Aarons 2005 Annual Report Download - page 40

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Notes to Consolidated Financial Statements
First Second Third Fourth
(In Thousands, Except Per Share) Quarter Quarter Quarter Quarter
YEAR ENDED DECEMBER 31, 2005
Revenues $279,348 $271,338 $278,667 $296,152
Gross Profit* 142,260 139,797 142,287 147,315
Earnings Before Taxes 29,618 25,644 13,506 23,569
Net Earnings 18,422 16,120 8,843 14,608
Earnings Per Share .37 .32 .18 .29
Earnings Per ShareAssuming Dilution .36 .32 .17 .29
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
* 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.
Note L: Related Party Transactions
The Company leases certain properties under capital leases
with certain related parties that are more fully described in
Note D above.
As part of its marketing program, the Company sponsors
professional driver Michael Waltrip’s Aaron’s Dream Machine
in the NASCAR Busch Series. In 2005, as part of this market-
ing program, the Company began sponsoring a driver develop-
ment program implemented by Mr. Waltrip’s company. The
two drivers participating in the driver development program for
2005 are both the sons of the president of the Company’s sales
and lease ownership division. The portion of the Company’s
sponsorship of Michael Waltrip attributable to the driver
development program is $890,000 for 2005.
Note M: Effects of Hurricanes Katrina and Rita
Operating expenses for the year also include the write off
of $4.4 million of rental merchandise and property destroyed
or severely damaged by Hurricanes Katrina and Rita, of which
approximately $1.9 million is expected to be covered by insur-
ance proceeds. The net pre-tax expense recorded for the year
for these damages is $2.5 million. In addition, included in
other income for 2005 is $934,000 of expected proceeds from
business interruption insurance associated with the operations
of hurricane affected areas.
Note N: Quarterly Financial Information (Unaudited)
During the fourth quarter of 2004, the Company recorded
an adjustment reducing the liability for personal property
taxes and personal property tax expense by $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.
In addition, during the fourth quarter of 2004, an adjustment
was recorded relating to the Company’s treatment of vendor
consideration under EITF 02-16. This adjustment resulted in
decreases in rental merchandise net of depreciation of
$579,000, rental merchandise depreciation expense of
$126,000, retail cost of goods sold of $146,000, and non-
retail cost of goods sold of $202,000, offset by an increase
in advertising expenses, included in operating expenses in
the accompanying consolidated statements of earnings,
of $1.1 million.