Aarons 2012 Annual Report Download - page 79

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In 2012, the Sales and Lease Ownership segment acquired the lease contracts, merchandise and other related assets
of 44 stores, including 21 franchised stores, and merged certain acquired stores into existing stores, resulting in a net
gain of 21 stores. In 2011, the Sales and Lease Ownership segment acquired the lease contracts, merchandise and
other related assets of 38 stores, including seven franchised stores, and merged certain acquired stores into existing
stores, resulting in a net gain of eight stores. In 2010, the Sales and Lease Ownership segment acquired the lease
contracts, merchandise and other related assets of 30 stores, including 12 franchised stores, and merged certain
acquired stores into existing stores, resulting in a net gain of 14 stores.
In 2012, the HomeSmart operations acquired the lease contracts, merchandise and other related assets of four stores
and merged certain acquired stores into existing stores, resulting in a net gain of one store. In 2011, HomeSmart
operations acquired the lease contracts, merchandise and other related assets of 47 stores and merged certain
acquired stores into existing stores, resulting in a net gain of 44 stores.
NOTE 12: SEGMENTS
Description of Products and Services of Reportable Segments
As of December 31, 2012, the Company had five operating segments: Sales and Lease Ownership, RIMCO,
HomeSmart, Franchise and Manufacturing. The Company’s RIMCO stores lease automobile wheels, tires and rims
to customers under sales and lease ownership agreements. Although the products offered are different, these stores
are managed, monitored and operated similarly to our other sales and lease ownership stores.
The Company has evaluated the characteristics of its operating segments and has determined that certain of its
operating segments meet the aggregation criteria in ASC 280, Segment Reporting. Accordingly, the Company has
identified four reportable segments: Sales and Lease Ownership, Franchise, HomeSmart and Manufacturing. In all
periods presented, HomeSmart was reclassified from ―Other‖ to the HomeSmart segment.
The Aaron’s Sales & Lease Ownership division offers electronics, residential furniture, appliances and computers to
consumers primarily on a monthly payment basis with no credit requirements. The HomeSmart division was
established to offer electronics, residential furniture, appliances and computers to consumers on a weekly payment
basis with no credit requirements. The Company’s franchise operation sells and supports franchisees of its sales and
lease ownership concept. The Manufacturing segment manufactures upholstered furniture and bedding
predominantly for use by Company-operated and franchised stores. Therefore, the Manufacturing segment revenues
and earnings before income taxes are primarily the result of intercompany transactions, substantially all of which
revenues and earnings are eliminated through the elimination of intersegment revenues.
Measurement of Segment Profit or Loss and Segment Assets
The Company evaluates performance and allocates resources based on revenue growth and pre-tax profit or loss
from operations. The accounting policies of the reportable segments are the same as those described in the summary
of significant accounting policies except that the sales and lease ownership division revenues and certain other items
are presented on a cash basis. Intersegment sales are completed at internally negotiated amounts. Since the
intersegment profit and loss affect inventory valuation, depreciation and cost of goods sold are adjusted when
intersegment profit is eliminated in consolidation.