NWPX Infrastructure, Inc. Fair Value Disclosure

9.	FAIR VALUE MEASUREMENTS:

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date.

 

The authoritative guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. These levels are: Level 1 (inputs are quoted prices in active markets for identical assets or liabilities); Level 2 (inputs are other than quoted prices that are observable, either directly or indirectly through corroboration with observable market data); and Level 3 (inputs are unobservable, with little or no market data that exists, such as internal financial forecasts). The Company is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

 

The following table summarizes information regarding the Company’s financial assets and liabilities that are measured at fair value on a recurring basis (in thousands):

 

		Total				Level 1				Level 2				Level 3
As of December 31, 2025
Financial assets:
Deferred compensation plan		$	3,722			$	3,324			$	398			$	-
Interest rate swaps			38				-				38				-
Total financial assets		$	3,760			$	3,324			$	436			$	-
Financial liabilities:
Foreign currency forward contracts		$	(277	)		$	-			$	(277	)		$	-
As of December 31, 2024
Financial assets:
Deferred compensation plan		$	3,784			$	3,282			$	502			$	-
Foreign currency forward contracts			143				-				143				-
Interest rate swaps			187				-				187				-
Total financial assets		$	4,114			$	3,282			$	832			$	-
Financial liabilities:
Foreign currency forward contracts		$	(6	)		$	-			$	(6	)		$	-
Interest rate swaps			(88	)			-				(88	)			-
Total financial liabilities		$	(94	)		$	-			$	(94	)		$	-

 

The deferred compensation plan assets consist of cash and several publicly traded stock and bond mutual funds, valued using quoted market prices in active markets, classified as Level 1 within the fair value hierarchy, as well as guaranteed investment contracts, valued at principal plus interest credited at contract rates, classified as Level 2 within the fair value hierarchy. Deferred compensation plan assets are included within Other assets in the Consolidated Balance Sheets.

 

The foreign currency forward contracts and interest rate swaps are derivatives valued using various pricing models or discounted cash flow analyses that incorporate observable market parameters, such as interest rate yield curves and currency rates, and are classified as Level 2 within the fair value hierarchy. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit risk adjustments associated with derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the counterparty or the Company. However, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. The foreign currency forward contracts and interest rate swaps are presented at their gross fair values. The current portion of foreign currency forward contract and interest rate swap assets are included within Prepaid expenses and other and foreign currency forward contract and interest rate swap liabilities are included within Accrued liabilities in the Consolidated Balance Sheets. The noncurrent portion of interest rate swap assets are included within Other assets in the Consolidated Balance Sheets.

 

The net carrying amounts of cash and cash equivalents, trade and other receivables, accounts payable, and accrued liabilities approximate fair value due to the short-term nature of these instruments. The net carrying amount of the borrowings on the line of credit approximates fair value due to its variable interest rate based on current market rates. The Company is obligated to repay the carrying value of its long-term debt. The fair value of the Company’s long-term debt is calculated using interest rates for its existing debt arrangements which are classified as Level 2 inputs within the fair value hierarchy. As of December 31, 2025, the fair value of the Company’s long-term debt approximates the carrying value due to its variable interest rate based on current market rates.