FAIR VALUE MEASUREMENTS

9 Months Ended

Apr. 03, 2021

Fair Value Measurements

The Company currently has forward contracts to hedge known future cash outflows for expenses denominated in the Mexican peso. 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. 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. 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 gain (loss), as they qualify for hedge accounting.

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 April 3, 2021 and June 27, 2020 (in thousands):


	April 3, 2021
	Level 1		Level 2		Level 3		Total Fair Value
Financial Assets:

Foreign currency forward contracts	$	—	$	3,699	$	—	$	3,699


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

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

The carrying values of cash and cash equivalents, accounts receivable and current liabilities reflected on the balance sheets at April 3, 2021 and June 27, 2020, reasonably approximate their fair value. The Company’s long-term debt, which is measured at amortized cost, primarily consists of an asset-based revolving credit facility, lease liability, and an equipment loan. These borrowings bear interest at LIBOR plus 2.5% per the loan agreement. Each of these rates is a variable floating rate dependent upon current market conditions and the Company’s current credit risk as discussed in Note 4.

As a result of the determinable market rates for our asset-based revolving credit facility and equipment loan, 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 April 3, 2021 and June 27, 2020.