Aarons 2013 Annual Report Download - page 42

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Balance Sheet
Cash and Cash Equivalents. The Company’s cash and cash equivalents balance increased to $231.1 million at December 31,
2013 from $129.5 million at December 31, 2012. For additional information related to the $101.6 million increase in cash and
cash equivalents, refer to the “Liquidity and Capital Resources” section below.
Investments. The Company's investment balance increased to $112.4 million at December 31, 2013 from $85.9 million at
December 31, 2012. The $26.5 million increase was primarily a result of purchases of investments, partially offset by
scheduled maturities and calls of investments, during 2013.
Lease Merchandise, Net. The decrease of $94.3 million in lease merchandise, net of accumulated depreciation, to
$869.7 million at December 31, 2013 from $964.1 million at December 31, 2012, is primarily the result of a net decrease of
$79.1 million in the Sales and Lease Ownership segment, $7.4 million in the HomeSmart segment and $7.8 million in the
RIMCO segment due to the classification of the RIMCO net assets as held for sale at December 31, 2013.
Prepaid Expenses and Other Assets. Prepaid expenses and other assets decreased $22.0 million to $55.4 million at
December 31, 2013 from $77.4 million at December 31, 2012, primarily as a result of a $22.7 million decrease in the
Company's income tax receivable.
Accrued Regulatory Expense. Accrued regulatory expense increased to $28.4 million at December 31, 2013 from zero at
December 31, 2012 and is related to a pending regulatory investigation by the California Attorney General into the Company's
leasing, marketing and privacy practices.
Deferred Income Taxes Payable. The decrease of $36.8 million in deferred income taxes payable to $227.0 million at
December 31, 2013 from $263.7 million at December 31, 2012 is primarily the result of the reversal of bonus depreciation
deductions on lease merchandise included in the Tax Relief, Unemployment Reauthorization and Job Creation Act of 2010.
Included in the deferred income tax payable as of December 31, 2013 are a deferred tax asset of $60.2 million and a valuation
allowance of $682,000. The Company has reserved the entire value of the Canadian net operating loss as there is no expected
taxable income to absorb the loss within that jurisdiction. With respect to all other deferred tax assets, the Company believes it
will have sufficient taxable income in future years to realize their benefit.
Liquidity and Capital Resources
General
Cash flows from operations for the years ended December 31, 2013, 2012 and 2011 were $308.4 million, $59.8 million and
$307.2 million, respectively. The $248.7 million increase in cash flows from operating activities during 2013 as compared to
2012 was due, in part, to a $41.7 million reduction in accrued litigation expense during 2012 resulting from the settlement of a
lawsuit and $28.4 million in non-cash legal and regulatory expense during 2013 for loss contingencies related to the pending
regulatory investigation by the California Attorney General. The increase in cash flows from operating activities also includes a
net $180.9 million decrease in lease merchandise, net of the effects of acquisitions and a $45.1 million increase related to the
Company's income tax receivable. The change in income tax receivable is due to The American Taxpayer Relief Act of 2012
enacted on January 2, 2013, which extended bonus depreciation on eligible inventory held during 2012 and 2013. In 2012, the
Company made payments based on enacted law, resulting in an overpayment when the act was signed.
Purchases of sales and lease ownership stores had a positive impact on operating cash flows in each period presented. The
positive impact on operating cash flows from purchasing stores occurs as the result of lease merchandise, other assets and
intangibles acquired in these purchases being treated as an investing cash outflow. As such, the operating cash flows
attributable to the newly purchased stores usually have an initial positive effect on operating cash flows that may not be
indicative of the extent of their contributions in future periods. The amount of lease merchandise purchased in acquisitions and
shown under investing activities, was $4.0 million in 2013, $11.9 million in 2012 and $13.4 million in 2011.
Sales of Company-operated stores are an additional source of investing cash flows in each period presented. Proceeds from
such sales were $2.2 million in 2013, $2.0 million in 2012 and $7.3 million in 2011. The amount of lease merchandise sold in
these sales and shown under investing activities was $882,000 in 2013, $1.4 million in 2012 and $8.9 million in 2011.