Aarons 2006 Annual Report Download - page 14

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We are almost a logistics business now rather
than a furnishings business, and the challenge is
maintaining a state of readiness to respond to
any challenge. Recently, major storms destroyed
hundreds of homes in central Florida. Within
days, major insurance companies and relief
organizations contacted us to furnish temporary
homes for those displaced. We also furnished
hundreds and hundreds of temporary homes
and offices after Hurricanes Katrina and Rita.
We offer a full line of products from furniture
to electronics to forks and towels. Corporations
use us as a corporate relocation service, an
alternative to extended-stay hotels.
We are often behind the scenes at major events.
We furnish all of the offices and trailers used in
the NFL Super Bowl and certain NASCAR races.
The buying power of Aaron’s is an advantage in our
procurement process, and the Company’s fulfillment centers
give us superior service capability. In addition, the Aaron’s
name and reputation are a major competitive advantage.
Over 50 years later, the original business is solid and
our market share is growing.
Gil Danielson
Executive Vice President, Chief Financial Officer,
Aaron Rents, Inc.
Years with Company: 17
Due to the nature of our business, Aaron Rents requires capital to grow. A typical new store needs
approximately $600,000 in available cash to fund its first
12 months of operations. The majority of that cash is used
to purchase merchandise to outfit the showroom floor and
to be leased to our customers. Normally, a store will begin
to generate positive cash flow in its second year, and
profitability continues to improve as a store matures.
As long as we continue to open stores and our revenues
grow, we will require additional capital. Over the years, we
have obtained this capital through bank credit facilities,
private debt placements and secondary stock offerings. A
stock offering in 2006 generated $84 million in proceeds
that were used to pay down bank borrowings. With this
stock offering and our strong balance sheet, we are in
the position to adequately fund our expansion for the
foreseeable future. We also have a Company-sponsored
credit facility that has been used for many years by our
franchisees to fund their growth. This financing facility
has been a significant factor in the success of our
franchise system.
Growth