Fair Value Measurements

9 Months Ended

Sep. 30, 2024

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The fair value ASC 820 establishes a three-tier hierarchy for grouping assets and liabilities, based on the significance and availability of inputs in active markets. The estimated fair values of the Company's assets and liabilities measured on a recurring basis are determined using the market approach.

In general, fair values determined by Level 1 inputs use quoted prices in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs use data points that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are “unobservable data points” for the asset or liability and include situations where there is little, if any, market activity for the asset or liability.

The Company measures its investments in certain fixed-income and equity securities at fair value with changes in fair value recognized in the unaudited condensed consolidated statements of income. The Company anticipates using these investments, which consist of insurance contracts, to satisfy its obligations as a participant in MDU Resources’ unfunded, nonqualified defined benefit plans for the Company's executive officers and certain key management employees, and invests in these fixed-income and equity securities for the purpose of earning investment returns and capital appreciation. These investments, which totaled $4.4 million and $5.0 million as of September 30, 2024 and December 31, 2023, respectively, are included in Investments on the unaudited condensed consolidated balance sheets. The Company recognized net unrealized gains on these investments of $0.2 million and $0.5 million, respectively, for the three and nine months ended September 30, 2024. The net unrealized losses on these investments were immaterial for each of the three and nine months ended September 30, 2023. The change in fair value, which is considered part of the cost of the plan, is classified in Other income on the unaudited condensed consolidated statements of income.

The Company’s Level 2 money market funds are included as a part of Investments on the unaudited condensed consolidated balance sheets and are valued at the net asset value of shares held at the end of the period, based on published market quotations on active markets or using other known sources, including pricing from outside sources. The estimated fair value of the Company’s Level 2 insurance contracts is based on contractual cash surrender values that are determined primarily by investments in managed separate accounts of the insurer. These amounts approximate fair value. The managed separate accounts are valued based on other observable inputs or corroborated market data.

Though the Company believes the methods used to estimate fair value are consistent with those used by other market participants, the use of other methods or assumptions could result in different estimates of fair value.

The estimated fair values of the Company’s cash and cash equivalents, receivables, accounts payable and other accrued liabilities approximate their carrying value due to the short-term maturities of these instruments.

The carrying value of the Company’s long-term debt, classified as related-party notes payable, approximates fair value based on a comparison with current prevailing market rates for borrowings of similar risks and maturities.

The Company’s assets measured at fair value on a recurring basis were as follows:

	Fair Value Measurements as of September 30, 2024, Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of September 30, 2024
	(In thousands)
Assets:
Insurance contracts	$	—	$	4,448	$	—	$	4,448
Total assets measured at fair value	$	—	$	4,448	$	—	$	4,448

	Fair Value Measurements as of December 31, 2023, Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2023
	(In thousands)
Assets:
Money market funds	$	—	$	1,725	$	—	$	1,725
Insurance contracts	—		5,005		—		5,005
Total assets measured at fair value	$	—	$	6,730	$	—	$	6,730