Aarons 2006 Annual Report Download - page 35

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Future maturities under the Company’s credit facilities
are as follows:
(In Thousands)
2007 $11,907
2008 38,716
2009 23,178
2010 13,274
2011 13,433
Thereafter 29,466
NOTE E: INCOME TAXES
Following is a summary of the Company’s income tax expense
for the years ended December 31:
(In Thousands) 2006 2005 2004
Current Income Tax
Expense (Benefit):
Federal $25,453 $50,064 $ (7,720)
State 2,132 4,541 (309)
27,585 54,605 (8,029)
Deferred Income
Tax (Benefit) Expense:
Federal 16,524 (17,751) 35,967
State 1,966 (2,510) 3,952
18,490 (20,261) 39,919
$46,075 $34,344 $31,890
Significant components of the Company’s deferred income tax
liabilities and assets at December 31 are as follows:
(In Thousands) 2006 2005
Deferred Tax Liabilities:
Rental Merchandise and
Property, Plant and Equipment $ 99,813 $81,388
Other, Net 10,273 6,543
Total Deferred Tax Liabilities 110,086 87,931
Deferred Tax Assets:
Accrued Liabilities 5,053 4,915
Advance Payments 8,959 7,556
Other, Net 2,387 3,256
Total Deferred Tax Assets 16,399 15,727
Less Deferred Tax Valuation Allowance — (2,993)
Net Deferred Tax Assets 16,399 12,734
Net Deferred Tax Liabilities $ 93,687 $75,197
The Company’s effective tax rate differs from the statutory
U.S. Federal income tax rate for the years ended December 31
as follows:
2006 2005 2004
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 2.1 2.2 2.8
Other, Net (.2) — (.1)
Effective Tax Rate 36.9% 37.2% 37.7%
NOTE F: COMMITMENTS
The Company leases warehouse and retail store space for
substantially all of its operations under operating leases expiring
at various times through 2021. The Company also leases certain
properties under capital leases that are more fully described in
Note D. 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 leases transportation
and computer equipment under operating leases expiring during
the next five 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 non-cancelable terms in
excess of one year as of December 31, 2006, are as follows:
$74.0 million in 2007; $58.4 million in 2008; $41.3 million in
2009; $25.7 million in 2010; $15.2 million in 2011; and $55.4
million thereafter.
The Company has guaranteed certain debt obligations of
some of the franchisees amounting to $111.6 million and $100.6
million at December 31, 2006 and 2005, respectively. Of this
amount, approximately $81.3 million represents franchise
borrowings outstanding under the franchise loan program and
approximately $30.3 million represents franchise borrowings
under other debt facilities at December 31, 2006. The Company
receives guarantee fees based on such franchisees’ outstanding
debt obligations, which it recognizes as the guarantee obligation
is satisfied. The Company has recourse rights to the assets
securing the debt obligations. As a result, the Company has
never incurred any, nor does management expect to incur any,
significant losses under these guarantees. See Note N for
subsequent event disclosures.
Rental expense was $72.0 million in 2006, $59.9 million in
2005, and $50.3 million in 2004.
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