Aarons 2005 Annual Report Download - page 37

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35
Notes to Consolidated Financial Statements
The following table summarizes information about stock
options outstanding at December 31, 2005:
Options Outstanding Options Exercisable
Weighted Average
Number Outstanding Remaining Weighted Average Number Exercisable Weighted Average
Range of Exercise Prices December 31, 2005 Contractual Life (in years) Exercise Price December 31, 2005 Exercise Price
$ 4.38 – 10.00 1,622,626 3.78 $ 6.51 1,477,501 $ 6.28
10.01 – 15.00 689,250 8.04 14.02 3,000 13.49
15.01 – 20.00 108,750 7.78 15.60 — —
20.01 – 24.94 605,646 8.90 22.40 2,000 21.84
$ 4.38 – 24.94 3,026,272 5.92 $11.73 1,482,501 $ 6.31
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 January1, 2003 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
Granted 102 23.17
Exercised (266) 8.01
Forfeited (133) 18.39
Outstanding at December 31, 2005 3,026 $11.73
Exercisable at December 31, 2005 1,483 $ 6.31
Note I: Franchising of Aaron’s Sales &
Lease Ownership Stores
The Company franchises Aaron’s Sales & Lease Ownership
stores. As of December 31, 2005 and 2004, 664 and 658
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’sobligations
per location aresatisfied, generally at the date of the store
opening. Franchise fees and area development fees received
before the substantial completion of the Company’s obligations
aredeferred. 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.
Franchise agreement fee revenue was $3.0 million, $3.3
million, and $2.2 million and royalty revenues $21.6 million,
$17.8 million, and $14.0 million for the years ended December
31, 2005, 2004 and 2003, respectively.Deferred franchise and
area development agreement fees, included in customer deposits
and advance payments in the accompanying consolidated
balance sheets, were $5.2 million and $4.8 million as of
December 31, 2005 and 2004, respectively.
Franchised Aaron’s Sales & Lease Ownership store activity
is summarized as follows:
2005 2004 2003
Franchised stores open at January 1 357 287 232
Opened 71 79 79
Added through acquisition 0 12 3
Purchased by the Company (35) (19) (26)
Closed (1) (2) (1)
Franchised stores open
at December 31 392 357 287