REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Investment Committee of the
Range Resources Corporation
401(k) Plan
Opinion on the Financial Statements
We
have audited the accompanying statements of net assets available for benefits of the Range Resources Corporation 401(k) Plan (the Plan) as of December 31, 2017 and 2016, and the related statements of changes in net assets available
for benefits for the years then ended, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the net assets available for benefits of the Plan
as of December 31, 2017 and 2016, and the changes in net assets available for benefits for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Plans management. Our responsibility is to express an opinion on the Plans financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with respect to the Plan in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits include performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We
believe that our audits provide a reasonable basis for our opinion.
Supplemental Information
The supplemental information in the accompanying schedule of Form 5500, Schedule H, Line 4i Schedule of Assets (Held at End of Year) as of
December 31, 2017 has been subjected to audit procedures performed in conjunction with the audit of the Plans financial statements. The supplemental information is the responsibility of the Plans management. Our audit procedures
included determining whether the supplemental information reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information
presented in the supplemental information.
In forming our opinion on the supplemental information, we evaluated whether the supplemental information,
including its form and content, is presented in conformity with the Department of Labors Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the supplemental information
is fairly stated, in all material respects, in relation to the financial statements as a whole.
We have served as the Plans auditor since 2001.
/s/ Whitley Penn LLP
Fort Worth, Texas
June 15, 2018
F-1
Notes to Financial Statements
December 31, 2017 and 2016
A.
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Description of the Plan
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Plan Description
The following description of the Range Resources Corporation 401(k) Plan (the Plan) provides only general information. The Plan is
sponsored by Range Resources Corporation (the Company or Plan Sponsor). Participants should refer to the Plan agreement for a more complete description of the Plans provisions.
General
The Plan was established
effective January 1, 1989, and most recently amended effective January 1, 2016, as a defined contribution plan covering employees of the Company who are eighteen years of age or older. The Plan is subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA).
Effective January 3, 2017, the Memorial Resource Development Corp.
401(k) Plan merged into the Plan and net assets of approximately $6.0 million were transferred into the Plan. The merger has been recorded as Transfer from another plan in the accompanying statements of changes in net assets
available for benefits.
The purpose of the Plan is to encourage employees to save and invest, systematically, a portion of their current
compensation in order that they may have a source of additional income upon their retirement, or for their family in the event of death.
Contributions
Participants may contribute up to 75% of their
pre-tax
annual compensation, as defined by the
Plan. Contributions are subject to limitations on annual additions and other limitations imposed by the Internal Revenue Code (the Code) as defined in the Plan agreement. The Plan allows for both
pre-tax
and Roth
after-tax
contributions.
Employees are
immediately eligible to participate in the Plan. The Company has an automatic enrollment feature under the Plan. Those employees that do not make an affirmative election to not contribute to the Plan are automatically enrolled in the Plan
approximately 45 to 60 days from hire with contributions equal to 6% of
pre-tax
annual compensation. If those employees added to the Plan under the automatic enrollment feature do not change their deferral,
the deferral will increase 1% on January 1st of each year up to a maximum of 10%.
Employees who are eligible to make salary deferral
contributions under the Plan and who have attained age 50 before the close of the Plan year, are eligible for
catch-up
contributions in accordance with and subject to the limitations imposed by the Code.
Beginning January 1, 2008, the Company began a Qualified Automatic Safe Harbor Matching Contribution (QASH) in the amount of
100% of the first 6% of deferred compensation. QASH contributions were approximately $5,129,000 and $4,743,000 during 2017 and 2016, respectively.
At the discretion of the Board of Directors, the Company may elect to contribute an additional matching contribution based on the amounts of
salary and/or bonus deferrals of the participants. The Board did not elect any matching contributions in addition to the QASH contributions in 2017 or 2016.
Participant Accounts
Each
participants account is credited with the participants elective contributions, employer contribution(s), and earnings thereon. Allocations are based on participant earnings as defined in the Plan. The benefit to which a participant is
entitled is the benefit that can be provided from the participants vested account.
F-4
RANGE RESOURCES CORPORATION 401(k) PLAN
Notes to Financial Statements
December 31, 2017 and 2016
A.
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Description of the Plan continued
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Vesting
Participants are immediately fully vested in their elective contributions plus actual earnings thereon. Effective January 1, 2013, all
matching contributions are immediately vested. Prior to January 1, 2013, vesting in the Company QASH contributions portion of their accounts plus actual earnings thereon was as follows:
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Years of Service
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Vested
Percentage
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Less than One (1) year
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0
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%
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One (1) year
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50
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%
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Two (2) years
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50
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%
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Loans
Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their vested
account balance. Loan terms range from one to five years or, in the case of a loan to acquire or construct the primary residence of a participant, a period not to exceed a repayment period used by commercial lenders for similar loans. The loans are
secured by the balance in the participants account and bear interest at the prime rate plus 2.00%, as defined by the Participant Loan Program. Interest rates for outstanding loans ranged from 5.25% to 7.00% for 2017 and 2016. Principal and
interest are paid ratably through payroll deductions.
Benefit Payments
Participants withdrawing during the year for reasons of service or disability, retirement, death, or termination are entitled to their vested
account balance. Benefits are distributed in the form of rollovers, lump sum distributions or installment payments. If withdrawing participants are not entitled to their entire account balance, the amounts not received are forfeited.
A participant may receive a hardship distribution from salary deferrals if the distribution is: (1) payment for medical expenses incurred
by the participant, their spouse or dependents for the diagnosis, cure, mitigation, treatment, or prevention of disease; (2) to purchase (excluding mortgage payments) a principal residence of the participant; (3) for the payment of
post-secondary tuition expenses; (4) needed to prevent eviction of the participant from his or her principal residence or foreclosure upon the mortgage of the participants principal residence; (5) on account of funeral or burial
expenses relating to the death of the participants deceased parent, spouse, child or dependent; or (6) on account of casualty expenses to repair damage to the participants principal residence.
Forfeitures
All forfeitures are used to
fund Plan expenses such as recordkeeping fees and fees paid in connection with the audit of the Plan.
B.
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Summary of Significant Accounting Policies
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Basis of Accounting
The financial statements of the Plan are presented on the accrual basis of accounting in accordance with accounting principles generally
accepted in the United States of America (U.S. GAAP).
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP, requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses. Actual results could differ from those estimates and changes in
those estimates are recorded when known.
F-5
RANGE RESOURCES CORPORATION 401(k) PLAN
Notes to Financial Statements
December 31, 2017 and 2016
B.
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Summary of Significant Accounting Policies continued
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Investment Valuation and Income Recognition
The Plans investments are stated at fair value. Quoted market prices are used to value investments in the mutual funds, self-directed
brokerage investments, and Range Resources Corporation common stock and there are no redemption restrictions on these investments. The Plans interest in the common collective trust is valued based on information reported by the investment
manager using the audited financial statements of the common collective trust at
year-end.
These investments are subject to market or credit risks customarily associated with equity investments.
Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on an accrual basis. Dividends are recorded
on the
ex-dividend
date. Net realized gains or losses from security transactions are reported on the average historical cost method.
Unrealized appreciation or depreciation of investments represents the increase or decrease in market value during the year. Investment
contracts held by a defined-contribution plan are required to be reported at fair value.
Contributions
Contributions from participants and the Company are accrued in the period in which they are deducted in accordance with salary deferral
agreements and as they become obligations of the Company, as determined by the Plans administrator.
Payment of Benefits
Benefits are recorded when paid.
Plan
Expenses
Employees of the Company, who may also be participants in the Plan, perform certain administrative functions with no
compensation from the Plan. Administrative costs of the Plan are paid by the Company or with forfeitures and are not reflected in the accompanying financial statements.
Notes Receivable from Participants
Notes
receivable from participants are valued at the unpaid principal balance plus any accrued but unpaid interest.
Participants may direct their 401(k) salary and/or bonus deferrals and
employer contributions to be invested into any of the investment options offered by the Plan, including Range Resources Corporation common stock. Additionally, upon election, employees can use a self-directed brokerage account where monies are
invested in mutual funds and investment decisions are directed by employees. Employees are limited to a maximum investment in the self-directed brokerage account of 50% of their 401(k) investment balance.
Common stock of the Company represented approximately 6% of net assets available for benefits at December 31, 2017 compared to 14% of net
assets available for benefits at December 31, 2016.
Effective January 1, 2013, the Company adopted a T. Rowe Price
prototype plan which has been approved by the Internal Revenue Service for use by employers as a qualified plan. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. Management believes the Plan
is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan is qualified and the related trust is tax exempt.
The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The
Plan administrator believes it is no longer subject to income tax examination for years prior to 2014.
F-6
RANGE RESOURCES CORPORATION 401(k) PLAN
Notes to Financial Statements
December 31, 2017 and 2016
At December 31, 2017 and 2016 the balance in the forfeiture account
was $544 and $0, respectively. Forfeitures utilized to pay plan expenses approximated $9,500 and $1,200 for 2017 and 2016 Plan years, respectively.
F.
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Transactions with Related Parties and
Parties-in-Interest
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Party-in-interest
transactions include those with fiduciaries
or employees of the Plan, any person who provides services to the Plan, an employer whose employees are covered by the Plan, an employee organization whose members are covered by the Plan, a person who owns 50% or more of such an employer or
employee organization, or relatives of such persons.
Participants have the option to invest their salary and/or bonus deferrals into the
Companys common stock. In addition, the Plan invests in shares of mutual funds and a common collective trust managed by T. Rowe Price, which acts as Trustee for these investments as defined by the Plan. Transactions in such investments, as
well as notes receivable from participants, qualify as
parties-in-interest
transactions, which are exempt from the prohibited transaction rules.
Although it has not expressed any intent to do so, the Company has the
right to terminate the Plan at any time, subject to the provisions of ERISA. In the event of such termination of the Plan, the net assets of the Plan would be distributed among the participants in accordance with ERISA, as the participants are
already fully vested.
H.
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Fair Value Measurements
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In accordance with U.S. GAAP, fair value measurements are based
upon inputs that market participants use in pricing an asset or liability, which are classified into two categories, observable inputs and unobservable inputs. Observable inputs represent market data obtained from independent sources, whereas
unobservable inputs reflect a companys own market assumptions, which are used if observable inputs are not reasonably available without undue cost and effort. These two types of inputs are further prioritized into the following fair value
input hierarchy:
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Level 1
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Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities as of the reporting date.
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Level 2
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Pricing inputs are other than quoted prices in active markets included in Level 1, which are directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using
models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual
prices for the underlying instruments, as well as other relevant economic measures. Where observable inputs are available, directly or indirectly, for substantially the full term of the asset or liability, the instrument is categorized in
Level 2.
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Level 3
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Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in managements best estimate of fair
value.
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The Plan uses a market approach for fair value measurements and endeavors to use the best information
available. Accordingly, valuation techniques that maximize the use of observable inputs are favored.
These items are classified in their
entirety based on the lowest priority level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement of assets
and liabilities within the levels of the fair value hierarchy. Mutual funds in Level 1 are measured at fair value with a market approach using published net asset values (NAV) of the shares held by the Plan at
year-end.
Range Resources Corporation common stock in Level 1 is exchange traded and measured at fair value with a market approach using the closing price. Self-directed brokerage in Level 1 is measured at
fair value with a market approach using the NAV of the mutual fund shares held by the Plan at
year-end.
For investments valued at NAV, there are no significant restrictions on redeeming these investments at
NAV.
F-7
RANGE RESOURCES CORPORATION 401(k) PLAN
Notes to Financial Statements
December 31, 2017 and 2016
H.
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Fair Value Measurements continued
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Investments in the common collective trust during the plan year included the T. Rowe Price
Stable Value fund. These investments consist of public or private investment vehicles valued using the NAV computed daily as of close of business each day by the Trustee of the fund. The NAV is used as a practical expedient to estimate fair value
and is based on the value of the underlying assets owned by the fund, then divided by the number of shares outstanding. Redemption is permitted daily with a required 12 month notice period that is only applicable to the Plan, with no other
restrictions. There are no unfunded commitments.
The following tables present the fair value hierarchy table for investments measured at
fair value, on a recurring basis:
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Fair Value Measurement at December 31, 2017 Using
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Total Carrying
Value
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Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
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Significant
Observable
Inputs
(Level 2)
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Significant
Unobservable
Inputs
(Level 3)
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Mutual funds
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$
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103,994,481
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$
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103,994,481
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$
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$
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Range Resources Corporation common stock
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7,161,975
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7,161,975
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Self-directed brokerage
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375,035
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375,035
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Total investment in the fair value hierarchy
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$
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111,531,491
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$
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111,531,491
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$
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$
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Common collective trust measured at NAV*
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10,636,110
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Total investments at fair value
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$
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122,167,601
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Fair Value Measurement at December 31, 2016 Using
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Total Carrying
Value
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Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
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Significant
Observable
Inputs
(Level 2)
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Significant
Unobservable
Inputs
(Level 3)
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Mutual funds
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$
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80,890,686
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$
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80,890,686
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$
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$
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Range Resources Corporation common stock
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15,659,034
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15,659,034
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Self-directed brokerage
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170,647
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170,647
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Total investment in the fair value hierarchy
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$
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96,720,367
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$
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96,720,367
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$
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$
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Common collective trust measured at NAV*
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11,158,648
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Total investments at fair value
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$
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107,879,015
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*
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Certain investments that are measured at fair value using the NAV per share (or its equivalent) as a practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in this
table are intended to permit reconciliation of the fair value hierarchy to the amounts presented on the Statement of Net Assets Available for Benefits.
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I.
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Risks and Uncertainties
|
The Plan invests in various investment securities. Investment
securities are exposed to various risks including interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the value of investment securities
will occur in the near term and that such changes could materially impact participants account balances and the amounts reported in the Statements of Net Assets Available for Benefits.
Effective April 1, 2018 the Plan was restated and amended for
the addition of allowing
after-tax
contributions, allowing
in-plan
Roth rollover, allowing a maximum investment of 100% in the self-directed brokerage account (50%
allowed in 2017 and prior) and the addition of a $50 annual service fee for outstanding loans issued after March 31, 2018.
F-8