Aarons 2010 Annual Report Download - page 41

The following is a summary of the Company’s intangible assets
by category:
(In Thousands) 2010 2009 2008
Customer Relationship
Intangible, Gross $748 $1,677 $4,250
Accumulated Amortization on
Customer Relationship Intangible (205) (469) (699)
Non-Compete Intangible, Gross 496 477 1,931
Accumulated Amortization
on Non-Compete Intangible (52) (109) (139)
Reacquired Franchise
Intangible, Gross 541 861 —
Accumulated Amortization on
Reacquired Franchise Rights (109) (191) —
The Company sells sales and lease ownership stores to fran-
chisees and third party operators during the course of the year.
The Company sold 11, 37 and 27 of its sales and lease ownership
locations in 2010, 2009 and 2008, respectively. The effect of these
sales on the consolidated financial statements was not significant.
Segments
Description of Products and Services of
Reportable Segments
Aaron’s, Inc. has three reportable segments: sales and lease owner-
ship, franchise and manufacturing. During 2008, the Company sold
its corporate furnishings division. The sales and lease ownership
division offers electronics, residential furniture, appliances and
computers to consumers primarily on a monthly payment basis with
no credit requirements. The Company’s franchise operation sells
and supports franchisees of its sales and lease ownership concept.
The manufacturing division manufactures upholstered furniture and
bedding predominantly for use by Company-operated and franchised
stores. The Company has elected to aggregate certain operating
segments.
Earnings before income taxes for each reportable segment are
generally determined in accordance with accounting principles gen-
erally accepted in the United States with the following adjustments:
• Sales and lease ownership revenues are reported on the cash basis
for management reporting purposes.
• A predetermined amount of each reportable segment’s revenues
is charged to the reportable segment as an allocation of corporate
overhead. This allocation was approximately 2% in 2010, 2009
and 2008.
Acquisitions and Dispositions
During 2010, the Company acquired the lease contracts, mer-
chandise and other related assets of a net of 14 sales and lease
ownership stores for an aggregate purchase price of $17.9 million.
Consideration transferred consisted primarily of cash. Fair value of
acquired tangible assets included $6.5 million for lease merchandise,
$333,000 for fixed assets and $34,000 for other assets. The excess
cost over the fair value of the assets and liabilities acquired in 2010,
representing goodwill, was $9.2 million. The fair value of acquired
separately identifiable intangible assets included $748,000 for cus-
tomer lists, $541,000 for non-compete intangibles and $496,000 for
acquired franchise development rights.
During 2009, the Company acquired the lease contracts,
merchandise and other related assets of a net of 29 sales and lease
ownership stores for an aggregate purchase price of $25.2 million.
Consideration transferred consisted primarily of cash. Fair value of
acquired tangible assets included $9.5 million for lease merchan-
dise, $712,000 for fixed assets and $28,000 for other assets. The
excess cost over the fair value of the assets and liabilities acquired in
2010, representing goodwill, was $12.0 million. The fair value of
acquired separately identifiable intangible assets included $1.1 mil-
lion for customer lists, $695,000 for non-compete intangibles and
$477,000 for acquired franchise development rights.
During 2008, the Company acquired the lease contracts,
merchandise and related assets of a net of 68 sales and lease
ownership stores for an aggregate purchase price of $79.8 mil-
lion. Consideration transferred consisted primarily of cash. Fair
value of acquired tangible assets included $28.5 million for lease
merchandise, $2.1 million for fixed assets, and $66,000 for other
assets. The excess cost over the fair value of the assets and liabili-
ties acquired in 2008, representing goodwill, was $44.1 million.
The fair value of acquired separately identifiable intangible assets
included $4.3 million for customer lists and $1.9 million for
acquired franchise development rights.
Acquisitions have been accounted for as purchases, and the
results of operations of the acquired businesses are included in the
Company’s results of operations from their dates of acquisition.
The effect of these acquisitions on the 2010, 2009 and 2008 con-
solidated financial statements was not significant. The estimated
amortization of customer lists, reacquired franchise development
rights and non-compete intangibles in future years approximates
$636,000, $432,000, $148,000, $64,000 and $63,000 for 2011,
2012, 2013, 2014 and 2015, respectively.
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