Aarons 2009 Annual Report Download - page 20

primarily resulted from the maturing of new Company-operated
sales and lease ownership stores, less new store start-up expenses,
and the 8.1% increase in same store revenues previously men-
tioned. Additionally, the decrease as a percentage of total rev-
enues was related to a reduction in expenses in certain areas.
Depreciation of lease merchandise increased $45.1 million
to $475.0 million in 2009 from $429.9 million during the com-
parable period in 2008, a 10.5% increase. As a percentage of
total lease revenues and fees, depreciation of lease merchandise
decreased to 36.2% from 36.5% a year ago, primarily due to
product mix and lower product cost from favorable purchasing
trends.
Interest expense decreased to $4.3 million in 2009 compared
with $7.8 million in 2008, a 45.0% decrease. The decrease in
interest expense was due to lower debt levels during 2009.
Income tax expense increased $9.8 million to $63.6 million
in 2009, compared with $53.8 million in 2008, representing an
18.1% increase. Aaron’s effective tax rate decreased to 36.0%
in 2009 from 38.6% in 2008 primarily related to the favor-
able impact of a $2.3 million reversal of previously recorded
liabilities for uncertain tax positions due to statue of limitations
expiration.
Net Earnings from Continuing Operations
Net earnings from continuing operations increased $27.1 million
to $112.9 million in 2009 compared with $85.8 million in 2008,
representing a 31.6% increase. As a percentage of total revenues,
net earnings from continuing operations were 6.4% and 5.4% in
2009 and 2008, respectively. The increase in net earnings from
continuing operations was primarily the result of the maturing of
new company-operated sales and lease ownership stores added
over the past several years, contributing to an 8.1% increase in
same store revenues, and a 17.6% increase in franchise royalties
and fees.
Discontinued Operations
Loss from discontinued operations (which represents the loss from
the former Aaron’s Corporate Furnishings division), net of tax, was
$277,000 in 2009, compared to net earnings of $4.4 million in
2008. Included in the 2008 results is a $1.2 million pre-tax gain on
the sale of substantially all of the assets of the Aaron’s Corporate
Furnishings division to CORT Business Services Corporation in the
fourth quarter of 2008.
Year Ended December 31, 2008 Versus Year Ended
December 31, 2007
The Aaron’s Corporate Furnishings division is reflected as a dis-
continued operation for all periods presented. The following table
shows key selected financial data for the years ended December
31, 2008 and 2007, and the changes in dollars and as a percentage
to 2008 from 2007.
Year Ended Year Ended Increase/(Decrease) % Increase/
December 31, December 31, in Dollars to 2008 (Decrease) to
(In Thousands) 2008 2007 from 2007 2008 from 2007
Revenues:
Lease Revenues and Fees $1,178,719 $1,045,804 $ 132,915 12.7%
Retail Sales 43,187 34,591 8,596 24.9
Non-Retail Sales 309,326 261,584 47,742 18.3
Franchise Royalties and Fees 45,025 38,803 6,222 16.0
Other 16,351 14,157 2,194 15.5
1,592,608 1,394,939 197,669 14.2
Costs and Expenses:
Retail Cost of Sales 26,379 21,201 5,178 24.4
Non-Retail Cost of Sales 283,358 239,755 43,603 18.2
Operating Expenses 705,566 617,106 88,460 14.3
Depreciation of Lease Merchandise 429,907 391,538 38,369 9.8
Interest 7,818 7,587 231 3.0
1,453,028 1,277,187 175,841 13.8
Earnings From Continuing
Operations Before Income Taxes 139,580 117,752 21,828 18.5
Income Taxes 53,811 44,327 9,484 21.4
Net Earnings From Continuing
Operations 85,769 73,425 12,344 16.8
Earnings From Discontinued
Operations, Net of Tax 4,420 6,850 (2,430) (35.5)
Net Earnings $ 90,189 $ 80,275 $ 9,914 12.4%

