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Note 8 - Fair Value of Financial Instruments
 9 Months Ended
Jun. 30, 2025
Notes to Financial Statements  
Fair Value Disclosures [Text Block]

Note 8 - Fair value of Financial Instruments

 

The Company’s financial instruments include marketable securities and cash equivalents that are measured at fair value on a recurring basis.

 

Fair value is based on the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

 

 

●

Level 1 — defined as observable inputs based on unadjusted quoted prices for identical instruments in active markets;

 

 

●

Level 2 — defined as inputs other than Level 1 that are either directly or indirectly observable in the marketplace for identical or similar instruments in markets that are not active; and

 

 

●

Level 3 — defined as unobservable inputs in which little or no market data exists where valuations are derived from techniques in which one or more significant inputs are unobservable.

 

The Company determines the level in the fair value hierarchy within which each fair value measurement falls in its entirety, based on the lowest level input that is significant to the fair value measurement in its entirety. In determining the appropriate levels, the Company performs an analysis of the assets and liabilities at each reporting period end.

 

The carrying amounts of cash, restricted cash, accounts receivable, accrued liabilities and accounts payable approximate fair value because of the short maturity and high liquidity of these instruments. Marketable securities and cash equivalents, which consist of money market funds, are measured and recorded at fair value on the Company’s consolidated balance sheet using Level 1 inputs. The Company determined the fair value of its Level 1 financial instruments, which are traded in active markets, using quoted market prices for identical instruments. There were no transfers between Level 1 and Level 2 or transfers in or out of Level 3 during the three or nine months ended June 30, 2025.

 

The following table summarizes the fair value hierarchy of the Company’s financial assets measured at fair value as of June 30, 2025 (in thousands):

 

   

Level 1

    

Level 2

    

Level 3

    

Total

  

Money market funds (cash equivalent)

   $ 3,846     $ -     $ -     $ 3,846  

Marketable securities

     443,011       -       -       443,011  

Total

   $ 446,857     $ -     $ -     $ 446,857  

 

The following table summarizes the fair value hierarchy of financial assets measured at fair value as of September 30, 2024 (in thousands):

 

   

Level 1

    

Level 2

    

Level 3

    

Total

  

Money market funds (cash equivalent)

   $ 3,945     $ -     $ -     $ 3,945  

Marketable securities

     358,691       -       -       358,691  

Total

   $ 362,636     $ -     $ -     $ 362,636  

 

 

As of June 30, 2025 and September 30, 2024, there were net accumulated pretax unrealized gains of marketable securities of $303,917,000 and $219,597,000, respectively, recorded in the accompanying consolidated balance sheets.  Most of the accumulated pretax unrealized gains were in the common stocks of three U.S. financial institutions and one foreign manufacturer.

 

During the nine months ended June 30, 2025, the Company recorded and included in its net income the net unrealized and realized gains on marketable securities of $84,320,000, as compared with $62,472,000, in the prior fiscal year period. There were no purchases or sales of marketable securities during the nine months ended June 30, 2025. In March 2024, the Company sold part of its marketable securities for approximately $40,579,000, realizing net gains of $14,261,000.

 

Our long-serving director and former chairman, Charles T. Munger, had managed the Company’s marketable securities portfolio since the original purchases were made with the Company’s excess cash in 2009. Mr. Munger passed away in November 2023, and the Company remains committed to using the portfolio as a source of strength in support of its operating businesses, just as it has for the past 16 years. The Board continues to work to ensure the prudent and effective management of these assets in the context of the current market and the needs of the businesses, including consultation with outside advisors to which the Board has access. The March 2024 sales of a portion of the portfolio (approximately 10%) to reduce the Company’s margin loan are aspects of that work.

 

Investments in marketable securities as of June 30, 2025 and September 30, 2024 are summarized below.

 

Investment in Financial Instruments (000)

 

   

June 30, 2025

    

September 30, 2024

  
   

Aggregate

fair value

    

Amortized/

Adjusted

cost basis

    

Pretax

unrealized

gains

    

Aggregate

fair value

    

Amortized/

Adjusted

cost basis

    

Pretax

unrealized

gains

  

Marketable securities

                                                

Common stocks

   $ 443,011     $ 139,094     $ 303,917     $ 358,691     $ 139,094     $ 219,597