Aarons 2001 Annual Report Download - page 26

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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,
2001 2000 1999
Statutory Rate 35.0% 35.0% 35.0%
Increases in Taxes
Resulting From:
State Income Taxes,
Net of Federal Income
Tax Benefit 1.1 2.5 2.7
Other, Net 1.8 0.4 0.3
Effective Tax Rate 37.9% 37.9% 38.0%
The Company leases warehouse and retail store space for substantially all of its operations
under operating leases expiring at various times through 2015. 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. In addition, certain properties occupied under operating leases
contain normal purchase options. The Company also has a $25,000,000 construction and
lease facility. Properties acquired by the lessor are purchased or constructed and then leased
to the Company under operating lease agreements. The total amount advanced and out-
standing under this facility at December 31, 2001 was approximately $24,700,000. Since
the resulting leases are operating leases, no debt obligation is recorded on the Company’s
balance sheet. 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 required under operating leases that have initial or
remaining non-cancelable terms in excess of one year as of December 31, 2001, are as
follows: $29,998,000 in 2002; $24,451,000 in 2003; $18,849,000 in 2004; $12,442,000
in 2005; $7,643,000 in 2006; and $8,845,000 thereafter. Certain operating leases expiring
in 2006 contain residual value guarantee provisions and other guarantees in the event of a
default. Although the likelihood of funding under these guarantees is considered by the
Company to be remote, the maximum amount the Company may be liable for under such
guarantees is approximately $24,700,000.
Rental expense was $36,506,000 in 2001, $30,659,000 in 2000; and $28,851,000 in 1999.
The Company leases one building from a partnership of which an officer of the Company
is a partner 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 $436,000 in 2001; $427,000 in 2000; and $447,000 in 1999.
In February 1999, the Company’s Board of Directors authorized the repurchase of up to
2,000,000 shares of the Company’s Common Stock and/or Class A Common Stock. During
2001, 10,000 shares of the Company’s common shares were transferred back into treasury at
an aggregate cost of $128,000 and the Company was authorized to purchase an additional
1,284,690 at December 31, 2001. At December 31, 2001, the Company held a total of
3,662,676 common shares in its treasury.
The Company has 1,000,000 shares of preferred stock authorized. The shares are issuable
in series with terms for each series fixed by the Board and such issuance is subject to approval
by the Board of Directors. No preferred shares have been issued.
NOTE F:
COMMITMENTS
NOTE G:
SHAREHOLDERS’
EQUITY