Aarons 1999 Annual Report Download - page 25

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The agreement requires that the Company not permit its
consolidated net worth as of the last day of any fiscal quarter
to be less than the sum of (a) $105,000,000 plus (b) 50%
of the Company’s consolidated net income (but not loss) for
the period beginning July 1, 1997 and ending on the last
day of such fiscal quarter. It also places other restrictions
on additional borrowings and requires the maintenance of
certain financial ratios. At December 31, 1999, $50,450,000
of retained earnings were available for dividend payments
and stock repurchases under the debt restrictions.
Other Debt— Other debt of $535,000 at December 31,
1999 and $1,316,000 at December 31, 1998 primarily
represents software financing and insurance premium agree-
ments with interest rates ranging from 4.94% to 5.68%.
Other debt matures in 2000.
Note E: Income Taxes
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
(In Thousands) 1999 1998 1997
Current Income
Tax Expense:
Federal $8,020 $11,422 $7,375
State 1,081 1,161 661
9,101 12,583 8,036
Deferred Income
Tax Expense:
Federal 5,989 949 3,287
State 610 175 518
6,599 1,124 3,805
$15,700 $13,707 $11,841
Significant components of the Company’s deferred income
tax liabilities and assets are as follows:
December 31, December 31,
(In Thousands) 1999 1998
Deferred Tax Liabilities:
Rental Merchandise and
Property, Plant & Equipment $19,345 $12,184
Other, Net 577 451
Total Deferred Tax Liabilities 19,922 12,635
Deferred Tax Assets:
Accrued Liabilities 961 836
Advance Payments 2,858 2,725
Other, Net 1,693 1,263
Total Deferred Tax Assets 5,512 4,824
Net Deferred Tax Liabilities $14,410 $7,811
The Company’s effective tax rate differs from the federal
income tax statutory rate as follows:
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
(In Thousands) 1999 1998 1997
Statutory Rate 35.0% 35.0% 35.0%
Increases in Taxes
Resulting From:
State Income Taxes,
Net of Federal Income
Tax Benefit 2.7 2.4 2.5
Other, Net 0.3 1.6 1.7
Effective Tax Rate 38.0% 39.0% 39.2%
Note F: Commitments
The Company leases warehouse and retail store space for
substantially all of its operations under operating leases
expiring at various times through 2013. Most of the leases
contain renewal options for additional periods ranging from
1 to 15 years or provide for options to purchase the related
property at predetermined purchase prices which do not
represent bargain purchase options. The Company also
leases transportation equipment under operating leases
expiring during the next 3 years. Management expects that
most leases will be renewed or replaced by other leases in
the normal course of business.
Future minimum rental payments, including guaranteed
residual values, required under operating leases that have
initial or remaining non-cancelable terms in excess of one
year as of December 31, 1999, are as follows: $24,693,000
in 2000; $20,404,000 in 2001; $12,682,000 in 2002;
$7,714,000 in 2003; $4,771,000 in 2004; and $8,037,000
thereafter.
Rental expense was $28,851,000 in 1999, $25,563,000
in 1998, and $22,146,000 in 1997.
The Company leases one building from an officer of the
Company under a lease expiring in 2008 for annual rentals
aggregating $212,700.
The Company maintains a 401(k) savings plan for all
full-time employees with at least one year of service with the
Company and who meet certain eligibility requirements.
The plan allows employees to contribute up to 10% of their
annual compensation with 50% matching by the Company
on the first 4% of compensation. The Company’s expense
related to the plan was $483,000 in 1999, $415,000 in 1998,
and $357,000 in 1997.