• Filing Date: 2013-03-14
  • Form Type: 10-K
  • Description: Annual report
v2.4.0.6
Fair Value Measurements
12 Months Ended
Dec. 31, 2012
Fair Value Measurements [Abstract]  
Fair Value Measurements

Note 4 — Fair Value Measurements

The Company records and discloses certain financial assets at their estimated fair value. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as follows:

Level 1 – Unadjusted quoted prices in active markets for identical assets.

Level 2 – Other inputs that are observable for the asset, either directly or indirectly.

Level 3 – Inputs that are unobservable.

Cash and cash equivalents:

Cash and cash equivalents primarily consist of money market funds. Their carrying value approximates fair value due to the short maturity and high liquidity of these funds.

 

Available-for-sale securities:

Estimated fair values of the Company’s available-for-sale securities are determined in accordance with U.S. GAAP, using valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Fair values are generally measured using quoted prices in active markets for identical securities or other inputs that are observable either directly or indirectly, such as quoted prices for similar securities. In those instances where observable inputs are not available, fair values are measured using unobservable inputs. Unobservable inputs reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the security and are developed based on the best information available in the circumstances. Fair value estimates derived from unobservable inputs are significantly affected by the assumptions used, including the discount rates and the estimated amounts and timing of future cash flows. The derived fair value estimates cannot be substantiated by comparison to independent markets and are not necessarily indicative of the amounts that would be realized in a current market exchange.

The estimated fair values for securities that do not trade on a daily basis are determined by management, utilizing prices obtained from an independent pricing service and information provided by brokers. Management reviews the assumptions and methods utilized by the pricing service and then compares the relevant data and pricing to broker-provided data. The Company gains assurance of the overall reasonableness and consistent application of the assumptions and methodologies and compliance with accounting standards for fair value determination through ongoing monitoring of the reported fair values.

Time deposits:

Time deposits consisted of certificates of deposit. Their carrying value approximated fair value due to the short maturity of these investments.

 

Assets Measured at Estimated Fair Value on a Recurring Basis:

The following table presents information about the Company’s financial assets measured at estimated fair value on a recurring basis as of December 31, 2012 and December 31, 2011, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (in thousands):

 

                                 
    Fair Value Measurements Using        
    (Level 1)     (Level 2)     (Level 3)     Total  

As of December 31, 2012

                               

Cash and cash equivalents

  $ 230,214       —         —         230,214  
   

 

 

   

 

 

   

 

 

   

 

 

 

Fixed-maturity securities:

                               

U.S. Treasury and U.S. government agencies

    583       864       —         1,447  

Corporate bonds

    10,860       —         —         10,860  

Commercial mortgage-backed securities

    —         11,644       —         11,644  

State, municipalities, and political subdivisions

    11,066       —         —         11,066  

Redeemable preferred stock

    936       —         —         936  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total fixed-maturity securities

    23,445       12,508       —         35,953  

Equity securities

    8,876       —         —         8,876  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total available-for-sale securities

    32,321       12,508       —         44,829  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 262,535       12,508           —         275,043  
   

 

 

   

 

 

   

 

 

   

 

 

 

 

                                 
    Fair Value Measurements Using        
    (Level 1)     (Level 2)     (Level 3)     Total  

As of December 31, 2011

                               

Cash and cash equivalents

  $ 100,355       —         —         100,355  
   

 

 

   

 

 

   

 

 

   

 

 

 

Time deposits

    —         —         12,427       12,427  
   

 

 

   

 

 

   

 

 

   

 

 

 

Fixed-maturity securities:

                               

U.S. Treasury and U.S. government agencies

    556       —         —         556  

Corporate bonds

    9,840       —         —         9,840  

Commercial mortgage-backed securities

    —         10,874       —         10,874  

State, municipalities, and political subdivisions

    10,372       —         —         10,372  

Redeemable preferred stock

    1,146       —         —         1,146  

Other

    2,735       265       —         3,000  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total fixed-maturity securities

    24,649       11,139       —         35,788  

Equity securities

    4,061       —         —         4,061  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total available-for-sale securities

    28,710       11,139       —         39,849  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 129,065       11,139       12,427       152,631  
   

 

 

   

 

 

   

 

 

   

 

 

 

Assets Measured at Estimated Fair Value on a Nonrecurring Basis:

The Company used a discounted cash flow method which relies on Level 3 inputs in valuing goodwill at November 30, 2012. The Company did not identify the existence of goodwill and, as a result, goodwill was eliminated resulting in an impairment loss of $161,000 for the year ended December 31, 2012.

There were no transfers between Level 1, 2 or 3 during the years ended December 31, 2012 and 2011.

 

With respect to the Company’s business acquisitions completed in 2012 and 2011 (see Note 5 – “Business Acquisitions”), all assets acquired, aside from cash which was valued based on Level 1 measurements, and liabilities assumed were valued based on Level 3 measurements. Property, plant and equipment acquired in April 2012 was valued based on an external appraisal using the sales comparison approach and other unobservable inputs. The carrying amounts of all other acquired assets and assumed liabilities approximated their fair values at the acquisition date. Property, plant and equipment related to the April 2011 acquisition was valued based on an external appraisal using the sales comparison approach and other unobservable inputs. The environmental liability was valued based on third party estimates to complete the site assessment and remediation plan. The November 2011 acquisition was valued using the market approach and other unobservable inputs. The carrying amounts of all other assets and liabilities approximated their fair values at the acquisition date.