Segment Information

9 Months Ended

Sep. 30, 2011

Segment Information

Note D – Segment Information

		September 30,			September 30,			September 30,			September 30,
	Three Months  Ended September 30,						Nine Months Ended September 30,
(In Thousands)	2011			2010			2011			2010
Revenues From External Customers:
Sales and Lease Ownership	$	467,413		$	435,573		$	1,440,207		$	1,331,635
Franchise		15,889			14,537			47,408			43,611
Other		7,430			3,940			13,399			13,343
Manufacturing		17,178			17,591			66,300			56,810
Revenues of Reportable Segments		507,910			471,641			1,567,314			1,445,399
Elimination of Intersegment Revenues		(17,369	)		(17,783	)		(66,865	)		(57,383	)
Cash to Accrual Adjustments		(5,346	)		(1,708	)		111			4,402
Total Revenues from External Customers	$	485,195		$	452,150		$	1,500,560		$	1,392,418
Earnings (Loss) Before Income Taxes:
Sales and Lease Ownership	$	39,523		$	33,493		$	98,974		$	114,312
Franchise		12,431			11,163			37,193			33,706
Other		(3,001	)		(654	)		(2,144	)		(8,729	)
Manufacturing		687			891			2,005			2,443
Earnings Before Income Taxes for Reportable Segments		49,640			44,893			136,028			141,732
Elimination of Intersegment Profit		(687	)		(891	)		(2,005	)		(2,445	)
Cash to Accrual and Other Adjustments		(3,861	)		(1,917	)		615			1,689
Total Earnings Before Income Taxes	$	45,092		$	42,085		$	134,638		$	140,976

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 charge for the lawsuit expense described in Note E.