Aarons 2014 Annual Report Download - page 75

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65
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) —
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 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.