Aarons 2015 Annual Report Download - page 42

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Interest expense. Interest expense increased to $23.3 million in 2015 from $19.2 million in 2014 and $5.6 million in 2013 due primarily to approximately
$491.3 million of additional debt financing incurred in connection with the April 14, 2014 Progressive acquisition. Interest expense also increased in 2015
due to increased revolving credit borrowings during the year to finance the acquisition of DAMI and the assumption of $44.8 million of debt in that
acquisition.
Other non-operating (expense) income, net. Other non-operating (expense) income, net includes the impact of foreign currency exchange gains and losses, as
well as gains and losses resulting from changes in the cash surrender value of Company-owned life insurance related to the Company's deferred compensation
plan. Included in other non-operating (expense) income, net were foreign exchange transaction losses of $2.5 million, $2.3 million and $1.0 million during
2015, 2014 and 2013, respectively. These losses result from the strengthening of the U.S. dollar against the British pound and Canadian dollar during the
period. Gains related to the changes in the cash surrender value of Company-owned life insurance were $831,000, $432,000 and $1.5 million during 2015,
2014 and 2013, respectively.
Earnings (Loss) Before Income Taxes
Information about our earnings (loss) before income taxes by reportable segment is as follows:




 




Sales and Lease Ownership $ 166,838
$ 140,854
$ 183,965
$ 25,984
18.4 %
$ (43,111)
(23.4)%
Progressive 54,525
4,603
—
49,922
nmf
4,603
nmf
HomeSmart 771
(2,643)
(3,428)
3,414
129.2
785
22.9
DAMI (1,964)
—
—
(1,964)
nmf
—
nmf
Franchise 48,576
50,504
54,171
(1,928)
(3.8)
(3,667)
(6.8)
Manufacturing 2,520
860
107
1,660
193.0
753
703.7
Other (51,651)
(75,905)
(56,114)
24,254
32.0
(19,791)
(35.3)
Earnings Before Income Taxes for
Reportable Segments 219,615
118,273
178,701
101,342
85.7
(60,428)
(33.8)
Elimination of Intersegment Profit (2,488)
(813)
(94)
(1,675)
(206.0)
(719)
(764.9)
Cash to Accrual and Other
Adjustments (4,007)
4,244
6,353
(8,251)
(194.4)
(2,109)
(33.2)
$ 213,120
$ 121,704
$ 184,960
$ 91,416
75.1 %
$ (63,256)
(34.2)%
nmf—Calculation is not meaningful
During 2015, earnings before income taxes increased $91.4 million, or 75.1%, to $213.1 million from $121.7 million in 2014. In 2015, the results of the
Company's operating segments were impacted by the following items:
• Sales and Lease Ownership earnings before income taxes included a $3.5 million loss related to a lease termination on a Company aircraft.
• Progressive earnings before tax included $3.7 million of transaction costs related to the October 15, 2015 DAMI acquisition.
During 2014, earnings before income taxes decreased $63.3 million, or 34.2%, to $121.7 million from $185.0 million in 2013. In 2014, the results of the
Company's operating segments were impacted by the following items:
• Sales and Lease Ownership earnings before income taxes included $4.8 million of restructuring charges related to the Company's strategic decision
to close 44 Company-operated stores and restructure its home office and field support.
• Other category loss before income taxes included $13.7 million in financial and advisory costs related to addressing now resolved strategic matters,
including proxy contests, $4.3 million of restructuring charges in connection with the store closures noted above, $9.1 million of charges associated
with the retirements of both the Company's Chief Executive Officer and Chief Operating Officer, $6.6 million in transaction costs related to the
Progressive acquisition and $1.2 million of regulatory income that reduced previously recognized regulatory expense upon the resolution of the
regulatory investigation by the California Attorney General.
41