Aarons 2011 Annual Report Download - page 19

Revenues
The 7.1% increase in total revenues, to $1.877 billion in 2010 from
$1.753 billion in 2009, was due mainly to a $117.9 million or 7.0%,
increase in revenues from the Sales and Lease Ownership segment
and $6.2 million, or 11.7%, increase in revenues from the Franchise
segment.
Sales and Lease Ownership segment revenues increased due
to a 7.3% increase in lease revenues and fees and 10.4% increase
in non-retail sales (which mainly represents merchandise sold to
our franchisees). Lease revenues and fees within the Sales and
Lease Ownership segment increased due to a net addition of 112
Company-operated stores since the beginning of 2009 and a 3.5%
increase in same store revenues. Non-retail sales increased primarily
due to net additions of 160 franchised stores since the beginning
of 2009.
Franchise segment revenues increased due to a $5.6 million, or
13.2%, increase in royalty income from franchisees. Franchise roy-
alty income increased primarily due to the growth in the number
of franchised stores and the maturation of franchised stores opened
over the last few years.
The $91.3 million increase in lease revenues and fees revenues
and $34.3 million in non-retail sales was primarily attributable to
our Sales and Lease Ownership segment discussed above. The $6.2
million increase in franchise royalties and fees was attributable to
our Franchise segment also discussed above.
The 6.5% decrease in revenues from retail sales, to $40.6 mil-
lion in 2010 from $43.4 million in the comparable period in 2009,
was due primarily to the closure of the majority of the Aaron’s
Office Furniture stores in 2010.
Other revenues decreased 27.6% to $12.9 million in 2010 from
$17.7 million in 2009. Included in other revenues in 2010 is a
$1.9 million gain from the sales of 11 stores. Included in other
revenues in 2009 is a $7.8 million gain on the sales of 39 stores.
Costs and Expenses
Retail cost of sales decreased 10.6% to $23.0 million in 2010
compared to $25.7 million in 2009, and as a percentage of retail
sales, decreased to 56.7% in 2010 from 59.3% in 2009 primarily
as a result of decline in the volume of lower margin office
furniture retail sales associated with the closure of 14 Aaron’s
Office Furniture stores.
Non-retail cost of sales increased 10.4%, to $330.9 million in
2010, from $299.7 million for the comparable period in 2009, and
as a percentage of non-retail sales, decreased slightly to 91.3% in
2010 from 91.4% in 2009.
Operating expenses in 2010 increased $53.3 million to $824.9
million from $771.6 million in 2009, a 6.9% increase. As a per-
centage of total revenues, operating expenses were 44.0% for both
the year ended December 31, 2010 and 2009.
Year Ended Year Ended Increase/(Decrease) % Increase/
December 31, December 31, in Dollars to 2010 (Decrease) to
(In Thousands) 2010 2009 from 2009 2010 from 2009
REVENUES:
Lease Revenues and Fees $1,402,053 $1,310,709 $ 91,344 7.0%
Retail Sales 40,556 43,394 (2,838) (6.5)
Non-Retail Sales 362,273 327,999 34,274 10.4
Franchise Royalties and Fees 59,112 52,941 6,171 11.7
Other 12,853 17,744 (4,891) (27.6)
1,876,847 1,752,787 124,060 7.1
COSTS AND EXPENSES:
Retail Cost of Sales 23,013 25,730 (2,717) (10.6)
Non-Retail Cost of Sales 330,918 299,727 31,191 10.4
Operating Expenses 824,929 771,634 53,295 6.9
Depreciation of Lease Merchandise 504,105 474,958 29,147 6.1
Interest 3,096 4,299 (1,203) (28.0)
1,686,061 1,576,348 109,713 7.0
Earnings From Continuing
Operations Before Income Taxes 190,786 176,439 14,347 8.1
Income Taxes 72,410 63,561 8,849 13.9
Net Earnings From Continuing
Operations 118,376 112,878 5,498 4.9
Loss From Discontinued
Operations, Net of Tax — (277) 277 (100.0)
Net Earnings $ 118,376 $ 112,601 $ 5,775 5.1%
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