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Fair Value of Financial Assets and Liabilities
 6 Months Ended
Jun. 30, 2019
Fair Value Disclosures [Abstract]  
Fair Value of Financial Assets and Liabilities

NOTE J – FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

The Company measures and records certain assets and liabilities at fair value. A fair value hierarchy is used for those assets and liabilities measured at fair value that distinguishes between assumptions based on market data, (observable inputs), and the Company’s assumptions (unobservable inputs). The hierarchy consists of the following three levels:

Level 1

Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.

Level 2

Inputs other than Level 1 inputs that are either directly or indirectly observable, which may include:

 

o

Quoted prices for similar assets in active markets;

 

o

Quoted prices for identical or similar assets or liabilities in inactive markets;

 

o

Inputs other than quoted prices that are observable for the asset or liability; and

 

o

Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3

Inputs to the valuation methodology are unobservable and developed using estimates and assumptions developed by the Company which reflect those that a market participant would use.  

The following table summarizes the Company’s assets and liabilities, recorded and measured at fair value, in the consolidated balance sheets as of June 30, 2019 and December 31, 2018:

 

Description

 

Balance as of

June 30, 2019

 

 

Quoted Prices in

Active Markets for

Identical Liabilities

(Level 1)

 

 

Significant Other

Observable Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental profit sharing plan

 

$

5,316

 

 

$

0

 

 

$

5,316

 

 

$

0

 

Total Liabilities

 

$

5,316

 

 

$

0

 

 

$

5,316

 

 

$

0

 

 

Description

 

Balance as of

December 31, 2018

 

 

Quoted Prices in

Active Markets for

Identical Assets or

Liabilities

(Level 1)

 

 

Significant Other

Observable Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketable securities

 

$

1,648

 

 

$

1,648

 

 

$

0

 

 

$

0

 

Total Assets

 

$

1,648

 

 

$

1,648

 

 

$

0

 

 

$

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental profit sharing plan

 

$

4,946

 

 

$

0

 

 

$

4,946

 

 

$

0

 

Total Liabilities

 

$

4,946

 

 

$

0

 

 

$

4,946

 

 

$

0

 

 

The Company has a non-qualified Supplemental Profit Sharing Plan for its executives. The liability for this unfunded Supplemental Profit Sharing Plan was $5.3 million at June 30, 2019 and $4.9 million at December 31, 2018.  These amounts are recorded within Other noncurrent liabilities on the Company’s consolidated balance sheets. During January 2018, the Company amended the Supplemental Profit Sharing Plan to allow the participants the ability to hypothetically invest their proportionate award into various investment options, which primarily includes mutual funds. The Company credits earnings, gains and losses to the participants’ deferred compensation account balances based on the investments selected by the participants. The Company measures the fair value of the Supplemental Profit Sharing Plan liability using the market values of the participants’ underlying investment accounts.

In order to mitigate the risk associated with the Supplemental Profit Sharing Plan, the Company had invested in marketable securities, principally equity based mutual funds, which were all transferred to the Company’s Corporate Owned Life Insurance Policy (“COLI”) as of June 30, 2019.  In April 2019, the full mutual fund investment balance was transferred to the Company’s COLI.  The balance in the marketable securities of $0 million and $1.6 million were reported at fair value within Other current assets on the Company’s consolidated balance sheets as of June 30, 2019 and December 31, 2018, respectively.  At June 30, 2019 and December 31, 2018, the cash surrender value of the COLI was $5.3 million and $2.8 million, respectively, and is recorded in Other assets on the Company’s consolidated balance sheet.  Changes in the fair value of the securities of $.1 million and $.2 million were recognized within Other income, net within the consolidated statements of income for the three and six-month periods ended June 30, 2019, respectively.  Changes in the fair value of the securities of less than $.1 million were recognized within Other income, net within the consolidated statements of income for both the three and six-month periods ended June 30, 2018.