Aarons 2007 Annual Report Download - page 42

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Notes to Consolidated Financial Statements
Franchised Aaron’s Sales and Lease Ownership store
activity is summarized as follows:
2007 2006 2005
Franchised stores open at
January 1, 441 392 357
Opened 65 75 71
Added through acquisition 9 0 0
Purchased from the Company 11 3 0
Purchased by the Company (39) (28) (35)
Closed (3) (1) (1)
Franchised stores open at
December 31, 484 441 392
Company-operated Aaron’s Sales and Lease Ownership
store activity is summarized as follows:
2007 2006 2005
Company-operated stores open
at January 1, 845 748 616
Opened 145 78 82
Added through acquisition 39 40 56
Closed, sold or merged (15) (21) (6)
Company-operated stores open
at December 31, 1,014 845 748
In 2007, the Company acquired the rental contracts,
merchandise, and other related assets of 77 stores, including
39 franchised stores, and merged certain acquired stores
into existing stores, resulting in a net gain of 51 stores. In
2006, the Company acquired the rental contracts, merchan-
dise, and other related assets of 40 stores, including 28
franchised stores, and merged certain acquired stores into
existing stores, resulting in a net gain of 37 stores. In 2005,
the Company acquired the rental contracts, merchandise, and
other related assets of 96 stores, including 35 franchised
stores, and merged certain acquired stores into existing
stores, resulting in a net gain of 56 stores.
NOTE J: ACQUISITIONS AND DISPOSITIONS
During 2007, the Company acquired the rental contracts,
merchandise, and other related assets of a net 39 sales and
lease ownership stores for an aggregate purchase price of
$57.3 million. Fair value of acquired tangible assets included
$20.4 million for rental merchandise, $2.2 million for fixed
assets, and $241,000 for other assets. Fair value of liabilities
assumed approximated $499,000. The excess cost over
the fair value of the assets and liabilities acquired in 2007,
representing goodwill, was $31.3 million. The fair value of
acquired separately identifiable intangible assets included
$2.7 million for customer lists and $1.1 million for acquired
franchise development rights. The estimated amortization
of these customer lists and acquired franchise development
rights in future years approximates $1.6 million, $1.1
million, $178,000, $168,000, and $141,000 for 2008, 2009,
2010, 2011, and 2012, respectively. The purchase price
allocations for certain acquisitions during December 2007
are preliminary pending finalization of the Company’s
assessment of the fair values of tangible assets acquired.
During 2006, the Company acquired the rental contracts,
merchandise, and other related assets of a net 40 sales and
lease ownership stores for an aggregate purchase price of
$32.4 million. Fair value of acquired tangible assets included
$13.3 million for rental merchandise, $1.5 million for fixed
assets, and $154,000 for other assets. Fair value of liabilities
assumed approximated $65,000. The excess cost over the
fair value of the assets and liabilities acquired in 2006,
representing goodwill, was $15.5 million. The fair value of
acquired separately identifiable intangible assets included
$1.4 million for customer lists and $885,000 for acquired
franchise development rights. The estimated amortization
of these customer lists and acquired franchise development
rights in future years approximates $857,000, $582,000,
$115,000, $112,000, and $106,000 for 2007, 2008, 2009,
2010, and 2011, respectively.
The results of operations of the acquired businesses are
included in the Company’s results of operations from their
dates of acquisition. The effect of these acquisitions on the
2007, 2006 and 2005 consolidated financial statements was
not significant.
The Company sold eleven, three, and five of its sales
and lease ownership locations to franchisees in 2007, 2006,
and 2005, respectively. The effect of these sales on the
consolidated financial statements was not significant. The
Company also sold the assets of 12 of its sales and lease
ownership locations in Puerto Rico to an unrelated third
party in the second quarter of 2006. The Company received
$16.0 million in cash proceeds, recognized a $7.2 million
gain, and disposed of goodwill of $1.0 million in conjunction
with the 2006 sales.