Aarons 2004 Annual Report Download - page 35

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Note L: Quarterly Financial Information (Unaudited)
First Second Third Fourth
(In Thousands, Except Per Share) Quarter Quarter Quarter Quarter
YEAR ENDED DECEMBER 31, 2004
Revenues $242,493 $230,286 $231,648 $242,053
Gross Profit* 116,856 114,641 116,320 121,466
Earnings Before Taxes 20,706 24,928 17,551 21,321
Net Earnings 12,817 15,385 10,647 13,767
Earnings Per Share .26 .31 .21 .28
Earnings Per Share Assuming Dilution .26 .30 .21 .27
YEAR ENDED DECEMBER 31, 2003
Revenues $191,260 $177,741 $188,406 $209,390
Gross Profit* 92,986 90,912 97,475 103,253
Earnings Before Taxes 13,907 13,906 13,733 16,297
Net Earnings 8,748 8,761 8,651 10,266
Earnings Per Share .18 .18 .18 .21
Earnings Per Share Assuming Dilution .18 .18 .17 .20
* Gross profit is the sum of rentals and fees, retail sales, and non-retail sales less retail cost of sales, non-retail cost of sales,
and depreciation of rental merchandise.
Management Report on Internal Control Over Financial Reporting
Management of Aaron Rents, Inc. (the “Company”)
is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rules
13a-15(f) and 15d-15(f) under the Securities Exchange Act
of 1934, as amended.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions or that the
degree of compliance with the policies or procedures may
deteriorate. Internal control over financial reporting cannot
provide absolute assurance of achieving financial reporting
objectives because of its inherent limitations. Internal control
over financial reporting is a process that involves human
diligence and compliance and is subject to lapses in judgment
and breakdowns resulting from human failures. Internal
control over financial reporting also can be circumvented by
collusion or improper management override. Because of such
limitations there is a risk that material misstatements may
not be prevented or detected on a timely basis by internal
control over financial reporting. However, these inherent
limitations are known features of the financial reporting
process. Therefore it is possible to design into the process
safeguards to reduce, though not eliminate, the risk.
The Company’s management assessed the effectiveness
of the Company’s internal control over financial reporting
as of December 31, 2004. In making this assessment, the
Company’s management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control — Integrated
Framework.
Based on our assessment, management believes that, as
of December 31, 2004, the Company’s internal control over
financial reporting is effective based on those criteria.
The Company’s independent auditor has issued an
audit report on our assessment of the Company’s internal
control over financial reporting. This report appears on the
following page.
During the fourth quarter of 2004, we recorded an adjustment reducing our liability for personal property taxes and our
personal property tax expense by approximately $1.3 million. These items are included in accounts payable and accrued
expenses in the accompanying Consolidated Balance Sheet and operating expenses in the accompanying Consolidated
Statements of Earnings, respectively.
Also during the fourth quarter of 2004, we recorded an adjustment arising from our annual examination of our treatment
of vendor consideration under EITF 02-16. This adjustment resulted in decreases in rental merchandise net of depreciation
of approximately $579,000, rental merchandise depreciation expense of approximately $126,000, retail cost of goods sold of
approximately $146,000, and non-retail cost of goods sold of approximately $202,000, offset by an increase in advertising
expenses, included in operating expenses in the accompanying consolidated statements of earnings, of approximately
$1.1 million.