Aarons 2013 Annual Report Download - page 43

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Our primary capital requirements consist of buying lease merchandise for sales and lease ownership stores. As we continue to
grow, the need for additional lease merchandise is expected to remain our major capital requirement. Other capital requirements
include purchases of property, plant and equipment and expenditures for acquisitions and income tax payments. These capital
requirements historically have been financed through:
• cash flow from operations;
• trade credit with vendors;
• proceeds from the sale of lease return merchandise;
• bank credit;
• private debt offerings; and
• stock offerings.
Debt Financing
At December 31, 2013, there was no outstanding balance under our revolving credit agreement. Our revolving credit facility
expires December 13, 2017 and the total available credit under the facility as of December 31, 2013 is $140.0 million. As of
December 31, 2013, the Company had outstanding $125.0 million in senior unsecured notes, originally issued to several
insurance companies in a private placement in July 2011. The notes bear interest at the rate of 3.75% per year and mature on
April 27, 2018. Payments of interest are due quarterly, commencing July 27, 2011, with principal payments of $25.0 million
each due annually commencing April 27, 2014.
On October 8, 2013, the Company's revolving credit agreement, senior unsecured notes and franchise loan agreement were
amended to remove or adjust certain covenants to make them less restrictive. The amendments to the Company's revolving
credit agreement, senior unsecured notes and franchise loan agreement are discussed in further detail in Note 8 to the
Company's consolidated financial statements.
Our revolving credit agreement and senior unsecured notes, and our franchise loan agreement discussed below, contain certain
financial covenants. These covenants include requirements that we maintain ratios of: (1) EBITDA plus lease expense to fixed
charges of no less than 2:1; and (2) total debt to EBITDA of no greater than 3:1; “EBITDA” in each case means consolidated
net income before interest and tax expense, depreciation (other than lease merchandise depreciation) and amortization expense,
and other non-cash charges. If we fail to comply with these covenants, we will be in default under these agreements, and all
amounts will become due immediately. We were in compliance with all of these covenants at December 31, 2013 and believe
that we will continue to be in compliance in the future.
Share Repurchases
We purchase our stock in the market from time to time as authorized by our Board of Directors. In October 2013, the Board of
Directors authorized the repurchase of an additional 10,955,345 shares of common stock over the previously authorized amount
of 4,044,655 shares, increasing the total number of our shares of common stock authorized for repurchase to 15,000,000.
In December 2013, the Company paid $125 million under an accelerated share repurchase program with a third party financial
institution and received an initial delivery of 3,502,627 shares. In February 2014, the accelerated share repurchase program was
completed and the Company received an additional 1,000,952 shares of common stock. The accelerated share repurchase
program is discussed in further detail in Note 9 to the Company's consolidated financial statements.
Dividends
We have a consistent history of paying dividends, having paid dividends for 26 consecutive years. Our annual common stock
dividend was $.072 per share, $.062 per share and $.054 per share in 2013, 2012 and 2011, respectively, and resulted in
aggregate dividend payments of $3.9 million, $5.8 million and $4.1 million in 2013, 2012 and 2011, respectively. At its
November 2013 meeting, our Board of Directors increased the quarterly dividend by 23.5%, raising it to $.021 per share. The
Company also increased its quarterly dividend rate by 13.3%, to $.017 per share, in November 2012 and by 15.4%, to $.015 per
share, in November 2011. Subject to sufficient operating profits, any future capital needs and other contingencies, we currently
expect to continue our policy of paying dividends.
If we achieve our expected level of growth in our operations, we anticipate we will supplement our expected cash flows from
operations, existing credit facilities, vendor credit and proceeds from the sale of lease return merchandise by expanding our
existing credit facilities, by securing additional debt financing, or by seeking other sources of capital to ensure we will be able
to fund our capital and liquidity needs for at least the next 12 to 24 months.