Aarons 2012 Annual Report Download - page 24

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Seasonality
Aaron's revenue mix is moderately seasonal, with the first quarter of each year generally resulting in higher revenues
than any other quarter during the year, primarily due to realizing the full benefit of business that historically gradually
increases in the fourth quarter as a result of the holiday season, as well as the receipt by our customers in the first
quarter of federal income tax refunds. Generally, our customers will more frequently exercise the early purchase option
on their existing lease agreements or purchase merchandise off the showroom floor during the first quarter of the year.
We expect this trend to continue in future periods. Furthermore, we tend to experience slower growth in the number of
agreements on lease in the third quarter of each year when compared to the other quarters of the year. We also expect
this trend to continue in future periods unless we significantly change our store base as a result of new store openings or
opportunistic acquisitions and dispositions.
Working Capital
We are required to maintain significant levels of lease merchandise in order to provide the enhanced service levels
demanded by the nature of our business and our customers, and to ensure timely delivery of our products. Consistent
and dependable sources of liquidity are required to maintain such merchandise levels. Failure to maintain appropriate
levels of merchandise could materially adversely affect our relationships with our customers and adversely affect our
business. We believe our operating cash flows, credit availability under our loan agreements and other sources of
financing are adequate to finance our normal liquidity requirements. We will continue to aggressively pursue
merchandise management, maintain tight cost controls and limit capital expenditures. However, deterioration in our
markets or significant additional cash expenditures above our normal liquidity requirements could require supplemental
financing or other funding sources. There can be no assurance that such supplemental financing or other sources of
funding can be obtained or will be obtained on terms favorable to us.
Government Regulation
Our operations are extensively regulated by and subject to the requirements of various federal, state and local laws and
regulations. In general such laws regulate applications for leases, late fees, other finance rates, the form of disclosure
statements, the substance and sequence of required disclosures, the content of advertising materials and certain
collection procedures. Violations of certain provisions of these laws may result in penalties ranging from nominal
amounts up to and including forfeiture of fees and other amounts due on leases. We do not anticipate that the various
laws and regulations have had or will have a material adverse effect on our operations. However, we are unable to
predict the nature or effect on our operations or earnings of unknown future legislation, regulations and judicial
decisions or future interpretations of existing and future legislation or regulations relating to our operations, and there
can be no assurance that future laws, decisions or interpretations will not have a material adverse effect on our
operations and earnings.
A summary of certain of the state and federal laws under which we operate follows. This summary does not purport to
be a complete summary of the laws referred to below or of all the laws regulating our operations.
Currently, 47 states and the District of Columbia specifically regulate rent-to-own transactions, including states in
which we currently operate Aaron's Sales & Lease Ownership and HomeSmart stores. Most state lease purchase laws
require rent-to-own companies to disclose to their customers the total number of payments, total amount and timing of
all payments to acquire ownership of any item, any other charges that may be imposed, and miscellaneous other items.
The more restrictive state lease purchase laws limit the total amount that a customer may be charged for an item, or
regulate the amount of deemed "interest" that rent-to-own companies may charge on rent-to-own transactions, generally
defining "interest" as lease fees paid in excess of the "retail" price of the goods. Our long-established policy in all states
is to disclose the terms of our lease purchase transactions as a matter of good business ethics and customer service. We
believe we are in material compliance with the various state lease purchase laws in those states where we use a lease
purchase form of agreement. At the present time, no federal law specifically regulates the rent-to-own industry. Federal
legislation to regulate the industry has been proposed from time to time.
There has been increased legislative attention in the United States, at both the state and federal levels, on consumer debt
transactions in general, which may result in an increase in legislative regulatory efforts directed at the rent-to-own
industry. We cannot predict whether any such legislation will be enacted and what the impact of such legislation would