Aarons 2013 Annual Report Download - page 71

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In Lomi Price v. Aaron's, Inc. and NW Freedom Corporation, filed on February 27, 2013, in the State Court of Fulton County,
Georgia (Case No. 13-EV-016812B), an individual plaintiff asserts claims against the Company and its independently owned
and operated franchisee, NW Freedom Corporation, for invasion of privacy/intrusion on seclusion, computer invasion of
privacy and infliction of emotional distress. Each of these claims arises out of the alleged use of PC Rental Agent software.
The plaintiff is seeking compensatory and punitive damages of not less than $250,000. On April 3, 2013, the Company filed an
answer and affirmative defenses. On that same day, the Company also filed a motion to stay the litigation pending resolution of
the Byrd litigation, a motion to dismiss for failure to state a claim and a motion to strike certain allegations in the complaint. All
three motions remain pending.
Regulatory Investigations
Federal Trade Commission Investigation. The Federal Trade Commission (“FTC”) investigated the Company in connection
with the alleged use of PC Rental Agent software by certain independently owned and operated Company franchisees, as noted
above under “Privacy and Related Matters,” and the Company's alleged responsibility for that use. On October 22, 2013, the
FTC published a proposed consent agreement that would close the investigation. Pursuant to FTC administrative procedure, the
consent agreement was subject to public comment through November 21, 2013. The FTC is currently deciding whether to make
the proposed consent agreement final.
California Attorney General Investigation. The California Attorney General has been investigating the Company's retail
transactional practices, including various leasing and marketing practices, information security and privacy policies and
practices related to the alleged use of PC Rental Agent software by certain independently owned and operated Company
franchisees. The Company is continuing to cooperate with the investigation, including producing documents for the Attorney
General's office and engaging in discussions about a possible resolution of this matter. The Company currently anticipates
achieving a comprehensive resolution without litigation.
Pennsylvania Attorney General Investigation. There is a pending, active investigation by the Pennsylvania Attorney General
relating to the Company's privacy practices in Pennsylvania. The privacy issues are related to the alleged use of PC Rental
Agent software by certain independently owned and operated Company franchisees, and the Company's alleged responsibility
for that use. The Company is continuing to cooperate in the investigation.
Other Commitments
At December 31, 2013, the Company had non-cancelable commitments primarily related to certain advertising and marketing
programs of $35.4 million. Payments under these commitments are scheduled to be $19.2 million in 2014, $15.5 million in
2015 and $710,000 in 2016.
The Company maintains a 401(k) savings plan for all its full-time employees with at least one year of service and who meet
certain eligibility requirements. As of December 31, 2013, the plan allows employees to contribute up to 100% of their annual
compensation in accordance with federal contribution limits with 100% matching by the Company on the first 3% of
compensation and 50% on the next 2% of compensation for a total of 4% matching compensation. The Company’s expense
related to the plan was $3.3 million in 2013, $999,000 in 2012, and $891,000 in 2011.
The Company is a party to various claims and legal proceedings arising in the ordinary course of business. Management
regularly assesses the Company’s insurance deductibles, monitors the Company's litigation and regulatory exposure with the
Company’s attorneys and evaluates its loss experience. The Company also enters into various contracts in the normal course of
business that may subject it to risk of financial loss if counterparties fail to perform their contractual obligations.
NOTE 9: SHAREHOLDERS’ EQUITY
The Company held 17,795,293 shares in its treasury and was authorized to purchase an additional 11,497,373 shares at
December 31, 2013. The holders of common stock are entitled to receive dividends and other distributions in cash, stock or
property of the Company as and when declared by its Board of Directors out of legally available funds. The Company
repurchased 3,502,627 shares of its common stock through an accelerated share repurchase program in 2013 and 1,236,689
shares of its common stock on the open market in 2012.
The Company has 1,000,000 shares of preferred stock authorized. The shares are issuable in series with terms for each series
fixed by and such issuance subject to approval by the Board of Directors. As of December 31, 2013, no preferred shares have
been issued.