Fair Value Measurements

12 Months Ended

Dec. 31, 2012

3. 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.

As indicated in the tables below, the Company has determined that its financial assets and liabilities at December 31, 2012 and 2011 are level 1 and level 2 in the fair value hierarchy (in thousands):

	December 31, 2012
	Level 1		Level 2		Level 3		Total
Financial Assets:
Trading equity securities:
SERP money market fund	$	996	$	--	$	--	$	996
SERP mutual funds		1,835		--		--		1,835
Preferred stocks		720		--		--		720
Trading debt securities:
Corporate bonds		3,342		909		--		4,251
Municipal bonds		1,449		957		--		2,406
Floating rate notes		749		--		--		749
U.S. Treasury bill		200		--		--		200
Other government bonds		--		409		--		409
Total financial assets	$	9,291	$	2,275	$	--	$	11,566
Financial Liabilities:
SERP liabilities	$	--	$	6,674	$	--	$	6,674
Derivative financial instruments		--		145		--		145
Total financial liabilities	$	--	$	6,819	$	--	$	6,819

	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	$	--	$	6,126	$	--	$	6,126

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

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