Aarons 2011 Annual Report Download - page 39

The weighted average fair value of unvested options was $7.12,
$6.66 and $6.08 as of December 31, 2011, 2010 and 2009, respec-
tively. The weighted average fair value of options that vested during
2011, 2010 and 2009 was $5.93, $5.87 and $5.35, respectively.
The Company granted 246,000 and 300,000 RSUs in 2011
and 2010, respectively, and there were no RSUs granted in 2009.
The Company granted 20,000 RSAs in 2011. The Company did
not grant RSAs in 2010 and 2009. Of the 246,000 RSUs granted
in 2011, 225,000 were related to executive grants and 21,000 were
granted as part of the AMP Plan. The weighted average grant date
fair value for RSUs not part of the AMP plan was $23.08 in 2011
and $16.20 in 2010. The weighted average grant date fair value
for RSUs granted as part of the AMP plan was $26.19 in 2011.
The weighted average grant date fair value for RSAs was $26.34 in
2011.
Shares of restricted stock or restricted stock units may be grant-
ed to employees and directors and typically vest over approximately
two to five year periods. Restricted stock grants may be subject to
one or more objective employment, performance or other forfei-
ture conditions as established at the time of grant. Any shares of
restricted stock that are forfeited may again become available for
issuance. Compensation cost for restricted stock is equal to the fair
market value of the shares at the date of the award and is amortized
to compensation expense over the vesting period. Total compensa-
tion expense related to restricted stock was $5.7 million, $1.5
million and $1.3 million in 2011, 2010 and 2009, respectively. At
December 31, 2011, there was $5.4 million of total unrecognized
compensation expense related to non-vested restricted stock which
is expected to be recognized over a period of 2.4 years.
During the year 287,000 restricted shares vested, 150,000 of
these shares were restricted stock units attributed to an immediate
vest modification related to the separation for a key executive,
137,000 of these shares were restricted stock awards granted in
2006. The total value of shares vesting during the year was $4.0
million for restricted stock units and $3.2 million for restricted
stock awards. There were no shares vested under the AMP Plan.
During 2011, the Company recorded a $3.5 million charge for
separation costs primarily related to the accelerated vesting of the
aforementioned 150,000 restricted stock units and 50,000 stock
option previously granted to a former key executive. The total
incremental compensation cost resulting from the modification was
$1.3 million.
The following table summarizes information about restricted
stock activity:
Restricted Weighted
Stock Average
(In Thousands) Grant Price
Outstanding at January 1, 2011 438 $17.01
Granted 266 23.57
Vested (287) 25.24
Forfeited (2) 22.84
Outstanding at December 31, 2011 415 $19.64
NOTE I: FRANCHISING OF AARON’S
SALES AND LEASE OWNERSHIP STORES
The Company franchises Aaron’s Sales & Lease Ownership stores.
As of December 31, 2011 and 2010, 943 and 946 franchises had
been granted, respectively. Franchisees typically 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 &
Lease Ownership stores. These fees are recognized as income when
substantially all of the Company’s obligations per location are satis-
fied, generally at the date of the store opening. Franchise fees and
area development fees are received before the substantial completion
of the Company’s obligations and 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 lease merchandise to franchisees.
Franchise agreement fee revenue was $2.6 million, $3.0 million
and $3.8 million and royalty revenue was $52.0 million, $47.9
million and $42.3 million for the years ended December 31, 2011,
2010 and 2009, respectively. Deferred franchise and area develop-
ment agreement fees, included in customer deposits and advance
payments in the accompanying consolidated balance sheets, were
$4.7 million and $5.5 million at December 31, 2011 and 2010,
respectively.
Franchised Aaron’s Sales & Lease Ownership store activity is
summarized as follows:
(Unaudited) 2011 2010 2009
Franchised stores open at January 1 664 597 504
Opened 55 62 84
Added through acquisition — 10 —
Purchased from the Company 9 10 37
Purchased by the Company (7) (12) (19)
Closed, sold or merged (8) (3) (9)
Franchised stores open at December 31, 713 664 597
Company-operated Aaron’s Sales & Lease Ownership store activity is
summarized as follows:
(Unaudited) 2011 2010 2009
Company-operated stores open
at January 1, 1,146 1,082 1,037
Opened 57 86 85
Added through acquisition 8 14 19
Closed, sold or merged (51) (36) (59)
Company-operated stores open
at December 31, 1,160 1,146 1,082
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