Aarons 2004 Annual Report Download - page 34

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Revenues in the “Other” category are primarily from
leasing space to unrelated third parties in our corporate
headquarters building and revenues from several minor
unrelated activities. The pretax losses in the “Other”
category are the net result of the activity mentioned above,
net of the portion of corporate overhead not allocated to
the reportable segments for management purposes, and, in
2004, the $5.5 million pretax gain recognized on the sale
of marketable securities.
Measurement of Segment Profit or Loss and
Segment Assets
The Company evaluates performance and allocates
resources based on revenue growth and pretax profit or loss
from operations. The accounting policies of the reportable
segments are the same as those described in the summary
of significant accounting policies except that the sales and
lease ownership division revenues and certain other items are
presented on a cash basis. Intersegment sales are completed
at internally negotiated amounts ensuring competitiveness
with outside vendors. Since the intersegment profit and loss
affect inventory valuation, depreciation and cost of goods
sold are adjusted when intersegment profit is eliminated in
consolidation.
Factors Used by Management to Identify the
Reportable Segments
The Company’s reportable segments are business units
that service different customer profiles using distinct payment
arrangements. The reportable segments are each managed
separately because of differences in both customer base and
infrastructure.
Information on segments and a reconciliation to earnings
before income taxes are as follows:
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
(In Thousands) 2004 2003 2002
Revenues From
External Customers:
Sales & Lease Ownership $804,723 $634,489 $501,390
Rent-to-Rent 108,453 109,083 119,885
Franchise 25,253 19,347 16,663
Other 10,185 4,206 4,746
Manufacturing 70,440 60,608 56,002
Elimination of
Intersegment Revenues (70,884) (60,995) (56,141)
Cash to Accrual Adjustments (1,690) 59 (1,857)
Total Revenues From
External Customers $946,480 $766,797 $640,688
Earnings Before Income Taxes:
Sales & Lease Ownership $56,578 $ 43,325 $ 31,220
Rent-to-Rent 8,842 6,341 9,057
Franchise 18,374 13,600 10,919
Other 2,118 (2,356) (5,544)
Manufacturing (175) 1,222 989
Earnings Before Income
Taxes For Reportable
Segments 85,737 62,132 46,641
Elimination of Intersegment
Loss (Profit) 178 (2,338) (760)
Cash to Accrual and
Other Adjustments (1,409) (1,951) (2,229)
Total Earnings Before
Income Taxes $ 84,506 $ 57,843 $ 43,652
Assets:
Sales & Lease Ownership $524,492 $412,836 $331,665
Rent-to-Rent 83,478 79,984 89,133
Franchise 23,495 19,493 12,627
Other 50,452 29,244 35,488
Manufacturing 18,371 18,327 18,555
Total Assets $700,288 $559,884 $487,468
Depreciation & Amortization:
Sales & Lease Ownership $255,606 $191,777 $154,310
Rent-to-Rent 19,213 21,266 22,901
Franchise 722 547 486
Other 711 839 541
Manufacturing 935 968 802
Total Depreciation
& Amortization $277,187 $215,397 $179,040
Interest Expense:
Sales & Lease Ownership $ 5,197 $ 5,215 $ 4,768
Rent-to-Rent 1,044 1,583 2,493
Franchise 96 93 83
Other (924) (1,109) (2,577)
Total Interest Expense $ 5,413 $ 5,782 $ 4,767