FAIR VALUE MEASUREMENTS

12 Months Ended

Jun. 27, 2020

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. There have been no changes in the fair value methodologies used at June 27, 2020 and June 29, 2019.

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 June 27, 2020 and June 29, 2019 (in thousands):


	June 27, 2020
	Level 1		Level 2		Level 3		Total Fair Value
Financial Assets:

Foreign currency forward contracts & swaps	$	—	$	1,097	$	—	$	1,097
Financial Liabilities:
Interest rate swaps	$	—	$	(957)	$	—	$	(957)
Foreign currency forward contracts & swaps	$	—	$	(1,977)	$	—	$	(1,977)

	June 29, 2019
	Level 1		Level 2		Level 3		Total Fair Value
Financial Assets:
Interest rate swaps	$	—	$	2	$	—	$	2
Foreign currency forward contracts & swaps	—		3,232		—		$	3,232

The Company currently has forward contracts to hedge known future cash outflows for expenses denominated in the Mexican peso and an interest rate swap 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 quarter with the unrealized gain or loss, net of tax, reported as a component of shareholders’ equity in accumulated other comprehensive income (loss), as they qualify for hedge accounting.

The carrying values of cash and cash equivalents, accounts receivable, current liabilities, and non current lease liability are reflected on the balance sheets at June 27, 2020 and June 29, 2019, reasonably approximate their fair value.

The Company’s long-term debt, which is measured at amortized cost, primarily consists of a revolving line of credit, a term loan and an equipment term loan. These borrowings 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 line of credit, term loan and equipment term, they are classified within Level 2 of the fair value hierarchy. Further, the carrying value of each of these instruments reasonably approximates their fair value as of June 27, 2020 and June 29, 2019.

Other assets and liabilities held by the Company may be required to be measured at fair value on a non recurring basis. As of June 29, 2019, the customer relationship intangibles were written down to their fair value of $0. This measurement was the result of certain triggering events that occurred during the third quarter of fiscal year 2019. Refer to Note 14 for further discussion of the impairment.