Aarons 2014 Annual Report Download - page 62

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NOTE 1: BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Aaron’s, Inc. (the “Company” or “Aaron’s”) is a leading specialty retailer engaged in the business of leasing and selling
furniture, consumer electronics, computers, appliances and household accessories throughout the United States and Canada.
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 lease-to-own basis.
Progressive consequently has no stores of its own, but rather offers lease-purchase solutions to the customers of traditional
retailers.
Subsequent to the Progressive acquisition, our major operating divisions are the Aaron’s Sales & Lease Ownership division
(established as a monthly payment concept), Progressive, HomeSmart (established as a weekly payment concept) and
Woodhaven Furniture Industries, which manufactures and supplies the majority of the upholstered furniture and bedding leased
and sold in our stores. In January of 2014, the Company sold the 27 Company-operated RIMCO stores, which were engaged in
the leasing of automobile tires, wheels and rims under sales and lease ownership agreements, and the rights to five franchised
RIMCO stores.
The following table presents store count by ownership type for the Company’s store-based operations:
Stores at December 31 (Unaudited) 2014 2013 2012
Company-operated stores
Sales and Lease Ownership 1,243 1,262 1,227
HomeSmart 83 81 78
RIMCO — 27 19
Total Company-operated stores 1,326 1,370 1,324
Franchised stores1782 781 749
Systemwide stores 2,108 2,151 2,073
1 As of December 31, 2014, 2013 and 2012, 920, 940 and 929 franchises had been awarded, respectively.
Basis of Presentation
The preparation of the Company’s consolidated financial statements in conformity with accounting principles generally
accepted in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts
reported in these financial statements and accompanying notes. Actual results could differ from those estimates. Generally,
actual experience has been consistent with management’s prior estimates and assumptions. Management does not believe these
estimates or assumptions will change significantly in the future absent unsurfaced and unforeseen events.
Certain reclassifications have been made to the prior periods to conform to the current period presentation. In all periods
presented, the Company’s RIMCO operations have been reclassified from the RIMCO segment to Other in Note 12 to the
consolidated financial statements.
Principles of Consolidation and Variable Interest Entities
The consolidated financial statements include the accounts of Aaron’s, Inc. and its wholly owned subsidiaries. Intercompany
balances and transactions between consolidated entities have been eliminated.
On October 14, 2011, the Company purchased 11.5% of the common stock of Perfect Home Holdings Limited (“Perfect
Home”), a privately-held rent-to-own company that is primarily financed by share capital and subordinated debt. Perfect Home
is based in the U.K. and operated 67 retail stores as of December 31, 2014. As part of the transaction, the Company also
received notes and an option to acquire the remaining interest in Perfect Home at any time through December 31, 2013. In May
2014, subsequent to the Company’s decision not to exercise the purchase option, the Company and Perfect Home extended the
maturity date of the notes to June 30, 2015, canceled the Company’s equity interest in Perfect Home and terminated the option.