Aarons 2013 Annual Report Download - page 41

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31
Earnings Before Income Taxes
Information about our earnings before income taxes by reportable segment is as follows:
Change
Year Ended December 31, 2013 vs. 2012 2012 vs. 2011
(In Thousands) 2013 2012 2011 $ % $ %
EARNINGS BEFORE
INCOME TAXES:
Sales and Lease Ownership $ 183,965 $ 244,014 $ 144,232 $ (60,049) (24.6)% $ 99,782 69.2%
HomeSmart (3,428) (6,962) (7,283) 3,534 50.8 321 4.4
RIMCO (414) 573 153 (987) (172.3) 420 274.5
Franchise 54,171 52,672 49,577 1,499 2.8 3,095 6.2
Manufacturing 107 382 2,960 (275) (72.0) (2,578)(87.1)
Other (55,700) (12,910) 119 (42,790) nmf (13,029) nmf
Earnings Before Income Taxes
for Reportable Segments 178,701 277,769 189,758 (99,068) (35.7) 88,011 46.4
Elimination of Intersegment
Profit (94) (393) (2,960) 299 76.1 2,567 86.7
Cash to Accrual and Other
Adjustments 6,353 (521) (3,421) 6,874 nmf 2,900 nmf
Total $ 184,960 $ 276,855 $ 183,377 $ (91,895) (33.2)% $ 93,478 51.0%
nmf—Calculation is not meaningful
Earnings before income taxes decreased $91.9 million, or 33.2%, due in part to a $60.0 million, or 24.6%, decrease in the Sales
and Lease Ownership segment, which includes the impact of the reversal of the lawsuit accrual of $35.5 million during 2012.
Earnings before income taxes were also impacted by $28.4 million in legal and regulatory expense related to a pending
regulatory investigation and charges of $4.9 million due to the retirement of the Company's Chief Operating Officer and a
change in the Company's vacation policies during 2013, as well as $10.4 million related to the retirement of the Company’s
founder and Chairman of the Board during 2012, all of which have been included in "Other" segment results.
Earnings before income taxes increased $93.5 million, or 51.0%, primarily due to a $99.8 million, or 69.2%, increase in the
Sales and Lease Ownership segment, which includes the impact of the lawsuit accrual of $36.5 million during 2011 followed
by the reversal of the lawsuit accrual of $35.5 million during 2012. Earnings before income taxes were also impacted by
$10.4 million related to the retirement of the Company’s founder and Chairman of the Board during 2012 and $3.5 million in
separation costs related to the departure of the Company’s former Chief Executive Officer during 2011, both of which have
been included in "Other" segment results.
Income Tax Expense
Income tax expense decreased $39.5 million to $64.3 million in 2013, compared with $103.8 million in 2012, representing a
38.1% decrease due primarily to a 33.2% decrease in earnings before income taxes in 2013. In addition, our effective tax rate
decreased to 34.8% in 2013 from 37.5% in 2012 due to the recognition of income tax benefits primarily related to the
Company's furniture manufacturing operations and increased federal and state tax credits being applied to lower than expected
earnings.
Income tax expense increased $34.2 million to $103.8 million in 2012, compared with $69.6 million in 2011, representing a
49.1% increase due to a 51.0% increase in earnings before income taxes in 2012, offset by a slightly lower tax rate in 2012. Our
effective tax rate was 37.5% in 2012 and 38.0% in 2011.
Net Earnings
Net earnings decreased $52.4 million to $120.7 million in 2013 from $173.0 million in 2012, representing a 30.3% decrease. As
a percentage of total revenues, net earnings were 5.4% and 7.8% in 2013 and 2012, respectively.
Net earnings increased $59.3 million to $173.0 million in 2012 from $113.8 million in 2011, representing a 52.1% increase. As
a percentage of total revenues, net earnings were 7.8% and 5.7% in 2012 and 2011, respectively.