Aarons 2006 Annual Report Download - page 20

18
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2006 VERSUS YEAR ENDED
DECEMBER 31, 2005
The following table shows key selected financial data for the
years ended December 31, 2006 and 2005, and the changes in
dollars and as a percentage to 2006 from 2005.
Year Ended Year Ended Increase % Increase
December 31, December 31, in Dollars to 2006 to 2006
(In Thousands) 2006 2005 from 2005 from 2005
REVENUES:
Rentals and Fees $ 992,791 $ 845,162 $147,629 17.5%
Retail Sales 62,319 58,366 3,953 6.8
Non-Retail Sales 224,489 185,622 38,867 20.9
Franchise Royalties and Fees 33,626 29,781 3,845 12.9
Other 13,367 6,574 6,793 103.3
1,326,592 1,125,505 201,087 17.9
COSTS AND EXPENSES:
Retail Cost of Sales 41,262 39,054 2,208 5.7
Non-Retail Cost of Sales 207,217 172,807 34,410 19.9
Operating Expenses 579,565 507,158 72,407 14.3
Depreciation of Rental Merchandise 364,109 305,630 58,479 19.1
Interest 9,729 8,519 1,210 14.2
1,201,882 1,033,168 168,714 16.3
EARNINGS BEFORE INCOME TAXES 124,710 92,337 32,373 35.1
INCOME TAXES 46,075 34,344 11,731 34.2
NET EARNINGS $ 78,635 $ 57,993 $ 20,642 35.6%
REVENUES
The 17.9% increase in total revenues, to $1.327 billion in 2006
from $1.126 billion in 2005, was due mainly to a $147.6 million,
or 17.5%, increase in rentals and fees revenues, plus a $38.9
million increase in non-retail sales. The $147.6 million increase
in rentals and fees revenues was attributable to a $142.4 million
increase from our sales and lease ownership division, which had
a 7.2% increase in same store revenues during the 24 month
period ended December 31, 2006 and added 229 company-
operated stores since the beginning of 2005. The growth in our
sales and lease ownership division was augmented by a $5.5
million increase in revenues in our corporate furnishings division.
Additionally, included in other revenues in 2006 was a $7.2
million gain from the sale of the assets of our 12 stores located
in Puerto Rico and three additional stores located in the conti-
nental United States. We received $16.0 million in cash proceeds
and disposed of goodwill of $1.0 million in conjunction with
these sales.
The 6.8% increase in revenues from retail sales, to $62.3
million in 2006 from $58.4 million in 2005, was primarily due
to an increase of $3.7 million in the sales and lease ownership
division as a result of the increased demand and growing store
base described above. Retail sales represents sales of both
new and returned rental merchandise.
The 20.9% increase in non-retail sales (which mainly
represents merchandise sold to our franchisees), to $224.5
million in 2006 from $185.6 million in 2005, was due to
the growth of our franchise operations and our distribution
network. The total number of franchised sales and lease
ownership stores at December 31, 2006 was 441, reflecting
a net addition of 84 stores since the beginning of 2005.
The 12.9% increase in franchise royalties and fees, to $33.6
million in 2006 from $29.8 million in 2005, primarily reflects an
increase in royalty income from franchisees, increasing 17.6%
to $25.4 million in 2006 compared to $21.6 million in 2005.
The increase in royalty income from franchisees was partially
offset by decreased franchise and financing fee revenues.
Revenues increased in this area primarily due to the previously
mentioned growth of franchised stores and an increase in
certain royalty rates.
The 103.3% increase in other revenues, to $13.4 million in
2006 from $6.6 million in 2005, is primarily attributable to a
$7.2 million gain from the sale of the assets of our 12 stores
located in Puerto Rico and three additional stores in the con-
tinental United States. In addition, included in other income
in 2005 is $934,000 of proceeds from business interruption
insurance associated with the operations of hurricane-affected
areas and a $565,000 gain in 2005 on the sale of our holdings
of Rent-Way, Inc. common stock.