FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
SEPTEMBER 30, 2001 0-12385
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For Quarter Ended Commission File No.
AARON RENTS, INC.
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(Exact name of registrant as
specified in its charter)
GEORGIA 58-0687630
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(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
309 E. PACES FERRY ROAD, N.E.
ATLANTA, GEORGIA 30305-2377
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(Address of principal executive offices) (Zip Code)
(404) 231-0011
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(Registrant's telephone number, including area code)
NOT APPLICABLE
(FORMER NAME, FORMER ADDRESS AND FORMER
FISCAL YEAR, IF CHANGED SINCE LAST REPORT)
Indicate by check mark whether registrant (l) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X]
No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Shares Outstanding as of
Title of Each Class November 13, 2001
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Common Stock, $.50 Par Value 16,150,561
Class A Common Stock, $.50 Par Value 3,829,506
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
AARON RENTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
2001 2000
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(In thousands, except share data)
ASSETS
Cash $ 99 $ 95
Accounts Receivable 23,474 23,637
Rental Merchandise 390,328 381,930
Less: Accumulated Depreciation (129,061) (114,217)
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261,267 267,713
Property, Plant and Equipment, Net 74,664 63,174
Prepaid Expenses and Other Assets 34,152 25,760
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Total Assets $ 393,656 $ 380,379
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LIABILITIES & SHAREHOLDERS' EQUITY
Accounts Payable and Accrued Expenses $ 59,890 $ 34,693
Dividends Payable 399
Deferred Income Taxes Payable 25,490 20,986
Customer Deposits and Advance Payments 12,808 10,994
Bank Debt 70,700 100,000
Other Debt 6,742 4,769
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Total Liabilities 175,630 171,841
Commitments & Contingencies
Shareholders' Equity
Common Stock, Par Value $.50 Per Share;
Authorized: 25,000,000 Shares;
Shares Issued: 18,270,987 9,135 9,135
Class A Common Stock, Par Value $.50 Per Share;
Authorized: 25,000,000 Shares;
Shares Issued: 5,361,761 2,681 2,681
Additional Paid-in Capital 53,834 53,662
Retained Earnings 195,719 185,782
Accumulated Other Comprehensive Loss (2,193)
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259,176 251,260
Less: Treasury Shares at Cost,
Common Stock, 2,127,426 Shares
at September 30, 2001 and 2,230,446 Shares
at December 31, 2000 (26,914) (28,486)
Class A Common Stock, 1,532,255 Shares at
September 30, 2001 and December 31, 2000 (14,236) (14,236)
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Total Shareholders' Equity 218,026 208,538
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Total Liabilities & Shareholders' Equity $ 393,656 $ 380,379
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See Notes to Consolidated Financial Statements
AARON RENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended Nine Months Ended
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September 30, September 30,
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2001 2000 2001 2000
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(In thousands, except per share amounts)
REVENUES:
Rentals and Fees $ 99,361 $ 89,460 $ 301,966 $ 266,231
Retail Sales 14,931 16,466 46,961 48,301
Non-Retail Sales 14,640 15,237 46,080 46,459
Other 3,584 3,687 11,689 11,141
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132,516 124,850 406,696 372,132
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COSTS AND EXPENSES:
Retail Cost of Sales 10,860 11,516 34,067 33,940
Non-Retail Cost of Sales 13,767 14,219 43,269 43,124
Operating Expenses 75,061 56,293 207,333 168,302
Depreciation
of Rental Merchandise 34,271 30,610 100,338 89,092
Interest 1,715 1,413 5,047 3,957
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135,674 114,051 390,054 338,415
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EARNINGS BEFORE
TAXES (3,158) 10,799 16,642 33,717
INCOME TAXES (1,197) 4,093 6,307 12,804
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NET EARNINGS $ (1,961) $ 6,706 $ 10,335 $ 20,913
=========== =========== =========== ===========
EARNINGS PER SHARE $ (.10) $ .34 $ .52 $ 1.05
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EARNINGS PER SHARE
ASSUMING DILUTION (.10) .34 .51 1.05
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CASH DIVIDENDS DECLARED
PER SHARE
Common Stock $ $ $ .02 $ .02
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Class A Common Stock $ $ $ .02 $ .02
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WEIGHTED AVERAGE
SHARES OUTSTANDING 19,959 19,834 19,914 19,841
=========== =========== =========== ===========
WEIGHTED AVERAGE
SHARES OUTSTANDING
ASSUMING DILUTION 19,959 19,938 20,140 19,980
=========== =========== =========== ===========
See Notes to Consolidated Financial Statements
AARON RENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
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2001 2000
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(In thousands)
OPERATING ACTIVITIES
Net Earnings $ 10,335 $ 20,913
Depreciation and Amortization 111,703 98,060
Deferred Income Taxes 4,504 8,215
Change in Accounts Payable and
Accrued Expenses 22,995 5,584
Change in Accounts Receivable 163 (4,406)
Other Changes, Net (3,323) 2,814
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Cash Provided by Operating Activities 146,377 131,180
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INVESTING ACTIVITIES
Additions to Property, Plant and Equipment (26,593) (19,670)
Book Value of Property Retired or Sold 5,026 6,059
Additions to Rental Equipment (178,515) (201,212)
Book Value of Rental Equipment Sold 90,399 85,673
Contracts and Other Assets Acquired (10,310) (10,069)
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Cash Used by Investing Activities (119,993) (139,219)
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FINANCING ACTIVITIES
Proceeds from Revolving Credit Agreement 136,002 142,527
Repayments on Revolving Credit Agreement (165,302) (132,719)
Increase in Other Debt 1,973 866
Dividends Paid (797) (793)
Acquisition of Treasury Stock (4,625)
Issuance of Stock Under Stock Option Plans 1,744 2,774
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Cash (Used) Provided by Financing Activities (26,380) 8,030
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Increase (Decrease) in Cash 4 (9)
Cash at Beginning of Year 95 99
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Cash at End of Period $ 99 $ 90
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See Notes to Consolidated Financial Statements
AARON RENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A: BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Aaron Rents, Inc.
("the Company") and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
The Consolidated Balance Sheet as of September 30, 2001, and the Consolidated
Statements of Earnings and Cash Flows for the quarter ended and the nine month
period ended September 30, 2001 and 2000, have been prepared without audit. In
the opinion of management, all adjustments necessary to present fairly the
financial position, results of operations and cash flows at September 30, 2001
and for all periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these financial statements
be read in conjunction with the financial statements and notes thereto included
in the Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 2000. The results of
operations for the period ended September 30, 2001 are not necessarily
indicative of the operating results for the full year. Certain amounts in the
2000 segment information have been reclassified to conform to the 2001
presentation.
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 142, "Goodwill and Other Intangible Assets",
effective for fiscal years beginning after December 15, 2001. Under the new
rules, goodwill and intangible assets deemed to have indefinite lives will no
longer be amortized but will be subject to annual impairment tests in accordance
with the Statement. Other intangible assets will continue to be amortized over
their useful lives.
The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. During 2002, the
Company will apply the non-amortization provisions and perform the first of the
required impairment tests of goodwill and indefinite lived intangible assets as
of January 1, 2002. The Company has not yet determined what effect the statement
will have on the earnings and financial position of the Company.
In October 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 144, Accounting for the Impairment or Disposal
of Long-Lived Assets, effective for fiscal years beginning after December 15,
2001. The FASB's new rules on asset impairment supersede FASB Statement No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of, and the provisions of APB Opinion 30, Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions, with
regard to reporting the effects of a disposal of a segment of a business. The
Statement provides a single accounting model for long-lived assets to be
disposed of and requires expected future operating losses from discontinued
operations to be displayed in discontinued operations in the periods in which
the losses are incurred.
The Company will apply the new rules under the statement beginning in the first
quarter of 2002. The Company has not yet determined what effect the statement
will have on the earnings and financial position of the Company.
NOTE B: ACCUMULATED OTHER COMPREHENSIVE LOSS AND COMPREHENSIVE INCOME
The following is a summary of the accumulated other comprehensive loss for the
nine month period ended September 30, 2001:
December 31, 2000 --
Cumulative effect of the adoption of FAS 133,
Net of income taxes $ (497)
Unrealized loss on the fair market value of
Interest rate swap agreements, net of income taxes (1,696)
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$(2,193)
=======
Comprehensive income for the nine month period ended September 30, 2001 totaled
$8,142,000. There were no differences between comprehensive income and net
income in the nine month period ended September 30, 2000.
NOTE C: SEGMENT INFORMATION
Three Months Ended Nine Months Ended
September 30, September 30,
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2001 2000 2001 2000
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(In thousands)
REVENUES FROM EXTERNAL CUSTOMERS:
Sales & Lease Ownership $ 92,555 $ 76,480 $ 276,820 $ 225,909
Rent-to-Rent 36,064 44,839 118,144 134,574
Franchise 3,101 3,196 10,081 9,174
Other 832 1,045 2,713 3,651
Manufacturing 14,066 11,596 36,067 42,066
Elimination of intersegment revenues (14,129) (11,676) (36,354) (42,211)
Cash to accrual adjustments 27 (630) (775) (1,031)
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Total revenues from external customers $ 132,516 $ 124,850 $ 406,696 $ 372,132
========= ========= ========= =========
EARNINGS BEFORE INCOME TAXES:
Sales & Lease Ownership $ 232 $ 4,447 $ 11,788 $ 14,885
Rent-to-Rent 987 4,040 7,681 13,041
Franchise 2,070 2,000 6,500 5,443
Other (923) (191) (2,899) (733)
Manufacturing 96 (65) (531) 1,358
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Earnings before income taxes for reportable segments 2,462 10,231 22,539 33,994
Elimination of intersegment profit (171) 132 428 (1,107)
Cash to accrual adjustments 152 (604) (724) (770)
Other allocations and adjustments (5,601) 1,040 (5,601) 1,600
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Total earnings before income taxes $ (3,158) $ 10,799 $ 16,642 $ 33,717
========= ========= ========= =========
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(b) No reports on Form 8-K were filed by the Registrant during the quarter
ended September 30, 2001.
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Special Note Regarding Forward-Looking Information: Except for historical
information contained herein, the matters set forth in this Form 10-Q are
forward-looking statements. The Company notes that the forward-looking
statements set forth involve a number of risks and uncertainties that could
cause actual results to differ materially from any such statements, including
the risks and uncertainties discussed in the Company's Annual Report on Form
10-K for the year ended December 31, 2000, filed with the Securities and
Exchange Commission, under the caption "Certain Factors Affecting Forward
Looking Statements," which discussion is incorporated herein by this reference.
RESULTS OF OPERATIONS:
QUARTER ENDED SEPTEMBER 30, 2001 VERSUS QUARTER ENDED SEPTEMBER 30, 2000:
Total revenues for the third quarter of 2001 increased $7.7 million (6.1%) to
$132.5 million compared to $124.9 million in 2000 due primarily to an $9.9
million (11.1%) increase in rentals and fees revenues, less a $2.1 million
(6.7%) decrease in sales. Of this increase in rentals and fees revenues, $16.1
million was attributable to the Aaron's Sales and Lease Ownership division.
Rentals and fees revenues from the Company's rent-to-rent operations decreased
$6.2 million during the same period. The increase in rental revenues in the
sales and lease ownership division was attributable to new stores opened since
the end of the third quarter last year (357 Company-operated sales and lease
ownership stores open at the end of the third quarter of 2001 compared to 248 at
the end of the third quarter of 2000) and an increase of 6.9% in comparable same
store revenues. The decrease in rental revenues in the rent-to-rent operations
was attributable to the reduction in stores opened (78 rent-to-rent stores open
at the end of the third quarter of 2001 compared to 99 at the end of the third
quarter of 2000), and a decline in revenues in the remaining stores.
Revenues from retail sales for the third quarter 2001 decreased $1.5 million
(9.3%) to $14.9 million compared to $16.5 million for the third quarter of 2000.
This decrease was primarily due to a $2.6 million decrease in sales of rental
return merchandise and new sales in the Company's rent-to-rent operations
partially offset by a $1.1 million increase in rental return merchandise and new
sales in the sales and lease ownership division. Non-retail sales, which
primarily represent merchandise sold to Aaron's Sales and Lease Ownership
franchisees, decreased $597,000 (3.9%) to $14.6 million compared to $15.2
million for the same period last year. The decrease in non-retail sales is
primarily the result of less initial merchandise sales to Aaron's Sales and
Lease Ownership franchisees due to the fewer number of franchise store openings
with 19 stores opening in the first nine months of 2001 compared to 35 in the
comparable period last year.
Other revenues for the third quarter of 2001 decreased $103,000 (2.8%) to $3.6
million compared to $3.7 million in 2000. This decrease was mainly attributable
to fees and royalties from franchise operations decreasing slightly $49,000
(1.6%) with the total remaining virtually unchanged from the previous year at
$3.1 million. This slight decrease is primarily the result of lower franchise
fees due to fewer franchise openings partially offset by higher royalties earned
from maturing franchise stores.
Cost of sales from retail sales decreased $656,000 (5.7%) to $10.9 million for
the third quarter 2001 compared to $11.5 million for the third quarter of 2000.
Cost of sales as a percentage of retail sales increased to 72.7% from 69.9%. The
increase of cost of sales as a percentage of retail sales is primarily due to
the rent-to-rent operations reducing inventory levels by selling rental return
merchandise. Cost of sales from non-retail sales decreased $452,000 (3.2%) to
$13.8 million from $14.2 million, and as a percentage of non-retail sales,
increased to 94.0% from 93.3%.
Operating expenses increased $18.8 million (33.3%) to $75.1 million from $56.3
million. As a percentage of total revenues, operating expenses were 56.6% in
2001 and 45.1% in 2000. Operating expenses increased as a percentage of total
revenues between quarters primarily due to costs associated with the acquisition
of sales and lease ownership store locations formerly operated by one of the
nation's largest furniture retailers along with other new store openings coupled
with the one time special charges of $5.6 million related to the rent-to-rent
division. These charges consist of $3.8 million for the recording of future real
estate lease obligations of closed rent-to-rent stores, $1.0 million pertaining
to the write-down of inventory, and $800,000 primarily for the write-down of
other assets relating to the division.
Depreciation of rental merchandise increased $3.7 million (12.0%) to $34.3
million, from $30.6 million, and as a percentage of total rentals and fees,
increased to 34.5% from 34.2%. The increase as a percentage of revenues is
primarily due to the accelerated rate of store openings in the Aaron's Sales and
Lease Ownership division.
Interest expense increased $302,000 (21.4%) to $1.7 million compared to $1.4
million. As a percentage of total revenues, interest expense was 1.3% in 2001
compared to 1.1% in 2000. The increase in interest expense as a percentage of
total revenues was due to higher debt levels in the third quarter of 2001.
Income tax expense decreased $5.3 million (129.2%) to a $1.2 million benefit in
the third quarter 2001 compared to $4.1 million of expense for the same period
last year. The Company's effective tax rate remained unchanged at 37.9% for the
third quarter of 2001 and 2000.
As a result, net earnings decreased $8.7 million (129.2%) to a loss of $2.0
million in the third quarter of 2001 compared to earnings of $6.7 million for
the same period last year. As a percentage of total revenue the net loss was
1.5% in the current quarter as compared to net earnings of 5.4% for the same
period last year. The decrease was attributable to the significant revenue
decline and the one time special charges of $5.6 million related to the
Company's rent-to-rent division as well as the start up costs associated with
the acquisition of store locations in the Aaron's Sales and Lease Ownership
division which negatively affected earnings for the third quarter of 2001.
The weighted average number of shares outstanding during the third quarter of
2001 was 19,959,000 compared to 19,834,000 (19,959,000 versus 19,938,000
assuming dilution) for the same period last year.
NINE MONTHS ENDED SEPTEMBER 30, 2001 VERSUS NINE MONTHS ENDED SEPTEMBER 30,
2000:
Total revenues for the first nine months of 2001 increased $34.6 million (9.3%)
to $406.7 million compared to $372.1 million in 2000 due primarily to a $35.7
million (13.4%) increase in rentals and fees revenues, offset by a $1.7 million
(1.8%) decrease in sales. Of this increase in rentals and fees revenues, $47.8
million was attributable to the Aaron's Sales and Lease Ownership division.
Rentals and fees revenues from the Company's rent-to-rent operations decreased
$12.1 million. The increase in rental revenues in the sales and lease ownership
division was attributable to new stores opened since the end of the third
quarter last year (357 Company-operated sales and
lease ownership stores open at the end of the third quarter of 2001 compared to
248 at the end of the third quarter of 2000) and an average increase of 10.1% in
comparable same store revenues. The decrease in rental revenues in the
rent-to-rent operations was attributable to the reduction in stores opened (78
rent-to-rent stores open at the end of the third quarter of 2001 compared to 99
at the end of the third quarter of 2000), and a decline in revenues in the
remaining stores.
Revenues from retail sales decreased slightly $1.3 million (2.8%) to $47.0
million for the first nine months of 2001 compared to $48.3 million for the same
period last year. This slight decrease was primarily due to a $4.0 million
decrease in sales of rental return merchandise and new sales in the Company's
rent-to-rent operation partially offset by a $2.7 million increase in rental
return merchandise and new sales in the sales and lease ownership division.
Non-retail sales, which primarily represent merchandise sold to Aaron's Sales
and Lease Ownership franchisees, decreased $379,000 (0.8%) to $46.1 million
compared to $46.5 million for the same period last year. The decrease in
non-retail sales is primarily the result of less initial merchandise sales to
Aaron's Sales and Lease Ownership franchisees due to the fewer number of
franchise store openings with 19 stores opening in the first nine months of 2001
compared to 35 in the comparable period last year.
Other revenues for the first nine months of 2001 increased $548,000 (4.9%) to
$11.7 million compared to $11.1 million in 2000. This increase was attributable
to fees and royalties from franchise operations increasing $1.0 million (11.1%)
to $10.0 million compared to $9.0 million last year, reflecting a net increase
of 13 franchised stores since the end of the third quarter of 2000 and
increasing operating revenues of maturing franchise stores.
Cost of sales from retail sales increased $127,000 (0.4%) to $34.1 million for
the first nine months of 2001 compared to $33.9 million for the same period last
year. Cost of sales as a percentage of retail sales increased to 72.5% in 2001
compared to 70.3% last year. Cost of sales from non-retail sales increased
$145,000 (0.3%) to $43.3 million from $43.1 million, and as a percentage of
non-retail sales, increased to 93.9% from 92.8%.
Operating expenses increased $39.0 million (23.2%) to $207.3 million from $168.3
million. As a percentage of total revenues, operating expenses were 51.0% in
2001 and 45.2% in 2000. Operating expenses increased as a percentage of total
revenues between periods primarily due to costs associated with the acquisition
of sales and lease ownership store locations formerly operated by one of the
nation's largest furniture retailers along with other new store openings coupled
with the one time special charges of $5.6 million related to the rent-to-rent
division. These charges consist of $3.8 million for the recording of future real
estate lease obligations of closed rent-to-rent stores, $1.0 million pertaining
to the write-down of inventory, and $800,000 primarily for the write-down of
other assets relating to the division.
Depreciation of rental merchandise increased $11.2 million (12.6%) to $100.3
million, from $89.1 million, and as a percentage of total rentals and fees,
decreased to 33.2% from 33.5%.
Interest expense increased $1.1 million (27.5%) to $5.0 million compared to $4.0
million. As a percentage of total revenues, interest expense was 1.2% in 2001
compared to 1.1% in 2000. The increase in interest expense as a percentage of
total revenues was due to higher debt levels in the first nine months of 2001.
Income tax expense decreased $6.5 million (50.7%) to $6.3 million for 2001
compared to $12.8 million for the same period in 2000. The Company's effective
tax rate decreased slightly to 37.9% for the first nine months of 2001 compared
to 38.0% for the same period in 2000.
As a result, net earnings decreased $10.6 million (50.6%) to $10.3 million in
the first nine months of 2001 compared to $20.9 million for the same period in
2000. As a percentage of total revenues, net earnings were 2.5% in the current
period as compared to 5.6% for the same period
last year. The decrease was attributable to the significant revenue decline and
the one time special charges of $5.6 million related to the Company's
rent-to-rent division as well as the start up costs associated with the
acquisition of store locations in the Aaron's Sales and Lease Ownership division
which negatively affected earnings for the first nine months of 2001.
The weighted average number of shares outstanding during the first nine months
of 2001 was 19,914,000 compared to 19,841,000 (20,140,000 versus 19,980,000
assuming dilution) for the same period last year.
LIQUIDITY AND CAPITAL RESOURCES:
The Company has paid dividends for fifteen consecutive years. A $.02 per share
dividend on Common Stock and on Class A Common Stock was paid in January 2001
and July 2001, for a total fiscal year cash outlay of $797,000. The Company
currently expects to continue its policy of paying dividends.
Cash flow from operations for the first nine months ended September 30, 2001 and
2000 was $146.4 million and $131.2 million, respectively. Such cash flows
include profits on the sale of rental return merchandise. The Company's primary
capital requirements consist of acquiring rental merchandise for both
Company-operated Aaron's Sales & Lease Ownership stores and rent-to-rent stores.
As the Company continues to grow, the need for additional rental merchandise
will continue to be the Company's major capital requirement. These capital
requirements historically have been financed through a revolving credit
agreement, cash flow from operations, trade credit, proceeds from the sale of
rental return merchandise, and stock offerings. On March 30, 2001 the Company
entered into a new $110 million revolving credit agreement that includes an $8.0
million credit line to fund daily working capital requirements. At September 30,
2001, an aggregate of $71.0 million was outstanding under this facility, bearing
interest at an average rate of 4.2%. The Company uses interest rate swap
agreements as part of its overall long-term financing program. At September 30,
2001, the Company had swap agreements with notional principal amounts of $60.0
million which effectively fixed the interest rates on an equal amount under the
Company's revolving credit agreement at 7.2%.
The Company issued $4,200,000 of industrial development corporation revenue
bonds in the fourth quarter of 2000 to finance the purchase of a manufacturing
facility. The borrowing rate on these bonds at September 30, 2001 was 2.5%. No
principal payments are due on the bonds until maturity in 2015.
The Company believes that the expected cash flows from operations, proceeds from
the sale of rental return merchandise, bank borrowings and vendor credit, will
be sufficient to fund the Company's capital and liquidity needs for at least the
next 24 months.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 142, "Goodwill and Other Intangible Assets",
effective for fiscal years beginning after December 15, 2001. Under the new
rules, goodwill and intangible assets deemed to have indefinite lives will no
longer be amortized but will be subject to annual impairment tests in accordance
with the Statement. Other intangible assets will continue to be amortized over
their useful lives.
The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. During 2002, the
Company will apply the non-amortization provisions and perform the first of the
required impairment tests of goodwill and indefinite lived
intangible assets as of January 1, 2002. The Company has not yet determined what
effect the statement will have on the earnings and financial position of the
Company.
In October 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 144, Accounting for the Impairment or Disposal
of Long-Lived Assets, effective for fiscal years beginning after December 15,
2001. The FASB's new rules on asset impairment supersede FASB Statement No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of, and the provisions of APB Opinion 30, Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions, with
regard to reporting the effects of a disposal of a segment of a business. The
Statement provides a single accounting model for long-lived assets to be
disposed of and requires expected future operating losses from discontinued
operations to be displayed in discontinued operations in the periods in which
the losses are incurred.
The Company will apply the new rules under the statement beginning in the first
quarter of 2002. The Company has not yet determined what effect the statement
will have on the earnings and financial position of the Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in The Company's market risk exposures
relating to interest rate risk that would affect or materially change the
disclosures in the Company's 2000 Annual Report on Form 10-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AARON RENTS, INC.
(Registrant)
Date - November 13, 2001 /s/ Gilbert L. Danielson
----------------- ------------------------
Gilbert L. Danielson
Executive Vice President
Chief Financial Officer
Date - November 13, 2001 /s/ Robert P. Sinclair, Jr.
----------------- ---------------------------
Robert P. Sinclair, Jr.
Vice President
Corporate Controller