Aarons 2012 Annual Report Download - page 43

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33
Net Earnings from Continuing Operations
Information about our earnings before income taxes by reportable segment is as follows:
Year Ended December 31,
Change
2012
2011
2010
2012 vs. 2011
2011 vs. 2010
(In Thousands)
$
%
$
%
EARNINGS BEFORE INCOME TAXES:
Sales and Lease Ownership
$ 243,531
$ 143,686
$ 159,417
$ 99,845
69.5%
$ (15,731)
(9.9)%
HomeSmart
(6,962)
(7,283)
(318)
321
(4.4)
(6,965)
nmf
Franchise
52,672
49,577
45,935
3,095
6.2
3,642
7.9
Manufacturing
382
2,960
3,218
(2,578)
(87.1)
(258)
(8.0)
Other
(11,854)
818
(12,437)
(12,672)
nmf
13,255
(106.6)
Earnings Before Income Taxes for
Reportable Segments
277,769
189,758
195,815
88,011
46.4
(6,057)
(3.1)
Elimination of Intersegment
Profit
(393)
(2,960)
(3,218)
2,567
(86.7)
258
(8.0)
Cash to Accrual and Other Adjustments
(521)
(3,421)
(1,811)
2,900
(84.8)
(1,610)
88.9
Total
$ 276,855
$ 183,377
$ 190,786
$ 93,478
51.0%
$ (7,409)
(3.9)%
nmf - Calculation is not meaningful
Year Ended December 31, 2012 Versus Year Ended December 31, 2011
Earnings before income taxes increased $93.5 million, or 51%, primarily due to a $99.8 million, or 69.5%, increase in
the Sales and Lease Ownership segment, a $3.1 million, or 6.2%, increase in the Franchise segment, and a $321,000
increase in the HomeSmart segment, partially offset by a decrease of $2.6 million in the Manufacturing segment, and
$12.7 million in the ―Other‖ segment, primarily due to the closure of the Aaron’s Office Furniture division store and
retirement charges of $10.4 million associated with the retirement of the Company’s founder and former Chairman of
the Board..
Net earnings increased $59.3 million to $173.0 million in 2012 compared with $113.8 million in 2011, representing a
52.1% increase. As a percentage of total revenues, net earnings from continuing operations were 7.8% and 5.6% in
2012 and 2011, respectively. Additionally, net earnings for 2012 included the recognition of income of $35.5 million
related to the Alford vs. Aaron Rents, Inc. et al case previously discussed. The Company’s increased profitability of
new Company-operated sales and lease ownership stores added over the past several years, contributing to a 5.1%
increase in same store revenues and a 5.4% increase in franchise royalties and fees.
Year Ended December 31, 2011 Versus Year Ended December 31, 2010
Earnings before income taxes decreased $7.4 million, or 3.9%, primarily due to a $15.7 million, or 9.9%, decrease in the
Sales and Lease Ownership segment and a $7.0 million decrease in the HomeSmart segment, partially offset by a $3.6
million, or 7.9%, increase in the Franchise segment and a $13.3 million increase in the ―Other‖ segment, primarily due
to the closure of 14 Aaron’s Office Furniture division stores during 2010.
Net earnings decreased $4.6 million to $113.8 million in 2011 compared with $118.4 million in 2010, representing a
3.9% decrease. As a percentage of total revenues, net earnings from continuing operations were 5.6% and 6.3% in 2011
and 2010, respectively. Additionally, the decrease in net earnings for 2011 was impacted by litigation expense of $36.5
million related to the Alford vs. Aaron Rents, Inc. et al case previously discussed partially offset by an increase in
profitability of new Company-operated sales and lease ownership stores added over the past several years, contributing
to a 4.4% increase in same store revenues, and a 7.0% increase in franchise royalties and fees.
Balance Sheet
Cash and Cash Equivalents. The Company’s cash balance decreased to $129.5 million at December 31, 2012 from
$176.3 million at December 31, 2011. The $46.7 million decrease in our cash balance is due to cash flow generated