Aarons 2006 Annual Report Download - page 33

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COMPREHENSIVE INCOME — For the years ended December 31,
2006, 2005 and 2004, comprehensive income totaled $78.6
million, $58.0 million, and $52.1 million, respectively.
NEW ACCOUNTING PRONOUNCEMENTS— In July 2006, the
FASB issued FASB Interpretation 48, Accounting for Income
Tax Uncertainties (“FIN 48”). FIN 48 defines the threshold for
recognizing the benefits of tax return positions in the financial
statements as “more-likely-than-not” to be sustained by the
taxing authority. The recently issued literature also provides
guidance on the derecognition, measurement and classification
of income tax uncertainties, along with any related interest and
penalties. FIN 48 also includes guidance concerning accounting
for income tax uncertainties in interim periods and increases
the level of disclosures associated with any recorded income tax
uncertainties. FIN 48 is effective for fiscal years beginning after
December 15, 2006. The differences between the amounts recog-
nized in the statements of financial position prior to the adoption
of FIN 48 and the amounts reported after adoption will be
accounted for as a cumulative-effect adjustment recorded to the
beginning balance of retained earnings. The Company is currently
evaluating the impact of FIN 48 on its financial statements.
In September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements (“SFAS 157”). SFAS 157 establishes a framework
for measuring the fair value of assets and liabilities which is
intended to provide increased consistency in how fair value
determinations are made under various existing accounting
standards which permit, or in some cases require, estimates
of fair value market value. SFAS 157 also expands financial
statement disclosure requirements about the use of fair value
measurements, including the effect of such measures on earnings.
SFAS 157 is effective for financial statements issued for fiscal
years beginning after November 15, 2007, and interim periods
within those years. The Company is currently evaluating the
impact of this Statement on its financial statements.
In February 2007, the FASB issues SFAS No. 159, The Fair
Value Option for Financial Assets and Financial Liabilities —
Including an Amendment of SFAS No. 115 (“SFAS 159”). SFAS
159 permits an entity to choose to measure many financial
instruments and certain other items at fair value. SFAS is effec-
tive for financial statements issued for fiscal years beginning
after November 15, 2007. The Company is currently evaluating
the impact of this Statement on its financial statements.
NOTE B: EARNINGS PER SHARE
Earnings per share is computed by dividing net income by the
weighted average number of Common Stock and Class A Common
Stock outstanding during the year, which were approximately
52,545,000 shares in 2006, 49,846,000 shares in 2005, and
49,602,000 shares in 2004. 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 832,000 in 2006,
959,000 in 2005, and 973,000 in 2004.
NOTE C: PROPERTY, PLANT AND EQUIPMENT
Following is a summary of the Company’s property, plant, and
equipment at December 31:
(In Thousands) 2006 2005
Land $ 26,195 $ 15,934
Buildings and Improvements 57,373 46,805
Leasehold Improvements and Signs 79,543 72,842
Fixtures and Equipment 54,148 45,343
Assets Under Capital Lease:
with Related Parties 9,534 15,734
with Unrelated Parties 10,564 1,475
Construction in Progress 10,719 6,449
248,076 204,582
Less: Accumulated Depreciation
and Amortization (77,782) (70,823)
$170,294 $133,759
NOTE D: CREDIT FACILITIES
Following is a summary of the Company’s credit facilities
at December 31:
(In Thousands) 2006 2005
Bank Debt $ 15,612 $ 91,336
Senior Unsecured Notes 90,000 100,000
Capital Lease Obligation:
with Related Parties 10,095 16,141
with Unrelated Parties 10,022 1,066
Other Debt 4,245 3,330
$129,974 $211,873
BANK DEBT — The Company has a revolving credit agreement
with several banks providing for unsecured borrowings up to
$140.0 million. Amounts borrowed bear interest at the lower
of the lender’s prime rate or LIBOR plus 87.5 basis points. The
pricing under the working capital line is based upon overnight
bank borrowing rates. At December 31, 2006 and 2005,
respectively, an aggregate of $15.6 million (bearing interest
at 6.22%) and $81.3 million (bearing interest at 5.35%) was
outstanding under the revolving credit agreement. The Company
pays a .20% commitment fee on unused balances. The weighted
average interest rate on borrowings under the revolving credit
agreement (before giving effect to interest rate swaps in 2004)
was 5.97% in 2006, 4.42% in 2005, and 2.72% in 2004. The
revolving credit agreement expires May 28, 2008.
The revolving credit agreement contains financial covenants
which, among other things, forbid the Company from exceeding
certain debt to equity levels and require the maintenance of
minimum fixed charge coverage ratios. If the Company fails to
comply with these covenants, the Company will be in default