Aarons 2007 Annual Report Download - page 41

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39
NOTE I: FRANCHISING OF AARON’S SALES
AND LEASE OWNERSHIP STORES
The Company franchises Aaron’s Sales and Lease Ownership
stores. As of December 31, 2007 and 2006, 768 and 674
franchises had been granted, respectively. Franchisees typi-
cally pay a non-refundable initial franchise fee from $15,000
to $50,000 depending upon market size and an ongoing
royalty of either 5% or 6% of gross revenues. Franchise fees
and area development fees are generated from the sale of
rights to develop, own and operate Aaron’s Sales and Lease
Ownership stores. These fees are recognized as income when
substantially all of the Company’s obligations per location
are satisfied, generally at the date of the store opening.
Franchise fees and area development fees received before
the substantial completion of the Company’s obligations are
deferred. Substantially all of the amounts reported as non-
retail sales and non-retail cost of sales in the accompanying
consolidated statements of earnings relate to the sale of
rental merchandise to franchisees.
Franchise agreement fee revenue was $3.4 million, $3.1
million, and $3.0 million and royalty revenue was $29.8
million, $25.4 million, and $21.6 million for the years ended
December 31, 2007, 2006 and 2005, respectively. Deferred
franchise and area development agreement fees, included in
customer deposits and advance payments in the accompany-
ing consolidated balance sheets, was $5.7 million and $4.3
million as of December 31, 2007 and 2006, respectively.
Options Outstanding Options Exercisable
Weighted Average
Range of Number Remaining Weighted Number Weighted
Exercise Outstanding Contractual Average Exercisable Average
Prices December 31, 2007 Life (in years) Exercise price December 31, 2007 Exercise Price
$ 4.38 – 10.00 874,199 2.88 $ 6.79 874,199 $ 6.79
10.01 – 15.00 352,650 5.81 14.43 352,650 14.43
15.01 – 20.00 199,450 5.95 17.41 199,450 17.41
20.01 – 24.94 994,396 7.87 21.87 554,888 22.08
$ 4.38 – 24.94 2,420,695 5.61 $14.98 1,981,187 $13.50
The table below summarizes option activity for the periods
indicated in the Company’s stock option plans:
Weighted Average Aggregate Weighted
Options Weighted Remaining Intrinsic Value Average
(In Thousands) Average Contractual Term (In Thousands) Fair Value
Outstanding at January 1, 2007 2,320 $13.67 $15,013 $ 6.57
Granted 338 21.14 — 10.79
Exercised (185) 8.57 (2,891) 4.43
Forfeited (52) 19.62 (97) 8.20
Outstanding at December 31, 2007 2,421 14.97 5.61 years 12,941 7.29
Exercisable at December 31, 2007 1,981 $13.50 4.79 years $12,941 $ 6.57
The following table summarizes information about stock
options outstanding at December 31, 2007:
The weighted average fair value of unvested options was
$9.66 as of December 31, 2006 and $10.53 as of December
31, 2007. The weighted average fair value of options that
vested during 2007 was $6.57.