Fair Value Measurement

6 Months Ended

Jun. 30, 2014

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)	June 30, 2014							December 31, 2013
	Level 1		Level 2			Level 3		Level 1		Level 2			Level 3
Deferred Compensation Liability	$	—	$	(13,175	)	$	—	$	—	$	(12,557	)	$	—

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)	June 30, 2014						December 31, 2013
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets Held for Sale	$	—	$	5,199	$	—	$	—	$	15,840	$	—

Assets held for sale includes real estate properties that consist mostly of parcels of land and commercial buildings, as well as the net assets of the former RIMCO operating segment (principally consisting of lease merchandise, office furniture and leasehold improvements, which have been included in “Other” segment assets as of December 31, 2013). 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 other operating expense (income), net. The Company estimated the fair values of real estate properties using market values for similar properties and estimated the fair value of the RIMCO disposal group based upon expectations of a sale price.

In January 2014, the Company sold the 27 Company-operated RIMCO stores and the rights to five franchised RIMCO stores, which leased automobile tires, wheels and rims under sales and lease ownership agreements. The Company received total cash consideration of $10.0 million from a third party. During the year ended December 31, 2013, the Company recognized impairment charges of $766,000 related to the write-down of the net assets of the RIMCO disposal group to fair value less cost to sell. During the three and six months ended June 30, 2014, the Company recognized a net loss on the sale of the RIMCO disposal group of $120,000 and $838,000, which has been included in other operating expense (income), net in the Company's results of operations. The Company expects any additional charges associated with the disposal of the former RIMCO segment to be immaterial to future results of operations.

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)	June 30, 2014							December 31, 2013
	Level 1		Level 2			Level 3		Level 1		Level 2			Level 3
Corporate Bonds¹	$	—	$	70,673		$	—	$	—	$	91,785		$	—
Perfect Home Notes²	—		—			22,412		—		—			20,661
Fixed-Rate Long Term Debt³	—		(429,888		)	—		—		(130,687		)	—


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 $400.0 million and $125.0 million at June 30, 2014 and December 31, 2013, respectively.

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 2014 through 2015, are recorded at amortized cost in the consolidated balance sheets. At June 30, 2014 and December 31, 2013, investments classified as held-to-maturity securities consisted of the following:



			Gross Unrealized
(In Thousands)	Amortized Cost		Gains		Losses			Fair Value
June 30, 2014
Corporate Bonds	$	70,514	$	166	$	(7	)	$	70,673
Perfect Home Notes	22,412		—		—			22,412
Total	$	92,926	$	166	$	(7	)	$	93,085
December 31, 2013
Corporate Bonds	$	91,730	$	98	$	(43	)	$	91,785
Perfect Home Notes	20,661		—		—			20,661
Total	$	112,391	$	98	$	(43	)	$	112,446

The amortized cost and fair value of held-to-maturity debt securities by contractual maturity at June 30, 2014 are as follows:



(In Thousands)	Amortized Cost		Fair Value
Due in one year or less	$	71,748	$	71,850
Due in years one through two	21,178		21,235
Total	$	92,926	$	93,085

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
June 30, 2014
Corporate Bonds	$	—	$	—		$	5,106	$	(7	)	$	5,106	$	(7	)
December 31, 2013
Corporate Bonds	$	28,839	$	(40	)	$	2,614	$	(3	)	$	31,453	$	(43	)

The unrealized losses relate principally to the increases in short-term market interest rates that occurred since the securities were purchased. As of June 30, 2014, two of the 35 bonds were in an unrealized loss position and at December 31, 2013, 18 of the 48 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 credit 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 June 30, 2014. While no impairment was noted during the six months ended June 30, 2014, 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.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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