Soffe was previously involved in several related litigation matters stemming from The Sports Authority's ("TSA") filing of a voluntary petition(s) for relief under Chapter of the United States Bankruptcy Code (the "TSA Bankruptcy"). Prior to such filing, Soffe provided TSA with products to be sold on a consignment basis pursuant to a "pay by scan" agreement and the litigation matters related to Soffe's interest in the products it provided TSA on a consignment basis (the "Products") and the proceeds derived from the sale of such products (the "Proceeds").

 

TSA Stores, Inc. and related entities TSA Ponce, Inc. and TSA Caribe, Inc. filed an action against Soffe on in the United States Bankruptcy Court for the District of Delaware (the "TSA Action") including requests for declaratory judgment on a variety of matters related to the Products and Proceeds as well as several related claims. TSA lender Wilmington Savings Fund Society, FSB, as Successor Administrative and Collateral Agent ("WSFS"), intervened in the TSA Action seeking declaratory judgment on a variety of matters related to the Products and Proceeds and including several related claims. Soffe subsequently asserted counterclaims against WSFS in the TSA Action seeking declaratory judgment on a variety of matters related to the Products and Proceeds.

 

On the court issued an order in favor of WSFS with respect to its claimed interest in the majority of the Products and Proceeds. Soffe, WSFS, TSA Stores, Inc., TSA Ponce, Inc. and TSA Caribe, Inc. subsequently reached agreement to settle the above-referenced matters, with Soffe agreeing to pay approximately million in exchange for a comprehensive release of all claims at issue in the matters. These matters have now been finally resolved, with the agreed amounts funded on We recorded the settlement expense in other income, net in our Consolidated Statement of Operations in fiscal year

In addition, at times we are party to various legal claims, actions and complaints. We believe that, as a result of legal defenses, insurance arrangements, and indemnification provisions with parties believed to be financially capable, such actions should have a material effect on our operations, financial condition, or liquidity.

 

We have entered into agreements, and have fixed prices, to purchase yarn, finished fabric, and finished apparel and headwear products. At minimum payments under these contracts were as follows (in thousands):

 

Yarn		$	19,231
Finished fabric			2,973
Finished products			16,946
		$	39,150

 

 

As of we had outstanding standby letters of credit totaling million.

 

 

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. The following financial instruments were outstanding as of

 

	Effective Date	Notational Amount		LIBOR Rate		Maturity Date
Interest Rate Swap	July 19, 2017	$10 million		1.99	%	May 10, 2021
Interest Rate Swap	July 25, 2018	$20 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 Consolidated Statement of Operations.

 

ASC  (“ASC ), defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Assets and liabilities measured at fair value are grouped in levels. The levels prioritize the inputs used to measure the fair value of the assets or liabilities. These levels are:

 

 

 

 

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

 

		Fair Value Measurements Using
Period Ended		Total				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
Interest Rate Swap
September 28, 2019		$	(1,293	)		$	—			$	(1,293	)		$	—
September 29, 2018		$	183			$	—			$	183			$	—
Cotton Options
September 28, 2019		$	—			$	—			$	—			$	—
September 29, 2018		$	(110	)			(110	)		$	—			$	—
Contingent Consideration
September 28, 2019		$	(9,094	)		$	—			$	—			$	(9,094	)
September 29, 2018		$	(10,542	)		$	—			$	—			$	(10,542	)

 

The fair value of the interest rate swap agreements were derived from 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. Fair values for debt are 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 Consolidated Balance Sheets for derivatives as of and

 

		September 28, 2019				September 29, 2018
Other assets		$	-			$	182
Deferred tax liabilities			324				(46	)
Other liabilities			(1,293	)			—
Accumulated other comprehensive loss		$	(969	)		$	136

 

 

The acquisition purchase price consisted of additional payments contingent on the combined business’s achievement of certain performance targets related to sales and earnings before interest, taxes, depreciation and amortization ("EBITDA") for the period from through as well as for our fiscal years and The valuation of the fair value of the contingent consideration is based upon inputs into the Monte Carlo model, including projected results, which then are discounted to a present value to derive the fair value. The fair value of the contingent consideration is sensitive to changes in our projected results. At we estimated the fair value of contingent consideration to be  million, a decrease of million from the balance of million. The decrease in the accrual was related to a payment of million for the period ended which was partially offset by an increase in the valuation for the remaining periods as a result of updated performance expectations.

 

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 which used 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 acquisition, 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 acquisition of Salt Life, a million reduction from the accrual at based on actual performance to date in calendar year compared to prior estimates.