Aarons 2013 Annual Report Download - page 74

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64
Retirement and Separation-Related Modifications
In connection with the retirement of the Company’s founder and Chairman of the Board, the Company recorded a $10.4 million
charge to operating expenses, of which $1.7 million related to the accelerated vesting of 75,000 shares of restricted stock and
25,000 stock options in 2012. During 2011, the Company recorded a $3.5 million charge for separation costs primarily related
to the immediate vest modification of 150,000 shares of restricted stock and 50,000 stock options related to the separation of
the Company’s Chief Executive Officer. The total incremental cost resulting from the modifications, due primarily to increases
in the Company’s stock price as of the modification date compared to the grant date, was $1.2 million and $1.3 million in 2012
and 2011, respectively. There were no similar modification charges in 2013.
NOTE 11: SEGMENTS
Description of Products and Services of Reportable Segments
As of December 31, 2013, the Company had five operating and reportable segments: Sales and Lease Ownership, HomeSmart,
RIMCO, Franchise and Manufacturing. In the first quarter of 2013, the Company determined that the RIMCO segment no
longer met the aggregation criteria in ASC 280, Segment Reporting. Accordingly, for all periods presented, RIMCO has been
reclassified from the Sales and Lease Ownership segment to the RIMCO segment. In January of 2014, the Company sold the
27 Company-operated RIMCO stores and the rights to five franchised RIMCO stores.
The Aaron’s Sales & Lease Ownership division offers electronics, furniture, appliances and computers to consumers primarily
on a monthly payment basis with no credit requirements. The HomeSmart division was established to offer electronics,
furniture, appliances and computers to consumers on a weekly payment basis with no credit requirements. The Company's
RIMCO stores leased automobile tires, wheels and rims to customers under sales and lease ownership agreements. The
Company’s Franchise operation awards franchises 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's 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 and intersegment profit.
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 affect inventory
valuation, depreciation and cost of goods sold are adjusted when intersegment profit is eliminated in consolidation.
Factors Used by Management to Identify the Reportable Segments
The Company’s reportable segments are based on the operations of the Company that the chief operating decision maker
regularly reviews to analyze performance and allocate resources among business units of the Company.
Information on segments and a reconciliation to earnings before income taxes are as follows for the years ended December 31:
(In Thousands) 2013 2012 2011
Revenues From External Customers:
Sales and Lease Ownership $ 2,076,269 $ 2,068,124 $ 1,920,372
HomeSmart 62,840 55,226 15,624
RIMCO 20,596 16,674 11,317
Franchise 68,575 66,655 63,255
Manufacturing 106,523 95,693 89,430
Other 1,562 3,014 5,539
Revenues of Reportable Segments 2,336,365 2,305,386 2,105,537
Elimination of Intersegment Revenues (103,834)(95,150)(89,430)
Cash to Accrual Adjustments 2,100 2,591 (3,529)
Total Revenues from External Customers $ 2,234,631 $ 2,212,827 $ 2,012,578