Aarons 2015 Annual Report Download - page 39

Year Ended December 31, 2014 Versus Year Ended December 31, 2013
Sales and Lease Ownership. Sales and Lease Ownership segment revenues decreased $39.2 million to $2.037 billion due to a $33.1 million, or 2.0%,
decrease in lease revenues and fees, and a $7.0 million, or 1.9%, decrease in non-retail sales. Lease revenues and fees within the Sales and Lease Ownership
segment decreased due to a 3.0% decrease in same store revenues, which more than offset the net addition of 16 Company-operated stores since the
beginning of 2013. Non-retail sales decreased primarily due to less demand for product by franchisees.
Progressive. Progressive segment revenues were $519.3 million and have been included in the Company's consolidated results from the April 14, 2014
acquisition date.
HomeSmart. HomeSmart segment revenues increased $1.4 million to $64.3 million due to a $1.3 million, or 2.2%, increase in lease revenues and fees. Lease
revenues and fees within the HomeSmart segment increased primarily due to a net addition of five HomeSmart stores since the beginning of 2013.
Franchise. Franchise segment revenues decreased $2.7 million to $65.9 million primarily due to a decrease in finance fees under the franchise loan program.
Other. Revenues in the Other category are primarily revenues attributable to (i) the RIMCO segment through the date of sale in January 2014, (ii) leasing
space to unrelated third parties in the corporate headquarters building and (iii) several minor unrelated activities.
Operating Expenses
Information about certain significant components of operating expenses is as follows:

 


Personnel costs $ 619,557
$ 594,246
$ 550,093
Occupancy costs 208,927
206,806
199,300
Lease merchandise write-offs 136,380
99,942
57,989
Bad debt expense 122,184
60,514
—
Advertising 39,334
50,445
42,956
Other operating expenses 230,648
219,848
172,346
 $ 1,357,030
$ 1,231,801
$ 1,022,684
Year Ended December 31, 2015 Versus Year Ended December 31, 2014
Operating expenses increased $125.2 million, or 10.2%, to $1.4 billion in 2015, from $1.2 billion for the comparable period in 2014 due primarily to the
consolidation of Progressive’s results from operations from the April 14, 2014 acquisition date.
Personnel costs increased in 2015 compared to 2014 due to hiring to support the growth of Progressive.
Lease merchandise write-offs increased $36.4 million in 2015 compared to 2014 due to the increase in Progressive revenues as a percentage of total revenues.
Progressive's lease merchandise write-offs as a percentage of Progressive's lease revenues decreased from 8% in 2014 to 7% in 2015. Lease merchandise write-
offs as a percentage of lease revenues for our core business increased from 3% in 2014 to 4% in 2015.
Bad debt expense increased $61.7 million in 2015 compared to 2014 due to the increase in Progressive revenues as a percentage of total revenues.
Progressive's bad debt expense in 2015 was affected by the impact of a temporary interruption of certain data attributes used to make our approval decisions.
We lost access to the attributes in February 2015 and replaced them in April 2015. Leases generated during the period of interruption, while expected to be
profitable, charged off at higher rates than originally anticipated during the second and third quarters. Nonetheless, Progressive's bad debt expense as a
percentage of Progressive's revenues remained constant at 12% in both years.
In 2015, other operating expenses includes $3.7 million of one-time transaction costs incurred in connection with the acquisition of DAMI.
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