Aarons 2011 Annual Report Download - page 40

Company-operated HomeSmart store activity is summarized
as follows:
(Unaudited) 2011 2010
Company-operated stores open at January 1, 3 —
Opened 24 3
Added through acquisition 44 —
Company-operated stores open at December 31, 71 3
In 2011, Sales and Lease Ownership segment acquired the
lease contracts, merchandise and other related assets of 38 stores,
including seven franchised stores, and merged certain acquired
stores into existing stores, resulting in a net gain of eight stores.
In 2010, the Company acquired the lease contracts, merchandise
and other related assets of 30 stores, including 12 franchised stores,
and merged certain acquired stores into existing stores, resulting in
a net gain of 14 stores. In 2009, the Company acquired the lease
contracts, merchandise and other related assets of 44 stores, includ-
ing 19 franchised stores, and merged certain acquired stores into
existing stores, resulting in a net gain of 29 stores.
In 2011, HomeSmart operations acquired the lease contracts,
merchandise and other related assets of 47 stores and merged
certain acquired stores into existing stores, resulting in a net gain of
44 stores.
NOTE J: ACQUISITIONS
AND DISPOSITIONS
During 2011, the Company acquired the lease contracts, merchan-
dise and related assets of a net of 52 sales and lease ownership stores
for an aggregate purchase price of $41.4 million. Consideration
transferred consisted primarily of cash. Fair value of acquired tan-
gible assets included $13.4 million for lease merchandise, $500,000
for fixed assets, and $21,000 for other assets. The excess cost over the
fair value of the assets and liabilities acquired in 2011, representing
goodwill, was $22.9 million. The fair value of acquired separately
identifiable intangible assets included $2.7 million for customer
lists, $1.7 million for non-compete intangibles, and $255,000 for
acquired franchise development rights. The weighted average amorti-
zation period for these intangibles was 2.5 years.
During 2010, the Company acquired the lease contracts,
merchandise 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 merchan-
dise, $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 customer lists, $541,000 for non-compete intangibles and
$496,000 for acquired franchise development rights. The weighted
average amortization period for these intangibles was 2.7 years.
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. The weighted
average amortization period for these intangibles was 2.4 years.
Acquisitions have been accounted for as business combina-
tions, 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 2011, 2010 and
2009 consolidated financial statements was not significant. The
estimated amortization of sales and lease ownership stores customer
lists, reacquired franchise development rights and non-compete
intangibles in future years approximates $916,000, $728,000,
$191,000, $34,000 and $32,000 for 2012, 2013, 2014, 2015 and
2016, respectively. The estimated amortization of HomeSmart
customer lists and non-compete intangibles in future years approxi-
mates $1.0 million, $826,000, and $202,000 for 2012, 2013, and
2014, respectively. All goodwill acquired in 2011, 2010 and 2009
is expected to be deductible for tax purposes.
The following is a summary of the Aaron’s Sales & Lease
Ownership Company-operated stores’ intangible assets by category
at December 31:
(In Thousands) 2011 2010 2009
Customer Relationship
Intangible, Gross $3,698 $6,675 $8,267
Accumulated Amortization on
Customer Relationship Intangible (1,827) (5,719) (6,406)
Reacquired Franchise
Intangible, Gross 1,227 2,814 3,561
Accumulated Amortization on
Re-acquired Franchise Rights (307) (862) (938)
Non-Compete Intangible, Gross 2,133 1,402 861
Accumulated Amortization on
Non-Compete Intangible (906) (478) (145)
The Company periodically sells sales and lease ownership stores
to franchisees and third party operators. The Company sold 25, 11
and 37 of its Aaron’s Sales and Lease Ownership stores in 2011,
2010 and 2009, respectively. The effect of these sales on the con-
solidated financial statements was not significant.
j
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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