Aarons 2003 Annual Report Download - page 31

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Note C: Earnings Per Share
Earnings per share is computed by dividing net income
by the weighted average number of common shares out-
standing during the year, which were 32,643,000 shares in
2003, 31,364,000 shares in 2002, and 29,892,000 shares
in 2001. The computation of earnings per share assuming
dilution includes the dilutive effect of stock options and
awards. Such stock options and awards had the effect of
increasing the weighted average shares outstanding assuming
dilution by approximately 546,000 shares in 2003, 486,000
shares in 2002, and 321,000 shares in 2001.
Note D: Property, Plant
& Equipment
December 31, December 31,
(In Thousands) 2003 2002
Land $ 10,370 $ 9,077
Buildings & Improvements 39,772 32,943
Leasehold Improvements & Signs 54,348 44,587
Fixtures & Equipment 32,135 29,768
Assets Under Capital Lease:
With Related Parties 10,308 10,308
With Unrelated Parties 1,432 1,432
Construction in Progress 3,647 4,318
$152,012 $132,433
Less: Accumulated Depreciation
& Amortization (52,428) (45,339)
$ 99,584 $ 87,094
Note E: Credit Facilities
Following is a summary of the Company’s credit facilities
at December 31:
December 31, December 31,
(In Thousands) 2003 2002
Bank Debt $13,870 $ 7,325
Private Placement 50,000 50,000
Capital Lease Obligations:
With Related Parties 10,144 10,308
With Unrelated Parties 1,319 1,432
Other Debt 4,237 4,200
$79,570 $73,265
Bank Debt — The Company has a revolving credit agree-
ment dated March 30, 2001 with several banks providing
for unsecured borrowings up to $86.7 million, which
includes an $8 million credit line to fund daily working
capital requirements. Amounts borrowed bear interest at
the lower of the lender’s prime rate or LIBOR plus 1.00%.
The pricing under the working capital line is based upon
overnight bank borrowing rates. At December 31, 2003
and 2002, an aggregate of approximately $13,870,000
(bearing interest at 2.24%) and $7,325,000 (bearing interest
at 2.65%) was outstanding under the revolving credit agree-
ment, respectively. The Company pays a .25% 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 2.53% in 2003,
3.86% in 2002, and 5.77% in 2001. The revolving credit
agreement expires May 31, 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) $235,232,000 plus (b) 50% of the
Company’s consolidated net income (but not loss) for the
period beginning July 1, 2002 and ending on the last day
of such fiscal quarter. It also places other restrictions on
additional borrowings and requires the maintenance of cer-
tain financial ratios. At December 31, 2003, $59,472,000 of
retained earnings was 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
unsecured notes (the Notes) in a private placement to a
consortium of insurance companies. The Notes mature
August 13, 2009. Quarterly interest-only payments at
an annual rate of 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 corporation
(LLC) controlled by the Company’s major shareholder.
Simultaneously, the Company and the LLC entered into a
15-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 totaling approximately $6,401,000.
The Company occupies the land and building collateralizing
the obligation associated with the lease. The transaction has
been accounted for as a financing in the accompanying con-
solidated financial statements. The rate of interest implicit in
the lease financing is approximately 8.7%. Accordingly, the
land and building and the debt 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 corporation (LLC) controlled by a group of
Company executives and managers, including the Company’s
majority shareholder. The LLC obtained borrowings col-
lateralized by the land totaling approximately $5,000,000.
The Company occupies the land and buildings collateralizing
the obligations associated with the leases. The transaction
has been accounted for as a financing 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, 2003 and 2002
includes $4,200,000 of industrial development corporation
revenue bonds. The average weighted borrowing rate on
these bonds in 2003 was 1.58%. No principal payments are
due on the bonds until maturity in 2015. At December 31,
2003, other debt also includes a note payable for approxi-
mately $37,000 assumed by the Company in connection
with a store acquisition.