Fair Value

Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. GAAP sets forth a three-level fair value hierarchy, which prioritizes the inputs used in measuring fair value. The three levels are as follows:

Level 1 – defined as observable inputs, such as quoted market prices in active markets.

Level 2 – defined as inputs other than quoted prices in active markets that are either directly or indirectly observable.

Level 3 – defined as unobservable inputs in which little or no market data exists, therefore, requiring an entity to develop its own assumptions.

Our financial assets and liabilities subject to the three-level fair value hierarchy consist principally of cash and equivalents, accounts receivable, accounts payable, contingent consideration payable and defined benefit pension plan assets. The estimated fair value of cash and equivalents, accounts receivable and accounts payable approximates their carrying value.

Our contingent consideration, which resulted from the earn-outs associated with our acquisitions of Bantam and Angelic Bakehouse, Inc. (“Angelic”), is measured at fair value on a recurring basis and is included in Other Noncurrent Liabilities on the Condensed Consolidated Balance Sheets. The following table summarizes our contingent consideration:



	Fair Value Measurements at March 31, 2019
	Level 1		Level 2		Level 3		Total
Contingent consideration - Bantam	$	—	$	—	$	8,183	$	8,183
Contingent consideration - Angelic	—		—		7,380		7,380
Total contingent consideration	$	—	$	—	$	15,563	$	15,563

	Fair Value Measurements at June 30, 2018
	Level 1		Level 2		Level 3		Total
Contingent consideration - Bantam	$	—	$	—	$	—	$	—
Contingent consideration - Angelic	—		—		17,080		17,080
Total contingent consideration	$	—	$	—	$	17,080	$	17,080

Bantam Contingent Consideration

This contingent consideration resulted from the earn-out associated with our October 19, 2018 acquisition of Bantam. In general, the terms of the acquisition specify the sellers will receive an earn-out based upon a pre-determined multiple of the defined adjusted EBITDA of Bantam for the twelve months ending December 31, 2023. The initial fair value of the contingent consideration was determined to be $8.0 million, which includes a refinement to the purchase price allocation in the current quarter related to a change in assumptions. The fair value is measured on a recurring basis using a Monte Carlo simulation that randomly changes revenue, EBITDA and other uncertain variables to estimate an expected value. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy.

The following table represents our Level 3 fair value measurements using significant other unobservable inputs for Bantam’s contingent consideration:



	Three Months Ended March 31,					Nine Months Ended March 31,
	2019			2018		2019		2018
Contingent consideration at beginning of period	$	8,995		$	—	$	—	$	—
Initial fair value - (reductions)/additions	(900		)	—		8,000		—
Change in contingent consideration included in operating income	88			—		183		—
Contingent consideration at end of period	$	8,183		$	—	$	8,183	$	—

Angelic Contingent Consideration

This contingent consideration resulted from the earn-out associated with our November 17, 2016 acquisition of Angelic. In general, the terms of the acquisition specify the sellers will receive an earn-out based upon a pre-determined multiple of the defined adjusted EBITDA of Angelic for fiscal 2021. The initial fair value of the contingent consideration was determined to be $13.9 million. The fair value is measured on a recurring basis using a present value approach, which incorporates factors such as business risks and projections, to estimate an expected value. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. Our December 31, 2018 fair value measurement resulted in a $9.7 million reduction in the fair value of Angelic’s contingent consideration based on a change in Angelic’s forecasted adjusted EBITDA for fiscal 2021. This adjustment was recorded in our Retail segment.

The following table represents our Level 3 fair value measurements using significant other unobservable inputs for Angelic’s contingent consideration:



	Three Months Ended March 31,				Nine Months Ended March 31,
	2019		2018		2019			2018
Contingent consideration at beginning of period	$	7,380	$	16,021	$	17,080		$	15,028
Change in contingent consideration included in operating income	—		521		(9,700		)	1,514
Contingent consideration at end of period	$	7,380	$	16,542	$	7,380		$	16,542