Aarons 2015 Annual Report Download - page 43

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During 2013, the results of the Company's operating segments were impacted by the following items:
• Other category loss before income taxes included $28.4 million related to an accrual for loss contingencies for the then-pending regulatory
investigation by the California Attorney General and $4.9 million related to retirement expense and a change in vacation policies.
Income Tax Expense
Income tax expense increased $33.9 million to $77.4 million in 2015, compared with $43.5 million in 2014, representing a 78.1% increase due primarily to a
75.1% increase in earnings before income taxes in 2015. The effective tax rate increased to 36.3% in 2015 from 35.7% in 2014 primarily as a result of
reduced federal credits.
Income tax expense decreased $20.8 million to $43.5 million in 2014, compared with $64.3 million in 2013, representing a 32.4% decrease due primarily to
a 34.2% decrease in earnings before income taxes in 2014. The effective tax rate increased to 35.7% in 2014 from 34.8% in 2013 as a result of decreased tax
benefits related to the Company's furniture manufacturing operations and reduced federal credits.
Net Earnings
Net earnings increased $57.5 million to $135.7 million in 2015 from $78.2 million in 2014, representing a 73.5% increase. As a percentage of total revenues,
net earnings were 4.3% and 2.9% in 2015 and 2014, respectively.
Net earnings decreased $42.4 million to $78.2 million in 2014 from $120.7 million in 2013, representing a 35.2% decrease. As a percentage of total revenues,
net earnings were 2.9% and 5.4% in 2014 and 2013, respectively.

The major changes in the consolidated balance sheet from December 31, 2014 to December 31, 2015, are as follows:
• Cash and cash equivalents increased $11.4 million to $14.9 million at December 31, 2015 from $3.5 million at December 31, 2014. For additional
information, refer to the "Liquidity and Capital Resources" section below.
• Lease merchandise, net increased $51.9 million to $1.139 billion at December 31, 2015 primarily due to the growth in invoice volume at
Progressive.
• Loans receivable, net of $85.8 million as of December 31, 2015, resulted from the October 15, 2015 DAMI acquisition. This amount represents the
principal, interest and fees outstanding from DAMI credit cardholders, net of an allowance for loan losses and unamortized fees. Refer to Notes 1 and
6 to the consolidated financial statements for further information.
• Income tax receivable increased $55.1 million due to the enactment of the Protecting Americans From Tax Hikes Act of 2015 signed into law on
December 18, 2015, which retroactively extended 50% bonus depreciation and reauthorized work opportunity tax credits for 2015. Throughout
2015, the Company made payments based on the previously enacted law, resulting in an overpayment when the current act was signed.
• Deferred income taxes payable increased $38.9 million due primarily to accelerated bonus depreciation deductions on lease merchandise on hand at
December 31, 2015. Purchases of lease merchandise increased by $310.0 million in 2015 compared to 2014 primarily due to the inclusion of
Progressive for a full year in 2015, as well as its continued growth.
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