From time to time, we use interest rate swaps or other instruments to manage our interest rate exposure and reduce the impact of future interest rate changes. These financial instruments are used for trading or speculative purposes. We have designated our interest rate swap contracts as cash flow hedges of our future interest payments. As a result, the gains and losses on the swap contracts are reported as a component of other comprehensive income and are reclassified into interest expense as the related interest payments are made. All components of other comprehensive income are attributable to shareholders.  As of , there are components related to the non-controlling interest.  Outstanding instruments as of , are as follows:

 

			Notational
	Effective Date		Amount				Fixed LIBOR Rate		Maturity Date
Interest Rate Swap	July 19, 2017		$10.0 million				1.74%		July 19, 2019
Interest Rate Swap	July 19, 2017		$10.0 million				1.99%		May 10, 2021
Interest Rate Swap	July 25, 2018		$20.0 million				3.18%		July 25, 2023

 

From time to time, we purchase cotton option contracts to economically hedge the risk related to market fluctuations in the cost of cotton used in our operations. We do receive hedge accounting treatment for these derivatives. As such, the realized and unrealized gains and losses associated with them are recorded within cost of goods sold on the Condensed Consolidated Statement of Operations. 

 

 

 

The following financial assets (liabilities) are measured at fair value on a recurring basis (in thousands):

 

		Fair Value Measurements Using
						Quoted Prices in				Significant Other				Significant
						Active Markets for				Observable				Unobservable
						Identical Assets				Inputs				Inputs
Period Ended		Total				(Level 1)				(Level 2)				(Level 3)
Interest Rate Swaps
June 29, 2019		$	(1,184	)			—			$	(1,184	)			—
September 29, 2018			183				—				183				—
Cotton Options
June 29, 2019		$	—				—				—				—
September 29, 2018			(110	)			(110	)			—				—
Contingent Consideration
June 29, 2019		$	(9,394	)			—				—			$	(9,394	)
September 29, 2018			(10,542	)			—				—				(10,542	)

 

The fair value of the interest rate swap agreements was derived from a discounted cash flow analysis based on the terms of the contract and the forward interest rate curves adjusted for our credit risk, which fall in Level of the fair value hierarchy. At , book value for fixed rate debt approximates fair value based on quoted market prices for the same or similar issues or on the current rates offered to us for debt of the same remaining maturities (a Level fair value measurement).

 

The following table summarizes the fair value and presentation in the Condensed Consolidated Balance Sheets for derivatives related to our interest swap agreements as of , and (in thousands):

 

		June 29,				September 29,
		2019				2018
Other assets		$	—			$	182
Deferred tax assets			297				(46	)
Other non-current liabilities			(1,184	)			—
Accumulated other comprehensive (loss) income		$	(887	)		$	136

 

In we acquired Salt Life and issued contingent consideration payable in cash after the end of calendar year if financial performance targets involving the sale of Salt Life-branded products are met during the calendar year.  We used a Monte Carlo model utilizing the historical results and projected cash flows based on the contractually defined terms, discounted as necessary, to estimate the fair value of the contingent consideration for Salt Life at the acquisition date as well as to remeasure the contingent consideration related to the acquisition of Salt Life at each reporting period.  Accordingly, the fair value measurement for contingent consideration falls in Level of the fair value hierarchy.

 

At , we had million accrued in contingent consideration related to the Salt Life acquisition, a million reduction from the accrual at . The reduction in the fair value of contingent consideration is recorded in other income and is based on the inputs into the Monte Carlo model, including the time remaining in the measurement period and our expectations of sales in calendar year which have been reduced based on our current view of the retail environment.

 

On we acquired Teeshirt Ink, Inc. d/b/a The purchase price consisted of million in cash and additional contingent consideration based on achievement of certain performance targets related to sales and EBITDA for the period from through , as well as for our fiscal years and In the quarter of fiscal year in accordance with the purchase agreement, contingent consideration of million was paid to the sellers for the earn-out period from through .  During the -months ended we expensed million to increase the contingent consideration primarily driven from the time value from the discount period.

 

At , we had a total of million accrued in contingent consideration, a million decrease from the accrual at . The decrease is driven by the million payment made during the fiscal quarter along with a  million decrease in the accrual which is recorded in other income. The fair value of contingent consideration is based on the inputs into the Monte Carlo model, including the time remaining in the measurement period. Accordingly, the fair value measurement for contingent consideration falls in Level of the fair value hierarchy.