Fair Value Measurements

6 Months Ended

Jun. 30, 2019

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 6.  Fair Value Measurements

The Company has various financial instruments that must be measured at fair value on a recurring basis, including marketable debt and equity securities held by Astec Insurance Company (“Astec Insurance”), the Company’s captive insurance company, and marketable equity securities held in an unqualified Supplemental Executive Retirement Plan (“SERP”).  The obligations of the Company associated with the financial assets held in the SERP also constitute a liability of the Company for financial reporting purposes and are included in other long-term liabilities in the accompanying unaudited condensed consolidated balance sheets.  The Company’s subsidiaries also occasionally enter into foreign currency exchange contracts to mitigate exposure to fluctuations in currency exchange rates.

The carrying amount of cash and cash equivalents, trade receivables, other receivables, accounts payable and long-term debt approximates their fair value because of their short-term nature and/or interest rates associated with the instruments.  Investments are carried at their fair value based on quoted market prices for identical or similar assets or, where no quoted prices exist, other observable inputs for the asset.  The fair values of foreign currency exchange contracts are based on quotations from various banks for similar instruments using models with market based inputs.

Financial assets and liabilities are categorized based upon the level of judgment associated with the inputs used to measure their fair value.  The inputs used to measure the fair value are identified in the following hierarchy:

Level 1 -	Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 -	Unadjusted quoted prices in active markets for similar assets or liabilities; or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs other than quoted prices that are observable for the asset or liability.
Level 3 -	Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

As indicated in the tables below (which excludes the Company’s pension assets), the Company has determined that all of its financial assets and liabilities as of June 30, 2019 and December 31, 2018 are Level 1 and Level 2 in the fair value hierarchy as defined above:

	June 30, 2019
	Level 1		Level 2		Total
Financial Assets:
Trading equity securities:
SERP money market fund	$	298	$	–	$	298
SERP mutual funds		4,946		–		4,946
Preferred stocks		272		–		272
Trading debt securities:
Corporate bonds		5,235		–		5,235
Municipal bonds		–		1,361		1,361
Floating rate notes		1,331		–		1,331
U.S. government securities		2,435		–		2,435
Asset backed securities		–		409		409
Other		–		1,004		1,004
Derivative financial instruments		–		176		176
Total financial assets	$	14,517	$	2,950	$	17,467
Financial Liabilities:
SERP liabilities	$	–	$	6,807	$	6,807
Derivative financial instruments		–		42		42
Total financial liabilities	$	–	$	6,849	$	6,849

	December 31, 2018
	Level 1		Level 2		Total
Financial Assets:
Trading equity securities:
SERP money market fund	$	229	$	–	$	229
SERP mutual funds		4,755		–		4,755
Preferred stocks		248		–		248
Trading debt securities:
Corporate bonds		5,398		–		5,398
Municipal bonds		–		1,546		1,546
Floating rate notes		1,300		–		1,300
U.S. government securities		2,210		–		2,210
Asset backed securities		–		442		442
Other		–		708		708
Derivative financial instruments		–		333		333
Total financial assets	$	14,140	$	3,029	$	17,169
Financial Liabilities:
SERP liabilities	$	–	$	6,641	$	6,641
Total financial liabilities	$	–	$	6,641	$	6,641

The Company reevaluates the volume of trading activity for each of its investments at the end of each quarter and adjusts the level within the fair value hierarchy as needed.  No investments changed hierarchy levels from December 31, 2018 to June 30, 2019.

The trading equity securities noted above are valued at their fair value based on their quoted market prices, and the trading debt securities are valued based upon a mix of observable market prices and model driven prices derived from a matrix of observable market prices for assets with similar characteristics obtained with the assistance of a nationally recognized third-party pricing service.  Additionally, a significant portion of the SERP’s investments in trading equity securities are in money market and mutual funds.  As these money market and mutual funds are held in a SERP, they are also included in the Company’s liability under its SERP.

Trading debt securities are comprised of marketable debt securities held by Astec Insurance. Astec Insurance has an investment strategy that focuses on providing regular and predictable interest income from a diversified portfolio of high-quality fixed income securities.