Aarons 2004 Annual Report Download - page 32

30
The following table summarizes information about stock
options outstanding at December 31, 2004:
Franchise agreement fee revenue approximated $3.3
million, $2.2 million, and $1.6 million and royalty revenues
approximated $17.8 million, $14.0 million, and $12.3
million for the years ended December 31, 2004, 2003 and
2002, respectively. Deferred franchise and area development
agreement fees, included in customer deposits and advance
payments in the accompanying consolidated balance sheets,
approximated $4.8 million and $3.8 million as of December
31, 2004 and 2003, respectively.
Franchised Aaron’s Sales & Lease Ownership store
activity is summarized as follows:
2004 2003 2002
Franchise stores open at January 1 287 232 209
Opened 79 79 27
Added through acquisition 12 3 4
Purchased by the Company (19) (26) (5)
Closed or liquidated (2) (1) (3)
Franchise stores open
at December 31 357 287 232
Company-operated Aaron’s Sales & Lease Ownership
store activity is summarized as follows:
2004 2003 2002
Company-operated stores
open at January 1 500 412 364
Opened 68 38 27
Added through acquisition 61 59 30
Closed or merged (13) (9) (9)
Company-operated stores open
at December 31 616 500 412
In 2004 the Company acquired the rental contracts,
merchandise, and other related assets of 85 stores, including
19 franchise stores. Many of these stores and/or their
accompanying assets were merged into other stores resulting
in a net gain of 61 stores. In 2003 the Company acquired the
rental contracts, merchandise, and other related assets of 98
stores, including 26 franchise stores. Many of these stores
and/or their accompanying assets were merged into other
stores resulting in a net gain of 59 stores. The 2002 acquisi-
tions were primarily additional new store locations.
Options Outstanding Options Exercisable
Weighted Average
Number Outstanding Remaining Weighted Average Number Exercisable Weighted Average
Range of Exercise Prices December 31,2004 Contractual Life (in years) Exercise Price December 31,2004 Exercise Price
$ 4.38 – 10.00 1,910,486 5.02 $6.75 1,455,986 $6.00
10.01 – 15.00 711,750 9.03 14.01
15.01 – 20.00 112,500 8.79 15.64
20.01 – 24.86 588,138 9.79 22.26
$ 4.38 – 24.86 3,322,874 6.85 $11.35 1,455,986 $ 6.00
The table below summarizes option activity for the
periods indicated in the Company’s stock option plans:
Weighted
Average
Options Exercise
(In Thousands) Price
Outstanding at December 31, 2001 2,928 $ 5.91
Granted 460 9.27
Exercised (220) 6.12
Forfeited (158) 7.71
Outstanding at December 31, 2002 3,010 6.31
Granted 738 13.29
Exercised (321) 6.18
Forfeited (142) 8.08
Outstanding at December 31, 2003 3,285 7.82
Granted 865 19.79
Exercised (738) 5.30
Forfeited (89) 13.27
Outstanding at December 31, 2004 3,323 $11.35
Exercisable at December 31, 2004 1,456 $ 6.00
Note I: Franchising of Aaron’s Sales & Lease
Ownership Stores
The Company franchises Aaron’s Sales & Lease
Ownership stores. As of December 31, 2004 and 2003,
658 and 528 franchises had been awarded, respectively.
Franchisees typically pay a non-refundable initial franchise
fee of $50,000 and an ongoing royalty of either 5% or 6%
of gross revenues. Franchise fees and area development fees
are generated from the sale of rights to develop, own and
operate Aaron’s Sales & Lease Ownership stores. These
fees are recognized as income 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. Substantially all of the amounts
reported as non-retail sales and non-retail cost of sales in the
accompanying consolidated statements of earnings relate to
the sale of rental merchandise to franchisees.