Fair Value Measurements

6 Months Ended

Jun. 30, 2011

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 financial assets held in the SERP also constitute a liability of the Company for financial reporting purposes.  The Company's subsidiaries also occasionally enter into foreign currency exchange contracts to mitigate exposure to fluctuations in currency exchange rates.

For cash and cash equivalents, trade receivables, other receivables, revolving debt and accounts payable, the carrying amount approximates the fair value because of the short-term nature of these 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 table below (which excludes the Company's pension assets), the Company has determined that all its financial assets and liabilities at June 30, 2011 are level 1 and level 2 in the fair value hierarchy as defined above (in thousands):

	Level 1		Level 2		Level 3		Total
Financial Assets:
Trading equity securities:
SERP money market fund	$	988	$	-	$	-	$	988
SERP mutual funds		1,877		-		-		1,877
Preferred stocks		468		-		-		468
Trading debt securities:
Corporate bonds		-		4,814		-		4,814
Municipal bonds		-		3,315		-		3,315
Floating rate notes		-		233		-		233
U.S. Treasury bill		250		-		-		250
Other government bonds		-		73		-		73
Total financial assets	$	3,583	$	8,435	$	-	$	12,018
Financial Liabilities:
SERP liabilities	$	6,583	$	-	$	-	$	6,583
Derivative financial instruments		-		1,050		-		1,050
Total financial liabilities	$	6,583	$	1,050	$	-	$	7,633

The Company's investments (other than pension assets) consist of the following (in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value (Net Carrying Amount)
June 30, 2011:
Trading equity securities	$	3,131	$	204	$	2	$	3,333
Trading debt securities		8,404		324		43		8,685
	$	11,535	$	528	$	45	$	12,018
December 31, 2010:
Trading equity securities	$	3,089	$	154	$	7	$	3,236
Trading debt securities		9,393		266		67		9,592
	$	12,482	$	420	$	74	$	12,828

The trading equity investments noted above are valued at their estimated fair value based on their quoted market prices and the 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 from a nationally recognized third party pricing service.  Additionally, a significant portion of the trading equity securities are in equity money market and mutual funds and also comprise a portion of 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. At June 30, 2011 and December 31, 2010, $644,000 and $1,156,000, respectively, of trading debt securities were due to mature within twelve months and, accordingly, are included in other current assets.  The financial liabilities related to the SERP shown above are included in other long-term liabilities and the derivative financial liabilities are included in other accrued liabilities in the accompanying balance sheets.

Net unrealized gains or losses incurred during the three-month periods ended June 30, 2011 and 2010 on investments still held as of the end of each reporting period amounted to a gain of $70,000 and a loss of $159,000, respectively.  Net unrealized gains or losses incurred during the six-month periods ended June 30, 2011 and 2010 on investments still held as of the end of each reporting period amounted to a gain of $194,000 and a loss of $14,000, respectively.