Aarons 2014 Annual Report Download - page 65

Download and view the complete annual report

Please find page 65 of the 2014 Aarons annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 102

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102

55
Compensation. The fair value of each share of restricted stock awarded is equal to the market value of a share of the Company’s
common stock on the grant date.
Deferred Income Taxes
Deferred income taxes represent primarily temporary differences between the amounts of assets and liabilities for financial and
tax reporting purposes. The Company’s largest temporary differences arise principally from the use of accelerated depreciation
methods on lease merchandise for tax purposes.
Earnings per Share
Earnings per share is computed by dividing net earnings by the weighted average number of shares of common stock
outstanding during the period. The computation of earnings per share assuming dilution includes the dilutive effect of stock
options, restricted stock units (“RSUs”), restricted stock awards (“RSAs”) and performance share units as determined under the
treasury stock method. The following table shows the calculation of dilutive stock awards for the years ended December 31
(shares in thousands):
2014 2013 2012
Weighted average shares outstanding 72,384 75,747 75,820
Effect of dilutive securities:
Stock options 168 421 789
RSUs 154 206 210
RSAs 17 16 7
Weighted average shares outstanding assuming dilution 72,723 76,390 76,826
Approximately 164,000 and 53,000 stock-based awards were excluded from the computations of earnings per share assuming
dilution in 2014 and 2012, respectively, as the awards would have been anti-dilutive for the years presented. No stock options,
RSUs or RSAs were anti-dilutive during 2013.
Cash and Cash Equivalents
The Company classifies highly liquid investments with maturity dates of three months or less when purchased as cash
equivalents. The Company maintains its cash and cash equivalents in a limited number of banks. Bank balances typically
exceed coverage provided by the Federal Deposit Insurance Corporation. However, due to the size and strength of the banks
where the balances are held, such exposure to loss is believed to be minimal.
Investments
The Company maintains investments in various corporate debt securities, or bonds. Historically, the Company has had the
positive intent and ability to hold its investments in debt securities to maturity. Accordingly, the Company classifies its
investments in debt securities, which mature in 2015, as held-to-maturity securities and carries the investments at amortized
cost in the consolidated balance sheets. Refer to Note 4 to these consolidated financial statements for further details of the
Company’s sale of certain corporate debt securities during the year ended December 31, 2014 due to the Company’s
Progressive acquisition.
The Company evaluates securities for other-than-temporary impairment on a quarterly basis, and more frequently when
economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which
the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer and (3) the intent and
ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery
in fair value. The Company does not intend to sell its remaining securities and it is not more likely than not that the Company
will be required to sell the investments before recovery of their amortized cost bases.
Accounts Receivable
Accounts receivable consist primarily of receivables due from customers of Company-operated stores and Progressive,
corporate receivables incurred during the normal course of business (primarily related to vendor consideration, real estate
leasing activities, in-transit credit card transactions and the secondary escrow described in Note 2 to these consolidated
financial statements) and franchisee obligations.