Aarons 2012 Annual Report Download - page 82

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72
* Gross profit is the sum of lease revenues and fees, retail sales, and non-retail sales less retail cost of sales, non-
retail cost of sales, depreciation of lease merchandise and write-offs of lease merchandise.
The first quarter of 2012 included a pre-tax $35.5 million reversal of a lawsuit accrual, and the third quarter of 2012
included a pre-tax $10.4 million retirement charge associated with the retirement of the Company’s founder and
former Chairman of the Board. The second quarter of 2011 included a pre-tax $36.5 million accrual of a lawsuit, and
the fourth quarter of 2011 included a pre-tax $3.5 million separation charge related to the Company’s former Chief
Executive Officer.
Revenue amounts for all quarterly periods prior to the third quarter of 2012 have been revised to exclude interest
income, which is now presented as a component of non-operating income and expenses in the consolidated
statements of earnings.
NOTE 15: DEFERRED COMPENSATION PLAN
Effective July 1, 2009, the Company implemented the Aaron’s, Inc. Deferred Compensation Plan (the ―Plan‖) an
unfunded, nonqualified deferred compensation plan for a select group of management, highly compensated
employees and non-employee directors. On a pre-tax basis, eligible employees can defer receipt of up to 75% of
their base compensation and up to 100% of their incentive pay compensation, and eligible non-employee directors
can defer receipt of up to 100% of both their cash and stock director fees. In addition, the Company elected to make
restoration matching contributions on behalf of eligible employees to compensate for certain limitations on the
amount of matching contributions an employee can receive under the Company’s tax-qualified 401(k) plan.
Compensation deferred under the Plan is credited to each participant’s deferral account and a deferred compensation
liability is recorded in accounts payable and accrued expenses in the consolidated balance sheets. The deferred
compensation plan liability was approximately $9.5 million and $6.3 million as of December 31, 2012 and 2011,
respectively. Liabilities under the Plan are recorded at amounts due to participants, based on the fair value of
participants’ selected investments. The Company has established a Rabbi Trust to fund obligations under the Plan
with Company-owned life insurance. The obligations are unsecured general obligations of the Company and the
participants have no right, interest or claim in the assets of the Company, except as unsecured general creditors. The
cash surrender value of these policies totaled $10.4 million and $5.8 million as of December 31, 2012 and 2011,
respectively, and is included in prepaid expenses and other assets in the consolidated balance sheets.
Deferred compensation expense charged to operations for the Company’s matching contributions totaled $285,000,
$306,000 and $231,000 in 2012, 2011, and 2010 respectively. Benefits of $616,000 and $77,000 were paid during
the years ended December 31, 2012 and 2011, respectively. No benefits were paid in 2010.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.