Aarons 2011 Annual Report Download - page 30

Information pertaining to held to maturity securities with gross unre-
alized losses at December 31, 2011 are as follows. All of the securities
have been in a continuous loss position for less than 12 months.
Gross Unrealized
(In Thousands) Fair Value Losses
Corporate Bonds $72,315 $(664)
The Company evaluates securities for other-than-temporary
impairment on a quarterly basis, and more frequently when eco-
nomic or market concerns warrant such evaluation. Consideration
is given to (1) the length of time and the extent to which the
fair value has been less than cost, (2) the financial condition and
near-term prospects of the issuer and (3) the intent and ability of
the Company to retain its investment in the issuer for a period of
time sufficient to allow for any anticipated recovery in fair value.
The Company does not intend to sell the securities and it is not
more likely than not that the Company will be required to sell the
investments before recovery of their amortized cost bases.
The unrealized losses at December 31, 2011 relate principally to
the increases in short-term market interest rates that occurred since
the securities were purchased and 38 of the 44 securities are in an
unrealized loss position as of December 31, 2011. 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 investment securities until their amortized
cost basis is recovered on the maturity date. As a result of manage-
ment’s analysis and review, no declines are deemed to be other
than temporary.
Accounts Receivable — The Company maintains an allowance for
doubtful accounts. The reserve for returns is calculated based on the
historical collection experience associated with lease receivables. The
Company’s policy is to write off lease receivables that are 60 days or
more past due.
The following is a summary of the Company’s allowance for
doubtful accounts as of December 31:
(In Thousands) 2011 2010 2009
Beginning Balance $ 4,544 $ 4,157 $ 4,040
Accounts written off (25,178) (23,601) (20,352)
Bad debt expense 25,402 23,988 20,469
Ending Balance $ 4,768 $ 4,544 $ 4,157
Property, Plant and Equipment — The Company records prop-
erty, plant and equipment at cost. Depreciation and amortization
are computed on a straight-line basis over the estimated useful
lives of the respective assets, which are from five to 40 years for
buildings and improvements and from one to fifteen years for
other depreciable property and equipment. Gains and losses
related to dispositions and retirements are recognized as incurred.
times a year, and appropriate provisions are made for missing, dam-
aged and unsalable merchandise. In addition, the Company monitors
lease merchandise levels and mix by division, store, and fulfillment
center, as well as the average age of merchandise on hand. If unsal-
able lease merchandise cannot be returned to vendors, it is adjusted
to its net realizable value or written off.
All lease merchandise is available for lease or sale. On a monthly
basis, all damaged, lost or unsalable merchandise identified is writ-
ten off. The Company records lease merchandise adjustments on
the allowance method. Lease merchandise write-offs totaled $46.2
million, $46.5 million, and $38.3 million during the years ended
December 31, 2011, 2010 and 2009, respectively, and are included
in operating expenses in the accompanying consolidated statements
of earnings. Included in 2010 is a write-down of $4.7 million
related to the closure of stores of the Aaron’s Office Furniture divi-
sion.
Disposal Activities — The Company began ceasing the opera-
tions of the Aaron’s Office Furniture division in June of 2010. The
Company closed 14 of its Aaron’s Office Furniture stores during
2010 and has one remaining store open to liquidate merchandise.
As a result, in 2010 the Company recorded $3.3 million in closed
store reserves, $4.7 million in lease merchandise write-downs and
other miscellaneous expenses, respectively, totaling $9.0 million. The
charges were recorded within operating expenses on the consolidated
statement of earnings and are included in the Other segment cat-
egory. There were no charges related to the closure of this division
in 2011.
Cash and Cash Equivalents — The Company classifies as cash
highly liquid investments with maturity dates of less than three
months when purchased.
Investment Securities — The amortized cost, gross unrealized gains
and losses, and fair value of investment securities held to maturity
at December 31, 2011 are as follows. The securities are recorded at
amortized cost in the consolidated balance sheets and mature at vari-
ous dates during 2012 and 2013. There were no investment securi-
ties held by the Company at December 31, 2010.
Gross Gross
Amortized Unrealized Unrealized Fair
(In Thousands) Cost Gains Losses Value
Corporate Bonds $82,243 $15 $(664) $81,594
Perfect Home Bonds 15,889 — — 15,889
$98,132 $15 $(664) $97,483
The amortized cost and fair value of held to maturity securities at
December 31, 2011, by contractual maturity are as follows:
(In Thousands) Amortized Cost Fair Value
Due in one year or less $60,403 $60,093
Due in years one through two 37,729 37,390
Ending Balance $98,132 $97,483
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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