Aarons 2001 Annual Report Download - page 28

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The following table summarizes information about stock options outstanding at December
31, 2001.
Options Outstanding Options Exercisable
Weighted Average Weighted Weighted
Number Remaining Average Number Average
Outstanding Contractual Exercise Exercisable Exercise
Range of Exercise Prices December 31, 2001 Life Price December 31, 2001 Price
$ 9.87 –$10.00 450,800 4.27 years $ 9.88 450,800 $ 9.88
10.01 –15.00 429,000 8.42 years 13.41 500 14.75
15.01 –20.25 421,050 7.57 years 16.81 187,300 16.03
$ 9.87 –$20.25 1,300,850 6.66 years $13.29 638,600 $11.68
The Company franchises Aaron’s Sales & Lease Ownership stores. As of December 31,
2001 and 2000, 299 and 339 franchises had been awarded, respectively. Franchisees pay
a non-refundable initial franchise fee of $35,000 and an ongoing royalty of 5% of cash
receipts. Franchise fees and area development franchise fees are generated from the sale
of rights to develop, own and operate Aaron’s Sales & Lease Ownership stores. These fees
are recognized when substantially all of the Company’s obligations per location are satisfied
(generally at the date of the store opening). Franchise fees and area development fees
received prior to the substantial completion of the Company’s obligations are deferred. The
Company includes this income in Other Revenues in the Consolidated Statement of Earnings.
The Company has guaranteed certain debt obligations of some of the franchisees amount-
ing to $30,609,000 at December 31, 2001. The Company receives a guarantee and servicing
fee based on such franchisees’ outstanding debt obligations which it recognizes as income as
earned. The Company has recourse rights to the assets securing the debt obligations. As a
result, the Company does not expect to incur any significant losses under these guarantees.
In 1999, the Company acquired 18 sales and lease ownership stores with an aggregate
purchase price of $10,252,000. The excess cost over the fair market value of tangible assets
acquired was approximately $5,985,000. Also in 1999, the Company acquired two rent-to-
rent stores. The aggregate purchase price of these 1999 acquisitions was not significant.
During 2000, the Company acquired 20 sales and lease ownership stores including nine stores
purchased from franchisees and 10 stores located in Puerto Rico. The aggregate purchase
price of these 2000 acquisitions was $14,273,000 and the excess cost over the fair market
value of tangible assets acquired was approximately $7,150,000. During 2001, the Company
acquired 23 sales & lease ownership stores including 13 stores purchased from franchisees.
The aggregate purchase price of these 2001 acquisitions was $10,423,000 and the excess
cost over the fair market value of tangible assets acquired was approximately $4,553,000.
Also, in 2001 the Company acquired two rent-to-rent stores. The aggregate purchase price
of these 2001 rent-to-rent acquisitions was not significant.
These acquisitions were accounted for under the purchase method and, accordingly, the
results of operations of the acquired businesses are included in the Company’s results of
operations from their dates of acquisition. The effect of these acquisitions on the 2001,
2000 and 1999 consolidated financial statements was not significant.
In 2001, the Company sold three of its sales and lease ownership stores to existing fran-
chisees and sold five of its rent-to-rent stores. In 2000, the Company sold four of its rent-to-
rent stores and an additional four in 1999. The effect of these sales on the consolidated
financial statements was not significant.
Description of Products and Services of Reportable Segments
Aaron Rents, Inc. has four reportable segments: sales and lease ownership, rent-to-rent,
franchise and manufacturing. The sales and lease ownership division offers electronics, resi-
dential furniture and appliances to consumers primarily 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 sales and lease ownership concept. The
NOTE I:
FRANCHISING OF
AARON’S SALES
& LEASE OWNERSHIP
STORES
NOTE J:
ACQUISITIONS AND
DISPOSITIONS
NOTE K:
SEGMENTS