Aarons 2009 Annual Report Download - page 32

ADVERTISING — The Company expenses advertising costs as
incurred. Advertising costs are recorded as expenses the first time
an advertisement appears. Such costs aggregated to $31.0 million
in 2009, $28.5 million in 2008 and $29.4 million in 2007. These
advertising expenses are shown net of cooperative advertising
considerations received from vendors, substantially all of which
represents reimbursement of specific, identifiable and incremental
costs incurred in selling those vendors’ products. The amount of
cooperative advertising consideration netted against advertising
expense was $23.4 million in 2009, $24.7 million in 2008 and
$20.1 million in 2007. The prepaid advertising asset was $2.6 mil-
lion and $1.5 million at December 31, 2009 and 2008, respectively.
STOCK-BASED COMPENSATION — The Company has stock-based
employee compensation plans, which are more fully described
in Note H below. The Company estimates the fair value for the
options granted on the grant date using a Black-Scholes option-
pricing model and accounts for stock-based compensation under
the fair value recognition provisions codified in FASB ASC Topic
718, “Compensation — Stock Compensation” (“ASC 718”).
INSURANCE RESERVES — Estimated insurance reserves are accrued
primarily for group health and workers compensation benefits pro-
vided to the Company’s employees. Estimates for these insurance
reserves are made based on actual reported but unpaid claims
and actuarial analyses of the projected claims run off for both
reported and incurred but not reported claims.
COMPREHENSIVE INCOME — For the years ended December 31,
2009, 2008 and 2007, comprehensive income totaled $113.9 mil-
lion, $88.8 million and $80.2 million, respectively.
FOREIGN CURRENCY TRANSLATION — Assets and liabilities denomi-
nated in a foreign currency are translated into U.S. dollars at
the current rate of exchange on the last day of the reporting
period. Revenues and expenses are generally translated at a daily
exchange rate and equity transactions are translated using the
actual rate on the day of the transaction.
NEW ACCOUNTING PRONOUNCEMENTS — The pronouncements that
the Company adopted in 2009 did not have a material impact on
the consolidated financial statements.
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Earnings per share is computed by dividing net earnings by the
weighted average number of shares of Common Stock and Class A
Common Stock outstanding during the year, which were approxi-
mately 54,092,000 shares in 2009, 53,409,000 shares in 2008, and
54,163,000 shares in 2007. 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 increas-
ing the weighted average shares outstanding assuming dilution by
approximately 442,000 in 2009, 683,000 in 2008, and 809,000 in
2007.
The Company has issued restricted stock awards under its
stock incentive plan whereby shares vest upon satisfaction of
certain performance conditions. As of December 31, 2009, only
a portion of the performance conditions had been met, and
therefore only a portion of these shares have been included in
the computation of diluted earnings per share. The effect of
restricted stock increased weighted average shares outstanding
by 100,000 in 2009, 97,000 in 2008 and 110,000 in 2007.
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Following is a summary of the Company’s property, plant, and
equipment at December 31:
(In Thousands) 2009 2008
Land $ 44,457 $ 45,880
Buildings and Improvements 99,484 89,987
Leasehold Improvements and Signs 84,101 81,981
Fixtures and Equipment 90,625 80,334
Assets Under Capital Leases:
with Related Parties 8,501 9,332
with Unrelated Parties 10,564 9,946
Construction in Progress 11,900 15,241
349,632 332,701
Less: Accumulated Depreciation
and Amortization (122,016) (108,270)
$227,616 $224,431
Amortization expense on assets recorded under capital leases
is included in operating expenses.
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Following is a summary of the Company’s credit facilities at
December 31:
(In Thousands) 2009 2008
Bank Debt $ — $ 35,000
Senior Unsecured Notes 36,000 58,000
Capital Lease Obligation:
with Related Parties 7,775 9,138
with Unrelated Parties 7,959 8,677
Other Debt 3,310 4,002
$55,044 $114,817
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 lend-
er’s prime rate or LIBOR plus 87.5 basis points. The pricing under a
working capital line is based upon overnight bank borrowing rates.
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