Fair Value Measurements

The Company has adopted ASC 820, Fair Value Measurements, which defines fair value, establishes a framework for assets and liabilities being measured and reported at fair value and expands disclosures about fair value measurements. There are three levels of fair value hierarchy inputs used to value assets and liabilities which include: Level 1 – inputs are quoted market prices for identical assets or liabilities; Level 2 – inputs other than quoted market prices included in Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3 – inputs are unobservable inputs for the asset or liability.

The following table summarizes the fair value of assets/(liabilities) of the Company’s derivatives that are required to be measured on a recurring basis as of March 28, 2015 and June 28, 2014 (in thousands):



	March 28, 2015
	Level 1		Level 2			Level 3		Total Fair Value
Financial Assets:
Interest rate swaps	$	—	$	2		$	—	$	2
Financial Liabilities:
Interest rate swaps	$	—	$	(432	)	$	—	$	(432	)
Foreign currency forward contracts	$	—	$	(6,215	)	$	—	$	(6,215	)



	June 28, 2014
	Level 1		Level 2		Level 3		Total Fair Value
Financial Assets:
Foreign currency forward contracts	$	—	$	3,641	$	—	$	3,641

The Company currently has forward contracts to hedge known future cash outflows for expenses denominated in the Mexican peso and interest rate swaps to mitigate risk associated with certain borrowings under the Company’s debt arrangement. These contracts are measured on a recurring basis based on the foreign currency spot rates and forward rates quoted by banks or foreign currency dealers. These contracts are marked to market using level 2 input criteria every period with the unrealized gain or loss, net of tax, reported as a component of shareholders’ equity in accumulated other comprehensive (loss) income, as they qualify for hedge accounting.

The carrying values of cash and cash equivalents, accounts receivable and current liabilities reflected on the balance sheets at March 28, 2015 and June 28, 2014, reasonably approximate their fair value. The Company’s long-term debt primarily consists of a revolving line of credit and a term loan. Borrowings under the revolving line of credit bear interest at either a “Base Rate” or a “Fixed Rate,” as elected by the Company. The base rate is the higher of the Wells Fargo Bank prime rate, daily one month London Interbank Offered Rate (LIBOR) plus 1.5%, or the Federal Funds rate plus 1.5%. Borrowings under the term loan bear interest at a fixed rate per annum of the daily one month LIBOR plus 1.75%, 2.00% or 2.25% depending on the ratio of the Company’s funded debt to EBITDA. Each of these rates is a variable floating rate dependent upon current market conditions and the Company’s current credit risk.

As a result of the determinable market rate for our revolving credit and term loan debt, they are classified within Level 2 of the fair value hierarchy. The discounted cash flow of the revolving line of credit is estimated to be $11.5 million as of March 28, 2015, with a carrying value that reasonably approximates the fair value. The Company did not have an outstanding balance on the line of credit as of June 28, 2014. The discounted cash flow of the term loan is estimated to be $32.5 million as of March 28, 2015, with a carrying value that reasonably approximates the fair value. The Company did not have an outstanding balance on the term loan as of June 28, 2014.

Additionally, borrowings under the accounts receivable purchase program bear interest at daily one month LIBOR plus 2.25%. As a result of the determinable market rate for our accounts receivable purchase program, it is classified within Level 2 of the fair value hierarchy. As of March 28, 2015, the Company had no remaining liability to WFB for transferred accounts receivables. As of June 28, 2014, the Company had a net liability to WFB of $7.9 million, which reasonably approximates the fair value. The outstanding balance of accounts receivable sold and not yet collected under the trade accounts receivable program are recorded initially at fair value as other current assets on the Consolidated Balance Sheet and valued using unobservable inputs (level 3) primarily discounted cash flows, due to their credit quality and short-term maturity. The fair value reasonably approximates the carrying value. The unobservable inputs consist of estimated credit losses and estimated discount rates, both of which have an immaterial impact on the fair value calculations of the account receivables sold and not yet collected.