Aarons 2009 Annual Report Download - page 37

The weighted average fair value of unvested options was
$9.12 as of December 31, 2009 and 2008. The weighted average
fair value of options that vested during 2009, 2008 and 2007
was $8.03, $6.54 and $6.57, respectively.
Shares of restricted stock may be granted to employees and
directors and typically vest over approximately three years.
Restricted stock grants may be subject to one or more objec-
tive employment, performance or other forfeiture conditions as
established at the time of grant. Any shares of restricted stock
that are forfeited will again become available for issuance.
Compensation cost for restricted stock is equal to the fair market
value of the shares at the date of the award and is amortized to
compensation expense over the vesting period. Total compensa-
tion expense related to restricted stock was $1.3 million, $1.5
million and $1.7 million in 2009, 2008 and 2007, respectively.
The following table summarizes information about restricted
stock activity:
Weighted
Restricted Average
(Shares In Thousands) Stock Grant Price
Outstanding at January 1, 2009 206 $25.40
Granted —
Vested —
Forfeited (11) 25.40
Outstanding at December 31, 2009 195 $25.40
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The Company franchises Aaron’s Sales & Lease Ownership stores.
As of December 31, 2009 and 2008, 866 and 786 franchises
had been granted, respectively. Franchisees typically pay a non-
refundable initial franchise fee from $15,000 to $50,000 depend-
ing upon market size and an ongoing royalty of either 5% or 6%
of gross revenues. Franchise fees and area development fees are
generated from the sale of rights to develop, own and operate
Aaron’s Sales & Lease Ownership stores. These fees are recognized
as income when substantially all of the Company’s obligations per
location are satisfied, generally at the date of the store opening.
Franchise fees and area development fees received before the
substantial completion of the Company’s obligations are deferred.
Substantially all of the amounts reported as non-retail sales
and non-retail cost of sales in the accompanying consolidated
statements of earnings relate to the sale of lease merchandise to
franchisees.
Franchise agreement fee revenue was $3.8 million, $3.2
million and $3.4 million and royalty revenue was $42.3 million,
$36.5 million and $29.8 million for the years ended December
31, 2009, 2008 and 2007, respectively. Deferred franchise and
area development agreement fees, included in customer deposits
and advance payments in the accompanying consolidated bal-
ance sheets, were $5.3 and $5.7 million at December 31, 2009
and 2008, respectively.
Franchised Aaron’s Sales & Lease Ownership store activity is
summarized as follows:
(Unaudited) 2009 2008 2007
Franchised stores open
at January 1, 504 484 441
Opened 84 56 65
Added through acquisition 0 12 9
Purchased from the Company 37 27 11
Purchased by the Company (19) (66) (39)
Closed, sold or merged (9) (9) (3)
Franchised stores open
at December 31, 597 504 484
Company-operated Aaron’s Sales & Lease Ownership store
activity is summarized as follows:
(Unaudited) 2009 2008 2007
Company-operated stores
open at January 1, 1,037 1,014 845
Opened 85 54 145
Added through acquisition 19 66 39
Closed, sold or merged (59) (97) (15)
Company-operated stores
open at December 31, 1,082 1,037 1,014
In 2009, the Company acquired the lease contracts, merchan-
dise and other related assets of 44 stores, including 19 fran-
chised stores, and merged certain acquired stores into existing
stores, resulting in a net gain of 29 stores. In 2008, the Company
acquired the lease contracts, merchandise and other related
assets of 95 stores, including 66 franchised stores, and merged
certain acquired stores into existing stores, resulting in a net
gain of 68 stores. In 2007, the Company acquired the lease con-
tracts, merchandise and other related assets of 77 stores, includ-
ing 39 franchised stores, and merged certain acquired stores into
existing stores, resulting in a net gain of 51 stores.
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During 2009, the Company acquired the lease contracts, mer-
chandise and other related assets of a net of 29 sales and lease
ownership stores for an aggregate purchase price of $25.2 million.
Consideration transferred consisted primarily of cash. Fair value of
acquired tangible assets included $9.5 million for lease merchan-
dise, $712,000 for fixed assets and $28,000 for other assets. The
excess cost over the fair value of the assets and liabilities acquired
in 2009, representing goodwill, was $12.0 million. The fair value
of acquired separately identifiable intangible assets included $1.1
million for customer lists, $695,000 for non-compete intangibles
and $477,000 for acquired franchise development rights. The esti-
mated amortization of these customer lists and acquired franchise
development rights in future years approximates $1.2 million,
$724,000, $174,000, $58,000 and $51,000 for 2010, 2011, 2012,
2013 and 2014, respectively. The purchase price allocations for
certain acquisitions during the fourth quarter of 2009 are prelimi-
nary pending finalization of the Company’s assessment of the fair
values of tangible assets acquired.
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