Aarons 2013 Annual Report Download - page 40

30
Retirement and vacation charges. Retirement and vacation charges of $10.4 million represent costs associated with the
retirement of the Company’s founder and former Chairman of the Board in 2012, while in 2011 the Company incurred
$3.5 million in separation costs related to the departure of the Company’s former Chief Executive Officer.
Depreciation of lease merchandise. Depreciation of lease merchandise increased $53.7 million to $601.6 million in 2012 from
$547.8 million during the comparable period in 2011, or 9.8%, as a result of higher on-rent lease merchandise due to the growth
of the Company's Sales and Lease Ownership and HomeSmart segments. Levels of merchandise on lease remained consistent
year over year, resulting in idle merchandise representing approximately 6% of total depreciation expense in 2012 and 2011. As
a percentage of total lease revenues and fees, depreciation of lease merchandise decreased to 35.9% from 36.1% in 2011.
Other Operating Expense (Income), Net
Other operating expense (income), net consists of gains or losses on sales of Company-operated stores and delivery vehicles,
impairment charges on assets held for sale and gains or losses on other dispositions of property, plant and equipment.
Information about the components of other operating expense (income), net is as follows:
Year Ended December 31,
(In Thousands) 2013 2012 2011
Gains on sales of stores and delivery vehicles $ (2,728) $ (3,545) $ (4,720)
Impairment charges and losses on asset dispositions 4,312 1,310 1,170
Other Operating Expense (Income), Net $ 1,584 $ (2,235) $ (3,550)
In 2013, other operating expense, net of $1.6 million included charges of $3.8 million related to the impairment of various land
outparcels and buildings that the Company decided not to utilize for future expansion and the net assets of the RIMCO
operating segment (principally consisting of lease merchandise, office furniture and leasehold improvements) in connection
with the Company's decision to sell the 27 Company-operated RIMCO stores. In addition, the Company recognized gains of
$833,000 from the sale of two Aaron's Sales & Lease Ownership stores during 2013.
Other operating income, net of $2.2 million in 2012 and $3.6 million in 2011 included gains of $2.0 million from the sale of
four stores and gains of $3.1 million from the sale of 25 stores, respectively.
Operating Profit
Interest income. Interest income decreased to $3.0 million in 2013 from $3.5 million in 2012 due to lower average interest-
bearing investment and cash equivalent balances during 2013 as compared to 2012. Interest income increased to $3.5 million in
2012 from $1.7 million during 2011 due to higher average investment and cash equivalent balances during 2012 as compared to
2011.
Interest expense. Interest expense decreased to $5.6 million in 2013 from $6.4 million in 2012. The decrease in interest
expense was due to lower average debt levels during 2013 as a result of the repayment at maturity of the remaining
$12.0 million outstanding under the Company's 5.03% senior unsecured notes issued in July 2005 and due July 2012. Interest
expense increased to $6.4 million in 2012 from $4.7 million in 2011 due to the issuance in July 2011 of the Company's
$125 million senior unsecured notes, which bear interest at the rate of 3.75%.
Other non-operating income (expense), net. Other non-operating income (expense), net includes the impact of foreign
currency exchange gains and losses, as well as gains and losses resulting from changes in the cash surrender value of
Company-owned life insurance related to the Company's deferred compensation plan. Included in other non-operating income
(expense), net were foreign exchange transaction losses of $1.0 million, gains of $2.0 million and losses of $465,000 during
2013, 2012 and 2011, respectively. Changes in the cash surrender value of Company-owned life insurance resulted in gains of
$1.5 million and $703,000 in 2013 and 2012, respectively, and losses of $318,000 in 2011.