Aarons 2013 Annual Report Download - page 76

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66
Revenues in the “Other” category are primarily revenues from leasing space to unrelated third parties in the corporate
headquarters building, revenues of the Aaron’s Office Furniture division through the date of sale in August 2012 and revenues
from several minor unrelated activities. The pre-tax losses or earnings in the “Other” category are the net result of the activity
mentioned above, net of the portion of corporate overhead not allocated to the reportable segments for management purposes.
For the year ended December 31, 2013, the pre-tax losses of the “Other” category included $28.4 million related to an accrual
for loss contingencies for a pending regulatory investigation and $4.9 million related to retirement expense and a change in
vacation policies. For the year ended December 31, 2012, the pre-tax losses of the “Other” category included $10.4 million in
retirement charges associated with the retirement of the Company’s founder and Chairman of the Board. Earnings (Loss) Before
Income Taxes above for the Sales and Lease Ownership segment include the $36.5 million accrual of a lawsuit for 2011 and the
reversal of the lawsuit accrual of $35.5 million in 2012. In addition, during 2011, the Company incurred $3.5 million in
separation costs related to the departure of the Company’s former Chief Executive Officer, which are reflected in the pre-tax
earnings of the “Other” category.
NOTE 12: RELATED PARTY TRANSACTIONS
The Company leases certain properties under capital leases with certain related parties that are more fully described in Note 6
above.
In the fourth quarter of 2011, the Company purchased an airplane for $2.8 million and sold it to R. Charles Loudermilk, Sr., the
Company’s founder and former Chairman of the Board, for the same amount. The Company paid approximately $80,000 in
brokerage fees in connection with the transaction, for which Mr. Loudermilk, Sr., reimbursed the Company. In the fourth
quarter of 2011, the Company transferred a Company-owned vehicle to Mr. Loudermilk, Sr., valued at $21,000.
NOTE 13: QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Certain reclassifications have been made to prior quarters to conform to the current period presentation.
(In Thousands, Except Per Share Data) First Quarter Second Quarter Third Quarter Fourth Quarter
Year Ended December 31, 2013
Revenues $ 593,010 $ 550,545 $ 537,224 $ 553,852
Gross Profit * 302,439 282,276 265,056 263,080
Earnings Before Income Taxes 81,042 40,387 29,420 34,111
Net Earnings 51,000 25,854 21,138 22,674
Earnings Per Share .67 .34 .28 .30
Earnings Per Share Assuming Dilution .67 .34 .28 .30
Year Ended December 31, 2012
Revenues $ 583,299 $ 537,279 $ 526,883 $ 565,366
Gross Profit * 284,083 266,913 259,957 264,396
Earnings Before Income Taxes 115,029 58,590 46,044 57,192
Net Earnings 71,226 36,244 28,941 36,632
Earnings Per Share .94 .48 .38 .48
Earnings Per Share Assuming Dilution .92 .47 .38 .48
* Gross profit is the sum of lease revenues and fees, retail sales, and non-retail sales less retail cost of sales, non-retail cost of
sales, depreciation of lease merchandise and write-offs of lease merchandise.
The second quarter of 2013 included a pre-tax $15.0 million charge related to an accrual for loss contingencies for a pending
regulatory investigation by the California Attorney General and a $4.9 million charge related to retirement expenses and a
change in vacation policies. The third quarter of 2013 included an additional pre-tax $13.4 million charge related to the
pending regulatory investigation.
The first quarter of 2012 included a pre-tax $35.5 million reversal of a lawsuit accrual, and the third quarter of 2012 included a
pre-tax $10.4 million retirement charge associated with the retirement of the Company’s founder and Chairman of the Board.
NOTE 14: DEFERRED COMPENSATION PLAN
Effective July 1, 2009, the Company implemented the Aaron’s, Inc. Deferred Compensation Plan, an unfunded, nonqualified
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 compensation, and eligible non-employee directors can defer receipt of up to 100% of both their cash and stock director
fees.