Aarons 2010 Annual Report Download - page 45

Discontinued Operations
On September 12, 2008, the Company entered into an agreement
with CORT Business Services Corporation to sell substantially all of
the assets of its Aaron’s Corporate Furnishings division and to trans-
fer certain of the Aaron’s Corporate Furnishings division’s liabilities
to CORT. The Aaron’s Corporate Furnishings division, which
operated at 47 stores, primarily engaged in the business of leasing
and selling residential furniture, electronics, appliances, housewares
and accessories. The Company consummated the sale of the Aaron’s
Corporate Furnishings division in the fourth quarter of 2008.
The consideration for the assets consisted of $72 million in
cash plus payments for certain accounts receivable of the Aaron’s
Corporate Furnishings division, subject to certain adjustments,
including for differences in the amount of the Aaron’s Corporate
Furnishings division’s inventory at closing and in the monthly rent
potential of the division’s merchandise on lease at closing as com-
pared to certain benchmark ranges set forth in the purchase agree-
ment. The assets transferred include all of the Aaron’s Corporate
Furnishings division’s lease contracts with customers and certain
other contracts, certain inventory and accounts receivable and store
leases or subleases for 27 locations. CORT assumed performance
obligations under transferred lease and certain other contracts and
customer deposits. The Company retained other liabilities of the
Aaron’s Corporate Furnishings division, including its accounts
payable and accrued expenses. Included in the 2008 results is a
$1.2 million pre-tax gain on the sale of the Aaron’s Corporate
Furnishings division in the fourth quarter of 2008.
Summarized operating results for the Aaron’s Corporate
Furnishings division for the years ended December 31 are
as follows:
(In Thousands) 2010 2009 2008
Revenues $ — $ — $83,359
(Loss) Earnings Before Income Taxes — (447) 7,162
(Loss) Earnings From Discontinued
Operations, Net of Tax — (277) 4,420
Deferred Compensation Plan
Effective July 1, 2009, the Company implemented the Aaron’s, Inc.
Deferred Compensation Plan (the “Plan”) an unfunded, nonquali-
fied deferred compensation plan for a select group of management,
highly compensated employees and non-employee directors. On a
pre-tax basis, eligible employees can defer receipt of up to 75% of
their base compensation and up to 100% of their incentive pay com-
pensation, and eligible non-employee directors can defer receipt of
up to 100% of both their cash and stock director fees. In addition,
the Company may elect to make restoration matching contributions
on behalf of eligible employees to compensate for certain limitations
on the amount of matching contributions an employee can receive
under the Company’s tax-qualified 401(k) plan.
Compensation deferred under the Plan is credited to each
participant’s deferral account and a deferred compensation liability
is recorded in accounts payable and accrued expenses in the con-
solidated balance sheets. The deferred compensation plan liability
was approximately $3.5 million and $713,000 as of December 31,
2010 and 2009, respectively. Liabilities under the Plan are recorded
at amounts due to participants, based on the fair value of partici-
pants’ selected investments. The Company has established a Rabbi
Trust to fund obligations under the Plan with Company-owned
life insurance. The obligations are unsecured general obligations of
the Company and the participants have no right, interest or claim
in the assets of the Company, except as unsecured general creditors.
The cash surrender value of these policies totaled $3.5 million and
$772,000 as of December 31, 2010 and 2009, respectively, and is
included in prepaid expenses and other assets in the consolidated
balance sheets.
Deferred compensation expense charged to operations for
the Company’s matching contributions totaled $231,000 and
$130,000 in 2010 and 2009, respectively. No benefits have been
paid as of December 31, 2010.
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