Aarons 2013 Annual Report Download - page 66

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56
Capital Leases with Related Parties
As of December 31, 2013, the Company had 19 capital leases with a limited liability company (“LLC”) controlled by a group
of executives, including the Company's former Chairman. In October and November 2004, the Company sold 11 properties,
including leasehold improvements, to the LLC. The LLC obtained borrowings collateralized by the land and buildings totaling
$6.8 million. The Company occupies the land and buildings collateralizing the borrowings under a 15-year term lease, with a
five-year renewal at the Company’s option, at an aggregate annual rental of $716,000. The transaction has been accounted for
as a financing in the accompanying consolidated financial statements. The rate of interest implicit in the leases is approximately
9.7%. Accordingly, the land and buildings, associated depreciation expense and lease obligations are recorded in the Company’s
consolidated financial statements. No gain or loss was recognized in this transaction.
In December 2002, the Company sold ten properties, including leasehold improvements, to the LLC. The LLC obtained
borrowings collateralized by the land and buildings totaling $5.0 million. The Company occupies the land and buildings
collateralizing the borrowings under a 15-year term lease at an aggregate annual rental of approximately $1,227,000. The
transaction has been accounted for as a financing in the accompanying consolidated financial statements. The rate of interest
implicit in the leases is approximately 10.1%. Accordingly, the land and buildings, associated depreciation expense and lease
obligations are recorded in the Company’s consolidated financial statements. No gain or loss was recognized in this transaction.
Sale-leasebacks
The Company finances a portion of store expansion through sale-leaseback transactions. The properties are generally sold at net
book value and the resulting leases qualify and are accounted for as operating leases. The Company does not have any retained
or contingent interests in the stores nor does the Company provide any guarantees, other than a corporate level guarantee of
lease payments, in connection with the sale-leasebacks.
Other Debt
Other debt at December 31, 2013 and 2012 includes $3.3 million of industrial development corporation revenue bonds. The
weighted-average interest rate on the outstanding bonds was .25% and .35% as of December 31, 2013 and 2012, respectively.
No principal payments are due on the bonds until maturity in 2015.
Future maturities under the Company’s long-term debt and capital lease obligations are as follows:
(In Thousands)
2014 $ 27,529
2015 31,015
2016 27,740
2017 27,659
2018 26,355
Thereafter 2,406
$ 142,704
NOTE 7: INCOME TAXES
Following is a summary of the Company’s income tax expense for the years ended December 31:
(In Thousands) 2013 2012 2011
Current Income Tax Expense:
Federal $ 91,664 $ 116,234 $ —
State 9,393 10,819 9,797
101,057 127,053 9,797
Deferred Income Tax Expense (Benefit):
Federal (35,941) (23,035) 62,015
State (822) (206) (2,202)
(36,763) (23,241) 59,813
$ 64,294 $ 103,812 $ 69,610
At December 31, 2011, the Company had a federal net operating loss (“NOL”) carryforward of approximately $31.2 million
available to offset future taxable income. The entire NOL carryforward was absorbed during 2012.