FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE

The Company’s financial assets and liabilities measured at fair value are required to be grouped in one of three levels. The levels prioritize the inputs used to measure the fair value of the assets or liabilities. These levels are:


•	Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;


•	Level 2 – Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and


•	Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

The following table presents by level within the fair value hierarchy assets and liabilities measured at fair value on a recurring basis as of June 30, 2018:



	Total		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets:
Cash equivalents	$	99	$	99	$	—	$	—
Forward foreign currency contracts	365		—		365		—
Available for sale securities	692		692		—		—
	$	1,156	$	791	$	365	$	—
Liabilities:
Forward foreign currency contracts	$	27	$	—	$	27	$	—
Contingent consideration, noncurrent	1,909		—		—		1,909
Total	$	1,936	$	—	$	27	$	1,909

The following table presents by level within the fair value hierarchy assets and liabilities measured at fair value on a recurring basis as of June 30, 2017:



	Total		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets:
Cash equivalents	$	21,800	$	21,800	$	—	$	—
Forward foreign currency contracts	99		—		99		—
Available for sale securities	882		882		—		—
	$	22,781	$	22,682	$	99	$	—
Liabilities:
Forward foreign currency contracts	53		—		53		—
Contingent consideration, current	2,656		—		—		2,656
Total	$	2,709	$	—	$	53	$	2,656

Available for sale securities consist of the Company’s investment in YHS (see Note 15, Investments and Joint Ventures). Fair value is measured using the market approach based on quoted prices. The Company utilizes the income approach to measure fair value for its foreign currency forward contracts. The income approach uses pricing models that rely on market observable inputs such as yield curves, currency exchange rates and forward prices.

The Company estimates the original fair value of the contingent consideration as the present value of the expected contingent payments, determined using the weighted probabilities of the possible payments. The Company reassesses the fair value of contingent payments on a periodic basis. Although the Company believes its estimates and assumptions are reasonable, different assumptions, including those regarding the operating results of the respective businesses, or changes in the future may result in different estimated amounts.

In connection with the acquisition of Belvedere in February 2015, payment of a portion of the respective purchase price was contingent upon the achievement of certain operating results. Contingent consideration of up to a maximum of C$4,000 related to the Belvedere acquisition was payable based on the achievement of specified operating results during the two consecutive one-year periods following the closing date. In both the fourth quarter of fiscal 2017 and 2016, the Company paid C$2,000 in each quarter in settlement of the Belvedere contingent consideration obligation.

In connection with the acquisition of Orchard House during fiscal 2016, contingent consideration of up to £3,000 was potentially payable to the sellers based on the outcome of a review by the CMA in the United Kingdom. As a result of this review, the Company agreed to divest certain portions of its own-label juice business in the fourth quarter of fiscal 2016, and on September 15, 2016, the Company settled the contingent consideration related to this acquisition for £1,500.

In connection with the acquisitions of Better Bean and Yorkshire Provender during fiscal 2017, payments of a portion of the respective purchase prices were contingent upon the achievement of certain operating results. Contingent consideration of up to a maximum of $4,000 related to the Better Bean acquisition is payable based on the achievement of specified operating results over the three years following the closing date. Contingent consideration of up to a maximum of £1,500 related to the Yorkshire Provender acquisition is payable based on the achievement of specified operating results at the end of the three-year period following the closing date.

In connection with the acquisition of Clarks during fiscal 2018, payment of a portion of the purchase price is contingent upon the achievement of certain operating results. Contingent consideration of up to a maximum of £1,500 is payable based on the achievement of specified operating results over the 18-month period following completion of the acquisition.

The following table summarizes the Level 3 activity:



	Fiscal Year Ended June 30,
	2018			2017
Balance at beginning of year	$	2,656		$	3,553
Fair value of initial contingent consideration	1,547			2,652
Contingent consideration adjustment	(2,281		)	526
Contingent consideration paid	—			(3,969		)
Translation adjustment	(13		)	(106		)
Balance at end of year	$	1,909		$	2,656

The change in fair value of contingent consideration is included in acquisition related expenses, restructuring, integration and other charges in the Company’s Consolidated Statement of Income. In the fiscal year ended June 30, 2018, the Company recorded a net benefit of $2,281 primarily due to a decrease in the fair value of contingent consideration primarily related to Better Bean due to lower probability of achievement of specified operating results.

There were no transfers of financial instruments between the three levels of fair value hierarchy during the fiscal years ended June 30, 2018 or 2017.

The carrying amount of cash and cash equivalents, accounts receivable, net, accounts payable and certain accrued expenses and other current liabilities approximate fair value due to the short-term maturities of these financial instruments. The Company’s debt approximates fair value due to the debt bearing fluctuating market interest rates (See Note 11, Debt and Borrowings).

Derivative Instruments

The Company primarily has exposure to changes in foreign currency exchange rates relating to certain anticipated cash flows and firm commitments from its international operations. The Company may enter into certain derivative financial instruments, when available on a cost-effective basis, to manage such risk. Derivative financial instruments are not used for speculative purposes. The fair value of these derivatives is included in prepaid expenses and other current assets and accrued expenses and other current liabilities in the Consolidated Balance Sheet. For derivative instruments that qualify as hedges of probable forecasted cash flows, the effective portion of changes in fair value is temporarily reported in accumulated other comprehensive income and recognized in earnings when the hedged item affects earnings. Fair value hedges and derivative instruments not designated as hedges are marked-to-market each reporting period with any unrealized gains or losses recognized in earnings.

Derivative instruments designated at inception as hedges are measured for effectiveness at the inception of the hedge and on a quarterly basis. These assessments determine whether derivatives designated as qualifying hedges continue to be highly effective in off-setting changes in the cash flows of hedged items. Any ineffective portion of change in fair value is not deferred in accumulated other comprehensive income and is included in current period results. The Company will discontinue cash flow hedge accounting when the forecasted transaction is no longer probable of occurring on the originally forecasted date or when the hedge is no longer effective. There were no discontinued foreign exchange hedges for the fiscal years ended June 30, 2018 and June 30, 2017.

There were no cash flow hedges outstanding as of June 30, 2018. The notional and fair value amounts of cash flow hedges at June 30, 2017 were $1,828 and $84 of net assets, respectively. There were no fair value hedges outstanding as of June 30, 2018 and June 30, 2017.

The notional and fair value amounts of derivatives not designated as hedges at June 30, 2018 were $20,986 and $338 of net assets, respectively. There were $6,114 of notional amount and $38 of net liabilities of derivatives not designated as hedges as of June 30, 2017.

Gains and losses related to both designated and non-designated foreign currency exchange contracts are recorded in the Company’s consolidated statements of operations based upon the nature of the underlying hedged transaction and were not material in the fiscal years ended June 30, 2018 and 2017.