Aarons 2013 Annual Report Download - page 54

44
NOTE 1: BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Aaron’s, Inc. (the “Company” or “Aaron’s”) is a leading specialty retailer engaged in the business of leasing and selling
consumer electronics, computers, furniture, appliances and household accessories throughout the United States and Canada.
The Company’s major operating divisions are the Sales & Lease Ownership division (established as a monthly payment
concept), the HomeSmart division (established as a weekly payment concept) and the Woodhaven Furniture Industries division,
which manufactures upholstered furniture and bedding predominantly for use by Company-operated and franchised stores. The
Company’s Sales & Lease Ownership division includes the Company’s RIMCO stores, which lease automobile tires, wheels
and rims under sales and lease ownership agreements. In January of 2014, we sold our 27 Company-operated RIMCO stores
and the rights to five franchised RIMCO stores.
The following table presents store count by ownership type:
Stores at December 31 (Unaudited) 2013 2012 2011
Company-operated stores
Sales and Lease Ownership 1,262 1,227 1,144
HomeSmart 81 78 71
RIMCO 27 19 16
Aaron’s Office Furniture — — 1
Total Company-operated stores 1,370 1,324 1,232
Franchised stores1781 749 713
Systemwide stores 2,151 2,073 1,945
1 As of December 31, 2013, 2012 and 2011, 940, 929 and 943 franchises had been awarded, respectively.
Basis of Presentation
The preparation of the Company’s consolidated financial statements in conformity with accounting principles generally
accepted in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts
reported in these financial statements and accompanying notes. Actual results could differ from those estimates. Generally,
actual experience has been consistent with management’s prior estimates and assumptions. Management does not believe these
estimates or assumptions will change significantly in the future absent unsurfaced and unforeseen events.
Certain reclassifications have been made to the prior periods to conform to the current period presentation. In all periods
presented, the Company's RIMCO operations have been reclassified from the Sales and Lease Ownership segment to the
RIMCO segment in Note 11 to the consolidated financial statements.
Principles of Consolidation and Variable Interest Entities
The consolidated financial statements include the accounts of Aaron’s, Inc. and its wholly owned subsidiaries. Intercompany
balances and transactions between consolidated entities have been eliminated.
On October 14, 2011, the Company purchased 11.5% of newly issued shares of common stock of Perfect Home Holdings
Limited (“Perfect Home”), a privately-held rent-to-own company that is primarily financed by share capital and subordinated
debt. Perfect Home is based in the U.K. and operated 64 retail stores as of December 31, 2013. As part of the transaction, the
Company also received notes and an option to acquire the remaining interest in Perfect Home at any time through
December 31, 2013. The Company did not exercise this purchase option but is in discussions with the owners of Perfect Home
to extend the notes through June 2015. The Company’s investment is denominated in British Pounds.
Perfect Home is a variable interest entity (“VIE”) as it does not have sufficient equity at risk; however, the Company is not the
primary beneficiary and lacks the power through voting or similar rights to direct the activities of Perfect Home that most
significantly affect its economic performance. As such, the VIE is not consolidated by the Company.