Aarons 2015 Annual Report Download - page 44

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General
The Company's operating activities provided $166.8 million of cash in 2015, used $49.0 million of cash in 2014 and provided $308.4 million of cash in
2013. The $215.8 million increase in cash flows from operating activities in 2015 as compared to 2014 was due primarily to revenue growth, operating
margin improvements and income tax refunds. Among other changes, there was a $57.5 million increase in net earnings, a $24.0 million increase related to
inventory reduction initiatives, and a $63.5 million increase related to income taxes receivable. The revenue growth and operating margin improvements
were related primarily to Progressive, which continues to grow and expand invoice volume and active doors, and has lower operating expenses as a
percentage of total revenues than the Company's traditional lease-to-own business because it does not have store operations. The operating margin
improvements also related to price increases, inventory reduction, and cost initiatives at the Aaron’s Sales & Lease Ownership division. The change in the
income tax receivable occurred primarily because of the enactment of the Tax Increase Prevention Act of 2014 and the Protecting Americans From Tax Hikes
Act of 2015, which have resulted in income tax refunds, as discussed further in the "Commitments" section below. Both acts were signed in December of the
respective years and retroactively extended accelerated depreciation. The Company made payments throughout the year based on enacted laws resulting in
overpayments at the end of the year.
Purchases of sales and lease ownership stores initially have a positive impact on operating cash flows because the lease merchandise, other assets and
intangibles acquired are recognized as investing cash outflows in the period of acquisition. However, the initial positive impact may not be indicative of the
extent to which these stores will contribute positively to operating cash flows in future periods. The amount of lease merchandise purchased in store
acquisitions and shown under investing activities was $8.5 million and $4.0 million in 2015 and 2013, respectively. The amount of lease merchandise
purchased in acquisitions and shown under investing activities was $144.0 million in 2014, substantially all of which was the direct result of the April 14,
2014 Progressive acquisition.
Sales of Company-operated stores are an additional source of investing cash flows, and resulted in net cash proceeds of $14.0 million, $16.5 million and
$2.2 million in 2015, 2014 and 2013, respectively. Proceeds from the sales of Company-operated stores in 2014 included cash consideration of $10.0 million
in connection with the sale of the 27 Company-operated RIMCO stores and the rights to five franchised RIMCO stores in January 2014. The amount of lease
merchandise sold in these sales and shown under investing activities was $8.8 million in 2015, $3.1 million in 2014 and $882,000 in 2013.
Our primary capital requirements consist of buying lease merchandise for sales and lease ownership stores and Progressive's operations. As we continue to
grow, the need for additional lease merchandise is expected to remain our major capital requirement. Other capital requirements include purchases of
property, plant and equipment, expenditures for acquisitions and income tax payments, and funding of loan receivables for DAMI. Our capital requirements
historically have been financed primarily through:
• cash flows from operations;
• private debt offerings;
• bank debt;
• trade credit with vendors;
• proceeds from the sale of lease return merchandise; and
• stock offerings.
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