Aarons 2014 Annual Report Download - page 47

Download and view the complete annual report

Please find page 47 of the 2014 Aarons annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 102

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102

37
Operating Profit
Interest income. Interest income decreased to $2.9 million in 2014 from $3.0 million in 2013 due to lower average interest-
bearing investment and cash equivalent balances during 2014 as compared to 2013. Interest income decreased to $3.0 million
in 2013 from $3.5 million during 2012 due to lower average investment and cash equivalent balances during 2013 as compared
to 2012.
Interest expense. Interest expense increased to $19.2 million in 2014 from $5.6 million in 2013 due primarily to approximately
$491.3 million of additional debt financing incurred in connection with the April 14, 2014 Progressive acquisition. Interest
expense decreased to $5.6 million in 2013 from $6.4 million in 2012 due to lower average debt levels during 2013 as a result of
the repayment at maturity of the remaining $12.0 million outstanding under the Company's 5.03% senior unsecured notes
issued in July 2005 and due July 2012.
Other non-operating (expense) income, net. Other non-operating (expense) income, net includes the impact of foreign currency
exchange gains and losses, as well as gains and losses resulting from changes in the cash surrender value of Company-owned
life insurance related to the Company's deferred compensation plan. Included in other non-operating (expense) income, net
were foreign exchange transaction losses of $2.3 million and $1.0 million during 2014 and 2013, respectively, and gains of $2.0
million during 2012. Changes in the cash surrender value of Company-owned life insurance resulted in gains of $432,000,
$1.5 million and $703,000 during 2014, 2013 and 2012, respectively.
Earnings Before Income Taxes
Information about our earnings before income taxes by reportable segment is as follows:
Change
Year Ended December 31, 2014 vs. 2013 2013 vs. 2012
(In Thousands) 2014 2013 2012 $ % $ %
EARNINGS BEFORE
INCOME TAXES:
Sales and Lease Ownership $ 140,854 $ 183,965 $ 244,014 $ (43,111) (23.4)% $ (60,049) (24.6)%
Progressive 4,603 — — 4,603 nmf — —
HomeSmart (2,643) (3,428) (6,962) 785 22.9 3,534 50.8
Franchise 50,504 54,171 52,672 (3,667) (6.8) 1,499 2.8
Manufacturing 860 107 382 753 703.7 (275) (72.0)
Other (75,905) (56,114) (12,337)(19,791) (35.3) (43,777) nmf
Earnings Before Income Taxes
for Reportable Segments 118,273 178,701 277,769 (60,428) (33.8) (99,068) (35.7)
Elimination of Intersegment
Profit (813) (94) (393)(719) (764.9) 299 76.1
Cash to Accrual and Other
Adjustments 4,244 6,353 (521)(2,109) (33.2) 6,874 nmf
Total $ 121,704 $ 184,960 $ 276,855 $ (63,256) (34.2)% $ (91,895) (33.2)%
nmf—Calculation is not meaningful
During 2014, earnings before income taxes decreased $63.3 million, or 34.2%, to $121.7 million from $185.0 million in 2013.
In 2014 the results of the Company's operating segments were impacted by the following items:
• Sales and Lease Ownership earnings before income taxes included $4.8 million of restructuring charges related to the
Company's strategic decision to close 44 Company-operated stores.
• Other segment loss before income taxes included $13.7 million in financial and advisory costs related to addressing
strategic matters, including proxy contests, $4.3 million of restructuring charges in connection with the store closures
noted above, $9.1 million of charges associated with the retirement of both the Company's Chief Executive Officer
and Chief Operating Officer, $6.6 million in transaction costs related to the Progressive acquisition and $1.2 million of
regulatory income that reduced previously recognized regulatory expense upon the resolution of the regulatory
investigation by the California Attorney General.