Aarons 2015 Annual Report Download - page 47

In the past, we financed a small portion of our store expansion through sale-leaseback transactions. The properties were generally sold at net book value and
the resulting leases qualified and are accounted for as operating leases. We do not have any retained or contingent interests in the stores nor do we provide
any guarantees, other than a corporate level guarantee of lease payments, in connection with the sale-leasebacks. The operating leases that resulted from these
transactions are included in the table below under "Contractual Obligations and Commitments."
Franchise Loan Guaranty. We have guaranteed the borrowings of certain independent franchisees under a franchise loan agreement with several banks. On
December 4, 2015, we amended our third amended and restated loan facility to, among other things, extend the maturity date to December 8, 2016.
At December 31, 2015, the portion that we might be obligated to repay in the event franchisees defaulted was $81.0 million. However, due to franchisee
borrowing limits, we believe any losses associated with defaults would be mitigated through recovery of lease merchandise and other assets. Since the
inception of the franchise loan program in 1994, we have had no significant associated losses. We believe the likelihood of any significant amounts being
funded in connection with these commitments to be remote.
Contractual Obligations and Commitments. The following table shows the approximate contractual obligations, including interest, and commitments to
make future payments as of December 31, 2015:
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
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
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Debt, Excluding Capital Leases $ 601,156
$ 154,281
$ 195,000
$ 191,875
$ 60,000
Capital Leases 9,294
2,897
3,990
2,070
337
Interest Obligations 64,614
20,210
29,611
13,486
1,307
Operating Leases 540,041
112,134
174,720
117,978
135,209
Purchase Obligations 22,556
6,672
11,379
3,937
568
Retirement Obligations 4,272
3,022
1,202
25
23
Regulatory 4,737
4,737
—
—
—
Total Contractual Cash Obligations $ 1,246,670
$ 303,953 $ 415,902 $ 329,371 $ 197,444
Purchase obligations are primarily related to certain advertising programs, marketing programs, software licenses, hardware and software maintenance and
support and telecommunications services. The table above includes only those purchase obligations for which the timing and amount of payments is certain.
We also have purchase obligations for certain advertising and marketing programs with required minimum purchase volumes that are not included in the
total contractual obligations table and that we estimate will result in additional annual spending in each of the next two years of approximately $12.0
million, based on recent history. We have no long-term commitments to purchase merchandise nor do we have significant purchase agreements that specify
minimum quantities or set prices that exceed our expected requirements for three months.
For future interest payments on variable-rate debt, which are based on a specified margin plus a base rate (LIBOR), we used the variable rate in effect at
December 31, 2015 to calculate these payments. Our variable rate debt at December 31, 2015 consisted of our borrowings under our revolving credit
facilities. Future interest payments related to our revolving credit facilities are based on the borrowings outstanding at December 31, 2015 through their
respective maturity dates, assuming such borrowings are outstanding at that time. The variable portion of the rates at December 31, 2015 ranged between
2.08% and 2.31% for borrowings under the unsecured revolving credit agreements. The variable rate for the DAMI credit facility was 4.24% at December 31,
2015. Future interest payments may be different depending on future borrowing activity and interest rates.
The following table shows the Company’s approximate commercial commitments as of December 31, 2015:
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






Guaranteed Borrowings of Franchisees $ 81,024
$ 81,024
$ —
$ —
$ —
Retirement obligations primarily represent future payments associated with the retirement of executive officers during the years ended December 31, 2014
and December 31, 2012.
Deferred income tax liabilities as of December 31, 2015 were approximately $307.5 million. This amount is not included in the total contractual obligations
table because we believe this presentation 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.
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