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 September 26, 2015 and June 27, 2015 (in thousands):



	September 26, 2015
	Level 1		Level 2			Level 3		Total Fair Value
Financial Liabilities:
Interest rate swaps	$	—	$	(616	)	$	—	$	(616	)
Foreign currency forward contracts	$	—	$	(11,115	)	$	—	$	(11,115	)



	June 27, 2015
	Level 1		Level 2			Level 3		Total Fair Value
Financial Assets:
Interest rate swaps	$	—	$	25		$	—	$	25
Financial Liabilities:
Interest rate swaps	$	—	$	(443	)	$	—	$	(443	)
Foreign currency forward contracts	$	—	$	(6,799	)	$	—	$	(6,799	)

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, 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 September 26, 2015 and June 27, 2015, 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. Each of these rates is a variable floating rate dependent upon current market conditions and the Company's current credit risk as discussed in footnote 4.

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 $12.1 million and $11.6 million as of September 26, 2015 and June 27, 2015, respectively, with a carrying value that reasonably approximates the fair value. The discounted cash flow of the term loan is estimated to be $30.0 million as of September 26, 2015 and $31.3 million as of June 27, 2015, respectively, with a carrying value that reasonably approximates the fair value.