Segment Information

6 Months Ended

Jun. 30, 2011

Segment Information

Note D – Segment Information

		September 30,			September 30,			September 30,			September 30,
	Three Months Ended June 30,						Six Months Ended June 30,
(In Thousands)	2011			2010			2011			2010
Revenues From External Customers:
Sales and Lease Ownership	$	459,796		$	422,564		$	972,794		$	896,062
Franchise		15,176			14,147			31,519			29,074
Other		3,019			4,508			5,969			9,403
Manufacturing		20,713			14,199			49,122			39,219
Revenues of Reportable Segments		498,704			455,418			1,059,404			973,758
Elimination of Intersegment Revenues		(20,905	)		(14,390	)		(49,496	)		(39,600	)
Cash to Accrual Adjustments		4,901			3,971			5,457			6,110
Total Revenues from External Customers	$	482,700		$	444,999		$	1,015,365		$	940,268
Earnings (Loss) Before Income Taxes:
Sales and Lease Ownership	$	2,234		$	35,076		$	59,451		$	80,819
Franchise		11,846			11,013			24,762			22,543
Other		(467	)		(7,262	)		857			(8,075	)
Manufacturing		(73	)		355			1,318			1,552
Earnings Before Income Taxes for Reportable Segments		13,540			39,182			86,388			96,839
Elimination of Intersegment Loss (Profit)		73			(355	)		(1,318	)		(1,554	)
Cash to Accrual and Other Adjustments		4,014			502			4,476			3,606
Total Earnings Before Income Taxes	$	17,627		$	39,329		$	89,546		$	98,891

Earnings before income taxes for each reportable segment are determined in accordance with accounting principles generally accepted in the United States with the following adjustments:

• Sales and lease ownership revenues are reported on a cash basis for management reporting purposes.

• A predetermined amount of each reportable segment’s revenues is charged to the reportable segment as an allocation of corporate overhead. This allocation was approximately 2% in 2011 and 2010.

• Accruals related to store closures are not recorded on the reportable segment’s financial statements, as they are maintained and controlled by corporate headquarters.

• The capitalization and amortization of manufacturing and distribution variances are recorded in the consolidated financial statements as part of Cash to Accrual and Other Adjustments and are not allocated to the segment that holds the related lease merchandise.

• Advertising expense in the sales and lease ownership division is estimated at the beginning of each year and then allocated to the division ratably over the year for management reporting purposes. For financial reporting purposes, advertising expense is recognized when the related advertising activities occur. The difference between these two methods is recorded as part of Cash to Accrual and Other Adjustments.

• Sales and lease ownership lease merchandise write-offs are recorded using the direct write-off method for management reporting purposes. For financial reporting purposes, the allowance method is used and is recorded as part of Cash to Accrual and Other Adjustments.

• Interest on borrowings is estimated at the beginning of each year. Interest is then allocated to operating segments on the basis of relative total assets.

Revenues in the “Other” category are primarily revenues of the Aaron’s Office Furniture division, from leasing space to unrelated third parties in the corporate headquarters building and revenues from several minor unrelated activities. The pre-tax losses or earnings in the “Other” category are the result of the activity mentioned above, net of the portion of corporate overhead not allocated to the reportable segments for management purposes. Included in the Earnings Before Income Taxes results above for the Sales and lease Ownership segment is a $36.5 million accrual for the lawsuit expense described in Note E.