

Contingent consideration
—

1.6

 
—

2.7

Total
$
0.3

$
1.6

 
$
0.8

$
2.7



The table below presents a reconciliation for liabilities measured at fair value using significant unobservable inputs (Level 3) (in millions).
Contingent Consideration
March 4, 2017
 
May 28, 2016
Beginning balance
$
2.7

 
$
2.6

Foreign currency translation adjustments
—

 
(0.1
)
Settlements
(1.1
)
 
(2.5
)
Purchases or additions
—

 
2.7

Ending balance
$
1.6

 
$
2.7



The contingent consideration liabilities represent future payment obligations that relate to business and product line acquisitions. These payments are based on the future performance of the acquired businesses or product line. The contingent consideration liabilities are valued using estimates based on discount rates that reflect the risk involved and the projected sales and earnings of the acquired businesses. The estimates are updated and the liabilities are adjusted to fair value on a quarterly basis.

The following is a summary of the carrying and market values of the company's marketable securities as of the respective dates.
 
March 4, 2017
 
May 28, 2016
(In millions)
Cost
 
Unrealized
Gain/(Loss)
 
Market
Value
 
Cost
 
Unrealized
Gain/(Loss)
 
Market
Value
Government obligations
$
—

 
$
—

 
$
—

 
$
0.4

 
$
—

 
$
0.4

Mutual funds - fixed income
7.1

 
0.1

 
7.2

 
6.4

 
—

 
6.4

Mutual funds - equity
0.7

 
$
0.1

 
0.8

 
0.7

 
—

 
0.7

Total
$
7.8

 
$
0.2

 
$
8.0

 
$
7.5

 
$
—

 
$
7.5



Adjustments to the fair value of available-for-sale securities are recorded as increases or decreases, net of income taxes, within Accumulated other comprehensive loss in stockholders’ equity. These adjustments are also included within the caption Unrealized holding gain within the Condensed Consolidated Statements of Comprehensive Income. Unrealized gains recognized in the company's Condensed Consolidated Statement of Comprehensive Income related to available-for-sale securities were $0.2 million and nil for the three and nine month periods ended March 4, 2017 and February 27, 2016, respectively. The cost of securities sold is based on the specific identification method; realized gains and losses resulting from such sales are included in the Condensed Consolidated Statements of Comprehensive Income within "Other, net".

The company reviews its investment portfolio for any unrealized losses that would be deemed other-than-temporary and require the recognition of an impairment loss in earnings. If the cost of an investment exceeds its fair value, the company evaluates, among other factors, general
market conditions, the duration and extent to which the fair value is less than its cost, the company's intent to hold the investment, and whether it is more likely than not that the company will be required to sell the investment before recovery of the cost basis. The company also considers the type of security, related industry and sector performance, and published investment ratings. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis in the investment is established. If conditions within individual markets, industry segments, or macro-economic environments deteriorate, the company could incur future impairments.

The company views its available-for-sale portfolio as available for use in its current operations. Accordingly, the investments are recorded within Current Assets within the Condensed Consolidated Balance Sheets.

Derivative Instruments and Hedging Activities
In September, 2016, the company entered into an interest rate swap agreement. The interest rate swap is for an aggregate notional amount of $150.0 million with a forward start date of January 3, 2018 and a termination date of January 3, 2028. As a result of the transaction, the company effectively will convert $150.0 million of its outstanding indebtedness from a LIBOR-based floating interest rate plus applicable margin to a 1.949 percent fixed interest rate plus applicable margin under the agreement as of the forward start date.

The company entered into the interest rate swap agreement to manage its exposure to interest changes and its overall cost of borrowing. The interest rate swap agreement was entered into to exchange variable rate interest payments for fixed rate payments over the life of the agreement without the exchange of the underlying notional amounts. The notional amount of the interest rate swap agreement is used to measure interest to be paid or received and does not represent the amount of exposure to credit loss. The differential paid or received on the interest rate swap agreement is recognized as an adjustment to interest expense.

The interest rate swap was a designated cash flow hedge at inception and remains an effective accounting hedge as of March 4, 2017. Since a designated derivative meets hedge accounting criteria, the fair value of the hedge is recorded in the Consolidated Statement of Stockholders’ Equity as a component of Accumulated other comprehensive loss, net of tax. The ineffective portion of the change in fair value of the derivative is immediately recognized in earnings. The interest rate swap agreement is assessed for hedge effectiveness on a quarterly basis.

As of March 4, 2017, the fair value of the company’s interest rate swap was $8.2 million and was recorded within Other noncurrent assets within the Condensed Consolidated Balance Sheets. The unrealized gain recorded within Other comprehensive loss, net of tax, for the effective portion of the designated cash flow hedge was $1.1 million and $5.3 million for the three and nine month periods ended March 4, 2017, respectively. For three and nine month periods ended March 4, 2017, there were no gains or losses recognized against earnings for hedge ineffectiveness and there were no gains or losses reclassified from Accumulated other comprehensive loss into earnings.