Aarons 2014 Annual Report Download - page 88

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78
Retirement-Related Modifications
In connection with the retirement of the Company’s founder and Chairman of the Board in 2012, during the year ended
December 31, 2012, 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. The total incremental cost resulting from the
modification, due primarily to increases in the Company’s stock price as of the modification date compared to the grant date,
was $1.2 million in 2012. There were no similar modification charges in 2014 or 2013.
NOTE 12: SEGMENTS
Description of Products and Services of Reportable Segments
As of December 31, 2014, the Company had five operating and reportable segments: Sales and Lease Ownership, Progressive,
HomeSmart, Franchise and Manufacturing. The results of Progressive, which is presented as a reportable segment, have been
included in the Company's consolidated results from the April 14, 2014 acquisition date. In January 2014, the Company sold the
27 Company-operated RIMCO stores and the rights to five franchised stores. In all periods presented, RIMCO has been
reclassified from the RIMCO segment to Other.
The Aaron’s Sales & Lease Ownership division offers furniture, electronics, appliances and computers to consumers primarily
on a monthly payment basis with no credit requirements. Progressive is a leading virtual lease-to-own company that provides
lease-purchase solutions through over 15,000 retail locations. The HomeSmart division was established to offer furniture,
electronics, appliances and computers to consumers primarily on a weekly payment basis with no credit requirements. 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 affects 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.