Aarons 2012 Annual Report Download - page 58

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48
NOTE 1: BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Aaron’s, Inc. (the ―Company‖ or ―Aaron’s‖) is a leading specialty retailer engaged in the business of leasing and
selling consumer electronics, computers, residential furniture, appliances and household accessories throughout the
United States and Canada. The Company’s major operating divisions are the Sales & Lease Ownership division
(established as a monthly payment concept), the HomeSmart division (established as a weekly payment concept)
and the Woodhaven Furniture Industries division, which manufactures upholstered furniture and bedding
predominantly for use by Company-operated and franchised stores. The Company’s Sales & Lease Ownership
division includes the Company’s RIMCO stores, which lease automobile wheels, tires and rims under sales and
lease ownership agreements. The Company began ceasing the operations of the Aaron’s Office Furniture division in
June of 2010. The Company closed 14 of its Aaron’s Office Furniture stores during 2010 and closed the remaining
store in 2012. Refer to Note 2 for additional disclosure regarding the disposal of the Aaron’s Office Furniture
division.
The following table presents store count by ownership type:
Stores at December 31 (Unaudited)
2012
2011
2010
Company-operated stores
Sales and Lease Ownership
1,227
1,144
1,135
RIMCO
19
16
11
HomeSmart
78
71
3
Aaron’s Office Furniture
-
1
1
Total Company-operated stores
1,324
1,232
1,150
Franchised stores1
749
713
664
Systemwide stores
2,073
1,945
1,814
1As of December 31, 2012, 2011 and 2010, 929, 943 and 946 franchises had been awarded, respectively.
Basis of Presentation
The preparation of the Company’s consolidated financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates and assumptions that affect the
amounts reported in these financial statements and accompanying notes. Actual results could differ from those
estimates. Generally, actual experience has been consistent with management's prior estimates and assumptions.
Management does not believe these estimates or assumptions will change significantly in the future absent
unsurfaced or unforeseen events.
Certain reclassifications have been made to the prior periods to conform to the current period presentation. The
HomeSmart division has been reclassified from the Other segment to the HomeSmart segment in all periods
presented. Refer to Note 12 for the segment disclosure. In all periods presented, ―bad debt expense‖ has been
separately presented from ―change in accounts receivable‖ in the consolidated statements of cash flows.
Additionally, interest income has been reclassified from ―Other‖ revenues and presented as a component of non-
operating income and expenses in the consolidated statements of earnings for all periods presented.
Principles of Consolidation and Variable Interest Entities
The consolidated financial statements include the accounts of Aaron’s, Inc. and its wholly owned subsidiaries.
Intercompany balances and transactions between consolidated entities have been eliminated.
On October 14, 2011, the Company purchased 11.5% of newly issued shares of common stock of Perfect Home
Holdings Limited (―Perfect Home‖), a privately-held rent-to-own company that is primarily financed by
subordinated debt. Perfect Home is based in the United Kingdom and operates 55 retail stores as of December 31,
2012. As part of the transaction, the Company also received notes and an option to acquire the remaining interest in
Perfect Home at any time through December 31, 2013. If the Company does not exercise the option prior to
December 31, 2013, it will be obligated to sell the common stock and notes back to Perfect Home at the original
purchase price plus interest. The Company’s investment is denominated in British Pounds.