Aarons 2014 Annual Report Download - page 80

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The following table summarizes the activity related to the Company’s uncertain tax positions:
(In Thousands) 2014 2013 2012
Balance at January 1, $ 1,960 $ 1,258 $ 1,412
Additions Based on Tax Positions Related to the Current Year 311 454 178
Additions for Tax Positions of Prior Years 928 423 83
Prior Year Reductions (370) (5) (315)
Statute Expirations (94) (85) (83)
Settlements (91) (85) (17)
Balance at December 31, $ 2,644 $ 1,960 $ 1,258
As of December 31, 2014 and 2013, the amount of uncertain tax benefits that, if recognized, would affect the effective tax rate
is $2.1 million and $1.5 million, respectively, including interest and penalties.
During the years ended December 31, 2014 and 2013, the Company recognized interest and penalties of $286,000 and $76,000,
respectively. During the year ended December 31, 2012, the Company recognized a net benefit of $126,000 related to interest
and penalties. The Company had $499,000 and $278,000 of accrued interest and penalties at December 31, 2014 and 2013,
respectively. The Company recognizes potential interest and penalties related to uncertain tax benefits as a component of
income tax expense.
NOTE 8: COMMITMENTS AND CONTINGENCIES
Leases
The Company leases warehouse and retail store space for most of its store-based operations, as well as corporate management
and call center space for Progressive’s operations, under operating leases expiring at various times through 2029. The Company
also leases certain properties under capital leases that are more fully described in Note 6 to these consolidated financial
statements. Most of the leases contain renewal options for additional periods ranging from one to 20 years or provide for
options to purchase the related property at predetermined purchase prices that do not represent bargain purchase options. In
addition, certain properties occupied under operating leases contain normal purchase options. Leasehold improvements related
to these leases are generally amortized over periods that do not exceed the lesser of the lease term or 15 years. While a majority
of leases do not require escalating payments, for the leases which do contain such provisions, the Company records the related
lease expense on a straight-line basis over the lease term. The Company also leases computer equipment and transportation
vehicles under operating leases expiring during the next four years. Management expects that most leases will be renewed or
replaced by other leases in the normal course of business.
Future minimum lease payments required under operating leases that have initial or remaining non-cancelable terms in excess
of one year as of December 31, 2014 are as follows:
(In Thousands)
2015 $ 116,564
2016 95,403
2017 75,667
2018 59,093
2019 46,842
Thereafter 125,725
$ 519,294
Rental expense was $116.4 million in 2014, $110.0 million in 2013 and $102.0 million in 2012. Rental expense for the year
ended December 31, 2014 included $4.8 million related to the closure of 44 Company-operated stores in 2014, as discussed in
Note 9 to these consolidated financial statements. These costs were included in the line item “Restructuring expenses” in the
consolidated statements of earnings. All other rental expense was included as a component of operating expenses in the
consolidated statements of earnings.
Sublease income was $3.9 million in 2014, $2.6 million in 2013 and $3.1 million in 2012. The Company has anticipated future
sublease rental income of $4.5 million in 2015, $3.9 million in 2016, $3.3 million in 2017, $3.0 million in 2018, $2.5 million in
2019 and $5.2 million thereafter through 2026. Sublease income is included in other revenues in the consolidated statements of
earnings.