Aarons 1999 Annual Report Download - page 24

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Note D: Debt
Bank Debt—The Company has a revolving credit agree-
ment with four banks providing for unsecured borrowings up
to $90,000,000, which includes a $6,000,000 credit line to
fund daily working capital requirements. Amounts borrowed
bear interest at the lower of the lender’s prime rate, LIBOR
plus .50%, or the rate at which certificates of deposit are
offered in the secondary market plus .625%. The pricing
under the working capital line is based upon overnight
bank borrowing rates. At December 31, 1999 and 1998, an
aggregate of $72,225,000 (bearing interest at 6.88%) and
$50,411,000 (bearing interest at 6.12%), respectively, was
outstanding under this agreement. The Company pays a
.22% commitment fee on unused balances. The weighted
average interest rate on borrowings under the revolving credit
agreement (before giving effect to interest rate swaps) was
5.94% in 1999, 6.41% in 1998, and 6.29% in 1997. The
effects of interest rate swaps on the weighted average interest
rate were not material.
The Company has entered into interest rate swap agree-
ments that effectively fix the interest rate on $20,000,000
of borrowings under the revolving credit agreement at an
average rate of 7.0% until November 2003 and an additional
$20,000,000 at an average rate of 6.85% until June 2005.
These swap agreements involve the receipt of amounts
when the floating rates exceed the fixed rates and the pay-
ment of amounts when the fixed rates exceed the floating
rates in such agreements over the life of the agreements.
The differential to be paid or received is accrued as interest
rates change and is recognized as an adjustment to the
floating rate interest expense related to the debt. The related
amount payable to or receivable from counterparties is
included in accrued liabilities or other assets. Unrealized
gains under the swap agreements aggregated $670,000 at
December 31, 1999.
The revolving credit agreement may be terminated on
ninety days’ notice by the Company or six months’ notice by
the lenders. The debt is payable in 60 monthly installments
following the termination date if terminated by the lenders.
New Accounting Pronouncements — In June 1998, the
FASB issued Statement No.133, Accounting for Derivative
Instruments and Hedging Activities. The statement requires
the Company to recognize all derivatives on the balance sheet
at fair value. Derivatives that are not hedges must be adjusted
to fair value through income. If the derivative is a hedge,
depending on the nature of the hedge, changes in the fair
value of derivatives are either offset against the change in fair
value of the hedged assets, liabilities, or firm commitments
through earnings or recognized in comprehensive income
until the hedged item is recognized in earnings. The ineffec-
tive portion of a derivative’s change in fair value will be
immediately recognized in earnings.
The Company is required to adopt Statement 133 in
2001, however, management does not expect its adoption to
have a significant impact on the Company’s financial position
or results of operations.
Note B: Earnings Per Share
Earnings per share is computed by dividing net income by
the weighted average number of common shares outstanding
during the year which were 20,062,000 shares in 1999,
20,312,000 shares in 1998, and 19,165,000 shares in 1997.
The computation of earnings per share assuming dilution
includes the dilutive effect of stock options. Such stock
options had the effect of increasing the weighted average
shares outstanding assuming dilution by 273,000, 421,000
and 497,000 in 1999, 1998 and 1997, respectively.
Note C: Property, Plant & Equipment
December 31, December 31,
(In Thousands) 1999 1998
Land $ 8,837 $ 6,342
Buildings & Improvements 25,612 21,770
Leasehold Improvements & Signs 31,294 27,069
Fixtures & Equipment 24,622 19,450
Construction in Progress 1,043 4,958
91,408 79,589
Less: Accumulated Depreciation
& Amortization (35,490) (29,476)
$ 55,918 $ 50,113