Aarons 1999 Annual Report Download - page 28

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Note K: Segments
Description of Products and Services of Reportable Segments
Aaron Rents, Inc. has four reportable segments: rental pur-
chase, rent-to-rent, franchise and manufacturing. The rental
purchase division offers electronics, residential furniture and
appliances to consumers on a monthly payment basis with no
credit requirements. The rent-to-rent division rents and sells
residential and office furniture to businesses and consumers
who meet certain minimum credit requirements. The
Company’s franchise operation sells and supports franchises
of its rental purchase concept. The manufacturing division
manufactures upholstery, bedroom and office furniture,
lamps and accessories, and bedding predominantly for use
by the other divisions.
The principal source of revenue in the “Other” category
was the Company’s convention furnishings division which
was sold during 1998.
Measurement of Segment Profit or Loss and Segment Assets
The Company evaluates performance and allocates resources
based on revenue growth and pretax profit or loss from
operations. The accounting policies of the reportable seg-
ments are the same as those described in the summary of
significant accounting policies except that the rental purchase
division revenues and certain other items are presented on
a cash basis. Intersegment sales are completed at internally
negotiated amounts ensuring competitiveness with outside
vendors. Since the intersegment profit and loss affect
inventory valuation, depreciation and cost of goods sold
are adjusted when intersegment profit is eliminated in
consolidation.
Factors Used by Management to Identify the
Reportable Segments
Aaron Rents, Inc.’s reportable segments are business units
that service different customer profiles using distinct payment
arrangements. The reportable segments are each managed
separately because of differences in both customer base and
infrastructure.
Information on segments and a reconciliation to earnings
before income taxes are as follows:
Years Ended December 31,
(In Thousands) 1999 1998 1997
Revenues From External Customers:
Rental Purchase $252,284 $193,283 $139,893
Rent-to-Rent 173,579 173,657 163,263
Franchise 9,079 7,209 4,880
Other 1,551 5,470 2,089
Manufacturing 54,550 52,628 49,302
Elimination of
Intersegment Revenues (53,941) (52,067) (48,344)
Cash to Accrual Adjustments 257 (521) (332)
Total Revenues From
External Customers $437,359 $379,659 $310,751
Earnings Before Income Taxes:
Rental Purchase $ 20,630 $ 11,668 $ 10,807
Rent-to-Rent 14,369 19,565 18,883
Franchise 5,042 3,607 1,880
Other (1,072) (744) (743)
Manufacturing 717 1,068 2,877
Earnings Before Income Taxes
For Reportable Segments 39,686 35,164 33,704
Elimination of
Intersegment Profit (357) (901) (2,856)
Cash to Accrual Adjustments 855 (344) (271)
Other Allocations
& Adjustments 1,118 1,272 (340)
Total Earnings Before
Income Taxes $ 41,302 $ 35,191 $ 30,237
Assets:
Rental Purchase $139,177 $103,930 $ 83,742
Rent-to-Rent 138,349 138,734 135,094
Franchise 10,755 5,415 3,287
Other 16,097 9,286 5,453
Manufacturing 14,030 14,809 11,806
Total Assets $318,408 $272,174 $239,382
Depreciation & Amortization:
Rental Purchase $ 78,385 $ 67,401 $ 48,879
Rent-to-Rent 32,946 29,327 27,685
Franchise 347 276 197
Other 492 562 224
Manufacturing 576 524 502
Total Depreciation
& Amortization $112,746 $ 98,090 $ 77,487
Interest Expense:
Rental Purchase $1,702 $2,826 $1,646
Rent-to-Rent 2,317 1,698 1,648
Franchise 117 48 9
Other (31) (1,011) 418
Manufacturing 406
Elimination of
Intersegment Allocations (406)
Total Interest Expense $4,105 $3,561 $3,721