Aarons 2015 Annual Report Download - page 41

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Retail cost of sales. Retail cost of sales increased $223,000, or .9%, to $24.5 million in 2014, from $24.3 million for the comparable period in 2013, and as a
percentage of retail sales, increased to 64.0% from 59.5% due to increased discounting of pre-leased merchandise.
Non-retail cost of sales. Non-retail cost of sales decreased $7.5 million, or 2.2%, to $330.1 million in 2014, from $337.6 million for the comparable period in
2013, and as a percentage of non-retail sales, remained consistent at approximately 91% in both periods.
Financial advisory and legal costs. Financial advisory and legal costs of $13.7 million were incurred during 2014 related to addressing now-resolved
strategic matters, including an unsolicited acquisition offer, two proxy contests and certain other shareholder proposals.
Restructuring expenses. In connection with the Company’s July 15, 2014 announced closure of 44 Company-operated stores and restructuring of its home
office and field support, charges of $9.1 million were incurred in 2014 and principally consist of contractual lease obligations, the write-off and impairment
of property, plant and equipment and workforce reductions.
Retirement and vacation charges. Retirement charges during 2014 were $9.1 million due primarily to the retirement of both the Company’s Chief Executive
Officer and Chief Operating Officer in 2014. Retirement and vacation charges during 2013 were $4.9 million associated with the retirement of the Company’s
Chief Operating Officer and a change in the Company's vacation policies.
Progressive-related transaction costs. Financial advisory and legal costs of $6.6 million were incurred in 2014 in connection with the April 14, 2014
acquisition of Progressive.
Legal and regulatory (income) expense. Regulatory income of $1.2 million in 2014 was recorded as a reduction in previously recognized regulatory expense
upon the resolution of the regulatory investigation by the California Attorney General. During 2013, regulatory expenses of $28.4 million were incurred
related to the then-pending regulatory investigation by the California Attorney General.
Other Operating Expense (Income), Net
Information about the components of other operating expense (income), net is as follows:

 


Net gains on sales of stores $ (2,139)
$ (1,694)
$ (833)
Net gains on sales of delivery vehicles (1,706)
(1,099)
(1,895)
Impairment charges and losses on asset dispositions and assets held for sale 5,169
1,617
4,312
 $ 1,324
$ (1,176)
$ 1,584
In 2015, other operating expense, net of $1.3 million included a $3.5 million loss related to a lease termination on a Company aircraft, impairment charges of
$757,000 on leasehold improvements related to Company-operated stores that were closed during the period and impairment of $502,000 on assets held for
sale. In addition, the Company recognized gains of $2.1 million from the sale of 25 Aaron's Sales & Lease Ownership stores during 2015.
In 2014, other operating income, net of $1.2 million included charges of $477,000 related to the impairment of various land outparcels and buildings that the
Company decided not to utilize for future expansion and $762,000 related to the loss on sale of the RIMCO net assets. In addition, the Company recognized
gains of $1.7 million from the sale of six Aaron's Sales & Lease Ownership stores during 2014.
In 2013, other operating expense, net of $1.6 million included charges of $3.8 million related to the impairment of various land outparcels and buildings that
the Company decided not to utilize for future expansion and the net assets of the RIMCO operating segment (principally consisting of lease merchandise,
office furniture and leasehold improvements) in connection with the Company's decision to sell the 27 Company-operated RIMCO stores. In addition, the
Company recognized gains of $833,000 from the sale of two Aaron's Sales & Lease Ownership stores during 2013.
Operating Profit
Interest income. Interest income decreased to $2.2 million in 2015 from $2.9 million in 2014 and $3.0 million in 2013 due to lower average investment and
cash equivalent balances.
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