Aarons 2002 Annual Report Download - page 29

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Future principal maturities under the Company’s credit facili-
ties are as follows:
2003 $ 277
2004 7,713
2005 10,425
2006 10,464
2007 10,556
Thereafter 33,830
NOTE F: INCOME TAXES
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
(In Thousands) 2002 2001 2000
Current Income Tax (Benefit)
Expense:
Federal ($11,431) $6,239 $ 9,461
State (1,911) 112 608
(13,342) 6,351 10,069
Deferred Income Tax Expense:
Federal 26,209 953 5,520
State 3,345 215 1,056
29,554 1,168 6,576
$16,212 $7,519 $16,645
Significant components of the Company’s deferred income tax
liabilities and assets are as follows:
December 31, December 31,
(In Thousands) 2002 2001
Deferred Tax Liabilities:
Rental Merchandise and
Property, Plant & Equipment $59,432 $28,852
Other, Net 3,486 1,376
Total Deferred Tax Liabilities 62,918 30,228
Deferred Tax Assets:
Accrued Liabilities 1,211 2,702
Advance Payments 5,371 3,512
Other, Net 5,819 3,051
Total Deferred Tax Assets 12,401 9,265
Net Deferred Tax Liabilities $50,517 $20,963
The Company’s effective tax rate differs from the federal
income tax statutory rate as follows:
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
2002 2001 2000
Statutory Rate 35.0% 35.0% 35.0%
Increases in Taxes
Resulting From:
State Income Taxes,
Net of Federal Income
Tax Benefit 2.1 1.1 2.5
Other, Net 1.8 0.4
Effective Tax Rate 37.1% 37.9% 37.9%
NOTE G: COMMITMENTS
The Company leases warehouse and retail store space for
substantially all of its operations under operating leases expiring
at various times through 2015. The Company also leases certain
properties under capital leases which are more fully described in
Note E. Most of the operating leases contain renewal options
for additional periods ranging from one to 15 years or provide
for options to purchase the related property at predetermined
purchase prices which do not represent bargain purchase options.
In addition, certain properties occupied under operating leases
contain normal purchase options. The Company also has a
$25,000,000 construction and lease facility. Properties acquired
by the lessor are purchased or constructed and then leased to the
Company under operating lease agreements. The total amount
advanced and outstanding under this facility at December 31,
2002 was approximately $24,700,000. Since the resulting leases are
operating leases, no debt obligation is recorded on the Company’s
balance sheet. The Company also leases transportation and com-
puter equipment under operating leases expiring during the next
three to five years. Management expects that most leases will
be renewed or replaced by other leases in the normal course
of business.
Future minimum rental payments required under operating
leases that have initial or remaining non-cancelable terms in excess
of one year as of December 31, 2002, are as follows: $33,325,000
in 2003; $27,847,000 in 2004; $19,831,000 in 2005; $12,596,000
in 2006; $6,829,000 in 2007; and $7,100,000 thereafter. Certain
operating leases expiring in 2006 contain residual value guarantee
provisions and other guarantees in the event of a default. Although
the likelihood of funding under these guarantees is considered by
the Company to be remote, the maximum amount the Company
may be liable for under such guarantees is approximately
$24,700,000.
Rental expense was $38,970,000 in 2002, $36,506,000 in 2001,
and $30,659,000 in 2000.
The Company leases one building from a partnership of which
an officer of the Company is a partner under an operating lease
expiring in 2008 for annual rentals aggregating $212,700.