Aarons 2003 Annual Report Download - page 32

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Future maturities under the Company’s Credit Facilities
are as follows:
(In Thousands)
2004 $14,262
2005 10,429
2006 10,468
2007 10,561
2008 10,697
Thereafter 23,153
Note F: Income Taxes
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
(In Thousands) 2003 2002 2001
Current Income Tax Expense
(Benefit):
Federal $16,506 ($11,431) $6,239
State 1,415 (1,911) 112
17,921 (13,342) 6,351
Deferred Income Tax Expense:
Federal 3,220 26,209 953
State 276 3,345 215
3,496 29,554 1,168
$21,417 $16,212 $7,519
Significant components of the Company’s deferred income
tax liabilities and assets are as follows:
December 31, December 31,
(In Thousands) 2003 2002
Deferred Tax Liabilities:
Rental Merchandise and
Property, Plant & Equipment $62,795 $59,432
Other, Net 3,035 3,486
Total Deferred Tax Liabilities 65,830 62,918
Deferred Tax Assets:
Accrued Liabilities 4,250 5,437
Advance Payments 5,770 5,371
Other, Net 520 1,593
Total Deferred Tax Assets 10,540 12,401
Net Deferred Tax Liabilities $55,290 $50,517
The Company’s effective tax rate differs from the
statutory U.S. federal income tax rate as follows:
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
2003 2002 2001
Statutory Rate 35.0% 35.0% 35.0%
Increases in U.S. Federal
Taxes Resulting From:
State Income Taxes,
Net of Federal Income
Tax Benefit 2.0 2.1 1.1
Other, Net 1.8
Effective Tax Rate 37.0% 37.1% 37.9%
Note G: Commitments
The Company leases warehouse and retail store space
for substantially all of its operations under operating leases
expiring at various times through 2017. The Company also
leases certain properties under capital leases that are more
fully described in Note E. Most of the leases contain renewal
options for additional periods ranging from one to 15 years
or provide for options to purchase the related property at
predetermined purchase prices that 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 outstanding
under this facility at December 31, 2003 was approximately
$24,881,000. 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 three 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 noncancelable
terms in excess of one year as of December 31, 2003, are
as follows: $40,329,000 in 2004; $31,636,000 in 2005;
$22,263,000 in 2006; $14,127,000 in 2007; $7,592,000 in
2008; and $8,147,000 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 $24,881,000.
Rental expense was $44,145,000 in 2003, $38,970,000
in 2002, and $36,506,000 in 2001.
In addition to the related-party capital leases described
in Note E, the Company leases one building from a
partnership of which the Company’s majority shareholder
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 $512,000 in 2003, $453,000 in
2002, and $436,000 in 2001.