Aarons 2014 Annual Report Download - page 29

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If we are unable to integrate other acquired businesses successfully and realize anticipated economic, operational and
other benefits in a timely manner, our profitability may decrease.
We frequently acquire other sales and lease ownership businesses. Since the beginning of 2010, we acquired the lease
agreements, merchandise and assets of 137 Aaron’s Sales & Lease Ownership stores and 51 HomeSmart stores. If we are
unable to successfully integrate businesses we acquire, we may incur substantial cost and delays in increasing our customer
base. In addition, our efforts to integrate acquisitions successfully may divert management’s attention from our existing
business, which may harm our profitability. The integration of an acquired business may be more difficult when we acquire a
business in an unfamiliar market or with a different management philosophy or operating style.
Challenges to our corporate governance could have a negative effect on our business.
We may be subject from time to time to legal and business challenges in the operation of the Company via proxy contests,
shareholder proposals, and other such corporate proceedings instituted by activist investors or other entities. Our business could
be adversely affected by these proceedings because responding to threatened or actual proxy contests and related matters is
time-consuming and can divert the attention of management and employees.
In response to threatened shareholder activism, we may incur advisory, legal fees, administrative and associated costs, and in
the event a proxy contest or other event actually ensues, we may incur additional such costs, which may be significant or
material. Perceived uncertainties as to our future direction may also adversely affect our employees’ morale and cause our stock
price to experience periods of volatility or stagnation.
Furthermore, if, via proxy contest or related proceeding, insurgent director nominees are elected to our board who disagree with
our current strategy and direction, it may impede our ability to implement our current strategy and to retain and attract the
managers we might otherwise seek to employ to execute it.
Our competitors could impede our ability to attract new customers, or cause current customers to cease doing business
with us.
The industries in which we operate are highly competitive. In the sales and lease ownership market, our competitors include
national, regional and local operators of rent-to-own stores, virtual rent-to-own companies and traditional retailers. Our
competitors in the traditional and virtual sales and lease ownership and traditional retail markets may have significantly greater
financial and operating resources and greater name recognition in certain markets. Greater financial resources may allow our
competitors to grow faster than us, including through acquisitions. This in turn may enable them to enter new markets before
we can, which may decrease our opportunities in those markets. Greater name recognition, or better public perception of a
competitor’s reputation, may help them divert market share away from us, even in our established markets.
In addition, new competitors may emerge or current and potential competitors may establish financial or strategic relationships
among themselves or with third parties. Accordingly, it is possible that new competitors or alliances among competitors could
emerge and rapidly acquire significant market share. The occurrence of any of these events could materially adversely impact
our business.
Our Progressive business relies heavily on relationships with retail partners. An increase in competition could cause our retail
partners to no longer offer the Progressive product in favor of our competitors which could slow growth in the Progressive
business and limit profitability.
If our independent franchisees fail to meet their debt service payments or other obligations under outstanding loans
guaranteed by us as part of a franchise loan program, we may be required to pay to satisfy these obligations which
could have a material adverse effect on our business and financial condition.
We have guaranteed the borrowings of certain franchisees under a franchise loan program with several banks with a maximum
commitment amount of $175.0 million. In the event these franchisees are unable to meet their debt service payments or
otherwise experience events of default, we would be unconditionally liable for a portion of the outstanding balance of the
franchisees’ debt obligations, which at December 31, 2014 was $89.8 million.
We have had no significant losses associated with the franchise loan and guaranty program since its inception. Although we
believe that any losses associated with defaults would be mitigated through recovery of lease merchandise and other assets, we
cannot guarantee that there will be no significant losses in the future or that we will be able to adequately mitigate any such
losses. If we fail to adequately mitigate any such future losses, our business and financial condition could be materially
adversely impacted.