Fair Value Measurement

12 Months Ended

Dec. 31, 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:



	December 31, 2014							December 31, 2013
(In Thousands)	Level 1		Level 2			Level 3		Level 1		Level 2			Level 3
Deferred Compensation Liability	$	—	$	(12,677	)	$	—	$	—	$	(12,557	)	$	—

The Company maintains a deferred compensation plan as described in Note 15 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:



	December 31, 2014						December 31, 2013
(In Thousands)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets Held for Sale	$	—	$	6,356	$	—	$	—	$	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 the 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 (income) expense, net. The Company estimated the fair values of real estate properties using the 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 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 year ended December 31, 2014, the Company recognized a net loss on the sale of the RIMCO disposal group of $762,000, which has been included in other operating (income) expense, 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:



	December 31, 2014							December 31, 2013
(In Thousands)	Level 1		Level 2			Level 3		Level 1		Level 2			Level 3
Corporate Bonds ¹	$	—	$	—		$	—	$	—	$	91,785		$	—
Perfect Home Notes ²	—		—			21,311		—		—			20,661
Fixed-Rate Long Term Debt ³	—		(429,049		)	—		—		(130,687		)	—

¹The 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.

²The 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.

³The 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 December 31, 2014 and December 31, 2013, respectively.

During the year ended December 31, 2014, the Company sold all of its investments in corporate bonds that were classified as held-to-maturity securities due to the Progressive acquisition. The amortized cost of the investments sold was $68.7 million, and a net realized gain of approximately $95,000 was recorded.

The Company has the positive intent and ability to hold its investment in Perfect Home notes to maturity. Accordingly, the Company classifies its Perfect Home notes, which mature in 2015, as held-to-maturity securities and carries the investment at amortized cost in the consolidated balance sheets.

At December 31, 2014 and 2013, investments classified as held-to-maturity securities consisted of the following:



			Gross Unrealized
(In Thousands)	Amortized Cost		Gains		Losses			Fair Value
2014
Corporate Bonds	$	—	$	—	$	—		$	—
Perfect Home Notes	21,311		—		—			21,311
Total	$	21,311	$	—	$	—		$	21,311
2013
Corporate Bonds	$	91,730	$	98	$	(43	)	$	91,785
Perfect Home Notes	20,661		—		—			20,661
Total	$	112,391	$	98	$	(43	)	$	112,446

Information pertaining to held-to-maturity 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
December 31, 2014
Corporate Bonds	$	—	$	—		$	—	$	—		$	—	$	—
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 December 31, 2013, 18 of the 48 securities were in an unrealized loss position and the Company expected the fair value to recover as the securities approached their maturities or if market yields for such investments declined. As a result of management’s analysis and review, no declines were deemed to be other than temporary as of December 31, 2013.

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 December 31, 2014. While no impairment was noted during 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.

+ References+ Details