Aarons 2014 Annual Report Download - page 37

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27
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Business Overview
Aaron’s, Inc. (“we”, “our”, “us”, “Aaron’s” or the “Company”) is a leading specialty retailer of furniture, consumer electronics,
computers, household appliances and accessories. On April 14, 2014, the Company acquired a 100% ownership interest in
Progressive Finance Holdings, LLC (“Progressive”), a leading virtual lease-to-own company, for merger consideration of
$700.0 million, net of cash acquired. Progressive provides lease-purchase solutions through over 15,000 retail locations in 46
states. It does so by purchasing merchandise from third-party retailers desired by those retailers’ customers, and in turn leasing
that merchandise to the customers on a rent-to-own basis. Progressive consequently has no stores of its own, but rather offers
lease-purchase solutions to the customers of traditional retailers.
On July 15, 2014, the Company announced that a rigorous evaluation of the Company-operated store portfolio had been
performed, which, along with other cost-reduction initiatives, resulted in the closure of 44 underperforming stores and the
realignment of home office and field support.
Our major operating divisions are the Aaron’s Sales & Lease Ownership division, Progressive, HomeSmart and Woodhaven
Furniture Industries, which manufactures and supplies the majority of the upholstered furniture and bedding leased and sold in
our stores.
Historically, Aaron’s has demonstrated revenue growth from the opening of new sales and lease ownership stores and increases
in same store revenues from previously opened stores. We also use our franchise program to help us expand our sales and lease
ownership concept more quickly and into more communities than through opening only Company-operated stores. Total
revenues increased from $2.213 billion in 2012 to $2.725 billion in 2014, primarily as a result of the Progressive acquisition
during 2014. Total revenues for the year ended December 31, 2014 increased $490.6 million, or 22.0%, over the prior year. The
increase was due to $549.5 million in revenue from Progressive, partially offset by a decrease of $58.9 million in revenue from
our core business primarily resulting from a 2.8% decrease in Company-operated same store revenues.
The Company’s franchised and Company-operated store activity is summarized as follows:
2014 2013 2012
Franchised stores
Franchised stores open at January 1, 781 749 713
Opened 23 45 56
Purchased from the Company 6 2 3
Purchased by the Company (9) (10) (21)
Closed, sold or merged (19) (5) (2)
Franchised stores open at December 31, 782 781 749
Company-operated Sales & Lease Ownership stores
Company-operated Sales & Lease Ownership stores open at January 1, 1,262 1,227 1,144
Opened 30 33 73
Added through acquisition 9 10 21
Closed, sold or merged (58) (8) (11)
Company-operated Sales & Lease Ownership stores open at December 31, 1,243 1,262 1,227
Company-operated HomeSmart stores
Company-operated HomeSmart stores open at January 1, 81 78 71
Opened 3 3 7
Added through acquisition — — 1
Closed, sold or merged (1) — (1)
Company-operated HomeSmart stores open at December 31, 83 81 78
Company-operated RIMCO stores 1
Company-operated RIMCO stores open at January 1, 27 19 16
Opened 8 3
Closed, sold or merged (27) — —
Company-operated RIMCO stores open at December 31, — 27 19
1 In January 2014, we sold our 27 Company-operated RIMCO stores and the rights to five franchised RIMCO stores.