Fair Value Measurements

6 Months Ended

Jun. 30, 2012

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.  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, revolving debt and accounts payable approximates their 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, 2012 and December 31, 2011 are level 1 and level 2 in the fair value hierarchy as defined above (in thousands):

	June 30, 2012
	Level 1		Level 2		Level 3		Total
Financial Assets:
Trading equity securities:
SERP money market fund	$	993	$	-	$	-	$	993
SERP mutual funds		2,054		-		-		2,054
Preferred stocks		717		-		-		717
Trading debt securities:
Corporate bonds		2,071		1,443		-		3,514
Municipal bonds		1,246		1,767		-		3,013
Floating rate notes		695		423		-		1,118
U.S. Treasury bill		250		-		-		250
Other government bonds		-		278		-		278
Total financial assets	$	8,026	$	3,911	$	-	$	11,937
Financial Liabilities:
SERP liabilities	$	6,342	$	-	$	-	$	6,342
Derivative financial instruments		-		129		-		129
Total financial liabilities	$	6,342	$	129	$	-	$	6,471

	December 31, 2011
	Level 1		Level 2		Level 3		Total
Financial Assets:
Trading equity securities:
SERP money market fund	$	989	$	-	$	-	$	989
SERP mutual funds		1,732		-		-		1,732
Preferred stocks		441		-		-		441
Trading debt securities:
Corporate bonds		1,649		2,238		-		3,887
Municipal bonds		211		2,880		-		3,091
Floating rate notes		97		233		-		330
U.S. Treasury bill		250		-		-		250
Other government bonds		-		343		-		343
Derivative financial instruments		-		307		-		307
Total financial assets	$	5,369	$	6,001	$	-	$	11,370
Financial Liabilities:
SERP liabilities	$	6,076	$	-	$	-	$	6,076
Derivative financial instruments		-		50		-		50
Total financial liabilities	$	6,076	$	50	$	-	$	6,126

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.  Due to increased trading activity in one of the debt securities held by Astec Insurance, $98,000 of investments are classified as Level 1 in the above table as of June 30, 2012 which were classified as Level 2 at March 31, 2012.  Due to decreased trading activity in several of the debt securities held by Astec Insurance, $1,110,000 of investments are classified as Level 2 in the above table as of June 30, 2012 which were classified as Level 1 at March 31, 2012.

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

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value (Net Carrying Amount)
June 30, 2012:
Trading equity securities	$	3,606	$	171	$	13	$	3,764
Trading debt securities		8,037		218		82		8,173
	$	11,643	$	389	$	95	$	11,937
December 31, 2011:
Trading equity securities	$	3,160	$	81	$	79	$	3,162
Trading debt securities		7,761		211		71		7,901
	$	10,921	$	292	$	150	$	11,063

The trading equity investments noted above are valued at their 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 equities and in money market and mutual funds.  These money market and mutual funds are held in a SERP and thus 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. At June 30, 2012 and December 31, 2011, $2,024,000 and $1,324,000, 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 in the accompanying balance sheets.

Net unrealized gains or losses incurred during the three-month periods ended June 30, 2012 and 2011 on investments still held as of the end of each reporting period amounted to a loss of $90,353 and a gain of $70,000, respectively. Net unrealized gains or losses incurred during the six-month periods ended June 30, 2012 and 2011 on investments still held as of the end of each reporting period amounted to gains of $162,000 and $194,000, respectively.