8-K/A

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

(Amendment No. 2)

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): April 14, 2014

AARON’S, INC.

(Exact name of Registrant as Specified in Charter)

Georgia	1-13941	58-0687630
(State or other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

309 E. Paces Ferry Road, N.E. Atlanta, Georgia	30305-2377
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code: (404) 231-0011

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

EXPLANATORY NOTE

This Amendment No. 2 (this “Form 8-K/A”) amends the Current Report on Form 8-K of Aaron's, Inc. (the “Company”) originally filed with the Securities and Exchange Commission on April 15, 2014 (the “Original Filing”) to include the historical financial statements of Progressive Finance Holdings, LLC (“Progressive”) and the unaudited pro forma combined financial information required pursuant to Rule 3-05 and Article 11 of Regulation S-X.

Item 9.01 Financial Statements and Exhibits.

(a) Financial Statements of Businesses Acquired.

The audited consolidated financial statements of Progressive as of and for the year ended December 31, 2013 and the related notes to such audited consolidated financial statements are filed as Exhibit 99.1 to this Current Report on Form 8-K/A.

(b) Pro Forma Financial Information.

Aaron's, Inc. and Progressive unaudited pro forma combined financial information, comprised of a pro forma combined balance sheet as of December 31, 2013 and a pro forma combined statement of earnings for the year ended December 31, 2013, and the related notes are filed as Exhibit 99.2 to this Current Report on Form 8-K/A.

(d) Exhibits.

Exhibit No.	Description
23.1	Consent of Independent Auditors
99.1	Progressive Finance Holdings, LLC audited consolidated financial statements as of and for the year ended December 31, 2013
99.2	Aaron's, Inc. unaudited pro forma combined financial information as of and for the year ended December 31, 2013

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		AARON’S, INC.
	By:	/s/ Gilbert L. Danielson
Date: June 27, 2014		Gilbert L. Danielson Executive Vice President and Chief Financial Officer

EX-23.1

Exhibit 23.1

Consent of Independent Auditors

We consent to the incorporation by reference in the following Registration Statements:

(1) Registration Statement (Form S-8 No. 333-160357) dated June 30, 2009 pertaining to the Aaron’s, Inc. Deferred Compensation Plan, and

(2) Registration Statement (Form S-8 No. 333-171113) dated December 10, 2010 pertaining to the 2001 Stock Option and Incentive Award Plan, as Amended and Restated, and Aaron’s, Inc. Employees Retirement Plan and Trust, as Amended and Restated;

of our report dated May 23, 2014, with respect to the consolidated financial statements of Progressive Finance Holdings, LLC as of December 31, 2013 and for the year then ended, included in this Current Report on Form 8-K/A of Aaron’s Inc.

/s/ Ernst & Young LLP

Salt Lake City, UT

June 27, 2014

EX-99.1

Exhibit 99.1

CONSOLIDATED FINANCIAL STATEMENTS

Progressive Finance Holdings, LLC

Year Ended December 31, 2013

With Report of Independent Auditors

Progressive Finance Holdings, LLC

Consolidated Financial Statements

Year Ended December 31, 2013

Contents

Report of Independent Auditors	1
Consolidated Financial Statements
Consolidated Balance Sheet	2
Consolidated Statement of Comprehensive Income	3
Consolidated Statement of Members’ Equity	4
Consolidated Statement of Cash Flows	5
Notes to Consolidated Financial Statements	6

Report of Independent Auditors

The Board of Directors and Stakeholders

Progressive Finance Holdings, LLC

We have audited the accompanying consolidated financial statements of Progressive Finance Holdings, LLC which comprise the consolidated balance sheet as of December 31, 2013, and the related consolidated statements of comprehensive income, member’s equity, and cash flows for the year then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in conformity with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Progressive Finance Holdings, LLC at December 31, 2013, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

Salt Lake City, UT

May 23, 2014

1

Progressive Finance Holdings, LLC

Consolidated Balance Sheet

December 31, 2013

(In Thousands)

Assets
Cash and cash equivalents	$	4,608
Accounts receivable, net of allowance for uncollectible accounts of $10,116 at December 31, 2013	12,326
Receivable from related-party	2,781
Leased merchandise, net	120,976
Property and equipment, net	3,958
Goodwill	7,264
Other intangibles, net	51,753
Prepaid expenses and other current assets	2,741
Total assets	$	206,407
Liabilities and members’ equity
Accounts payable and accrued expenses	$	20,598
Deferred revenue	13,807
Credit facilities	44,470
Related-party note payable	70,969
Total liabilities	149,844
Members’ equity	56,563
Total liabilities and members’ equity	$	206,407

See accompanying notes.

2

Progressive Finance Holdings, LLC

Consolidated Statement of Comprehensive Income

Year Ended December 31, 2013

(In Thousands)

Revenues:
Lease revenues and fees	$	403,951
Total revenues	403,951
Cost of lease revenues	300,069
Gross margin	103,882
Operating expenses:
Sales, general, and administrative expenses	70,410
Depreciation and amortization	13,238
Total operating expenses	83,648
Operating profit	20,234
Other income and expenses:
Interest expense	7,847
Total other income and expenses	7,847
Net income	12,387
Other comprehensive income	–
Comprehensive income	$	12,387

See accompanying notes.

3

Progressive Finance Holdings, LLC

Consolidated Statement of Members’ Equity

Year Ended December 31, 2013

	Members’ Equity
	(In Thousands)
Balance at December 31, 2012	$	72,581
Issuance of Class A units	800
Unit-based compensation	795
Dividends – Class A units	(30,000)
Net income	12,387
Balance at December 31, 2013	$	56,563

See accompanying notes.

4

Progressive Finance Holdings, LLC

Consolidated Statement of Cash Flows

Year Ended December 31, 2013

(In Thousands)

Operating activities
Net income	$	12,387
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and impairment of leased merchandise	260,236
Depreciation and amortization	13,238
Bad debt expense	36,555
Unit-based compensation expense	795
Changes in operating assets and liabilities:
Additions to leased merchandise	(315,734)
Accounts receivable	(41,611)
Prepaid expenses and other current assets	(1,538)
Accounts payable and accrued expenses	8,544
Deferred revenue	8,366
Net cash used in operating activities	(18,762)
Investing activities
Purchase of property and equipment	(3,593)
Net cash used in investing activities	(3,593)
Financing activities
Proceeds from credit facility	40,470
Payments of credit facility	(3,000)
Proceeds from related-party payable	15,000
Payments of related-party payable	(199)
Dividends and Distributions	(30,000)
Proceeds from the sale of Class A units	800
Net cash provided by financing activities	23,071
Net increase in cash and cash equivalents	716
Cash and cash equivalents at beginning of period	3,892
Cash and cash equivalents at end of period	$	4,608
Noncash investing and financing activities
Cash paid for interest	$	7,510

See accompanying notes.

5

Progressive Finance Holdings, LLC

Notes to Consolidated Financial Statements

December 31, 2013

1. Description of Business and Summary of Significant Accounting Policies

Progressive Finance Holdings, LLC (the Company) is a provider of consumer financing via rent-to-own agreements with customers throughout the United States. The Company typically leases residential furniture, mattresses, cell phones, consumer electronics, computers, appliances and household accessories to end consumers. The Company was established on June 15, 2012 and acquired full ownership of Progressive Finance, L.C. from IDEE, LLC in exchange for 10 million Class B units in the Company. The Company is a holding company and has no operations other than its ownership of various subsidiaries, including Prog Finance, LLC, which is the only entity with material historical and current operations. Under the Company’s limited liability agreement dated June 15, 2012, the Company is intended to have a perpetual existence, and is not scheduled to be dissolved. The Company’s headquarters are based in Draper, Utah. The Company is organized as an LLC, and its members are afforded limitation of personal liability as applicable under Delaware statutes.

Basis of Presentation

The financial statements include the accounts of Progressive Finance Holdings, LLC, and have been prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP).

Revenue Recognition and Deferred Revenue

The Company generates revenues by leasing Company-owned merchandise to its customers pursuant to rental purchase agreements which provide for weekly, bi-weekly, semi-monthly or monthly lease terms with non-refundable lease payments. Generally, the customer has the right to acquire title either through a purchase option or through payment of all required rentals over the lease term, which is typically 9 to 12 months. Lease revenue and fees, including initial payments are recognized over the lease term or at the time the customer exercises the purchase option.

All of the Company’s customer agreements are considered operating leases under the provisions of ASC 840, Leases, as the agreements are cancellable at any time. As such, lease revenues are recognized as revenue in the month they are due. Lease payments received prior to the month due are recorded as deferred lease revenue. Until all payment obligations are satisfied under rental purchase agreements, the Company maintains ownership of the leased merchandise. Initial direct costs related to the Company’s customer agreements are expensed as incurred and are not significant. These initial direct costs have been classified as operating expenses in the Company’s consolidated statements of operations.

Cost of Lease Revenues

Cost of lease revenues consists primarily of depreciation of leased merchandise, impairment of leased merchandise, and bad debt expense.

Cash and Cash Equivalents

Cash equivalents include all highly liquid investments with an original maturity of three months or less. The Company maintains cash and cash equivalents at financial institutions, which at times may not be federally insured or may exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risks on such accounts.

6

Progressive Finance Holdings, LLC

Notes to Consolidated Financial Statements (continued)

Allowance for Uncollectible Accounts Receivable

Accounts receivable consists of amounts due from customers on leased merchandise. The Company has established an allowance for doubtful accounts for its accounts receivables. The Company’s policy for determining the allowance is based upon historical loss experience, as well as management’s review and consideration of more recent trends in customer collections. The allowance represents the Company’s estimate of known or probable losses. The Company’s policy is to charge-off receivables that are 120 days or more contractually past due. Charge-offs are applied as a reduction to the allowance for doubtful accounts receivable and any recoveries of previously charged off balances are applied as an increase to the allowance for doubtful accounts receivable.

Leased Merchandise

The Company’s leased merchandise consists primarily of residential furniture, mattresses, cell phones, consumer electronics, computers, appliances and household accessories and is recorded at cost. Leased merchandise is depreciated over the lease agreement period on a straight-line basis, generally 9 to 12 months with no estimated salvage value. When indicators of impairment exist, the Company tests leased merchandise for recoverability pursuant to ASC 360, Property, Plant, and Equipment, and records an impairment reserve against the carrying value of the leased merchandise. The Company uses historical charge off information to assess recoverability and estimate the impairment reserve. The net leased merchandise balances consisted of the following as of December 31, 2013 (in thousands):

Leased merchandise – gross	$	199,107
Accumulated depreciation	(67,891)
Impairment reserve	(10,240)
Leased merchandise – net	$	120,976

Depreciation and impairment on leased merchandise was $260,236,000 for the year ended December 31, 2013.

Property and Equipment

Property and equipment are stated at historical cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The estimated useful life of each asset category is as follows:

Computer equipment	5 years
Software	3 years
Furniture and fixtures	7 years
Leasehold improvements	Useful life or remaining lease term, whichever is shorter

When there are indicators of potential impairment, the Company evaluates recoverability of the carrying values of property and equipment by comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated undiscounted future net cash flows, an impairment charge is recognized based on the amount by which the carrying value of the asset exceeds the fair value of the asset. The Company did not incur any material impairment charges for the year ended December 31, 2013.

7

Progressive Finance Holdings, LLC

Notes to Consolidated Financial Statements (continued)

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price paid over the fair value of the identifiable net tangible and intangible assets acquired in connection with the Company’s June 15, 2012 acquisition accounting. The Company does not amortize goodwill but tests for impairment at least annually or sooner whenever events or changes in circumstances indicate that the goodwill may be impaired. The Company performs its goodwill asset impairment test in the first quarter of each fiscal year. The Company did not recognize any goodwill impairment charges for the year ended December 31, 2013.

The Company reviews identifiable intangible assets recorded in connection with the Company’s June 15, 2012 acquisition accounting, excluding goodwill, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by comparison of their carrying amounts to future undiscounted cash flows the assets are expected to generate. If identifiable intangible assets are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds its fair market value. The Company did not record any material impairments for the year ended December 31, 2013.

Advertising Costs

Advertising costs are expensed as incurred. Advertising expenses were $1,138,000 for the year ended December 31, 2013.

Commissions

Commissions are expensed as incurred, and are recognized as a component of sales, general and administrative expenses.

Unit-Based Compensation

The Company has issued grants of Incentive units to employees during the year ended December 31, 2013. These grants are intended to be profits interests under IRS Revenue Procedure 93-27, IRS Revenue Procedure 2001-43, and IRS Notice 2005-43. The Company accounts for these grants under ASC 718, Stock-Based Compensation, using the fair values of the awards as determined by an independent third party valuation firm. The valuation of these units requires the use of highly subjective and complex assumptions.

Incentive units are granted at a participation threshold of not less than the fair market value of the Company on the date of the grant. The participation threshold is a threshold amount of cumulative distributions that must be made with respect to all or one or more specified classes of units outstanding before such Incentive units may receive any distributions.

Sales Tax

The Company applies the gross basis for sales taxes imposed on lease revenues. The Company is required by the applicable governmental authorities to remit sales taxes. The amount of sales tax recorded as lease revenue and selling, general, and administrative cost is $30,605,000for the year ended December 31, 2013.

8

Progressive Finance Holdings, LLC

Notes to Consolidated Financial Statements (continued)

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist principally of cash and accounts receivable. The Company deposits cash with established, reputable financial institutions. These deposits at times may exceed federally insured amounts. The Company has not experienced any losses on its deposits. The Company reviews the expected collectability of accounts receivable and records an allowance for doubtful accounts receivable for amounts that it determines are not collectible. No collateral or other security is required against trade receivables.

The Company also records an impairment allowance for its leased merchandise to estimate expected losses relating to merchandise currently under lease. To date, losses from doubtful accounts and impairment of leased merchandise have been within management’s expectations. For the year ended December 31, 2013 no single customer accounted for over 5% of total revenue, 5% of accounts receivable or 5% of leased merchandise.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, the Company evaluates its estimates, including those related to revenue recognition, allowance for doubtful accounts, leased merchandise impairment, useful lives of property, plant and equipment, measurement of unit‑based compensation and contingencies, among others. Actual results could differ from those estimates.

Risks and Uncertainties

The Company is subject to all of the risks inherent in a business operating in the retail finance industry. These risks include, but are not limited to complex state and federal regulation, unfavorable economic and market conditions, changes in level of demand for the Company’s products and services, and competitive pressures. Failure by the Company to identify changes in regulatory requirements or industry standards, obtain new customers, or maintain its current customer base would have a material adverse effect on the Company’s business and operating results.

Income Taxes

The results of operations of the Company are includable in the taxable income of the members and, accordingly, no provision for federal or state income taxes has been made in the accompanying financial statements. Income and losses for tax purposes may differ from the financial statements’ amounts and may be allocated to the members on a different basis for tax purposes than for financial reporting purposes. Members’ Equity reflected in the accompanying financial statements does not necessarily represent the member’s tax basis of its respective interest.

Recent Accounting Pronouncements

On January 16, 2014, the Financial Accounting Standards Board issued ASU 2014-02, Intangibles — Goodwill and Other (Topic 350): Accounting for Goodwill (A Consensus of the Private Company Council), which provides private companies an alternative for the subsequent accounting of goodwill, including the amortization of goodwill. Early application of ASU 2014-02 is permitted for any annual or interim period for which a reporting entity’s financial statements have not yet been made available for issuance. The Company has elected not to early adopt the provisions of ASU 2014-02 in its consolidated financial statements as of December 31, 2013. Further, the Company does not expect to elect the alternative in ASU 2014-02 to amortize its goodwill.

9

Progressive Finance Holdings, LLC

Notes to Consolidated Financial Statements (continued)

From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that the Company may adopt as of the specified effective date. Unless otherwise discussed, the Company believes the impact of any other recently issued standards that are not yet effective are either not applicable to the Company at this time or will not have a material impact on the Company’s consolidated financial statements upon adoption.

2. Property and Equipment

Property and equipment consist of the following (in thousands):

	2013
Furniture and fixtures	$	815
Leasehold improvements	349
Computer software	2,138
Office and computer equipment	1,534
Total property and equipment	4,836
Less: accumulated depreciation	878
Property and equipment, net	$	3,958

Depreciation expense for property and equipment was $623,000 for the year ended December 31, 2013.

3. Intangible Assets

The following is a summary of the Company’s identifiable intangible assets by category at December 31, 2013:

	Gross		Accumulated Amortization		Net
	(In Thousands)
Merchant relationships	$	59,100	$	13,808	$	45,292
Customer contracts	5,500		5,500		–
Trade names and trademarks	2,400		412		1,988
Internally developed software	5,400		927		4,473
Total	$	72,400	$	20,647	$	51,753

The weighted-average amortization period for the Company’s acquired intangible assets is 8 years.

10

Progressive Finance Holdings, LLC

Notes to Consolidated Financial Statements (continued)

Merchant relationships are being amortized in proportion to the expected future cash flows to be realized over 9 years. The weighted-average amortization period of the merchant relationships intangible asset is 6.5 years. Acquired customer contracts, trade names, trademarks, and internal use software are amortized on a straight-line basis over the expected useful life. Intangible assets held by the Company as of December 31, 2013 had the following amortization periods:

Intangible Assets	Amortization Period in Years
Merchant relationships	9
Acquired customer contracts	1
Trade names/trademarks	9
Internal use software	9

Total amortization expense of intangible assets, included in operating expenses in the accompanying statements of comprehensive income (loss), was $12,615,000 for the year ended December 31, 2013. As of December 31, 2013, estimated future amortization expense for the next five years related to identifiable intangible assets is as follows (in thousands):

2014	$	10,135
2015	8,853
2016	8,361
2017	7,212
2018	5,811

4. Debt

Debentures

On June 15, 2012, the Company received $55,969,000 in cash from a related-party in exchange for non-convertible, subordinated debentures. These debentures carry a 12.5% interest rate per annum, require quarterly interest payments, and principal is due at maturity on December 15, 2017. On December 17, 2013, the Company received $15,000,000 in cash from a related-party in exchange for non-convertible, subordinated debentures. These debentures carry a 7.0% interest rate per annum, require quarterly interest payments, and principal is due at maturity on June 3, 2018. The fair value of the Company’s debt classified as Level 2 was estimated using the discounted cash flow analysis, based upon the Company’s current estimated incremental borrowing rates for similar types of arrangements. The fair value of the Company’s debt was estimated to be $87,668,000 as of December 31, 2013 compared to a carrying amount of $70,969,000 as of December 31, 2013.

11

Progressive Finance Holdings, LLC

Notes to Consolidated Financial Statements (continued)

Line of Credit

On December 17, 2013, the Company entered into a first amendment to its revolving line of credit agreement dated December 3, 2012. The amendment increased borrowing capacity under the line of credit to $86,500,000. The line of credit requires quarterly interest payments on borrowings, with the principal amount due at maturity. The credit facility matures on December 3, 2017 and is collateralized by certain assets of the Company under the agreement. The interest rate on this facility is variable. Alternatively, the Company may choose to select a rate defined by the financial institution. The Company has financial covenants for minimum cash collections, leverage ratio, and fixed-charges coverage ratio. The Company was in compliance with all financial covenants as of December 31, 2013. The amounts outstanding on the line of credit were $44,470,000 at December 31, 2013. The weighted-average interest rate on the outstanding borrowings was 3.472% at December 31, 2013. The Company also pays a commitment fee on unused balances, which ranges from 0.35% to 0.65% as determined by the amount of unused balance.

5. Members’ Equity

Class A Units

The Company has 7,048,421 Class A units authorized. There were 7,048,421 units outstanding as of December 31, 2013. Each Class A unit has the right to one vote on all matters submitted to a vote of unit holders. Class A units are also entitled to an annual cumulative dividends calculated as 5% of the combined purchase price and accumulated unpaid dividends.

Class B Units

The Company has 10,000,000 Class B units authorized. There were 3,000,000 units outstanding at December 31, 2013. Each Class B unit has the right to one vote on all matters submitted to a vote of unit holders. The Company’s Board of Directors may, but is not required to make non-liquidating dividends to the holders of Class B units, subject to prior rights of holders of other classes of units outstanding which have priority rights as to dividends. No dividends have been declared or paid on the Company’s Class B units through December 31, 2013.

Issuances

During 2013 the Company issued 48,421 Class A units to an employee and a board member in exchange for $800,000 in cash consideration.

Dividends

The holders of the Class A units are entitled to cumulative dividends of 5% per annum, of the combined purchase price and accumulated unpaid dividends. In the event of a dividend distribution, Class A unit holders are entitled to receive these dividends prior to and in preference of Class B units or Incentive units. After payment of the preferential dividends or distributions, any additional dividends or distributions shall be distributed among all holders of Class B and Incentive units in proportion to the number of units held immediately prior to the dividend distribution. $30,000,000 in dividends were declared and paid on December 17, 2013.

12

Progressive Finance Holdings, LLC

Notes to Consolidated Financial Statements (continued)

Liquidation Preferences

In the event of a liquidation, dissolution, or winding up of the Company, holders of Class A units shall be entitled to receive, prior to any payments to Class B units and Incentive units, any unpaid, accumulated dividends owed to Class A holders. Once all accumulated dividends have been paid to Class A holders, Class A holders shall receive, prior to any payments to Class B and Incentive units, an amount equal to the original purchase price of the Class A units.

In the event of a liquidation, dissolution, or winding up of the Company, holders of Class B units shall be entitled to receive, prior to any payments to Incentive units, an amount equal to the liquidation preference paid to Class A units, multiplied by a fraction, the numerator of which shall be the number of Class B units immediately prior to such distribution, and the denominator shall be the number of Class A units immediately prior to such distribution.

A change in control or a sale, transfer, or lease of all or substantially all of the assets of the Company is considered to be a liquidation event.

Voting Rights

Holders of Class A and Class B units are entitled one vote per unit. Incentive units do not have voting rights.

6. Unit-Based Compensation

The Limited Liability Company agreement (LLC Agreement) dated June 15, 2012 provided for the granting of incentive units to directors, officers and other employees or consultants of the Company. These incentive units are intended to be “profits interests” under IRS Revenue Procedure 93-27, IRS Revenue Procedure 2001-43, and IRS Notice 2005-43. At December 31, 2013, there were 2,107,037 shares authorized for grant and no remaining units available for grant under the LLC Agreement. No unit-based compensation had been issued prior to 2012.

All incentive units were granted with a participation threshold equal to the estimated fair value of the Company on the date of grant. Because there has been no public market for the incentive units, the Company’s Board of Directors has determined the fair value of the Company’s incentive units based on an analysis of relevant metrics. In addition, the Board of Directors has obtained a valuation study from a third-party valuation firm to estimate the fair value of the Incentive units. In performing its valuation analysis, the valuation firm engaged in discussions with management, analyzed historical and forecasted financial statements and reviewed corporate documents. In addition, this valuation study was based on a number of assumptions, including industry, general economic, market and other conditions that could reasonably be evaluated at the time of the valuation. Upon termination of services, the Company has the right, but not the obligation to repurchase unvested and vested Incentive units from the holder. Incentive units are granted with time vesting conditions. The awards generally vest over a service period of four years. Certain vesting modifications occur based on a change of control. The fair value of the incentive units is recognized as compensation expense over the service period of the grant.

Total unit-based compensation expense recognized for the time-based incentive units granted under the LLC Agreement was $795,000 for the year ended December 31, 2013. These amounts are included in sales, general and administrative costs in the statement of operations. Of the incentive units granted, 756,169 vest only upon a specified liquidation event. The Company has not recorded any compensation expense for these incentive units that vest only upon a liquidation event, as such a liquidity event is not estimated as probable as of December 31, 2013.

13

Progressive Finance Holdings, LLC

Notes to Consolidated Financial Statements (continued)

A summary of the Incentive unit activity under the LLC Agreement for the year ended December 31, 2013 is as follows:

	Incentive Units
Outstanding at December 31, 2012	1,336,207
Units granted	770,830
Units repurchased	–
Outstanding at December 31, 2013	2,107,037

Units vested totaled 316,171 during the year ended December 31, 2013. Total fair value of units vested was $569,108 for the year ended December 31, 2013.

The weighted-average grant-date fair value of each of the Incentive units granted for the year ended December 31, 2013 was $2.47 per unit. As of December 31, 2013, $2,689,512 of unrecognized compensation expense related to the Company’s Incentive units is expected to be recognized over a weighted average period of 1.9 years. The Incentive units do not have contractual lives.

7. Commitments and Contingencies

Capital Leases

The Company had not entered into any material capital leases as of December 31, 2013.

Operating Leases

The Company leases office space under two non-cancellable and one cancelable month-to-month operating leases. The non-cancellable leases have terms of 76 and 60 months.

Rent expense under operating leases totaled $1,054,000 for the year ended December 31, 2013.

Future minimum lease payments required under operating leases that have initial or remaining non-cancellable terms in excess of one year as of December 31, 2013 are as follows (in thousands):

2014	$	1,107
2015	1,323
2016	1,394
2017	1,436
2018	1,074
2019	407
	$	6,741

14

Progressive Finance Holdings, LLC

Notes to Consolidated Financial Statements (continued)

Indemnifications

The Company indemnifies its officers and directors for certain events or occurrences, while the officer or director is or was serving at the Company’s request in such capacity. The maximum amount of potential future indemnification is unlimited; however, the Company has a director and officer insurance policy that limits its exposure and enables it to recover a portion of any future amounts paid. The Company is unable to reasonably estimate the maximum amount that could be payable under these arrangements since these obligations are not capped but are conditional to the unique facts and circumstances involved. Accordingly, the Company has no liabilities recorded for these agreements as of December 31, 2013.

Employee Agreements

The Company has signed various employment agreements with key executives pursuant to which, if their employment is terminated by the Company without cause or by the employee for good reason, the employees are entitled to receive certain benefits, including severance payments, and bonus earned but not yet paid. The Company is not aware of any liabilities relating to existing employment agreements as of December 31, 2013.

8. Employee Benefit Plans

The Company sponsors a 401(k) defined contribution plan covering all employees. Matching contributions and profit sharing contributions to the plan are at the discretion of the Company and were $134,000 for the year ended December 31, 2013.

9. Related-Party Transaction

The Company leases office space for approximately $14,600 per month on a month-to-month basis from existing unit holders of the Company. The Company recognized rent expense of $176,000 for the year ended December 31, 2013.

On June 15, 2012, the Company received funds totaling $55,969,000 in the form of non-convertible debentures from related parties. These debentures carry a 12.5% interest rate per annum, require quarterly interest payments, and principal is due at maturity of December 15, 2017.

On December 17, 2013, the Company received funds totaling $15,000,000 in the form of subordinated debentures from related parties. This amount represents the escrow balance released to related parties, which was established as of June 15, 2012. These debentures carry a 7.0% interest rate per annum, require quarterly interest payments, and principal is due at maturity of June 3, 2018.

Management has estimated that approximately $2,781,000 in sales taxes was owed by the Company as of the June 15, 2012 acquisition of Progressive Finance, L.C.. Management believes that this amount is fully recoverable from the $15,000,000 amount recorded as subordinated debentures from related parties.

15

Progressive Finance Holdings, LLC

Notes to Consolidated Financial Statements (continued)

10. Subsequent Events

On April 14, 2014, the Company was acquired by Aaron’s, Inc., in an all-cash transaction valued at approximately $700 million. As part of this transaction, all notes payable and credit facilities held by the Company were paid in full with the proceeds of the transaction.

Subsequent events have been evaluated through May 23, 2014, the date the financial statements were available to be issued.

16

EX-99.2

Exhibit 99.2

Unaudited Pro Forma Combined Financial Information

The following Unaudited Pro Forma Combined Financial Statements present the combination of the historical financial statements of Aaron’s, Inc. (the “Company”) and Progressive Finance Holdings, LLC (“Progressive”), hereafter referred to as the “Merger”, adjusted to give effect to: (1) the Merger and (2) all related transactions, including borrowings under the Term Loan, the borrowings under the Revolving Credit Facility and the issuance of the Senior Notes (the “Financing Transactions”).

The Unaudited Pro Forma Combined Statement of Earnings for the fiscal year ended December 31, 2013 combines the historical Consolidated Statement of Earnings of Aaron’s, Inc. and the Consolidated Statement of Comprehensive Income for Progressive, giving effect to the Merger as if it had been consummated on January 1, 2013, the beginning of the period presented. The Unaudited Pro Forma Combined Balance Sheet combines the historical Consolidated Balance Sheet of Aaron’s, Inc. and the Consolidated Balance Sheet of Progressive, as of December 31, 2013, giving effect to the Merger as if it had been consummated on December 31, 2013.

The Unaudited Pro Forma Combined Financial Statements were prepared using the acquisition method of accounting as prescribed by Accounting Standards Codification No. 805, Business Combinations, with Aaron’s, Inc. considered the acquirer of Progressive. Under the acquisition method of accounting, the underlying tangible and intangible assets acquired and liabilities assumed are recorded based upon their respective estimated fair values, with any excess purchase price over the fair value of the net assets acquired recorded to goodwill. The pro forma acquisition accounting was based on an estimate of the fair values of the tangible and intangible assets and liabilities related to Progressive. In arriving at the estimated fair values, the Company has considered the appraisals of independent consultants which were based on a preliminary and limited review of the assets related to Progressive to be transferred. Following the effective date of the Merger, the Company expects to complete the acquisition accounting after considering the appraisal of Progressive’s assets and liabilities at the level of detail necessary to finalize the underlying valuations. The final acquisition accounting may be different than that reflected in the pro forma acquisition accounting presented herein, and this difference may be material.

The Unaudited Pro Forma Combined Financial Statements do not reflect the costs of any integration activities or benefits that may result from realization of future cost savings from operating efficiencies or revenue synergies expected to result from the Merger.

The Unaudited Pro Forma Combined Financial Statements should be read in conjunction with the accompanying notes to the Unaudited Pro Forma Combined Financial Statements; Aaron’s, Inc. audited historical consolidated financial statements and related notes for the year ended December 31, 2013 incorporated by reference into this document; and Progressive’s audited consolidated financial statements for the year ended December 31, 2013 included in this Current Report on Form 8-K/A.

1

AARON'S, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
As of December 31, 2013
	Historical					Pro Forma Adjustments
(In Thousands)	Aaron's Inc.			Progressive Finance Holdings, LLC		Acquisition Adjustments (Note 2)				Financing Adjustments (Note 3)			Pro Forma Combined
ASSETS:
Cash and Cash Equivalents	$	231,091		$	4,608	$	(704,608	)	A	$	488,984	A	$	13,516
						(6,559		)	B	—
Investments	112,391			—		—				—			112,391
Receivables, Net	68,684			15,107		(2,781		)	C	—			81,010
Lease Merchandise, Net	869,725			120,976		—				—			990,701
Property, Plant and Equipment, Net	231,293			3,958		—				—			235,251
Goodwill	239,181			7,264		299,921			D	—			546,366
Other Intangibles, Net	3,535			51,753		281,247			E	—			336,535
Prepaid Expenses and Other Assets	55,436			2,741		(1,287		)	C	2,266		A	59,156
Assets Held for Sale	15,840			—		—				—			15,840
Total Assets	$	1,827,176		$	206,407	$	(134,067	)		$	491,250		$	2,390,766
LIABILITIES & SHAREHOLDERS’ EQUITY:
Accounts Payable and Accrued Expenses	$	243,910		$	20,598	$	—			$	—		$	264,508
Accrued Regulatory Expense	28,400			—		—				—			28,400
Deferred Income Taxes Payable	226,958			—		48,301			F	—			275,259
Customer Deposits and Advance Payments	45,241			13,807		(3,807		)	G	—			55,241
Debt	142,704			115,439		(115,439		)	C	491,250		B	633,954
Total Liabilities	687,213			149,844		(70,945		)		491,250			1,257,362
Shareholders’ Equity:
Common Stock	45,376			—		—				—			45,376
Additional Paid-in Capital	198,182			—		—				—			198,182
Retained Earnings	1,202,219			—		(6,559		)	B	—			1,195,660
Accumulated Other Comprehensive Loss	(64		)	—		—				—			(64		)
Members' Equity	—			56,563		(56,563		)	H	—			—
	1,445,713			56,563		(63,122		)		—			1,439,154
Less: Treasury Shares at Cost	(305,750		)	—		—				—			(305,750		)
Total Shareholders’ Equity	1,139,963			56,563		(63,122		)		—			1,133,404
Total Liabilities & Shareholders’ Equity	$	1,827,176		$	206,407	$	(134,067	)		$	491,250		$	2,390,766

See accompanying notes to the Unaudited Pro Forma Combined Financial Statements.

2

AARON'S, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS
Year Ended December 31, 2013
	Historical						Pro Forma Adjustments
(In Thousands, Except Per Share Data)	Aaron's Inc.			Progressive Finance Holdings, LLC			Acquisition Adjustments (Note 2)				Financing Adjustments (Note 3)				Pro Forma Combined
REVENUES:
Lease Revenues and Fees	$	1,748,699		$	403,951		$	—			$	—			$	2,152,650
Retail Sales	40,876			—			—				—				40,876
Non-Retail Sales	371,292			—			—				—				371,292
Franchise Royalty Fees	68,575			—			—				—				68,575
Other	5,189						—				—				5,189
	2,234,631			403,951			—				—				2,638,582
COSTS AND EXPENSES:
Retail Cost of Sales	24,318			—			—				—				24,318
Non-Retail Cost of Sales	337,581			—			—				—				337,581
Cost of Lease Revenues	—			300,069			(260,236		)	I	—				—
							(39,833		)	J	—
Operating Expenses	1,022,684			83,648			75,618			J	—				1,181,950
Legal and Regulatory Expense	28,400			—			—				—				28,400
Retirement and Vacation Charges	4,917			—			—				—				4,917
Depreciation of Lease Merchandise	628,089			—			260,236			I	—				888,325
Other Operating Expense, Net	1,584			—			—				—				1,584
	2,047,573			383,717			35,785				—				2,467,075
OPERATING PROFIT	187,058			20,234			(35,785		)		—				171,507
Interest Income	2,998			—			—				—				2,998
Interest Expense	(5,613		)	(7,847		)	7,847			K	(20,866		)	C	(26,479		)
Other Non-Operating Income, Net	517			—			—				—				517
EARNINGS BEFORE INCOME TAXES	184,960			12,387			(27,938		)		(20,866		)		148,543
INCOME TAXES	64,294			—			(5,832		)	L	(7,825		)	D	50,637
NET EARNINGS	$	120,666		$	12,387		$	(22,106	)		$	(13,041	)		$	97,906
EARNINGS PER SHARE	$	1.59													$	1.29
EARNINGS PER SHARE ASSUMING DILUTION	$	1.58													$	1.28
Weighted Average Shares Outstanding - Basic	75,747														75,747
Weighted Average Shares Outstanding - Diluted	76,390														76,390

See accompanying notes to the Unaudited Pro Forma Combined Financial Statements.

3

Aaron's, Inc. and Subsidiaries

Notes to the Unaudited Pro Forma Combined Financial Statements

December 31, 2013

(in thousands, except per share data and percentages)

1. Basis of Presentation

The accompanying Unaudited Pro Forma Combined Financial Statements present the pro forma combined financial position and results of operations of the combined company based upon the historical financial statements of each of Aaron’s, Inc. and Progressive, after giving effect to the Merger and all related transactions, including Financing Transactions and adjustments described in these notes, and are intended to reflect the impact of the Merger and Financing Transactions on the Company’s combined financial statements. The accompanying Unaudited Pro Forma Combined Financial Statements have been prepared using and should be read in conjunction with the respective audited consolidated financial statements of each of Aaron’s, Inc. and Progressive for the fiscal year ended December 31, 2013.

The accompanying Unaudited Pro Forma Combined Financial Statements are presented for illustrative purposes only and do not reflect the costs of any integration activities or benefits that may result from realization of future costs savings due to operating efficiencies or revenue synergies expected to result from the Merger. The accompanying Unaudited Pro Forma Combined Financial Statements include the presentation of Aaron's, Inc. sales on the net basis and Progressive's sales on the gross basis for sales taxes imposed on lease revenues. For the year ended December 31, 2013, the amount of Progressive sales tax recorded as lease revenues and fees and operating expenses is $30,605. At this time, the Company is not aware of any other policy differences that have a material impact on the combined financial statements.

The Unaudited Pro Forma Combined Statement of Earnings for the fiscal year ended December 31, 2013 combines the historical Consolidated Statement of Earnings of Aaron’s, Inc. and the Consolidated Statement of Comprehensive Income for Progressive, giving effect to the Merger as if it had been consummated on January 1, 2013, the beginning of the period presented. The Unaudited Pro Forma Combined Balance Sheet combines the historical Consolidated Balance Sheet of Aaron’s, Inc. and the Consolidated Balance Sheet of Progressive as of December 31, 2013, giving effect to the Merger as if it had been consummated on December 31, 2013.

The Unaudited Pro Forma Combined Financial Statements were prepared using the acquisition method of accounting with Aaron’s, Inc. considered the acquirer of Progressive. The audited consolidated financial statements of Progressive have been adjusted to reflect certain reclassifications in order to conform to Aaron’s, Inc. financial statement presentation.

2. Acquisition Adjustments

The Unaudited Pro Forma Combined Balance Sheet has been adjusted to reflect the preliminary acquisition accounting, which is based on the preliminary estimated fair values of the tangible and intangible assets acquired and liabilities assumed, with the excess purchase price being recorded to goodwill. The preliminary acquisition accounting in these Unaudited Pro Forma Combined Financial Statements is based upon a purchase price of approximately $704,608.

The following represents the preliminary estimate of the purchase price to be paid in the Merger:

Proceeds from private placement note issuance	$	300,000
Proceeds from senior debt facility	126,250
Proceeds from draw on revolver	65,000
Portion of purchase price paid from cash on hand	213,358
Total	$	704,608

4

Aaron's, Inc. and Subsidiaries

Notes to the Unaudited Pro Forma Combined Financial Statements

December 31, 2013

(in thousands, except per share data and percentages)

Following is a summary of the preliminary estimated fair value of the assets acquired and liabilities assumed:

Estimated Purchase Price	$	704,608
Estimated Fair Value of Identifiable Assets Acquired and Liabilities Assumed
Cash and Cash Equivalents	4,608
Receivables, Net	12,326
Lease Merchandise, Net	120,976
Property, Plant and Equipment, Net	3,958
Other Intangibles, Net	333,000
Prepaid Expenses and Other Assets	1,454
Total Identifiable Assets Acquired	476,322
Accounts Payable and Accrued Expenses	(20,598		)
Deferred Income Taxes Payable	(48,301		)
Customer Deposits and Advance Payments	(10,000		)
Total Liabilities Assumed	(78,899		)
Net Assets Acquired	397,423
Goodwill	$	307,185

The Unaudited Pro Forma Combined Balance Sheet reflects the following adjustments:

A. Represents cash consideration given in the transaction of $704,608.

B. The Company estimates transaction expenses of $6,559. Expenses include fees for investment banking services, legal, accounting, due diligence, tax, valuation, printing and other various services necessary to complete the transaction. These expenses are reflected as a reduction of cash and a charge to retained earnings.

C. All outstanding indebtedness of Progressive was extinguished at the closing of the Merger using a portion of the Merger Consideration, net of the settlement of $2,781 of related party receivables. Unamortized debt issuance costs of $1,287 related to Progressive's pre-Merger debt were eliminated.

D. Reflects the preliminary adjustment to establish estimated goodwill of $307,185. The goodwill created in the Merger is not expected to be deductible for tax purposes.

E. Represents the elimination of $51,753 of existing intangible assets of Progressive and the recording of $333,000 of the estimated fair value of the identifiable intangible assets attributable to the Merger.

5

Aaron's, Inc. and Subsidiaries

Notes to the Unaudited Pro Forma Combined Financial Statements

December 31, 2013

(in thousands, except per share data and percentages)

The estimated intangible assets attributable to the Merger are comprised of the following:

	Amount		Annual Amortization Expense	Quarterly Amortization Expense	Estimated Weighted Average Life (Years)
Internal Use Software	$	14,000	4,700	1,200	3.0
Technology	66,000		6,600	1,700	10.0
Trade Names and Trademarks	53,000		—	—	Indefinite
Customer Lease Contracts	19,000		19,000	4,800	1.0
Merchant Relationships	181,000		18,100	4,500	10.0

The estimated fair values for this pro forma presentation for technology and trade names were measured using the relief-from-royalty method. This method assumes the technology and trade names have value to the extent that the owner is relieved of the obligation to pay royalties for the benefits received from them. Significant assumptions required to develop estimates using this method are revenue growth rates for the related brands, the appropriate royalty rate, an appropriate discount rate and obsolescence of technology.

The estimated fair values for this pro forma presentation for customer lease contracts and merchant relationships were measured using the multi-period excess earnings method. The principle behind the multi-period excess earnings method is that the value of an intangible asset is equal to the present value of the incremental after-tax cash flows attributable to the subject intangible asset, after taking charges for the use of other assets employed by the business. Significant assumptions required for this method are revenue growth rates and profitability related to customers, customer attrition rates, contributory asset charges and an appropriate discount rate.

The use of different methodologies or assumptions could result in materially different values.

F. Reflects an adjustment to deferred tax liabilities representing the deferred income tax liability based on the global blended statutory tax rate of 37.5% multiplied by the fair value adjustments made to the assets to be acquired and liabilities to be assumed. For purposes of these Unaudited Pro Forma Combined Financial Statements, a global blended statutory tax rate of 37.5% has been used. This does not reflect the Company’s expected effective tax rate, which will include other tax charges and benefits, and does not take into account any historical or possible future tax events that may impact the combined company.

G. Reflects a $3,807 decrease in deferred revenue to reflect the estimated fair value associated with performance obligations assumed by the Company.

H. Represents the elimination of the Progressive member’s equity balance.

The Unaudited Pro Forma Combined Statement of Earnings reflects the following adjustments:

I. Depreciation of Progressive’s lease merchandise of $260,236 was reclassified from cost of lease revenues to depreciation of lease merchandise.

6

Aaron's, Inc. and Subsidiaries

Notes to the Unaudited Pro Forma Combined Financial Statements

December 31, 2013

(in thousands, except per share data and percentages)

J. Operating expense was adjusted as follows:

• The reclassification of Progressive's bad debt expense and merchant rebates of $39,833 from cost of lease revenues to operating expenses.

• The removal of $12,615 of amortization expense incurred for the twelve months ended December 31, 2013 on pre-Merger intangible assets that will be eliminated upon consummation of the transaction.

• An increase to reflect amortization expense of $48,400 incurred for the twelve months ended December 31, 2013 on the estimated fair value of the identifiable intangible assets recognized attributable to the Merger.

K. Reversal of interest expense of $7,664 and amortization of debt issuance costs of $183 for the Progressive debt that was extinguished at the closing of the Merger as described above.

L. For purposes of these Unaudited Pro Forma Combined Financial Statements, a blended statutory tax rate of 37.5% has been used. This does not reflect the Company’s effective tax rate, which will include other tax items such as state and other tax charges and benefits, and does not take into account any historical or possible future tax events that may impact the consolidated company.

3. Financing Adjustments

Upon consummation of the Merger and Financing Transactions, on a pro forma consolidated basis, Aaron’s, Inc. incurred approximately $491,250 in additional debt, comprised of $300,000 in Senior Notes, $126,250 in Term Loans and a $65,000 draw on the existing Revolving Credit Agreement.

The Unaudited Pro Forma Combined Balance Sheet reflects the following adjustments:

A. Represents proceeds of $300,000 from Senior Notes, $126,250 from Term Loans and a $65,000 draw on the existing Revolving Credit Agreement less expected debt issuance costs incurred of $2,266. These debt issuance costs, which are expected to be paid with existing cash on hand, are expected to be capitalized and amortized over the term of the related debt balances.

B. As described above, upon consummation of the Merger and related Financing Transactions, the Company incurred $491,250 in additional debt, comprised of $300,000 of Senior Notes, $126,250 from Term Loans and a $65,000 draw on the existing Revolving Credit Agreement.

The Unaudited Pro Forma Combined Statement of Earnings reflects the following adjustments:

C. Interest expense was adjusted to include an estimate of interest expense and amortization of debt issuance costs on additional debt issued in connection with the Financing Transactions, as summarized below:

7

Aaron's, Inc. and Subsidiaries

Notes to the Unaudited Pro Forma Combined Financial Statements

December 31, 2013

(in thousands, except per share data and percentages)

	Interest Rate		Principal		Year Ended December 31, 2013
Composition of new debt and related interest expense:
Senior Notes	4.75	%	$	300,000	$	14,250
Term Loans	3.75	%	126,250		4,734
Revolving Credit Agreement	2.06	%	65,000		1,339
Total New Debt			$	491,250	$	20,323
Incremental amortization of debt issuance costs					$	543

For each one-eighth of 1% (12.5 basis points) change in the estimated interest rate associated with the $491,250 borrowings, interest expense would increase or decrease by $614 for the year ended December 31, 2013.

D. For purposes of these Unaudited Pro Forma Combined Financial Statements, a blended statutory tax rate of 37.5% has been used. This does not reflect the Company’s effective tax rate, which will include other tax items such as state and other tax charges and benefits, and does not take into account any historical or possible future tax events that may impact the combined company.

8