Aarons 2005 Annual Report Download - page 33

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Notes to Consolidated Financial Statements
to be tested for impairment by applying the guidance in the
consensus. The adoption of EITF 04-1 did not have a material
impact on the financial condition or results of operations.
In November 2004, the FASB issued Statement of Financial
Accounting Standards No. 151, Inventory Costs — An
Amendment of ARB No. 43, Chapter 4 (SFAS 151). SFAS 151
amends ARB 43, Chapter 4, to clarify that abnormal amounts
of idle facility expense, freight, handling costs, and wasted
materials (spoilage) should be recognized as current-period
charges. In addition, this Statement requires that allocation of
fixed production overheads to the costs of conversion be based
on the normal capacity of the production facilities. SFAS 151
is effective for the Company beginning January 1, 2006.
Management is currently assessing the impact of SFAS 151,
but does not expect the impact to be material.
In December 2004, the FASB issued Statement of Financial
Accounting Standards No. 123 (revised 2004), Share-based
Payment (SFAS 123R). SFAS 123R amends SFAS 123 to
require adoption of the fair-value method of accounting for
employee stock options. In April 2005, the SEC extended the
adoption date of SFAS 123R to January 1, 2006 for calendar-
year companies. The transition guidance in SFAS 123R specifies
that compensation expense for options granted prior to the
effective date be recognized over the remaining vesting period
of those options, and that compensation expense for options
granted subsequent to the effective date be recognized over
the vesting period of those options. Management is currently
assessing the impact of SFAS No. 123R, but does not expect
the impact to be material.
In May 2005, the FASB issued SFAS No. 154, Accounting
Changes and Error Corrections — a replacement of APB
Opinion No. 20 and FASB Statement No. 3. SFAS 154 replaces
APB Opinion No. 20, Accounting Changes and SFAS No. 3,
Reporting Accounting Changes in Interim Financial Statements,
and changes the requirements for the accounting for and
reporting of a change in accounting principle. SFAS 154
applies to all voluntary changes in an accounting principle. It
also applies to changes required by an accounting pronounce-
ment in the unusual instance that the pronouncement does not
include specific transition provisions. SFAS 154 is effective for
accounting changes and error corrections occurring in fiscal
years beginning after December 15, 2005. The adoption of
SFAS 154 is not anticipated to have a material effect on the
Company’s financial position or results of operations.
In March 2005, the FASB issued Interpretation No. 47,
Accounting for Conditional Asset Retirement Obligations
(FIN 47). FIN 47 clarifies that the term “conditional asset
retirement obligation” as used in SFAS No. 143, Accounting
for Asset Retirement Obligations,refers to a legal obligation
to perform an asset retirement activity in which the timing
and method of settlement are conditional on a future event
that may or may not be within the control of the entity. FIN 47
is effective no later than the end of fiscal years ending after
December 15, 2005. The Company’sleases contain asset
retirement obligations related to the removal of signage at the
termination of these leases. The Company adopted FIN 47 for
the year ended December 31, 2005. The impact of adoption
was not material.
Note B: Earnings Per Share
Earnings per share is computed by dividing net income
by the weighted average number of Common and Class A
Common shares outstanding during the year, which were
approximately 49,846,000 shares in 2005, 49,602,000 shares
in 2004, and 48,964,000 shares in 2003. 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
959,000 in 2005, 973,000 in 2004, and 819,000 in 2003.
Note C: Property, Plant and Equipment
Following is a summary of the Company’s property, plant,
and equipment at December 31:
(In Thousands) 2005 2004
Land $ 15,934 $ 11,687
Buildings and Improvements 46,805 39,305
Leasehold Improvements and Signs 72,842 63,291
Fixtures and Equipment 45,343 36,518
Assets Under Capital Lease:
With Related Parties 15,734 15,734
With Unrelated Parties 1,475 1,475
Construction in Progress 6,449 4,339
$204,582 $172,349
Less: Accumulated Depreciation
and Amortization (70,823) (61,231)
$133,759 $111,118
Note D: Credit Facilities
Following is a summary of the Company’s credit facilities
at December 31:
(In Thousands) 2005 2004
Bank Debt $ 91,336 $ 45,528
Senior Unsecured Notes 100,000 50,000
Capital Lease Obligations:
With Related Parties 16,141 16,596
With Unrelated Parties 1,066 1,197
Other Debt 3,330 3,334
$211,873 $116,655