Aarons 2003 Annual Report Download - page 5

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Note that non-GAAP (generally accepted
accounting principles) systemwide revenues are
calculated by adding GAAP revenues to the
revenues of the Company’s franchisees and
subtracting the Company’s royalty revenues.
Franchisee revenues, however, are not revenues
of Aaron Rents, Inc. and are not included in our
consolidated financial statements.
The aggressive growth in new Aaron’s Sales &
Lease Ownership stores over the past several
years began to contribute materially during 2003
as these stores reported higher revenues and
earnings. Approximately 27% of our sales and
lease ownership stores have been added within
the past two years. Since new stores generally
reach maturity in revenues and earnings over
a period of years, margin improvement is
expected to continue in future periods.
MacTavish Furniture Industries, the Company’s
manufacturing division, posted a record year
in 2003, manufacturing more than $60 million
(at cost) of furniture for our stores out of 10
production facilities. Aaron Rents also now
operates twelve distribution centers. We continue
to believe that vertical integration is a strategic
advantage, enabling our stores to offer rapid
delivery of a full product line to our customers
and to operate with lower inventory levels. Our
nimble manufacturing operation can respond
quickly to changes in demand and styling,
allowing us to better serve our customers.
The Company’s financial strength continues to
be a competitive advantage. We have funded
acquisition activity out of cash flow and increased
our dividend payout with little utilization of our
$87 million revolving credit facility. With our
debt-to-capital ratio the lowest in many years,
Aaron’s has the financial strength to fund
expansion goals for the foreseeable future.
Our Board of Directors was strengthened in 2003
by the addition of David L. Kolb, Chief Executive
Officer of Mohawk Industries, Inc. from 1988
to 2001. Mr. Kolb, now Chairman of the Board
of Directors of Mohawk, has broad corporate
experience and serves on a number of corporate
and educational boards. He is a valuable addition
to our Board.
During 2003, growth within the Aaron’s Sales
& Lease Ownership Division necessitated the
creation of another regional field operation.
Michael P. Ryan was named Vice President,
Northern Operations, to oversee this new region.
In addition, David A. Boggan was promoted to
Vice President, Marketing and Merchandising.
We are pleased to recognize and promote
talented employees who have contributed to
the Company’s success for a number of years.
There is more growth in store for Aaron Rents.
Our Aaron’s Sales & Lease Ownership concept
is a proven model and is in the early stages of
penetrating its market. Experience demonstrates
that these stores can be successfully operated
in any town or city with a trading area of at
least 20,000 people. With fewer than 800
stores in operation, we believe our market
potential is substantial.
Our goal is unchanged: to build Aaron’s into
the premier, market-dominant company in our
industry, recognized by our customers and peers
as the standard bearer for integrity, honesty and
fairness, and a company that earns a premium
return for its shareholders.
Reaching the $1 billion level in systemwide
revenues has been a goal for our Company for
several years. We now feel that the $2 billion
level is within reach, just a number of years away.
As always, our success is based on the dedicated
efforts of our associates and the support of our
shareholders, for which we are grateful.
R. Charles Loudermilk, Sr.
Chairman and Chief Executive Officer
Robert C. Loudermilk, Jr.
President and Chief Operating Officer
At the end of
December, we had
an additional 241
franchise stores
in our new store
pipeline.There
is more growth
in store for
Aaron Rents.