-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JD2f23NV9V2SVEWCymDoboY9NjGVY5zFqzenqmVfym+u6a564I12PCSHX7at9TGz 2sqrrtzlFcq0+VkNUo4MEA== /in/edgar/work/20000814/0000950144-00-010295/0000950144-00-010295.txt : 20000921 0000950144-00-010295.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950144-00-010295 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AARON RENTS INC CENTRAL INDEX KEY: 0000706688 STANDARD INDUSTRIAL CLASSIFICATION: [7359 ] IRS NUMBER: 580687630 STATE OF INCORPORATION: GA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13941 FILM NUMBER: 699621 BUSINESS ADDRESS: STREET 1: 3001 N FULTON DR NE STREET 2: 1100 AARON BLDG CITY: ATLANTA STATE: GA ZIP: 30363 BUSINESS PHONE: 4042310011 MAIL ADDRESS: STREET 1: 309 E. PACES FERRY ROAD., N.E. STREET 2: 3001 N FULTON DRIVE NE CITY: ATLANTA STATE: GA ZIP: 30305-2377 10-Q 1 e10-q.txt AARON RENTS, INC. 1 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 JUNE 30, 2000 0-12385 ----------------- ------------------- For Quarter Ended Commission File No. AARON RENTS, INC. ---------------------------- (Exact name of registrant as specified in its charter) GEORGIA 58-0687630 ------------------------------- ------------------ (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 ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (404) 231-0011 ---------------------------------------------------- (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 August 7, 2000 ------------------------------------ ------------------------ Common Stock, $.50 Par Value 15,964,041 Class A Common Stock, $.50 Par Value 3,829,506 2 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS AARON RENTS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
(Unaudited) June 30, December 31, 2000 1999 ---------- ------------ (In thousands, except share data) ASSETS Cash $ 91 $ 99 Accounts Receivable 23,435 21,030 Rental Merchandise 342,927 316,294 Less: Accumulated Depreciation (104,335) (96,463) ---------- ---------- 238,592 219,831 Property, Plant and Equipment, Net 55,096 55,918 Prepaid Expenses and Other Assets 18,316 21,530 ---------- ---------- Total Assets $ 335,530 $ 318,408 ========== ========== LIABILITIES & SHAREHOLDERS' EQUITY Accounts Payable and Accrued Expenses $ 27,782 $ 36,941 Dividends Payable 396 399 Deferred Income Taxes Payable 18,888 14,410 Customer Deposits and Advance Payments 10,864 10,180 Bank Debt 80,829 72,225 Other Debt 2,229 535 ---------- ---------- Total Liabilities 140,988 134,690 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 53,740 54,181 Retained Earnings 173,124 159,313 ---------- ---------- 238,680 225,310 Less: Treasury Shares at Cost, Common Stock, 2,342,246 Shares at June 30, 2000 and 2,177,956 Shares at December 31, 1999 (29,902) (27,356) Class A Common Stock, 1,532,255 Shares at June 30, 2000 and December 31, 1999 (14,236) (14,236) ---------- ---------- Total Shareholders' Equity 194,542 183,718 ---------- ---------- Total Liabilities & Shareholders' Equity $ 335,530 $ 318,408 ========== ==========
See Notes to Consolidated Financial Statements 3 AARON RENTS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
Three Months Ended Six Months Ended -------------------------- -------------------------- June 30, June 30, -------------------------- -------------------------- 2000 1999 2000 1999 -------- -------- -------- -------- (in thousands, except per share amounts) REVENUES: Rentals and Fees $ 89,257 $ 79,980 $176,771 $157,241 Retail Sales 14,530 14,617 31,835 31,080 Non-Retail Sales 14,392 10,334 31,222 18,305 Other 3,731 2,433 7,454 5,041 -------- -------- -------- -------- 121,910 107,364 247,282 211,667 -------- -------- -------- -------- COSTS AND EXPENSES: Retail Cost of Sales 10,191 10,360 22,424 22,218 Non-Retail Cost of Sales 13,412 9,617 28,905 16,979 Operating Expenses 55,594 50,202 112,009 98,923 Depreciation of Rental Merchandise 30,219 25,708 58,482 50,477 Interest 1,317 862 2,544 1,676 -------- -------- -------- -------- 110,733 96,749 224,364 190,273 -------- -------- -------- -------- EARNINGS BEFORE TAXES 11,177 10,615 22,918 21,394 INCOME TAXES 4,248 4,040 8,711 8,140 -------- -------- -------- -------- NET EARNINGS $ 6,929 $ 6,575 $ 14,207 $ 13,254 ======== ======== ======== ======== EARNINGS PER SHARE $ .35 $ .33 $ .72 $ .66 -------- -------- -------- -------- EARNINGS PER SHARE ASSUMING DILUTION $ .35 $ .32 $ .71 $ .65 -------- -------- -------- -------- CASH DIVIDENDS DECLARED PER SHARE Common Stock $ .02 $ .02 $ .02 $ .02 -------- -------- -------- -------- Class A Common Stock $ .02 $ .02 $ .02 $ .02 -------- -------- -------- -------- WEIGHTED AVERAGE SHARES OUTSTANDING 19,790 20,040 19,845 20,127 ======== ======== ======== ======== WEIGHTED AVERAGE SHARES OUTSTANDING ASSUMING DILUTION 19,905 20,445 19,998 20,439 ======== ======== ======== ========
See Notes to Consolidated Financial Statements 4 AARON RENTS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended ----------------------------------- June 30, ----------------------------------- 2000 1999 ---------- ---------- (in thousands) OPERATING ACTIVITIES Net Earnings 14,207 $ 13,254 Depreciation and Amortization 64,258 56,220 Deferred Income Taxes 4,478 (3,233) Change in Accounts Payable and Accrued Expenses (9,159) 5,077 Change in Accounts Receivable (2,405) (1,314) Other Changes, Net 3,950 (2,394) ---------- ---------- Cash Provided by Operating Activities 75,329 67,610 ---------- ---------- INVESTING ACTIVITIES Additions to Property, Plant and Equipment (9,512) (11,392) Book Value of Property Retired or Sold 4,709 5,812 Additions to Rental Equipment (132,316) (99,445) Book Value of Rental Equipment Sold 55,292 42,495 Contracts and Other Assets Acquired (422) (9,610) ---------- ---------- Cash Used by Investing Activities (82,249) (72,140) ---------- ---------- FINANCING ACTIVITIES Proceeds from Revolving Credit Agreement 97,765 91,571 Repayments on Revolving Credit Agreement (89,161) (81,202) Increase in Other Debt 1,694 809 Dividends Paid (399) (415) Acquisition of Treasury Stock (4,625) (9,437) Issuance of Stock Under Stock Option Plans 1,638 3,199 ---------- ---------- Cash Provided by Financing Activities 6,912 4,525 ---------- ---------- Decrease in Cash (8) (5) Cash at Beginning of Year 99 95 ---------- ---------- Cash at End of Period $ 91 $ 90 ========== ==========
See Notes to Consolidated Financial Statements 5 AARON RENTS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE A: PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Aaron Rents, Inc. ("the Company") and its wholly-owned subsidiary. All significant intercompany accounts and transactions have been eliminated. The Consolidated Balance Sheet as of June 30, 2000, and the Consolidated Statements of Earnings and Cash Flows for the six months ended June 30, 2000 and 1999, 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 June 30, 2000 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, 1999. The results of operations for the period ended June 30, 2000 are not necessarily indicative of the operating results for the full year. Certain amounts in the 1999 segment information have been reclassified to conform to the 2000 presentation. NOTE B: COMPREHENSIVE INCOME There were no differences between net income and comprehensive income for the six months ended June 30, 2000 and 1999. NOTE C: SEGMENT INFORMATION
Three Months Ended Six Months Ended June 30 June 30 ------------------------ ------------------------- 2000 1999 2000 1999 --------- --------- --------- --------- (in thousands) REVENUES FROM EXTERNAL CUSTOMERS: Rental Purchase $ 72,203 $ 61,322 $ 149,429 $ 119,428 Rent-to-Rent 44,163 43,483 89,735 88,252 Franchise 3,048 1,946 5,978 4,034 Other 1,782 (201) 2,606 (250) Manufacturing 13,022 14,901 30,470 29,244 Elimination of intersegment revenues (13,042) (14,726) (30,535) (29,022) Cash to accrual adjustments 734 639 (401) (19) --------- --------- --------- --------- Total revenues from external customers $ 121,910 $ 107,364 $ 247,282 $ 211,667 ========= ========= ========= ========= EARNINGS BEFORE INCOME TAXES: Rental Purchase $ 3,872 $ 5,353 $ 10,438 $ 9,388 Rent-to-Rent 4,228 3,919 9,001 10,611 Franchise 1,749 995 3,443 2,220 Other (245) 66 (542) (565) Manufacturing 711 420 1,423 472 --------- --------- --------- --------- Earnings before income taxes for reportable segments 10,315 10,753 23,763 22,126 Elimination of intersegment profit (624) (337) (1,239) (288) Cash to accrual adjustments 901 569 (166) (133) Other allocations and adjustments 585 (370) 560 (311) --------- --------- --------- --------- Total earnings before income taxes $ 11,177 $ 10,615 $ 22,918 $ 21,394 ========= ========= ========= =========
6 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, 1999, 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 JUNE 30, 2000 VERSUS QUARTER ENDED JUNE 30, 1999: Total revenues for the second quarter of 2000 increased $14.5 million (13.5%) to $121.9 million compared to $107.4 million in 1999 due primarily to a $9.3 million (11.6%) increase in rentals and fees revenues, plus a $4.0 million (15.9%) increase in sales. Of this increase in rentals and fees revenues, $7.9 million was attributable to the Aaron's Rental Purchase division which opened five new Company-operated stores in the second quarter of 2000. Rentals and fees revenues from the Company's rent-to-rent operations increased $1.4 million. Revenues from retail sales decreased $87,000 (0.6%) to $14.5 million in 2000, from $14.6 million for the same period last year. This decrease was primarily due to a $614,000 decrease in sales of rental return merchandise in the Company's rent-to-rent operations partially offset by a $428,000 increase in rental return sales in the rental purchase division and a $63,000 increase in new sales. Non-retail sales, which primarily represent merchandise sold to Aaron's Rental Purchase franchisees, increased $4.1 million (39.3%) to $14.4 million compared to $10.3 million for the same period last year. The increased sales are due to the growth of the franchise operations. Other revenues for the second quarter of 2000 increased $1.3 million (53.3%) to $3.7 million compared to $2.4 million in 1999. This increase was attributable to fees and royalties from franchise operations increasing $964,000 (58.3%) to $2.6 million compared to $1.7 million last year, reflecting a net increase of 43 franchised stores since the end of the second quarter of 1999 and increasing operating revenues of maturing franchise stores. Cost of sales from retail sales decreased $169,000 (1.6%) to $10.2 million compared to $10.4 million last year, and as a percentage of retail sales, decreased slightly to 70.1% from 70.9%. Cost of sales from non-retail sales increased $3.8 million (39.5%) to $13.4 million from $9.6 million, and as a percentage of sales, increased slightly to 93.2% from 93.1%. Operating expenses increased $5.4 million (10.7%) to $55.6 million from $50.2 million. As a percentage of total revenues, operating expenses were 45.6% in 2000 and 46.8% in 1999. Operating expenses decreased as a percentage of total revenues between quarters primarily due to increased revenues in the Aaron's Rental Purchase division. Depreciation of rental merchandise increased $4.5 million (17.5%) to $30.2 million, from $25.7 million, and as a percentage of total rentals and fees, increased slightly to 33.9% from 32.1%. The increase as a percentage of revenues is primarily due to a greater percentage of the Company's 7 rentals and fees coming from the Aaron's Rental Purchase division, which depreciates its rental merchandise at a faster rate than the Rent-to-Rent division. Interest expense increased $455,000 (52.8%) to $1.3 million compared to $862,000. As a percentage of total revenues, interest expense was 1.1% in 2000 compared to .80% in 1999. The increase in interest expense as a percentage of total revenues was due to slightly higher interest rates and higher debt levels in the second quarter of 2000. Income tax expense increased $208,000 (5.1%) to $4.2 million for 2000 compared to $4.0 million for the same period in 1999. The Company's effective tax rate was 38.0% for the second quarter of 2000 compared to 38.1% in the second quarter of 1999. As a result, net earnings increased $354,000 (5.4%) to $6.9 million in the second quarter of 2000 compared to $6.6 million for the same period in 1999. As a percentage of total revenues, net earnings were 5.7% in the current quarter as compared to 6.1% for the same period last year. The weighted average number of shares outstanding during the second quarter of 2000 was 19,790,000 compared to 20,040,000 (19,905,000 versus 20,445,000 assuming dilution) for the same period last year. Six Months Ended June 30, 2000 versus Six Months Ended June 30, 1999: Total revenues for the first six months of 2000 increased $35.6 million (16.8%) to $247.3 million compared to $211.7 million in 1999 due primarily to a $19.5 million (12.4%) increase in rentals and fees revenues, plus a $13.7 million (27.7%) increase in sales. Of this increase in rentals and fees revenues, $16.8 million was attributable to the Aaron's Rental Purchase division which opened 18 new Company-operated stores in the first six months of 2000. Rentals and fees revenues from the Company's rent-to-rent operations increased $2.7 million. Revenues from retail sales increased $755,000 (2.4%) to $31.8 million in 2000, from $31.1 million for the same period last year. This increase was primarily due to increased sales of new and rental return merchandise in the Company's rental purchase operations primarily offset by a decrease of rental return sales in the rent-to-rent operations. Non-retail sales, which primarily represent merchandise sold to Aaron's Rental Purchase franchisees, increased $12.9 million (70.6%) to $31.2 million compared to $18.3 million for the same period last year. The increased sales are due to the growth of the franchise operations. Other revenues for the second quarter of 2000 increased $2.4 million (47.8%) to $7.5 million compared to $5.0 million in 1999. This increase was attributable to fees and royalties from franchise operations increasing $1.6 million (46.6%) to $5.0 million compared to $3.4 million last year, reflecting a net increase of 43 franchised stores since the end of the second quarter of 1999 and increasing operating revenues of maturing franchise stores. Cost of sales from retail sales increased $206,000 (0.9%) to $22.4 million compared to $22.2 million last year, and as a percentage of retail sales, decreased slightly to 70.4% from 71.5%. Cost of sales from non-retail sales increased $11.9 million (70.2%) to $28.9 million from $17.0 million, and as a percentage of sales, decreased slightly to 92.6 % from 92.8%. Operating expenses increased $13.1 million (13.2%) to $112.0 million from $98.9 million. As a percentage of total revenues, operating expenses were 45.3% in 2000 and 46.7% in 1999. Operating expenses decreased as a percentage of total revenues between periods primarily due to increased revenues in the Aaron's Rental Purchase division. 8 Depreciation of rental merchandise increased $8.0 million (15.9%) to $58.5 million, from $50.5 million, and as a percentage of total rentals and fees, increased slightly to 33.1% from 32.1%. The increase as a percentage of revenues is primarily due to a greater percentage of the Company's rentals and fees coming from the Aaron's Rental Purchase division, which depreciates its rental merchandise at a faster rate than the Rent-to-Rent division. Interest expense increased $868,000 (51.8%) to $2.5 million compared to $1.7 million. As a percentage of total revenues, interest expense was 1.0% in 2000 compared to 0.8% in 1999. The increase in interest expense as a percentage of total revenues was due to slightly higher interest rates and higher debt levels in the first six months of 2000. Income tax expense increased $571,000 (7.0%) to $8.7 million for 2000 compared to $8.1 million for the same period in 1999. The Company's effective tax rate was 38.0% for both the first six months of 2000 and 1999. As a result, net earnings increased $953,000 (7.2%) to $14.2 million in the first six months of 2000 compared to $13.3 million for the same period in 1999. As a percentage of total revenues, net earnings were 5.7% in the current period as compared to 6.3% for the same period last year. The weighted average number of shares outstanding during the first six months of 2000 was 19,845,000 compared to 20,127,000 (19,998,000 versus 20,439,000 assuming dilution) for the same period last year. LIQUIDITY AND CAPITAL RESOURCES: During the first six months of 2000, the Company paid a semi-annual dividend that was declared on November 3, 1999 of $.02 per share on both Common Stock and Class A Common Stock. On May 2, 2000, the Company declared a semi-annual dividend payable on July 6, 2000 of $.02 per share on both Common Stock and Class A Common Stock. Cash flow from operations for the six months ended June 30, 2000 and 1999 was $75.3 million and $67.6 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 rent-to-rent stores and Company-operated Aaron's Rental Purchase 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. The revolving credit agreement provides for unsecured borrowings up to $90.0 million which includes a $6.0 million credit line to fund daily working capital requirements. At June 30, 2000, an aggregate of $80.8 million was outstanding under this facility, bearing interest at an average rate of 7.17%. The Company uses interest rate swap agreements as part of its overall long-term financing program. At June 30, 2000, the Company had swap agreements with notional principal amounts of $40.0 million which effectively fixed the interest rates on an equal amount under the Company's revolving credit agreement at 6.93%. 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. 9 PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Annual Meeting of Shareholders was held on May 2, 2000 in Atlanta, Georgia, at which the following matter was submitted to a vote of the shareholders: Votes cast for or withheld regarding the election of nine (9) Directors for a term of one (1) year were as follows:
Name of Nominee For Withheld - --------------- --------- -------- R.C. Loudermilk, Sr. 3,718,599 125 Gilbert L. Danielson 3,718,599 125 Earl Dolive 3,718,619 105 Robert C. Loudermilk, Jr. 3,718,599 125 Ronald W. Allen 3,718,619 105 Leo Benatar 3,718,619 105 Ingrid Sanders Jones 3,718,619 105 J. Rex Fuqua 3,718,619 105 M. Collier Ross 3,718,619 105
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K: (a) The following exhibits are furnished herewith:
Exhibit Number Description of Exhibit ------ ---------------------- 27 Financial Data Schedule (for SEC use only) 10(J) Amended and Restated Loan Facility Agreement
(b) No reports on Form 8-K were filed by the Registrant during the six months ended June 30, 2000. 10 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 - August 14, 2000 /s/ Gilbert L. Danielson ------------------------------ Gilbert L. Danielson Executive Vice President Chief Financial Officer Date - August 14, 2000 /s/ Robert P. Sinclair, Jr. ------------------------------ Robert P. Sinclair, Jr. Vice President Corporate Controller EX-10.(J) 2 ex10-j.txt AMENDED AND RESTATED LOAN FACILITY AGREEMENT 1 EXHIBIT 10.(J) AMENDMENT NO. 1 TO AMENDED AND RESTATED LOAN FACILITY AGREEMENT AND GUARANTY THIS AMENDMENT NO. 1 TO AMENDED AND RESTATED LOAN FACILITY AGREEMENT AND GUARANTY (this "Amendment") dated as of June __, 2000, by and among AARON RENTS, INC., a Georgia corporation ("Sponsor"), each of the financial institutions listed on the signature pages hereof (the "Participants") and SUNTRUST BANK, a Georgia banking corporation, formerly known as SunTrust Bank, Atlanta, as servicer (in such capacity, the "Servicer"). WITNESSETH: WHEREAS, the Sponsor, Participants and Servicer, in order to make available a loan facility to certain franchisees of Sponsor, entered into that certain Amended and Restated Loan Facility Agreement and Guaranty dated as of November 3, 1999 (as hereafter amended or modified, the "Loan Facility Agreement") by and among Sponsor, Servicer and the Participants; WHEREAS, in order to expedite the ongoing operations of the loan facility, Sponsor and Servicer entered into that certain Servicing Agreement, dated as of November 3, 1999 (as amended or modified from time to time, the "Servicing Agreement") to set forth certain agreements regarding fees and operations; WHEREAS, the Sponsor has requested among other things (i) that the Maximum Commitment Amount be increased to $70,000,000.00 (by increase of the Participating Commitments of the existing Participants), and (ii) that the Commitment Termination Date be extended to June __, 2001; WHEREAS, the Sponsor, the Participants and the Servicer wish to enter into this Amendment to set forth their understandings regarding the amendments; NOW, THEREFORE, for and in consideration of the mutual premises contained herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: 1. Definitions. All terms used herein without definition shall have the meanings set forth for such terms in the Loan Facility Agreement. 2. Amendment to Section 1.1 of the Loan Facility Agreement. Section 1.1 of the Loan Facility Agreement is hereby amended by deleting the definitions of "Maximum Committed Amount", "Maximum Established Franchisee Recourse Amount", "Payment Date" and "Wind-Down Event" and replacing them with the following definitions: "Maximum Commitment Amount" shall mean $70,000,000, as such amount may be reduced pursuant to Section 2.7, Section 2.8 or Section 15.2. 2 "Maximum Established Franchisee Recourse Amount" shall mean the greater of (x) $20,000,000 and (y) two (2) times the largest aggregate amount committed or loaned to any Borrower Group under the Franchisee Loan Program, in each case as reduced by any amounts paid by Sponsor pursuant to Section 10.3(c). "Payment Date" shall mean the last day of each calendar month; provided, however, if such day is not a Business Day, the next succeeding Business Day "Wind-Down Event" shall mean either (i) the event that the Commitments are not extended for any reason and the Commitment Termination Date occurs or (ii) the event that the Maximum Established Franchisee Recourse Amount is, at any date of determination, less than $20,000,000. 3. Amendment to Section 2.1 of the Loan Facility Agreement. Section 2.1 of the Loan Facility Agreement is hereby amended by replacing subsection 2.1(a) and subsection 2.1(b) with the following subsection 2.1(a) and subsection 2.1(b): (a) Startup Franchisee Commitment. Subject to and upon the terms and conditions set forth in this Agreement and the other Operative Documents, and in reliance upon the guaranty and other obligations of the Sponsor set forth herein, the Servicer hereby establishes a commitment to the Sponsor to establish Startup Franchisee Loan Commitments and to make Advances thereunder to such Startup Franchisees as may be designated by the Sponsor in its Funding Approval Notices during a period commencing on the date hereof and ending on June __, 2001 (as such period may be extended for one or more subsequent 364-day periods pursuant to Section 2.8, the "Commitment Termination Date") in an aggregate committed amount at any one time outstanding not to exceed SEVENTY MILLION AND NO/100 DOLLARS ($70,000,000) (the "Startup Franchisee Commitment"); provided that, notwithstanding any provision of this Agreement to the contrary, at no time shall the sum of aggregate committed amounts of all Loan Commitments outstanding pursuant to the Commitments, or, following the termination of any such Loan Commitment, Advances outstanding thereunder, exceed the Maximum Commitment Amount. (b) Established Franchisee Commitment. Subject to and upon the terms and conditions set forth in this Agreement and the other Operative Documents, and in reliance upon the guaranty and other obligations of the Sponsor set forth herein, the Servicer hereby establishes a commitment to the Sponsor to establish Established Franchisee Loan Commitments and to make Advances thereunder to such Established Franchisees as may be designated by the Sponsor in its Funding Approval Notices during a period commencing on the date hereof and ending on the Commitment Termination Date in an aggregate committed amount at any one time outstanding not to exceed SEVENTY MILLION AND NO/100 DOLLARS 3 ($70,000,000) (the "Established Franchisee Commitment"); provided that, notwithstanding any provision of this Agreement to the contrary, at no time shall the sum of aggregate committed amounts of all Loan Commitments outstanding pursuant to the Commitments, or, following the termination of any such Loan Commitment, Advances outstanding thereunder, exceed the Maximum Commitment Amount. 4. Amendment to Section 2.9 to the Loan Facility Agreement. Section 2.9 of the Loan Facility is hereby amended by replacing subsection 2.9(b) with the following: (b) In the event that the Maximum Established Franchisee Recourse Amount is, at any date of determination, less than $20,000,000, then the Sponsor shall not have the right to request that any further Established Franchisee Loan Commitments be established; provided, however, that the occurrence of such Wind-Down Event shall not affect the obligation of (x) the Servicer to make Advances pursuant to existing Established Franchisee Loan Commitments, (y) the Participants to fund their Participant's Interest as provided herein, or (z) the Credit Parties under the Operative Documents. 5. Amendment to Section 10.2 of the Loan Facility Agreement. Section 10.2 of the Loan Facility Agreement is hereby amended by replacing the first paragraph of Section 10.2 with the following: 10.2 Limitation on Guaranty of Startup Franchisee Loans. The obligation of the Sponsor pursuant to this Article 10 with respect to the Startup Franchisee Loans shall be limited, as of any date of determination, to an amount (the "Maximum Amount") equal to the greater of (a) fifty percent (50%) of the aggregate outstanding principal amount of the Startup Franchisee Loans on such date (after giving effect to any payments, recoveries on Collateral or other recoveries made by the Servicer or any Participant on such date with respect to the Startup Franchisee Loans), (b) three (3) times the largest aggregate amount of all Loan Commitments (or if the Loan Commitments have been terminated, all outstanding Loans) made to any Startup Franchisee Borrower and its Borrower Group and (c) $10,000,000; provided that, the Maximum Amount shall not on any date of determination exceed the aggregate outstanding Loan Indebtedness of the Startup Franchisee Loans. As a material inducement to the Servicer's and each Participant's entering into this Agreement, the parties hereto expressly agree that the Maximum Amount shall be redetermined (and the obligation of the Sponsor to pay such replenished Maximum Amount shall be enforceable by the Servicer and the Participants hereunder) on each day that any Loan Indebtedness remains outstanding pursuant to any Startup Franchisee Loan regardless of (i) any previous payments made by the Sponsor hereunder on any prior date, whether or not constituting the Maximum Amount payable on such prior date, or (ii) the 4 number of prior demands made by the Servicer or the Participants hereunder; provided that, for purposes of calculating the Maximum Amount, (x) any Defaulted Loan for which a demand has previously been made, or deemed to have been made, pursuant to this Section 10.2 shall not be deemed to be outstanding and (y) demand shall be deemed to have been made with respect to each Defaulted Loan on the date on which the Servicer is authorized to make a demand on the Sponsor with respect to such Defaulted Loan pursuant to Section 4.3 or Section 4.4 of this Agreement unless such Loan Default arises solely from the occurrence of a Credit Event in which case demand shall be deemed to be made only upon receipt of written request from the Servicer. 6. Amendment to Exhibit E to Loan Facility Agreement. Section 6(i) of the form of Startup Franchisee Loan Agreement attached as Exhibit E to the Loan Facility Agreement is hereby deleted in its entirety and replaced by the following Section 6(i): (i) Rental Revenue to Debt Service. Commencing on the first day of the calendar quarter in which the 25th month following the Opening Date of the first store location of the Borrower occurs, and measured as of the last day of the calendar quarter in which such 25th month occurs and on the last day of each calendar quarter thereafter, the ratio of the Borrower's Rental Revenue to Debt Service for such quarter shall not be less than 2.2:1.00; 7. Conditions of Effectiveness. The effectiveness of this Amendment (the date on which this amendment becomes effective is referred to herein as, the "Effective Date") and the obligation of Servicer to make lines of credit available to franchisees of Sponsor under the Loan Facility Agreement, as amended hereby, and the obligation of each Participant to purchase its participation therein, is subject to receipt by Servicer of each of the following in form and substance satisfactory to Servicer and each of the Participants: (a) a fee in the amount of $45,000 in immediately available funds, which the Sponsor agrees to pay on the date hereof; (b) from each of the parties hereto a duly executed counterpart of this Amendment; (c) a certificate of Sponsor, dated as of the date hereof, signed by the Secretary or Assistant Secretary of Sponsor, (i) certifying as to names and true signatures of the officers of Sponsor authorized to execute and deliver this Amendment, (ii) certifying that Sponsor's articles of incorporation and bylaws delivered to Servicer on November 3, 1999 have not been amended or modified and are in full force and effect as of the date hereof, and (iii) certifying a true and correct copy of the action taken by the Board of Directors or the Sponsor authorizing the Sponsor's execution, delivery and performance of this Amendment and the certificates referred to herein; 5 (d) a certificate of the Secretary of State of the State of Georgia as to the existence of the Sponsor as a Georgia corporation; (e) a favorable written opinion of Kilpatrick Stockton, LLP, counsel for Sponsor and Guarantors, in form satisfactory to Servicer and each Participant and covering such matters relating to the transactions contemplated by this Amendment as Servicer may reasonably request; (f) a duly executed amendment to the Servicing Agreement; and (g) in addition, each of the Participants shall have received a duly executed Participation Certificate from the Servicer. 8. Representations and Warranties of Sponsor. Sponsor, without limiting the representations and warranties provided in the Loan Facility Agreement, represents and warrants to the Participants and the Servicer as follows: (a) The execution, delivery and performance by Sponsor of this Amendment are within Sponsor's corporate powers, have been duly authorized by all necessary corporate action (including any necessary shareholder action) and do not and will not (a) violate any provision of any law, rule or regulation, any judgment, order or ruling of any court or governmental agency, the articles of incorporation or by-laws of Sponsor or any indenture, agreement or other instrument to which Sponsor is a party or by which Sponsor or any of its properties is bound or (b) be in conflict with, result in a breach of, or constitute with notice or lapse of time or both a default under any such indenture, agreement or other instrument. (b) This Amendment constitutes the legal, valid and binding obligations of Sponsor, enforceable against Sponsor in accordance with their respective terms. (c) No Unmatured Credit Event or Credit Event has occurred and is continuing as of the Effective Date. 9. Survival. Each of the foregoing representations and warranties and each of the representations and warranties made in the Loan Facility Agreement shall be made at and as of the Effective Date. Each of the foregoing representations and warranties shall constitute a representation and warranty of Sponsor under the Loan Facility Agreement, and it shall be a Credit Event if any such representation and warranty shall prove to have been incorrect or false in any material respect at the time when made. Each of the representations and warranties made under the Loan Facility Agreement (including those made herein) shall survive and not be waived by the execution and delivery of this Amendment or any investigation by the Participants or the Servicer. 10. No Waiver, Etc. Sponsor hereby agrees that nothing herein shall constitute a 6 waiver by the Participants of any Unmatured Credit Event or Credit Event, whether known or unknown, which may exist under the Loan Facility Agreement. Sponsor hereby further agrees that no action, inaction or agreement by the Participants, including without limitation, any indulgence, waiver, consent or agreement altering the provisions of the Loan Facility Agreement which may have occurred with respect to the non-payment of any obligation during the terms of the Loan Facility Agreement or any portion thereof, or any other matter relating to the Loan Facility Agreement, shall require or imply any future indulgence, waiver, or agreement by the Participants. In addition, Sponsor acknowledges and agrees that it has no knowledge of any defenses, counterclaims, offsets or objections in its favor against any Participant with regard to any of the obligations due under the terms of the Loan Facility Agreement as of the date of this Amendment. 11. Ratification of Loan Facility Agreement. Except as expressly amended herein, all terms, covenants and conditions of the Loan Facility Agreement and the other Operative Documents shall remain in full force and effect, and the parties hereto do expressly ratify and confirm the Loan Facility Agreement as amended herein. All future references to the Loan Facility Agreement shall be deemed to refer to the Loan Facility Agreement as amended hereby. 12. Ratification of Guaranty Agreement. The Guarantor hereby ratifies and confirms that the Guaranty Agreement remains in full force and effect and is hereby affirmed by the Guarantor. 13. Binding Nature. This Amendment shall be binding upon and inure to the benefit of the parties hereto, their respective heirs, successors, successors-in-titles, and assigns. 14. Costs, Expenses and Taxes. Sponsor agrees to pay on demand all reasonable costs and expenses of the Servicer in connection with the preparation, execution and delivery of this Amendment and the other instruments and documents to be delivered hereunder, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Servicer with respect thereto and with respect to advising the Servicer as to its rights and responsibilities hereunder and thereunder. In addition, Sponsor shall pay any and all stamp and other taxes payable or determined to be payable in connection with the execution and delivery of this Amendment and the other instruments and documents to be delivered hereunder, and agrees to save the Servicer and each Participant harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes. 15. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA. 16. Entire Understanding. This Amendment sets forth the entire understanding of the parties with respect to the matters set forth herein, and shall supersede any prior negotiations or agreements, whether written or oral, with respect thereto. 17. Counterparts. This Amendment may be executed in any number of counterparts 7 and by different parties hereto in separate counterparts and may be delivered by telecopier. Each counterpart so executed and delivered shall be deemed an original and all of which taken together shall constitute but one and the same instrument. [Remainder of page intentionally left blank.] 8 IN WITNESS WHEREOF, the parties hereto have executed this Amendment through their authorized officers as of the date first above written. AARON RENTS, INC. By: --------------------------------- Name: Title: SUNTRUST BANK, FORMERLY KNOWN AS SUNTRUST BANK, ATLANTA, as Servicer By: --------------------------------- Name: Title: 9 SUNTRUST BANK, FORMERLY KNOWN AS SUNTRUST BANK, ATLANTA By: --------------------------------- Name: Title: Participating Commitment Amount: $20,000,000 Pro Rata Share: 28.57% 10 BANK ONE, NA By: --------------------------------- Name: Title: Participating Commitment Amount: $12,666,667.00 Pro Rata Share: 18.10% 11 FIRST UNION NATIONAL BANK By: --------------------------------- Name: Title: Participating Commitment Amount: $18,666,667.00 Pro Rata Share: 26.67% 12 SOUTHTRUST BANK, N.A. By: --------------------------------- Name: Title: Participating Commitment Amount: $18,666,667.00 Pro Rata Share: 26.67% 13 ACKNOWLEDGMENT OF GUARANTOR The Guarantor acknowledges and agrees to the terms of the foregoing Amendment, and further acknowledges and agrees that (i) all of the obligations of the Sponsor shall continue to constitute "Guaranteed Obligations" covered by Guaranty Agreement executed by the undersigned, and (ii) the Guaranty Agreement is and shall remain in full force and effect on and after the date hereof, and (iii) the foregoing agreement shall in no way release, discharge, or otherwise limit the obligations of the undersigned Guarantor under the Guaranty Agreement. This Acknowledgment of Guarantor made and delivered as of June __, 2000. AARON INVESTMENT COMPANY By: ---------------------------- Name: Title: EX-27 3 ex27.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF AARON RENTS FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 91 0 23,435 0 238,592 0 55,096 0 335,530 0 0 0 0 11,816 182,726 335,530 63,057 247,282 51,329 221,820 0 0 2,544 22,918 8,711 14,207 0 0 0 14,207 .72 .71 THE ALLOWANCE OF DOUBTFUL ACCOUNTS IS NETTED AGAINST TOTAL ACCOUNTS RECEIVABLE IN THE ACCOUNTS RECEIVABLE BALANCE. RENTAL MERCHANDISE HAS BEEN CLASSIFIED AS INVENTORY FOR PURPOSES OF THIS SCHEDULE. RENTAL MERCHANDISE HAS BEEN SHOWN NET OF 104,335 ACCUMULATED DEPRECIATION. THE FINANCIAL STATEMENTS ARE PRESENTED WITH AN UNCLASSIFIED BALANCE SHEET. PP&E HAS BEEN SHOWN NET OF ACCUMULATED DEPRECIATION.
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