Aarons 2002 Annual Report Download - page 28

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NOTE D: PROPERTY, PLANT & EQUIPMENT
December 31, December 31,
(In Thousands) 2002 2001
Land $ 9,077 $ 10,504
Buildings & Improvements 32,943 37,570
Leasehold Improvements & Signs 44,587 38,214
Fixtures & Equipment 29,768 28,357
Assets Under Capital Lease:
With Related Parties 10,308
With Unrelated Parties 1,432
Construction in Progress 4,318 1,788
132,433 116,433
Less: Accumulated Depreciation
& Amortization (45,339) (39,151)
$ 87,094 $ 77,282
NOTE E: CREDIT FACILITIES
Following is a summary of the Company’s credit facilities at
December 31:
December 31, December 31,
(In Thousands) 2002 2001
Bank Debt $ 7,325 $72,397
Private Placement 50,000
Capital Lease Obligation:
With Related Parties 10,308
With Unrelated Parties 1,432
Other Debt 4,200 5,316
$73,265 $77,713
Bank Debt — The Company has a revolving credit agreement
dated March 30, 2001 with several banks providing for unsecured
borrowings up to $110,000,000, which includes an $8,000,000
credit line to fund daily working capital requirements. Amounts
borrowed bear interest at the lower of the lender’s prime rate or
LIBOR plus 1.25%. The pricing under the working capital line
is based upon overnight bank borrowing rates. At December 31,
2002 and 2001, an aggregate of $7,325,000 (bearing interest at
2.65%) and $72,397,000 (bearing interest at 3.21%) was out-
standing under the current and prior revolving credit agreements,
respectively. The Company pays a .25% commitment fee on
unused balances. The weighted average interest rate on borrow-
ings under the revolving credit agreement (before giving effect to
interest rate swaps) was 3.86% in 2002, 5.77% in 2001, and 7.07%
in 2000. The revolving credit agreement expires March 30, 2004.
The revolving credit agreement contains certain covenants
which require 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) $187,675,000 plus (b) 50% of the Company’s consoli-
dated net income (but not loss) for the period beginning January
1, 2001 and ending on the last day of such fiscal quarter plus
(c) 100% of the net proceeds of $34,078,000 from an underwritten
public offering of 1,725,000 newly-issued shares of its common
stock in June 2002. It also places other restrictions on additional
borrowings and requires the maintenance of certain financial
ratios. At December 31, 2002, $37,901,000 of retained earnings
were available for dividend payments and stock repurchases under
the debt restrictions, and the Company was in compliance with
all covenants.
Private Placement — On August 14, 2002 the Company
sold $50,000,000 in aggregate principal amount of senior unse-
cured notes (the Notes) in a private placement to a consortium
of insurance companies. The Notes mature August 13, 2009.
Quarterly interest only payments at 6.88% are due for the first
two years followed by annual $10,000,000 principal repayments
plus interest for the five years thereafter.
Capital Leases with Related Parties — In April 2002,
the Company sold land and buildings with a carrying value of
approximately $6,258,000 to a limited liability company (LLC)
controlled by the Company’s majority shareholder. Simultaneously,
the Company and the LLC entered into a fifteen-year lease for
the building and a portion of the land, with two five-year renewal
options at the discretion of the Company. The LLC obtained
borrowings collateralized by the land and building totalling
approximately $6,401,000. The land and building associated
with the lease collateralizing the obligation are occupied by the
Company. The transaction has been accounted for as a financing
in the accompanying consolidated financial statements. The rate
of interest implicit in the lease financing is approximately 8.7%.
Accordingly, the land and building and the lease obligation are
recorded in the Company’s consolidated financial statements. No
gain or loss was recognized associated with this transaction.
In December 2002, the Company sold 11 properties, including
leasehold improvements, to a separate limited liability company
(LLC) controlled by a group of Company executives and man-
agers, including the Company’s majority shareholder. The LLC
obtained borrowings collateralized by land and buildings totalling
approximately $5 million. Simultaneously, the Company and the
LLC entered into 11 separate fifteen-year leases for the land and
buildings, each lease containing one five-year renewal option at
the discretion of the Company. The land and buildings associated
with the lease collateralizing the obligation are occupied by the
Company. The transactions have been accounted for as capital
leases in the accompanying consolidated financial statements.
The rate of interest implicit in the leases is approximately 11.1%.
Accordingly, the land and buildings and the lease obligations are
recorded in the Company’s consolidated financial statements.
No gain or loss was recognized associated with this transaction.
Other Debt — Other debt at December 31, 2002 is comprised
of $4,200,000 of industrial development corporation revenue
bonds. The average weighted borrowing rate on these bonds in
2002 was 1.60%. No principal payments are due on the bonds
until maturity in 2015.