Aarons 2011 Annual Report Download - page 24

Purchase obligations are primarily related to certain advertising and
marketing programs. We do not have significant agreements for the
purchase of lease merchandise or other goods specifying minimum
quantities or set prices that exceed our expected requirements for
three months.
Deferred income tax liabilities as of December 31, 2011 were
approximately $287.0 million. This amount is not included in the
total contractual obligations table because we believe this presenta-
tion would not be meaningful. Deferred income tax liabilities are
calculated based on temporary differences between the tax basis
of assets and liabilities and their respective book basis, which will
result in taxable amounts in future years when the liabilities are
settled at their reported financial statement amounts. The results of
these calculations do not have a direct connection with the amount
of cash taxes to be paid in any future periods. As a result, schedul-
ing deferred income tax liabilities as payments due by period could
be misleading, because this scheduling would not relate to liquidity
needs.
RECENT ACCOUNTING PRONOUNCEMENTS
In May 2011, the Financial Accounting Standards Board (“FASB”)
issued Accounting Standards Update (“ASU”) No. 2011-4,
Amendments to Achieve Common Fair Value Measurement and
Disclosure Requirements in U.S. GAAP and IFRS (“ASU 2011-4”).
ASU 2011-4 is intended to improve the comparability of fair value
measurements presented and disclosed in financial statements
prepared in accordance with U.S. Generally Accepted Accounting
Principles and International Financial Reporting Standards. The
amendments are of two types: (i) those that clarify the FASB’s intent
about the application of existing fair value measurement and disclo-
sure requirements and (ii) those that change a particular principle or
requirement for measuring fair value or for disclosing information
about fair value measurements. ASU 2011-4 is effective for annual
periods beginning after December 15, 2011.
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
As of December 31, 2011, we had $12.0 million and $125.0
million of senior unsecured notes outstanding at a fixed rate of
5.03% and 3.75%, respectively. We had no balance outstand-
ing under our revolving credit agreement indexed to the LIBOR
(“London Interbank Offer Rate”) or the prime rate, which exposes
us to the risk of increased interest costs if interest rates rise. Based on
our overall interest rate exposure at December 31, 2011, a hypotheti-
cal 1.0% increase or decrease in interest rates would not be material.
We do not use any significant market risk sensitive instruments
to hedge commodity, foreign currency, or other risks, and hold
no market risk sensitive instruments for trading or speculative
purposes.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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