Aarons 2009 Annual Report Download - page 41

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On September 12, 2008, the Company entered into an agreement
with CORT Business Services Corporation to sell substantially all
of the assets of its Aaron’s Corporate Furnishings division and to
transfer certain of the Aaron’s Corporate Furnishings division’s lia-
bilities to CORT. The Aaron’s Corporate Furnishings division, which
operated at 47 stores, primarily engaged in the business of leasing
and selling residential and office furniture, electronics, appliances,
housewares and accessories. The Company consummated the sale
of the Aaron’s Corporate Furnishings division in the fourth quarter
of 2008.
The consideration for the assets consisted of $72 million
in cash plus payments for certain accounts receivable of the
Aaron’s Corporate Furnishings division, subject to certain adjust-
ments, including for differences in the amount of the Aaron’s
Corporate Furnishings division’s inventory at closing and in the
monthly rent potential of the division’s merchandise on lease
at closing as compared to certain benchmark ranges set forth
in the purchase agreement. The assets transferred include all of
the Aaron’s Corporate Furnishings division’s lease contracts with
customers and certain other contracts, certain inventory and
accounts receivable and store leases or subleases for 27 loca-
tions. CORT assumed performance obligations under transferred
lease and certain other contracts and customer deposits. The
Company retained other liabilities of the Aaron’s Corporate
Furnishings division, including its accounts payable and accrued
expenses. Included in the 2008 results is a $1.2 million pre-tax
gain on the sale of the Aaron’s Corporate Furnishings division in
the fourth quarter of 2008.
Summarized operating results for the Aaron’s Corporate
Furnishings division for the years ended December 31 are as fol-
lows:
(In Thousands) 2009 2008 2007
Revenues $ — $83,359 $99,972
(Loss) Earnings Before
Income Taxes (447) 7,162 11,093
(Loss) Earnings From
Discontinued Operations,
Net of Tax (277) 4,420 6,850
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Effective July 1, 2009, the Company adopted the Aaron’s, Inc.
Deferred Compensation Plan (the “Plan”) an unfunded, nonquali-
fied deferred compensation plan for a select group of manage-
ment, highly compensated employees and non-employee directors.
On a pre-tax basis, eligible employees can defer receipt of up to
75% of their base compensation and up to 100% of their incen-
tive pay compensation, and eligible non-employee directors can
defer receipt of up to 100% of both their cash and stock director
fees, whether payable in cash or Company stock. In addition, the
Company may elect to make restoration matching contributions
on behalf of eligible employees to make up for certain limitations
on the amount of matching contributions an employee can receive
under the Company’s tax-qualified 401(k) plan.
Compensation deferred under the Plan is credited to each
participant’s deferral account and a deferred compensation
liability is recorded in accounts payable and accrued expenses
in our consolidated balance sheets. The deferred compensation
plan liability was approximately $713,000 as of December 31,
2009. Liabilities under the Plan are recorded at amounts due
to participants, based on the fair value of participants’ selected
investments. The obligations are unsecured general obligations
of the Company and the participants have no right, interest or
claim in the assets of the Company, except as unsecured general
creditors. The Company has established a Rabbi Trust to fund
obligations under the Plan with Company-owned life insurance
(“COLI”) contracts. The cash surrender value of these policies
totaled $772,000 as of December 31, 2009 and is included in
prepaid expenses and other assets in the consolidated balance
sheets.
Deferred compensation expense charged to operations for the
Company’s matching contributions totaled $130,000 in 2009. No
benefits have been paid as of December 31, 2009.
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