Fair Value Measurement

9 Months Ended

Sep. 30, 2013

Fair Value Measurement

NOTE 3. FAIR VALUE MEASUREMENT

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes financial liabilities measured at fair value on a recurring basis:

(In Thousands)	September 30, 2013							December 31, 2012
	Level 1		Level 2			Level 3		Level 1		Level 2			Level 3
Deferred Compensation Liability	$	—	$	(11,808	)	$	—	$	—	$	(9,518	)	$	—

The Company maintains a deferred compensation plan as described in Note 1 to these consolidated financial statements. The liability representing benefits accrued for plan participants is valued at the quoted market prices of the participants’ investment elections, which consist of equity and debt "mirror" funds. As such, the Company has classified the deferred compensation liability as a Level 2 liability.

Non-Financial Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The following table summarizes non-financial assets measured at fair value on a nonrecurring basis:

(In Thousands)	September 30, 2013						December 31, 2012
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets Held for Sale	$	—	$	6,783	$	—	$	—	$	11,104	$	—

Assets held for sale represents real estate properties that consist mostly of parcels of land and commercial buildings. The highest and best use of these assets is as real estate land parcels for development or real estate properties for use or lease; however, the Company has chosen not to develop or use these properties. In accordance with ASC Topic 360, Property, Plant and Equipment, assets held for sale are written down to fair value less cost to sell, and the adjustment is recorded in operating expenses. The Company estimated the fair values of these properties using market values for similar properties.

Certain Financial Assets and Liabilities Not Measured at Fair Value

The following table summarizes the fair value of assets (liabilities) that are not measured at fair value in the consolidated balance sheets, but for which the fair value is disclosed:

(In Thousands)	September 30, 2013							December 31, 2012
	Level 1		Level 2			Level 3		Level 1		Level 2			Level 3
Corporate Bonds1	$	—	$	86,911		$	—	$	—	$	67,470		$	—
Perfect Home Notes2	—		—			19,732		—		—			18,449
Fixed-Rate Long Term Debt3	—		(128,762		)	—		—		(127,261		)	—

¹  The fair value of corporate bonds is determined through the use of model-based valuation techniques for which all significant assumptions are observable in the market.

²  The Perfect Home notes were initially valued at cost. The Company periodically reviews the valuation utilizing company-specific transactions or changes in Perfect Home’s financial performance to determine if fair value adjustments are necessary.

³  The fair value of fixed-rate long term debt is estimated using the present value of underlying cash flows discounted at a current market yield for similar instruments. The carrying value of fixed-rate long term debt was $125 million at September 30, 2013 and December 31, 2012.

Held-to-Maturity Securities

The Company classifies its investments in debt securities as held-to-maturity securities based on its intent and ability to hold these securities to maturity. Accordingly, the debt securities, which mature at various dates during 2013 through 2015, are recorded at amortized cost in the consolidated balance sheets. At September 30, 2013 and December 31, 2012, investments classified as held-to-maturity securities consisted of the following:

			Gross Unrealized
(In Thousands)	Amortized Cost		Gains		Losses			Fair Value
September 30, 2013
Corporate Bonds	$	86,945	$	61	$	(95	)	$	86,911
Perfect Home Notes	19,732		—		—			19,732
Total	$	106,677	$	61	$	(95	)	$	106,643
December 31, 2012
Corporate Bonds	$	67,412	$	99	$	(41	)	$	67,470
Perfect Home Notes	18,449		—		—			18,449
Total	$	85,861	$	99	$	(41	)	$	85,919

The amortized cost and fair value of held-to-maturity debt securities by contractual maturity at September 30, 2013 are as follows:

(In Thousands)	Amortized Cost		Fair Value
Due in one year or less	$	27,812	$	27,799
Due in years one through two	78,865		78,844
Total	$	106,677	$	106,643

Information pertaining to held-to-maturity debt securities with gross unrealized losses is as follows:

	Less than 12 months					12 months or longer				Total
(In Thousands)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
September 30, 2013
Corporate Bonds	$	44,295	$	(95	)	$	—	$	—	$	44,295	$	(95	)
December 31, 2012
Corporate Bonds	$	22,785	$	(41	)	$	—	$	—	$	22,785	$	(41	)

The unrealized losses relate principally to the increases in short-term market interest rates that occurred since the securities were purchased. As of September 30, 2013, 22 of the 45 bonds were in an unrealized loss position and at December 31, 2012, 16 of the 38 securities were in an unrealized loss position. The fair value is expected to recover as the securities approach their maturity or if market yields for such investments decline. In analyzing an issuer’s financial condition, management considers whether downgrades by bond rating agencies have occurred. The Company has the intent and ability to hold the investments until their amortized cost basis is recovered on the maturity date. As a result of management’s analysis and review, no declines are deemed to be other than temporary.

The Company has estimated that the carrying value of its Perfect Home notes approximates fair value and, therefore, no impairment is considered to have occurred as of September 30, 2013. While no impairment was noted during the nine months ended September 30, 2013, if profitability is delayed as a result of the significant start-up expenses associated with Perfect Home, there could be a change in the valuation of the Perfect Home notes that may result in the recognition of an impairment loss in future periods.