Aaron's Initiation 3-3-09

Aaron Rents
(RNT:NYSE)
Outperform 2
EQUITY
RESEARCH
Budd Bugatch, CFA

(727) 567-2527
Budd.Bugatch@RaymondJames.com
TJ McConville
Research Associate
(727) 567-5761
March 3, 2009
Home Retailers
Initiation of Coverage
Chad Bolen
Senior Research Associate
(727) 567-2546
All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates, Inc. (RJA) as of the date stated above and are subject to change.
Information has been obtained from third-party sources we consider reliable, but we do not guarantee that the facts cited in the foregoing report are accurate or complete. Other
departments of RJA may have information that is not available to the Research Department about companies mentioned in this report. RJA or its affiliates may execute
transactions in the securities mentioned in this report that may not be consistent with the report's conclusions.
2009 Raymond James & Associates, Inc. All Rights Reserved
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Table of Contents
Executive Summary ............................................................................................................ 4
Investment Thesis............................................................................................................... 4
Positive Industry Characteristics: Profitability, Growth, and Barriers....................... 5
Expanding Customer Base...................................................................................... 5
Focused Business Approach................................................................................... 5
High Quality, Experienced Leadership .................................................................... 6
Valuation.................................................................................................................. 6
Stock Drivers ......................................................................................................... 10
Investment Risks............................................................................................................... 11
Aaron Rents: A Detailed Examination.............................................................................. 14
Company History: Lease Ownership Begins ........................................................ 14
Company History: Public Trading of RNT and RNT.A.......................................... 16
Revenue and Earnings Growth ............................................................................. 17
"Gross Margins"..................................................................................................... 27
Operating Expenses .............................................................................................. 28
Competition ........................................................................................................... 35
Senior Management .............................................................................................. 37
Recent Results ...................................................................................................... 38
Model and Estimates ............................................................................................. 39
Technical Analysis............................................................................................................. 41
Summary and Recommendation....................................................................................... 42
Appendices
Income Statement Model .................................................................................................. 43
Common Size Income Statement Model .......................................................................... 44
Balance Sheet Model ........................................................................................................ 45
Cash Flow Statement Model ............................................................................................. 46
Operating Expense Model ................................................................................................ 47
Economic Value Added Worksheet (EVA) ........................................................................ 48
Free Cash Flow Intrinsic Value Calculation ...................................................................... 49
Operating Assumptions Sensitivity Analysis ..................................................................... 50
Sample Aarons Customer Information and Order Form................................................... 51
Sample Aarons Lease Agreement & Federal Consumer Leasing Act Disclosures.......... 53
Rent-to-Own Industry Overview ........................................................................................ 56
Please read disclosure/risk information on page 64 and Analyst Certification on page 68.
Aaron Rents
Aaron Rents
(RNT:NYSE)
Outperform 2
Headquartered in Atlanta, Georgia, Aaron Rents is the second largest participant in

the sales and lease ownership, or rent-to-own, industry. Through its network of
more than 1,000 company-owned and 500 franchised stores, Aaron Rents serves
cash- or credit-constrained customers who want important quality-of-life enhancing
merchandise. Aaron Rents manufactures a significant amount of the upholstered
furniture and bedding it leases through its MacTavish division.
RNT: Initiating Coverage with an Outperform Rating
We initiate coverage of Aaron Rents with an Outperform rating and

$28.00, twelve-month target price. Our target represents about 16x
and 14x our 2009 and 2010 EPS estimates, respectively, in-line with
historical averages and just above our ~13% three-year projected EPS
growth rate. The target is also supported by our free cash flow and
economic profit calculation of intrinsic value, detailed in the Appendix
of this report.
Aaron Rents is one of two leaders in the rental purchase industry, a
growing sub-segment of the retail sector. Over the past decade, as
consumers have continued to adopt the rent-to-own or lease
ownership transaction, industry sales have outpaced the overall
economy. Furthermore, the tenets of a lease ownership transaction
to be discussed later in this report become increasingly attractive
during periods of tight credit and economic uncertainty.
Although Aaron Rents has been recently modified its strategy from
aggressive unit growth to increased operating profitability, abundant
opportunity for incremental store expansion remains. Sales growth will
be driven internally and by additions of company-owned and
franchised stores. Additionally, as management focuses on store
profitability, there is the prospect for reaccelerating earnings growth.
Aarons management team is one of the most respected in the
industry. The companys founder and current chairman of the board is
a pioneer within rent-to-own and his knowledge and experience have
been passed along to his son, the current CEO. Aaron Rents has a
reputation for exceeding earnings expectations and delivering solidly
positive comparable-store sales growth.
Despite its historically elevated valuation, the stock currently trades at
a discount to historical medians. Currently, shares are priced at
~13.5x our 2009 EPS estimate, below the ~16x ten-year median.
Versus its peers, the stocks valuation premium well below peak levels.
We are introducing a 2009 EPS estimate of $1.80, within
managements $1.72-1.87 guidance. For 2010 our EPS estimate is
$2.07.
Non-GAAP
EPS
FY=Dec
Q1
Mar
Q2
Jun
Q3
Sep
Q4
Dec
Full
Year
2008A
2009E
2010E
2011E
$0.42
0.49
0.56
UR
$0.39
0.45
0.51
UR
$0.39
0.43
0.49
UR
$0.39
0.42
0.51
UR
$1.55
1.80
2.07
2.26
GAAP EPS
Full
Year
$1.66
1.80
2.07
2.26
March 3, 2009
Home Retailers
Initiation of Coverage
Budd Bugatch, CFA
(727) 567-2527
Budd.Bugatch@RaymondJames.com
TJ McConville
Research Associate
(727) 567-5761
Chad Bolen
Senior Research Associate
(727) 567-2546
Current Price
(3/2/2009 )
$24.32
Projected 12-Month Target Price:
$28.00
52-Week Range
Dividend/Yield
Book Value (12/08)
Suitability
$30.22-$15.11
$0.07/0.3%
$14.30
Growth
Shares Out. (mil.)

Market Cap. (mil.)
Avg. Daily Vol. (10 day)
53.4
$1299
1,034,011
Proj. 3-Yr EPS Growth Rate

13%
ROE
11%
LT Debt (mil.)/% Cap.
$116/13%
P/E Ratios (Non-GAAP)
2009E
2010E
2011E
Revenues (mil.)
2008A
2009E
2010E
2011E
Operating Margins
2008A
2009E
2010E
2011E
13.5x
11.7x
10.8x
$1,593
$1,759
$1,947
$2,126
9.3%
9.4%
9.8%
9.7%
Rows may not add due to rounding. UR: Under Review. Non-GAAP EPS exclude
earnings from discontinued operations and one-time items.
Aaron Rents
Executive Summary
Thomson-Reuters
Insider Trading BOT/SL
last 6 months.....394,400/1,031,185
Float (mil.)............................... 53.5
Common Equity
(mil.)/% of Cap ........... $762/87%
Aaron Rents, based in Atlanta, Georgia, is one of the two largest players in the
growing rent-to-own (RTO) industry. The company now focuses on lease
ownership sales of home furnishings to customers that have little, no, or poor
credit histories. Aarons owns and operates 1,053 store locations and
franchises an additional 504 stores in 48 states and Canada. Plans are
underway for additional expansion in Canada.
Founded in 1955 by Chairman R. Charles Loudermilk, Sr., Aarons initially
focused on renting outdoor tents and chairs. It since has migrated into
primarily a Sales and Lease Ownership (SALO) business that offers a wide
variety of products and serves more than 1.1 million customers. Aaron Rents
operates three distinct divisions: Sales and Lease Ownership, Corporate
Furnishings, and Manufacturing.
The Aarons Sales & Lease Ownership (SALO) division is the companys
largest and fastest growing division, serving credit-constrained consumers in
need of basic home furnishings, appliances, and electronics. At year-end 2008
there were 1,037 company-owned stores, including 10 RIMCO outlets, and
504 franchised stores, including eight RIMCO outlets.
The companys Corporate Furnishings business serves both corporate
customers with office furniture and residential furniture for employee
relocations and the traditional residential customers. In the fourth quarter of
2008, the company sold substantially all of the assets of this division to CORT
Business Services Corporation, a wholly owned subsidiary of Berkshire
Hathaway for more than $75 million. As of year-end, there were 16 stores
operating exclusively as Aarons Corporate Furnishings.
The MacTavish Furniture Industries division manufactures the majority of
upholstered furniture and a significant portion of the mattresses and
foundations leased, rented, and sold by Aarons.
Investment Thesis
Aaron Rents is on a roll. During the past several years, management has
grown its store count aggressively through green field store openings,
acquisition, conversion of independent rent-to-own (RTO) operators to the
Aarons format, and expansion of its franchise program.
During this period, Aarons has focused its business almost exclusively on its
Sales and Lease Ownership division by selling most of the assets of its
Corporate Furnishings division, by closing underperforming stores, and
shrinking other RTO concepts. In the movement of stores, 2008 was a
particularly active year.
Contrary to other home furnishings and hard goods retailers, a challenging
job/wage and consumer confidence environment benefits RTO operators.
RTO transactions are popular with consumers that are cash-, credit-, and/or
budget-constrained. As unemployment rates rise and consumers look to
maintain and/or improve their living standards, RTO operators benefit by an
increased pool of potential customers.
Aarons is an industry leader that caters to a better class of these cash- and/or
credit-constrained customers. By virtue of its policies and practices, it has
delivered consistent revenue and earnings comparisons for several years and
quarterly results have exceeded estimates for each of the past five quarters.
Moreover, management has recently increased its earnings outlook several
times. In combination, these factors make Aarons an attractive equity to
recommend.
Aaron Rents

We initiate coverage of Aarons common stock, RNT, with an Outperform
rating for the following specific reasons:
Positive Industry
Characteristics:
Profitability, Growth,
and Barriers
Even in its early days, the rent-to-own (RTO) or lease-ownership industry was
highly profitable. In fact, the perceived too-large profits of the early players
and calculated annual percentage rate proxies were the lightning rods that
caused much of the negative attention directed towards the business.
Despite the criticisms, the industry continues to grow, primarily from market
penetration and an expanding customer base and less so from new locations.
Nevertheless, store growth opportunities still exist. We believe that within the
realm of furnishing retailers few, if any, growth stories remain. Aaron Rents
is one of them.
Since 1995, RTO industry revenues have grown at an above-average 5.0%
compound annual growth rate (CAGR), driven by increased adoption by
consumers. Over this period, there has yet to be a down year in revenue
growth for the industry, with revenues actually increasing in 2001s recession.
In the current recession, the industrys popularity with consumers is growing as
more consumers face financial pressures and the need for new furnishings
particularly digital television increases. To many of the industrys customers,
the home television is their chief source of entertainment, raising its status to a
necessity.
From a Porter analysis view, the most attractive aspects of the rent-to-own
industry are (a) the relatively high start-up costs that limit the threat of new
entrants and (b) the comparative advantage of the lessor versus the lessee in
determining price and terms, given the customers typical financial position.
Additionally, rivalry among competitors, while appearing fierce on the surface,
is, on balance, relatively rational because the major players target different
customer populations. That said, the industry leadership is tightly contested,
and Aarons has found its own niche amongst the upper portion of the target
customer - $50,000 in household income and below. Management sized this
market at about 50% of the ~78 million family households in the U.S. today.
Expanding Customer Base
The recent economic meltdown seems likely to have long-term effects on the
consumer landscape. In Aarons case, the collapse of many consumers FICO
scores should drive more customers to its stores. The fact that the company
does not conduct formal credit checks becomes an increasingly attractive
value proposition to consumers who were forced to file for bankruptcy or
suffered home foreclosures.
As evident recently, the reaction of many lending institutions to a downturn is
to tighten credit. In most states, lease ownership transactions are not defined
as outright sales, meaning that no additional debt is incurred by RTO
customers. These important features no credit checks and no incurred new
debt seem likely to be increasingly valuable to a larger number of
households that previously might not rent-to-own.
Focused Business
Approach
Aaron Rents continues to focus and streamline its business by adjusting its
corporate structure as well as its product offering. The result is a leaner
operating structure that is attuned to its customers wants and needs.
Recently, it sold the majority of its Aarons Corporate Furnishings division to
the CORT Business Services Corporation division of Berkshire Hathaway. The
sale signaled a heightened commitment by Aaron Rents management to the
Sales and Lease Ownership business, its growth engine.
The necessary wants that Aarons offers include home furnishings such as
furniture, electronics, and appliances. Although not necessary for basic
survival, these products are all but essential for quality of life attainment for
most Americans. In addition, given the relatively low levels of discretionary
income of most Aarons customers, a comfortable and entertaining home is
necessary since nights out are rare.
Aaron Rents

Rent-to-own industry observers recognize that the Aarons model has
revolutionized, and improved, the lease ownership business. The company
focuses on providing the lowest possible total cost of ownership for its
customers, consistent with acceptable profit potential, thereby maximizing the
number of items a customer can obtain.
The result is a much higher customer count per store than the industry
average. At the beginning of 2008, when available industry data exists,
Aarons had roughly 583 customers per average company-owned store and
614 customers per store including franchises. This compares with the industry
at 350 customers per store for operators with over 21 stores. At year end of
2008, Aarons had 696 customers per company-owned store and 702
customers per store including franchises. Customer count is a key indicator of
successful execution in the RTO industry.
The favorable lease terms also lead to better relationships between the
customers and store managers. Anecdotal reports suggest that the opening of
an Aarons store in a market with pre-existing rent-to-own outlets can cause
those operators to lose as much as 40% of their business if they fail to match
Aarons pricing model.
High Quality,
Experienced Leadership
Management talent is another of Aarons core advantages. Its senior

executives have been with Aarons for over 75 years combined. Board
Chairman R. Charles Charlie Loudermilk, Sr. (81) remains the majority holder
of the companys Class-A voting stock.
Current Chief Executive Officer Robert C. Robin Loudermilk, Jr. (49) is
Charlie Loudermilks son and served as the companys chief operating officer
from 1997 to June 2008. Robin has been a member of the board of directors
since 1982.
Gilbert Gil Danielson (62) has been Aaron Rents chief financial officer since
1990. In 1994, after the early 1990s creation to two classes of stock, he
guided the initial offering of the Aarons common stock. Mr. Danielson also
serves on the board of directors and has been on the board at Servidyne Inc.,
an office building optimization consulting firm, since 2000.
Chief Operating Officer William Ken Butler joined Aaron Rents in 1974,
starting as an assistant store manager. In 1987, he was tasked to spearhead
the development of Aarons rent-to-own business that led to the transition of
Aarons from a rent-to-rent business. Following Robin Loudermilks promotion
to CEO in June 2008, Mr. Butler was promoted to COO. Prior to that, he was
president of the companys Sales and Lease Ownership division, a title that he
still holds today.
Valuation
The common shares of Aaron Rents have enjoyed a significant valuation

premium to Rent-A-Center, its closest peer. Historically, the valuation gap
between the two has ranged from 11.8 multiple turns in RCIIs favor (in 1999)
to 11.5 multiple turns in RNTs favor (in 2004) on a forward P/E basis.
Recently, however, RNTs premium has eroded following an upward move in
RCIIs stock price. Currently, RNT trades at 4.9 multiple turns higher than
RCII.
From a growth perspective, Aarons is poised to significantly outpace the RTO
industry, its main competitor, and retailers in general. With just over 1,500
stores currently, Aarons management is confident that the market will support
a near doubling of its base. Through the use of its franchise program, the
company should be able to expand its footprint more quickly than it would on
its own.
We currently project that revenues will grow at a 10% CAGR over the next
three years. This will be driven primarily through continued growth at the
company-owned stores as well as from franchise royalties and fees.
Aaron Rents

Furthermore, our EPS estimates imply a 13%, three-year CAGR as the
company focuses on improving store profitability.
This page and the following three delve deeply into the valuation metrics for
RNT. For interested readers, the data shows 10-year historical averages for a
number of metrics. For those inclined to skip the section, the main thesis is
that although RNT trades at somewhat elevated valuations versus its
peer, it currently is below its historical medians.
The ending figures presented are as of February 24, 2009.
We see that based on consensus estimates, RNT currently trades at 13.4x
forward EPS. This compares with the approximate 10-year median multiple of
15.5x. In the lower portion of the below chart, we see that RNT typically trades
at about 1.5x the RCII forward earnings multiple. Currently, shares trade at
about 1.8x.
RNT Forward P/E - Compared with RCII
25.0
10.0
9.0
20.0
8.0
7.0
15.0
Absolute P/E
6.0
13.4
5.0
10.0
4.0
P/E Relative to RCII
15.5
3.0
1.8
5.0
2.0
1.5
1.0
0.0
RNT Forward P/E Relative to RCII
RNT Forward P/E
Jan-09
Sep-08
Jan-08
May-08
Sep-07
Jan-07
Median
May-07
Sep-06
Jan-06
May-06
Sep-05
Jan-05
May-05
Sep-04
Jan-04
May-04
Sep-03
Jan-03
May-03
Sep-02
Jan-02
May-02
Sep-01
Jan-01
May-01
Sep-00
Jan-00
May-00
Sep-99
Jan-99
May-99
0.0
Median
Source: Baseline and Raymond James Research.
On the following page, we present a similarly constructed chart that compares

the forward P/E multiple of RNT to that implied by consensus estimates for the
S&P 500 Index. Noting that RNT has a 10-year median of 1.0x the S&P 500
multiple, the stock currently trades at 1.2x the multiple. This is mainly a
function of the overall market pullback throughout 2008 and the relative
resiliency of the Aaron Rents business model and stock performance.
Aaron Rents
RNT Forward P/E - Compared with S&P 500

25.0
10.0
9.0
20.0
8.0
7.0
15.0
Absolute P/E
6.0
13.4
5.0
10.0
4.0
P/E Relative to RCII
15.5
3.0
5.0
2.0
1.2
1.0
1.0
RNT Forward P/E
Median
Jan-09
Sep-08
Jan-08
May-08
Sep-07
Jan-07
May-07
Sep-06
Jan-06
May-06
Sep-05
Jan-05
May-05
Sep-04
Jan-04
RNT Forward P/E Relative to S&P 500
May-04
Sep-03
Jan-03
May-03
Sep-02
Jan-02
May-02
Sep-01
Jan-01
May-01
Sep-00
Jan-00
May-00
Sep-99
Jan-99
0.0
May-99
0.0
Median
On an absolute price-to-sales (P/S) basis, shown by the solid line in the chart
below, RNT now trades at a discount to its historical median multiple. Shares
trade at 0.8x trailing four quarter sales compared with the 10-year median 0.9x
multiple. Relative to RCII, however, RNT trades at a premium: 1.9x, compared
with its historical 10-year median premium of 1.4x.
6.0
1.4
5.3
1.2
4.5
3.8
Absolute P/S
1.0
0.9
0.8
3.0
0.8
2.3
0.6
P/S Relative to RCII
RNT P/S - Compared with RCII

1.6
1.9
1.5
0.4
1.4
RNT Price/Sales Relative to RCII
RNT Price/Sales
Median
Jan-09
Sep-08
May-08
Jan-08
Sep-07
May-07
Jan-07
Sep-06
May-06
Jan-06
Sep-05
May-05
Jan-05
Sep-04
May-04
Jan-04
Sep-03
May-03
Jan-03
Sep-02
May-02
Jan-02
Sep-01
May-01
Jan-01
Sep-00
May-00
Jan-00
0.0
Sep-99
0.0
Jan-99
0.8
May-99
0.2
Median
Aaron Rents

Likewise, relative to the S&P 500 P/S ratio, RNT now trades at a premium to
the 10-year median multiple.
6.0
1.4
5.3
1.2
4.5
1.0
3.8
0.9
0.8
0.8
3.0
0.6
2.3
0.4
P/S Relative to SPX
Absolute P/S
RNT P/S - Compared With the S&P 500

1.6
1.5
1.1
0.2
0.8
0.6
0.0
RNT Price/Sales Relative to S&P 500
RNT Price/Sales
Jan-09
Sep-08
Jan-08
Median
May-08
Sep-07
Jan-07
May-07
Sep-06
Jan-06
May-06
Sep-05
Jan-05
May-05
Sep-04
Jan-04
May-04
Sep-03
Jan-03
May-03
Sep-02
Jan-02
May-02
Sep-01
Jan-01
May-01
Sep-00
Jan-00
May-00
Sep-99
Jan-99
May-99
0.0
Median
Below, we extend the valuation comparison analysis to other home furnishings

companies as well as Cash America and Advance America. We chose these
latter issues because these companies target a similar customer base as
Aaron Rents, as well as the comparability of the revenue streams.
Rent-to-Own and Other Home Furnishings Retailers

RJ
Rating
Ticker
RNT
Aaron Rents
RCII
Rent-A-Center
HVT
TTM
P/E
NTM
P/E
P/E to
SPX
PEG
Ratio
P/B
P/CF
P/S
EV /
EBITDA
Avg Vol
(000)'s
Mkt Cap
(Mil)
$23.31
0.3%
14.3
12.8
1.1
0.9
1.7
2.4
0.8
2.2
1,000
1,247
NR
$17.22
0.0%
8.4
8.2
0.7
1.0
1.1
1.4
0.4
2.2
1,318
1,150
Haverty Furniture
MP3
$7.85
0.0%
NA
0.6
9.7
0.2
8.6
141
167
PIR
Pier 1 Imports
SB1
$0.20
0.0%
NA
0.2
0.0
13.6
461
18
CPWM
Cost Plus
MP3
$0.70
0.0%
NA
0.2
0.0
33.9
41
15
CSH
Cash America Int'L
NR
$13.25
1.1%
4.4
4.5
0.4
0.4
0.7
3.1
0.4
4.1
395
384
AEA
Advance America
NR
$0.85
Source: BASELINE, and
Raymond James Research

Updated
OP2
Price
Budd Bugatch, CFA 727-567-2527

Div
Yield
29.4%
1.3
1.4
0.1
0.1
0.3
0.9
0.1
2.4
177
52
Mean:
4.4%
7.1
6.7
0.6
0.6
0.7
3.5
0.27
9.6
505
433
Median:
0.0%
6.4
6.4
0.6
0.7
0.6
2.4
0.24
4.1
395
167
3/4/2009
Aaron Rents
Stock Drivers
Aaron Rents: 10-Year Stock Price History versus Forward EPS Estimates
$40
$2.00
$1.82
$36
$1.80
Closing Price
Forward Earnings
$28
$1.40
$24.32
Feb-09
Feb-08
Aug-08
Feb-07
Aug-0
7
Feb-06
Aug-06
$0.00
Feb-05
$0
Aug-05
$0.20
Aug-04
$4
Feb-04
$0.40
Aug-03
$8
Feb-03
$0.60
Aug-0
2
$12
Feb-02
$0.80
Aug-01
$16
Feb-01
$1.00
Aug-0
0
$20
Feb-00
$1.20
Aug-99
$24
Consensus Forward EPS Estimate
$1.60
Feb-99
Month End Closing Stock Price
$32
Source; Baseline, Raymond James Research.
The above chart tracks Aaron Rents month-end closing stock price versus the
consensus forward EPS estimate at the same time. For most of the period, the
share price tracked closely with the slope and movement in estimates. More
recently, the directional movements in each continue to track; but, as we noted
earlier, RNTs forward multiple has contracted from its historical 15.5 median to
about 13.5x.
Given the positive environment for RTO and given managements increasing
emphasis on improving in-store and overall profitability, it seems likely that
near-term earnings revisions ours and probably consensus will be higher.
Also, below we provide a historical chart showing RNTs share price movement
versus trailing P/E bands. We observe that in recent years, when the shares
have been valued at 15x or below, forward performance has usually been
positive.
Aaron Rents
10
Aaron Rents: 10-Year Historical Trailing P/E Bands

$60
$50
Stock Price
$40
$30
$20
$10
30 times
25 times
20 times
15 times
Jan-09
Sep-08
Jan-08
May-08
Sep-07
Jan-07
May-07
Sep-06
Jan-06
May-06
Sep-05
Jan-05
May-05
Sep-04
Jan-04
May-04
Sep-03
Jan-03
May-03
Sep-02
Jan-02
May-02
Sep-01
Jan-01
Actual Price USD
May-01
Sep-00
Jan-00
May-00
Sep-99
$0
10 times
Source: Bloomberg; Raymond James Research.
Investment Risks
Despite these positive attributes, we remain cognizant of the following
investment risks:
Economic Risk
Despite the fact that the rent-to-own industry is typically resilient to, and thrives
during, a normal recession, a longer and even more severe economy could
negatively impact results at Aarons. While its customer typically has
experience with job loss and/or limited spending capacity, a severely worse
economic climate could dramatically increase the population of consumers that
would not be able to afford the rent-to-own monthly payment for those
perceived-necessary wants.
An even more dramatic economic downturn also heightens the risk of an
explosion of previously on-lease inventory returning to the stores more rapidly
than management could curtail new purchases. If more customers are forced
to cut back, more merchandise could be forfeited to the stores. With less
product moving out to new customers, Aarons could be caught with
depreciating inventory that generates no income. The companys focus on rerenting or selling returned goods, as well as its MacTavish manufacturing
division, should provide it with the flexibility to avoid such a scenario.
Consumer Acceptance
Challenges
U.S. consumers have been learning about, and adopting, lease ownership
transactions for more than three decades. That said, the industry is often the
target of a number of consumer advocacy groups.
These advocates ignore, or minimize, the benefits of lease ownership for the
RTO target consumer group and attack the industry for what they view as
predatory pricing and terms toward the weakest consumers. Over the years,
these views have generated a significant amount of negative publicity that
continues today. A good deal of political attention has been paid to the
industry over the years, as well.
Management remains vigilant in working to educate and comfort new
customers about the transaction. While rent-to-own is common lingo in the
public and other parts of the industry, Aarons always labels the transaction as
lease ownership. The improvements in merchandise quality are also leading
to less negative commentary surrounding the process.
Aaron Rents
11

Nonetheless, if larger numbers of consumers are persuaded not to try lease
ownership, results could suffer.
Regulatory Risk
As noted, the RTO industry has attracted (arguably more than) its fair share of
negative attention from consumer advocates as well as the government. The
scrutiny results, in part, from the industrys pricing and, in part, from prior
indiscretions in collection practices. Whether deserved, or not, the heightened
notice is currently, and will remain, a risk for the foreseeable future.
Today, the chief source of regulation is state law, as there is now no federal
regulation to set guidelines for the lease ownership industry. There are 47
states with regulation that allows rent-to-own stores, as we know them today,
to operate.
The laws vary from one state to the next, but essentially, in exchange for full
consumer disclosure about the terms and condition of the RTO transaction, the
states deem the transaction a lease, thus maintaining the three fundamental
principals of the transfer. That said, a few of these states are considering
pricing modifications to the laws that would make lease-ownership a much less
attractive business from an operators standpoint.
The Association of Progressive Rental Organizations (APRO) and certain
members of Congress have proposed a version of a nationwide bill to govern
the industry, but the bill has not achieved legislative success in the Congress
and Senate. In opposition, a federal bill to designate all lease ownership
transactions as credit sales, thus making them subject to state usury laws, has
also been proposed by Senator Charles Schumer (D-NY). The industrys bill
has attracted far greater support in Washington over the years as senators
worry about potentially displaced constituents. Neither side has achieved its
goal as of yet.
Should a federal law similar to that proposed by Senator Schumer be enacted
and signed, the result would be severely detrimental to Aaron Rents and other
RTO operators. In essence, the industry would cease to exist in its current
form and it would be likely that most operators would not survive. If the current
pricing bills in New York, New Jersey, Indiana, and Maine are passed, it is
likely that Aarons operations within these states would cease to grow.
Aarons has developed alternative lease structures for the states that do not
recognize the rental purchase transaction as a lease, but a significant portion
of the customer offering is lost in these agreements. The company has stated
that it does not believe that the current legislative proposals represent an
immediate threat to the company.
Merits of either sides arguments aside, investors need to be aware of the
potential threats of limiting regulation.
Execution Risk:
New Store Development
The premium valuation multiple that Aaron Rents enjoys is largely a function of
its superior growth versus its peers. A significant portion of the future growth
of the company will depend on the opening of new stores. Although Aarons
has proven its prowess at selecting store sites, pre-opening operations, and
other opening activities, there remains the risk that it will falter in future new
store openings. According to management, nearly $600,000 in start-up capital
(cash investment and first-year loss) is required to open new stores, most of
which becomes permanent investment.
Historically, when Aarons has entered new markets, other RTO operators
have had to convert to the Aarons pricing model or risk losing up to 40% of
their business. However, should customer loyalty be extremely deep in a
given market, it remains a risk that Aarons will not succeed in the area.
Execution Risk:
Cash Collections
In addition to acquiring new customers and new business, the key success
factor in RTO is cash collections. Despite the fact that Aarons customers tend
to be the best of those who are cash-, credit-, and/or budget-constrained,
Aaron Rents
12

their customers often, if not always, do not have enough ready cash to pay
each and every one of their monthly bills.
The leadership challenge given to each Aarons store manager is to NOT let
one of those unpaid bills be that of his or her store. Accordingly, the store
manager is vital to that since he or she must know each customer and, more
importantly, know how to contact them. If the company becomes less effective
in pursuing late payers or experiences an increase in the amount of losses
associated with skips and stolen, results will suffer. Quarterly write-offs
(skips and stolen), as a percentage of revenues, have historically ranged from
2% to 4%, in-line with industry averages.
Despite the local nature of collections, Aarons must maintain a high level of
corporate operational integrity in its collection processes or risk being punished
for abuses. The punishments could come from either the regulating authorities
that could pursue charges against improper collections or from customers who
file suit against the company. In either event, should Aaron Rents take part in
inappropriate collection activities, the companys image would be tarnished.
Execution Risk:
Franchisee Development
Also very important to the future revenue and earnings growth at Aarons is
managements franchising program. If the company were unable to attract
qualified new franchisees, results would suffer. Currently, the companys
franchises are held in high regard within the industry. If this esteem were lost,
the company might find it more difficult to attract capable people.
The high initial investment required to open an Aarons franchise, or multiple
Aarons franchises, as management prefers, could also pose a risk to future
franchise growth, particularly in a credit-constrained business economy. As
the difficult economic cycle persists and business credit remains tight, fewer
entrepreneurs may have access to the necessary capital. The company
attempts to combat this factor by having developed a $125 million, maximum
commitment, bank loan that it guarantees. At year-end 2008, management
had guaranteed $95.6 million under the franchisee loan program, of which
$89.2 million was under the bank loan program.
In addition to attracting qualified franchisees, a portion of Aarons results are a
function of its franchisees success. If industry outsiders or insiders operate
their stores poorly and proliferate too many unsuccessful stores, the royalty
stream to the corporation could shrink. Furthermore, if franchisees deliver
poor customer experiences, it will reflect poorly across the chain, impacting
both company-owned and other franchise stores.
Competitive Risk
Despite the barriers to entry and other positive characteristics discussed

previously, RTO competitor action is always a risk to potential share gains.
Aarons most visible and major competitor is Rent-A-Center, which operates
just over 3,000 locations across the U.S. and Canada. As the first publicly
traded rent-to-own corporation, Rent-A-Center typically is recognized as the
pioneer of the industry (the McDonalds to Aaron Rents Burger King).
Additionally, as more entrepreneurs and investors become aware of RTOs
attractive economics, more become interested in opening outlets. With mature
store level operating profits in the mid 20s percentages, many would-be
operators may be compelled to step off the sidelines and into the game.
Aarons combats this risk by opening its franchise program to such individuals,
although an increasing number of other franchise groups are surfacing.
Included in this group is Premier Rentals, a consortium of RTO operators who
use the size of the operation for buying and advertising leverage. Other
groups are likely to mirror this approach if the prospects for the industry remain
positive, as we believe they will.
Valuation Risk
Despite our commentary in the Valuation section, Aaron Rents stock still tends
to trade at somewhat lofty valuations on most metrics. The market appears
comfortable with rewarding the companys growth and profitability track record
Aaron Rents
13

with a premium multiple. That said, should the company fail to meet or
possibly to exceed expectations, there is risk of rapid and meaningful multiple
compression.
Aaron Rents: A Detailed Examination

Headquartered in Atlanta, Georgia, Aaron Rents is a leading specialty retailer
of consumer electronics, computers, residential and office furniture, household
appliances, and accessories. It was founded in 1955 by Board Chairman R.
Charles Loudermilk, Sr.
At its founding, Aaron Rents specialized in renting chairs and tents for outdoor
gatherings. Aarons rent-to-rent division continues today through the 16 store
remainder of its Aarons Corporate Furnishings division.
Company History:
Lease-Ownership Begins
The rent-to-rent environment began to change in the mid-1960s when another

industry pioneer created a concept, known as rent-to-own or now more
socially acceptable lease-ownership. Mr. Loudermilk, ever vigilant about
trends in the industry, was inspired to test the concept that ultimately
transformed Aaron Rents into the countrys second largest lease ownership
business. Mr. Loudermilk tapped Ken Butler, now the companys chief
operating officer, to begin the lease ownership effort.
In 1987, Aarons developed stores to cater to cash- and/or credit-constrained
customers by allowing them to lease merchandise over 12 months by making
equal monthly payments. At the end of a satisfied lease term, the customer
would own the goods. Originally, Aarons dubbed the transaction Twelve-toOwn.
The principal differentiating factor between Aarons and its larger peer, Rent-ACenter, was that its typical payment terms were monthly, not weekly. The
monthly payment cadence allows customers to synchronize their outlays with
other bills. Also, this payment rhythm tends to attract consumers with slightly
higher incomes than competitors.
Despite some negative media and consumer advocate group attention,
customer adoption of lease ownership accelerated in the late 1980s and early
1990s. This likely was influenced by the high interest rates charged by banks
and credit card companies for purchases during this period.
Company History:
Manufacturing
In 1971, Loudermilk began to worry about supply continuity and cost treatment
by suppliers. In response, he created MacTavish Furniture Industries to
manufacture upholstered and office furniture and bedding. MacTavish has
now expanded from its initial Quincy, Florida, (since closed) furniture facility by
adding seven furniture manufacturing facilities and five bedding manufacturing
facilities, aggregating about 767,000 square feet.
The MacTavish manufacturing division operates in leased facilities to
manufacture upholstered furniture and bedding. The furniture manufacturing
facilities now range from 10,000 to 300,000 square feet. The company also
operates five bedding facilities that average about 25,000 square feet.
Aaron Rents
14
Below is a detailed list of Aarons current manufacturing facilities, by location.
Aaron Rents Properties

Location
Square Feet
Cairo, Georgia
300,000
Cairo, Georgia
147,000
Coolidge, Georgia
81,000
Coolidge, Georgia
48,000
Coolidge, Georgia
41,000
Coolidge, Georgia
10,000
Duluth, Georgia
23,000
Lewisburg, Pennsylvania
25,000
Buford, Georgia
32,000
Sugarland, Texas
20,000
Orlando, Florida
16,000
Indianapolis, Indiana
24,000
Source: Company Reports and Raymond James Research
Company History:
Franchising to Expand
In 1992, in order to expand and capitalize on the growing market, Aaron Rents
began its franchise program. Under the program, approved, independent, and
seasoned entrepreneurs operate SALO stores, paying an initial franchise fee
of $15,000 to $50,000 (market size dependent) and a continuing royalty stream
that equates to 5% or 6% (6% for all new and/or renewed agreements) of the
franchisees weekly cash collections. Franchise agreements are typically 10
years in duration with one 10-year renewal option. Today, the company has
more than 500 franchised stores and plans to grow this business faster than
any other.
Aarons franchisee selection process is disciplined. Before approval, a
potential franchisee must demonstrate financial wherewithal and experience.
Historically, management targets potential franchisees that have the ability to
open and operate multiple locations. The term Aarons Six-Pack refers to a
cluster of six stores which a franchisee takes on when joining the Aaron Rents
team. In some cases, franchisees will have previously owned and operated
locations under their own or another banner.
Through acquisition of private operators, organic unit growth, and aggressive
franchising, Aarons store base has grown from 456 at the end of 2000 to
1,557 at the end of 2008, including 504 franchises.
The company has stores throughout the United States and in some parts of
Canada. Currently, Aaron Rents operates in 48 U.S. states. While diversified
geographically, there is a denser concentration of stores in the Southeast
where the company began. Demographics in Aarons major markets also
more closely align with the characteristics of a typical rent-to-own customer
(FICO scores, income levels, debt capacity utilization, and population of
transient workers).
Company History:
Secondary Concepts
In 2004, the company experimented with the RIMCO concept. RIMCO rents
and leases automobile rims and tires. The company started with two separate
RIMCO units and peaked at 30 company-owned and nine franchised locations.
That said, in December 2008, Aaron Rents announced it rolled 20 of its 30
company-owned locations into existing Aaron Rents stores. The move was
enacted in order for Aarons product offering to be focused on more necessary
life merchandise.
In September 2008, Aarons also announced an agreement to sell most of its
Aarons Corporate Furnishings division to CORT Business Services, a division
of Berkshire Hathaway. The move signaled an almost total focus on Sales and
Aaron Rents
15

Lease Ownership. The Corporate Furnishings Division was the companys
oldest business, renting home and office furniture to individuals and
businesses.
Aaron Rents: Support and

Manufacturing Locations
In addition to its store base, the company also leases 16 fulfillment centers
across the U.S. in order to merchandise its company-owned and franchised
stores. The facilities average 86,000 square feet and bundle shipments of
furniture, electronics, appliances, and other items for delivery to stores. Each
fulfillment center services an area with a 250-mile radius and reaches
approximately 100 stores.
Below is a listing of Aaron fulfillment centers location and size.
Aaron Rents SALO Fulfillment Centers

Location
Square Feet
Auburndale, Florida
77,000
Baltimore, Maryland
95,000
Columbus, Ohio
92,000
Dallas, Texas
89,000
Duluth, Georgia
97,000
Sugarland, Texas
104,000
Winston-Salem, North Carolina
83,000
Blythewood, South Carolina
77,000
Madison, Tennessee
38,000
Oklahoma City, Oklahoma
90,000
Phoenix, Arizona
96,000
Magnolia, Mississippi
125,000
Plainfield, Indiana
98,000
Portland, Oregon
98,000
Rancho Cucamonga, California
96,000
Westfield, Massachusetts
102,000
Company History:
Public Trading of
RNT and RNT.A
In November, 1982, Aaron Rents entered the publicly traded equity arena
through an IPO. In the early 1990s, the company created two classes of stock,
the Class-A voting stock and the non-voting common shares. This action
permitted the company to raise additional outside capital without diluting the
founders voting control. Shortly thereafter, Aarons issued 1 million shares of
the now classified Class-A stock, which was priced at $15.50 (split adjusted
$3.44).
Shares of the Class-A stock trade on the New York Stock Exchange under
ticker symbol RNT.A. Mr. Loudermilk owns about 64% of theses shares.
Including Loudermilk, executives and board members own 67% of the Class-A
shares. Institutional investors own much of the balance of the Class-A shares,
with T. Rowe Price accounting for nearly 10% at year-end.
As sales and units continued to grow, Aaron Rents decided to offer additional
shares of common stock (RNT) to investors in another public offering. The
company completed a 1.75 million unit distribution of common, non-voting
stock in May 1994, pricing the shares at $12.00 (split adjusted $2.67).
The company followed this distribution of common stock with another follow-on
offering in April 1998, selling 2.5 million shares at $20.125 (split adjusted
$8.94). Again in June 2002, the company sold 2 million shares to the public at
a price of $21.00. Finally, in May of 2006, the company sold 3.45 million
shares of common stock at $25.75. The proceeds are typically used to pay
down debt and for general corporate purposes.
Aaron Rents
16

Currently, shares offer an annual $0.07 dividend on its Class-A and common
stock. By rule, Class-A stock cannot be paid a dividend unless the common
stock is paid an equal or greater amount. The companys earnings and
operating cash flow amply cover the dividend.
Aaron Rents sales and earnings growth has been consistent and impressive,
coinciding with its aggressive unit growth during the past eight years.
Management is now transitioning its attention slightly towards store efficiency,
recognizing the need to maintain control of its expanding store base. Since
2000, total revenue at Aaron Rents has grown from $503 million to $1.6 billion
in 2008, representing a 16% compound annual growth rate (CAGR) over the
period.
Aaron Rents: Annual Total Revenue and Y/Y Growth
28%
$1,800
16% CAGR 2000-2008

$1,600
25%
$1,395
18.9%
$1,327
21%
17.2%
$1,200
$1,126
$946
$1,000
18%
14.2%
17.9%
14%
$767
$800
$547
$600
$1,593
23.4%
19.7%
$1,400
Millions
Revenue and
Earnings Growth
$641
11%
$503
7%
8.7%
$400
4%
$200
5.2%
$0
0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
Source: Company Filings and Raymond James Research
In addition, Sales and Lease Ownership (SALO) division revenues, which

include both rental charges and fees as well as retail sales, have grown
steadily. From 2000, when total SALO revenue was $422 million, to 2008,
when SALO revenue reached $1.2 billion, revenue has grown at a 14% CAGR.
Aarons has not weathered down year-over-year comparisons for the company
in either total or SALO revenue.
Aaron Rents
17
Aaron Rents: Franchise Royalties and Fees and Y/Y Growth

$50
80%
$45
67.2%
$45
70%
18% CAGR 2000-2008
$40
$39
Millions
$35
60%
50%
$34
$30
$30
40%
$25
$25
22.1%
18.4%
16.0%
13.2%
$20
$14
$15
15.4%
$17
30%
20%
$15
10%
$12
9.7%
$10
0%
-9.6%
$5
-10%
$0
-20%
2000
2001
2002
2003
2004
2005
2006
2007
2008
Source: Company Filings, First Call and Raymond James Research
Aaron Rents: Annual EPS and Y/Y Growth

75%
$1.80
62.9%
$1.60
$1.55
$1.47
$1.40
31.1%
$1.20
60%
$1.41
45%
$1.18
24.6%
30%
$1.00
29.8%
$0.97
$0.61
15%
10.2%
21.6%
$0.74
$0.80
0%
$0.57
$0.60
$0.35
-15%
-4.1%
$0.40
-30%
$0.20
$0.00
-42.6%
2000
-45%
2001
2002
2003
2004
2005
2006
2007
2008
Reported Segments: SALO,

Corporate Furnishings,
Franchises and Other
Aaron Rents now has three reportable business segments: (1) Companyowned Sales and Lease Ownership, (2) Franchise, and (3) Other. The
company recently ceased reporting its Corporate Furnishings segment
separately. Its revenues are now included in the SALO division. The company
also discloses similar data for MacTavish industries, its manufacturing unit,
with most of its revenues eliminated from net sales as intercompany sales.
By far, the largest contributors to both revenue and operating income are the
Sales and Lease Ownership channels, with corporate-owned stores providing
the bulk of revenues and operating income.
Revenues generated by the franchises belong to those franchisees, with
Aarons collecting continuing royalty payments. We will examine each of the
business segments in detail.
Aaron Rents
18
Aaron Rents: 2008 Revenues by Segment
1%
3%
19%
3%
74%
Rentals and Fees
Retail Sales
Non-Retail Sales
Franchise Royalties and Fees
Other
Aarons most significant division is its company-owned Sales and Lease

Ownership (SALO) business. Revenues in this segment come from monthly
lease payments and fees as well as merchandise sales at retail. The bulk of
the revenues are from monthly lease payments and fees.
Segment revenues grew from $422 million in 2000 to $1.2 billion in 2008 and
represented 84% and 74% of total revenues during these periods, respectively.
As a percentage of earnings before interest and taxes (EBIT) however, the
Sales and Lease Ownership division has gone from representing 45% of EBIT
in 2000 to 75% in 2008. The EBIT contribution peaked in 2006, when Sales
and Lease Ownership contributed 77.0% of operating income.
Comparable store sales are reported for stores open during the entirety of the
periods of measurement. For instance, on a quarterly basis, a store would
have to be open, and not have acquired the accounts of another operator, for
the entire 15-month period of comparison to be included in the comparablestore calculation. On a yearly basis, stores must be open for the entire 24month period without having acquired any external accounts.
Aaron Rents Inc.

Company-owned SALO Comparable Store Sales
2002
2003
2004
2001
Q1
-0.5%
7.4%
14.1%
13.7%
Q2
10.6%
9.9%
11.3%
14.7%
Q3
6.9%
13.6%
9.8%
10.9%
20.2%
10.6%
8.0%
Q4
5.0%
Year
7.7%
13.0%
11.4%
11.7%
2005
8.3%
7.3%
8.4%
11.5%
8.9%
2006
7.0%
9.1%
6.9%
7.2%
7.5%
2007
9.3%
5.0%
4.0%
3.9%
5.6%
2008
2.6%
4.1%
5.7%
6.2%
4.6%
2009
5.5%
5.0%
5.0%
5.0%
5.1%
2010
5.0%
5.0%
5.0%
5.0%
5.0%
2003
2004
2005
2002
Q1
3.5%
10.8%
13.9%
11.0%
Q2
10.3%
10.6%
13.0%
11.0%
Q3
10.3%
11.7%
10.4%
9.7%
15.4%
9.3%
9.8%
Q4
12.6%
Year
10.4%
12.2%
11.6%
10.3%
Reported Figures are In Bold
2006
7.7%
8.2%
7.7%
9.4%
8.2%
2007
8.2%
7.1%
5.5%
5.6%
6.6%
2008
6.0%
4.6%
4.9%
5.1%
5.1%
2009
4.1%
4.6%
5.4%
5.6%
4.9%
2010
5.3%
5.0%
5.0%
5.0%
5.1%
2-Year Average
Aaron Rents
19
Within the company-owned SALO segment, lease or rental payments and

fees make up the bulk of revenue. In 2008, rentals and fees comprised ~96%
of company-owned SALO revenue, with the remaining 4% coming from retail
sales. This is due to a strategy of raising retail, or cash-and-carry, prices
modestly in response to competition and in an attempt to drive behavior.
Aaron Rents: 2008 Company Owned SALO Revenue Mix
4%
96%
Rentals and Fees
Retail Sales
Stores offer home products ranging from furniture to electronics and

accessories. Furniture merchandising tends to be relatively basic, giving store
managers the ability to interchange individual pieces within sets. This strategy
allows for returned merchandise to be either re-rented or sold with other sets
on the floor. Aside from its MacTavish manufactured furniture and mattresses,
Aarons offers Simmons mattresses, as well. Furniture accounts for about
one-third of SALO revenues.
Electronics merchandising aims to be one step behind the cutting edge of
technology, but still of high quality. Brands are well-known and include JVC,
Mitsubishi, Philips, RCA, Sony, Dell, and Hewlett-Packard. One of
the companys fastest growing items remains flat-panel televisions, a trend
which was accelerated in 2008 by the pending discontinuation of the analog
television spectrum. Today, electronics and computers account for about 51%
of revenues, split 35% electronics and 16% computers.
The companys RIMCO operation, which leases custom rims and tires for cars,
was an experimental concept launched in 2004. At the end of 2008, the
company operated 10 RIMCO stores, after merging 20 of the stores into
existing Aarons facilities during 4Q08. The company did this in order to
maintain its focus on necessity items compared with more discretionary ones.
Outside of these items, Aarons also makes available jewelry, accessories, and
outdoor tractors (in some geographies) that customers may lease to own.
Below is a graphical depiction of 2007 SALO merchandise rental fees and
sales by category (2008 data was not yet available at time of publishing).
Aaron Rents
20
Aaron Rents: 2008 SALO Merchandise Sales
16%
4%
35%
30%
15%
Electronics
Appliances
Furniture
Computers
Other
SALO operating income as a percentage of total operating income has grown

significantly since 2000, though it declined slightly in 2007 as the company
integrated the numerous stores it had opened in the 12 months prior. Aaron
Rents continues to shift away from traditional rent-to-rent and outright retail
sale revenue streams, which will continue to increase the importance of the
SALO segment.
The following chart depicts total EBIT dollars segmented into Sales and Lease
Ownership contribution and Other. The second chart shows the information
based on a percentage of total EBIT.
Aaron Rents: EBIT Dollars, By Segment

$180
$148
$160
$140
$127
$123
Millions
$120
$97
$86
$100
$80
$60
$62
$47
$43
$26
$40
$20
$0
2000
2001
2002
2003
2004
Sales and Lease Ownership
2005
2006
Franchise
2007
2008
Other
Aaron Rents
21
Aaron Rents: % EBIT, By Segment

100%
10%
37%
22%
23%
12%
13%
21%
90%
80%
8%
4%
3%
2%
19%
23%
22%
23%
21%
70%
60%
36%
17%
50%
40%
77%
70%
67%
66%
30%
20%
45%
73%
65%
75%
44%
10%
0%
2000
2001
2002
2003
2004
Sales and Lease Ownership
2005
Franchise
2006
2007
2008
Other
Customer count is a key metric within the rent-to-own industry. As discussed

previously, Aarons stores generate higher customer volume than industry
averages due to the companys low-cost focus and customer service
reputation. Below is a chart of ending annual customer counts for both
company-owned stores and franchises. The company has generated a 20%
CAGR in customer growth since 2002 and franchises have generated a 16%
CAGR. In total, the company serves over 1.1 million customers.
Aaron Rents: Annual Ending Customer Count

1,200,000
1,000,000
CAGRs 2002-2008:
Company Owned: 20%
Franchise: 16%
Total: 19%
363,034
800,000
317,559
273,874
600,000
234,500
207,703
400,000
166,492
740,278
147,422
200,000
243,662
314,408
386,865
468,228
531,366
609,519
Company Owned Stores
2008
2007
2006
2005
2004
2003
2002
Franchises
Sourc: Company Reports and Raymond James Research
Aaron Rents
22
Lease Ownership
Transaction
Aarons Sales and Lease Ownership division provides durable household

goods to low- and middle-income customers with limited or no access to
traditional credit sources. To do this, the company utilizes what is known as a
lease ownership or rent-to-own transaction.
The three fundamental features of a lease ownership transaction are as
follows:
1) The transaction is defined as a lease agreement and thus the customer
assumes no debt when he or she enters into the agreement.
2) The customer can return the merchandise at any time and be absolved of
any further lease payment obligations.
3) The customer is never required to make any future payments if the
merchandise is returned.
Since the transaction is not on credit, no traditional credit check is performed
on customers prior to approval. Instead, Aarons asks customers to fill out
informational sheets with data such as name, contact information, employment
history, and two references to verify the information. Store managers ask the
applicant whether it is permissible to contact the reference if said-customer
becomes delinquent on payments.
Once completed, the Aarons store manager reviews the application and
determines the applicants ability to pay. A significant portion of the store
managers compensation is tied to the overall profitability of the store and thus
he or she is motivated to grant as much leasing power to the applicant as is
practicable, but no more. The manager is also responsible for collecting late
payments or repossessing property of severely delinquent accounts through
the stores collections department.
Aarons offers a wide variety of payment options to make the merchandise
affordable to as many customers as possible. Typically, the company offers
payment terms on a monthly basis (~84% of lease agreements) for terms of
12, 18, or 24 months. Intuitively, higher ticket items tend to have longer lease
terms in order to make payments affordable.
Aarons lease terms are slightly shorter than the industry average, allowing for
a lower total cost of ownership at the end of the transaction. The monthly
payment lease also allows for lower cost of ownership since fewer payments
allows Aarons to keep administrative costs lower than the competition. These
savings can be passed along to customers.
Should the customer desire to buy out the contract at anytime during the
agreement, she is able to do so without penalty. In fact, the customer is
credited with 50% of the rental payments made against the original retail price
of the product. Presented below is a table which depicts potential scenarios.
Note that during the latter months of the lease, the early buyout option loses
much of its value.
Aaron Rents
23

Early Buyout Example
Data uses Aaron's pricing
Item:
Advertised Payment
Service Plus
Total Outlay, before tax
Term
Total Cost of Ownership
Advertised C-n-C price
Cost of Lease Services
Frigidaire 23 cu ft.
side-by-side
refrigerator
$99.99
$10.00
$109.99
18 months
$1,979.80
$1,066.99
$912.81
R-T-O Schedule
Payment Number
Amount
Remaining Balance
1
$109.99
$1,869.81
2
$109.99
$1,759.82
3
$109.99
$1,649.84
4
$109.99
$1,539.85
5
$109.99
$1,429.86
6
$109.99
$1,319.87
7
$109.99
$1,209.88
8
$109.99
$1,099.89
9
$109.99
$989.90
10
$109.99
$879.91
11
$109.99
$769.92
12
$109.99
$659.93
13
$109.99
$549.94
14
$109.99
$439.96
15
$109.99
$329.97
16
$109.99
$219.98
17
$109.99
$109.99
18
$109.99
($0.00)
Source: ShopAarons.com, Company Reports and Raymond James Research
Buyout Price
$957.00
$847.01
$737.02
$847.01
$792.02
$737.02
$682.03
$627.03
$572.04
$517.05
$462.05
$407.06
$352.06
$297.07
$242.07
$187.08
$132.08
$77.09
Total to Aaron's % Above Retail % Savings to Lease

$1,066.99
0.0%
46.1%
$1,066.99
0.0%
46.1%
$1,066.99
0.0%
46.1%
$1,286.97
20.6%
35.0%
$1,341.96
25.8%
32.2%
$1,396.96
30.9%
29.4%
$1,451.95
36.1%
26.7%
$1,506.95
41.2%
23.9%
$1,561.94
46.4%
21.1%
$1,616.94
51.5%
18.3%
$1,671.93
56.7%
15.6%
$1,726.92
61.9%
12.8%
$1,781.92
67.0%
10.0%
$1,836.91
72.2%
7.2%
$1,891.91
77.3%
4.4%
$1,946.90
82.5%
1.7%
$2,001.90
87.6%
-1.1%
$2,056.89
92.8%
-3.9%
In contrast, if a customer wishes to return the merchandise at anytime prior to

lease term, she is allowed to do so without obligation for making any additional
payments. Further, if a customer has returned merchandise recently (usually
within six months or one year) and wishes to re-rent the same merchandise
again, she can do so and re-enter the previous agreement at the point where
she left off.
In addition to the monthly payment, customers at Aarons are also charged a
Service Plus fee equal to 10% of the monthly rental charge. This fee is
intended to cover shipping, handling, delivery, installation and lease-term
maintenance and/or replacement of the merchandise. Other rent-to-own
companies have made this type of charge optional in their offerings, but
Aarons charges the fee on all lease agreements.
Throughout the term of the lease agreement, Aarons offers free maintenance
or, if necessary, replacement of the property. This bolsters customer loyalty to
the company from the consumer standpoint and maintains the merchandise
should the customer decide to forfeit it from the companys perspective.
Historically, rent-to-own retailers only accepted cash and/or money orders as
forms of payment. Aarons accepts these mediums as well as personal checks
and credit cards for payment. The result is a more steady cash stream should
the customer need to use a credit card to make the payment.
Since Aarons focuses on monthly payment terms and thus a slightly higher
income demographic than other rent-to-own operators, it finds that check use
is less of a problem than do some weekly-pay operators.
Aaron Rents
24
Below is an example of a typical lease agreement for a bedroom set. Prices

were quoted on September 3, 2008.
Aaron's Sales and Lease Ownership

Example Quote
Bedroom Set leased for 24 months
SKU
7603RE2
7605RE2
7609RE2
7610RE2
7615RE2
7607RE2
7601RE3
7611WL7
7613WL7
Description
Dresser
Mirror
5/0 Queen Sleigh HB
5/0 Queen Sleigh FB
5/0 Queen Rails
Nightstand
Chest
Queen Mattress
Queen Foundation
Total
Payments
Service
Lease
Plus
$138.88
$13.89
Monthly
Semi-Monthly
$74.42
$7.44
Source: Aaron Rents and Raymond James Research
Excludes sales tax computation
Monthly Price
$25.89
5.70
19.16
9.84
4.14
12.95
32.95
21.92
6.33
$138.88
Total
Payment
$152.77
$81.86
Semi-Monthly
Price
$13.86
3.06
10.27
5.27
2.22
6.94
17.66
11.75
3.39
$74.42
Retail Price
$400.41
88.16
296.86
152.87
64.70
200.60
509.60
338.92
97.87
$2,149.99
Payments
24
48
Cost of
Ownership
$3,666.43
$3,929.38
As one can see below, the total cost of ownership under the lease ownership
scenario is relatively expensive on a nominal basis. For instance, if one were
to look at the above example as a traditional credit sale, one would find that
the annual percentage rate (APR) on this transaction would be ~64% for the
monthly payment and ~71% for the semi-monthly payment. We exclude sales
taxes from the calculation, although these are paid by the customer as a part
of each periodic payment.
While these calculations are useful analytically to understand the relative cost
of these transactions versus typical credit or conditional sales, there are a
series of factors that are not accounted for by the math. In particular, these
analyses do not take into account the right of the customer to terminate the
transaction at anytime without penalty or further obligation and the fact that no
credit history is required, maintained, or reported negatively from the
transactions. Although we know of no objective means of pegging a value to
these rights, the sheer magnitude of the imputed rates helps to explain why
RTO transactions are subjected to advocacy group and regulator scrutiny and
angst.
Hypothetical Interest Rate Scenario

Semi-Monthly
Retail
$2,149.99 Retail
$2,149.99
Total Cost of Ownership
$3,666.43 Total Cost of Ownership
$3,929.38
Monthly Payment
$152.77 Semi-monthly Payment
$81.86
Monthly Interest %
5.3% Semi-monthly Interest%
2.9%
Annual %
64.0% Annual %
70.7%
Source: Aaron Rents and Raymond James Research
APR calculated using Prin. & Int. Method; payment at beginning of period
APR calculation excludes value for lessee right to terminate, taxes
cost of delivery and warranty
Monthly
Aaron Rents
25
Below we extend the APR calculation to two electronics items (Dell computer
and a 42 Phillips LCD HD TV) and one appliance (Frigidaire refrigerator). The
calculated APRs for the computer and refrigerator are even more eye-popping
than the above furniture example and TV. We remind investors that these are
imputed interest rates that are not disclosed to consumers because the
transactions are defined as leases.
Aaron's Sales and Lease Ownership

Example Quotes
SKU
Description
Frigidaire 22 Cu Ft Side-by-Side
7405FWW/FWB
Months to own
18
Lease
Service Plus
Monthly
$99.99
$10.00
Imputed Annual Percentage Rate (APR)
SKU
7360C92
Description
Dell Compt'r w/ Wide Screen Monitor
Lease
Service Plus
Monthly
$99.99
$10.00
Months to own
12
Monthly Price
$99.99
Retail Price
$1,066.99
Total Payment
$109.99
Cost to own
$1,979.80
$912.81
105%
Monthly Price
$99.99
Total Payment
$109.99
Retail Price
$899.99
Cost to own
$1,319.87
$419.88
94%
Months to own
Monthly Price
Retail Price
Description
$1,499.99
Phillips 42" LCD - Full HD 1080p
24
$99.99
Total Payment
Cost to own
Lease
Service Plus
$99.99
$10.00
$109.99
$2,639.74
$1,139.75
68%
Source: Aaron Rents Waltrip Dream Products, Investor Presentation, and Raymond James Research
APR Calculated using Principal and Interest Method; payment at beginning of period
APR calculation excludes value for lessee right to terminate, taxes, and cost of delivery and warranty
SKU
7301PLC
Despite what appear to be expensive transactions from a cost-of-funds

perspective, a typical RTO customer does not have access to more traditional
purchase avenues. Importantly, as well, about 50% of Aarons customers,
according to management, obtain ownership of their leased merchandise
versus less than a 25% norm for the industry. In our comparison shopping, we
found that similar items, offered with weekly payment schedules, resulted in
even higher APR calculations.
Another factor that our mathematics cannot account for is the fact that the cost
of servicing typical Aaron Rents customers is much higher than at other
retailers. These include such services as included delivery, relocation delivery,
and some payment holidays.
Reinforcing the fact of the high cost of service to RTO customers is the actual
disconnect between the pricing and returns of an individual lease ownership
transaction and the reported EBIT and EBIT margin of Aarons SALO segment.
The following graph shows the last nine years history of the companys SALO
segment EBIT and EBIT margin. With the exception of 2001 and 2006, the
EBIT margin of the division averaged about 7%. This is an attractive margin
when compared to other home furnishings retailers, but it is not nearly the
outsized level that the above APRs for individual transactions would suggest.
Aaron Rents
26
Aaron Rents: SALO EBIT and EBIT Margin

$ 200
10 %
9 .1%
$ 18 0
9%
7 .7 %
7 .7 %
$ 16 0
8%
7 .1%
$ 14 0
7 .7 %
$Millions
7 .2 %
7%
7 .2 %
7 .4 %
119
$ 12 0
6%
10 6
$ 10 0
$ 80
62
98
5%
4%
71
4 .2 %
$ 60
3%
49
36
$ 40
22
2%
16
$ 20
1%
$0
0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
In the final analysis, Aarons customers are typically not concerned with, and
cannot relate to, interest rates. They are concerned only with affordable
monthly payments. Without these transactions, it is arguable that many of
Aarons customers would not be able to procure, use, and enjoy the
items offered in its stores. In the Appendix, we provide the reader with a
sample Aarons order form and a sample lease ownership contract.
"Gross Margins"
Since, throughout the lease term, Aaron Rents still maintains official ownership
of the merchandise in circulation, a true cost of goods sold is not practicable to
report. The merchandise does, however, depreciate throughout its life and
thus a margin is possible to derive.
Rental merchandise typically depreciates over a 24-month period when rented
and 36-month period when not rented. In both cases, the salvage value is 0%.
Once an item is rented for the first time, it usually remains under the 24-month
depreciation schedule until 0 salvage value. If an item is unrented and
remains on a store floor, it does not begin depreciating until it has remained on
the floor for six months.
In examining the rental merchandise gross margins, we find that the business
generates returns well in excess of the depreciation. That said, the rentals and
fees gross margins have contracted modestly over the past few years as
Aarons continues to use a price leadership strategy to gain market share. In
2008, as the company benefitted from lower merchandise costs from its
suppliers, the metric rebounded.
Aaron Rents
27
Aaron Rents: Rentals and Fees Gross Margins

67.0%
66.0%
65.0%
63.5%
64.0%
63.0%
62.0%
61.0%
60.0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
Rental Fees less Depreciation of Rental Merchandise
Retail sales in the SALO division are typical merchandise sales, which result in
more traditional gross margins. In the retail sales segment, we see steadily
increasing gross margins. This is the result of Aarons decision to raise price
in response to competition and perceptibly to drive behavior towards the lease
ownership business. It is also due to a contraction in the cost of merchandise
the company sells.
Aaron Rents: Retail Sales Gross Margins

45.0%
38.9%
40.0%
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
Retail Sales GM %
Operating Expenses
At the store level, much of the operating costs at Aaron Rents are relatively
fixed. Typically, there are three to four employees within the store at any given
time, with two to four delivery crew members delivering merchandise. Each
store maintains at least two trucks to deliver the goods to customers.
Aaron Rents
28

Other employees in the store include the manager, responsible for the overall
operation of the store, the assistant manager, the collections representative,
and another salesperson.
Aarons stores are typically about 9,000 square feet, the majority of which is
used as a show room floor. This is a larger format than traditional rent-to-own
units which tend to be roughly half the size of Aarons. The larger store format
is an advantage for the company, allowing it to showcase more of the
merchandise on the floor. Stores tend to be located in high-traffic strip malls in
well-established working class towns, near stores of competing rent-to-own
operators. Aarons also builds to suit free-standing facilities.
Source: Aarons Website.
Marketing spend is a key driver for sales at Aarons. Currently, the company
utilizes national and local television advertising, direct mail, and direct delivery
of promotional material. All television commercials feature name brand
merchandise including HDTV flat-panel televisions, computers, stainless steel
refrigerators, washers, dryers, and lawn tractors.
The company also uses various sporting events at the collegiate and
professional levels. These leagues include NASCAR racing, the National
Basketball Association (NBA), World Wrestling Entertainment (WWE),
Arena Football League (AFL), Southeastern Conference (SEC) and Atlantic
Coast Conference (ACC) football and basketball, and Major League Baseball
(MLB).
Aarons premier partnership continues to be the Aarons Dream Weekend at
Talladega Superspeedway. The event, a weekend in April, consists of the
Aarons 499 NASCAR Sprint Cup Series Race and the Aarons 312 NASCAR
Nationwide Series Race. Both races are televised live on ABC/ESPN
television and are among the most watched NASCAR events.
The company also sponsors the #99 Aarons Dream Machine car year-round in
the NASCAR Nationwide Series and the Aarons #00 Dream Machine car in
the NASCAR Sprint Cup Series races at Daytona, Atlanta, and Bristol.
Aarons Lucky Dog mascot is another well-known tool the company uses in
its marketing efforts. The concept is that Everyone is a lucky dog at Aarons,
since people can afford to purchase items they typically would not be able to
otherwise.
Aaron Rents
29
Source: Aaron Rents Website.
Other expenses, including rent, utilities, common-area maintenance, other

occupancy, and delivery costs are presented on the following page in our
estimate of a store-level operating profit scenario. We see that store level
operating profits are attractive, reaching over 25% on a four-wall, preadvertising basis at maturity. When allocating about 3.0% of sales to
advertising, the direct store profit before corporate overhead is about 23%.
On an economic basis, once we account for corporate overhead, taxes, and
the present value of leases, we come to net operating profit after taxes
(NOPAT) returns on sales of 15.6% at maturity and on beginning capital of
23.2%.
Aaron Rents
30

Below is our estimate for a typical Aarons store during the first five years of
operation.
Aaron Rents
Average SALO Store Model
$000s, except per square foot
Store Square Footage
Monthly Rental Fees
Retail Sales
Revenues: Rentals, Fees, and Mdse. Sales
Comp Store Sales
Store Revenue per SF
Merchandise Margin
Operating Expenses:
Rent
Utilities
Other Occupancy
Leasehold Depreciation
Delivery Expense
Store Payroll
Payroll Benefits
Write offs - (skip, stolen, damaged)
Total Direct Operating Expenses
YR1
9,000
$31
14
$386
65
28
20
20
15
167
47
11
$373
66
29
20
17
24
169
47
18
$389
67
29
20
14
42
183
48
32
$434
67
29
20
12
48
227
60
37
$500
68
29
20
18
53
231
60
41
$519
Four Wall Profit

Four Wall Profit Margin
($150)
-39.0%
($11)
-1.7%
$256
23.2%
$300
23.5%
$358
25.6%
12
($162)
-42.0%
39
($123)
(47)
($75)
-19.5%
19
($30)
-4.7%
40
$10
4
$6
1.0%
33
$223
20.2%
40
$263
101
$161
14.7%
38
$262
20.5%
40
$302
116
$186
14.5%
42
$316
22.6%
41
$356
137
$219
15.6%
100
90
0
322
(87.0)
425
522
$947
$947
($1,022)
83
0
0
356
(87.0)
352
527
$880
($67)
$73
69
0
0
395
(87.0)
377
532
$909
$30
$132
58
0
0
437
(87.0)
408
538
$946
$36
$149
90
0
50
484
(87.0)
537
543
$1,080
$134
$85
($75)
$947
$6
$880
0.6%
$161
$909
18.3%
$186
$946
20.4%
$219
$1,080
23.2%
Allocated Share of Net Advertising

Direct Store Profit Before Overhead
% of Sales
Add back Imputed Int. Exp.Comp. of Rent
Adjusted Pre-Tax Direct Store Profit
Estimated Cash Taxes
Net Operating Profit After Tax (NOPAT)
% of Sales
Store Investment
Fixtures, Leasehold, Net
Pre-Opening
Continuing Cap Expenditures
In-Store Inventory
Less: Payables
Est'd Cash Investment per average store
Capitalized Value of Rental Payments
Total Economic Investment per avg Store
Change in Capital
Net Cash Flow
NOPAT
Ending Capital
R (Beginning Capital)
$42.85
222
YR2
$51
22
$628
63%
$69.80
378
YR3
$88
39
$1,100
75%
$122.22
689
YR4
$106
45
$1,276
16%
$141.78
800
YR5
$117
49
$1,400
10%
$155.56
877
Source: Company Reports and Raymond James Research.
Franchise Program
Aaron Rents franchise initiative has been an effective avenue for expanding
Aarons brand and geographical footprint with a lower initial investment by the
company.
Through its meticulous scrutiny of a franchise applicants
background and financial solvency, Aarons has become known within the
industry as one of the toughest franchises to gain access to.
That said, the company has grown its franchise store count from 193 stores in
2000 to 504 stores at the end of 2008. The company has also struck area
development agreements with franchisees for an additional ~280 stores in the
future. Management has stated that of the roughly 10% annual square footage
growth it hopes to achieve over the next few years (5% to 9% in 2009), it would
like at least half to come from franchises.
Traditionally, Aarons looks for franchisees with the ability to operate more than
one facility, though a small number of franchisees operate only one store.
Ideally, an applicant would enter an agreement for the Aarons Six-Pack, or
six stores to operate. The companys franchising team carefully selects areas
Aaron Rents
31

in which it will allow franchises to open that do not compete with Aarons
existing corporate-owned store base.
Currently, Aarons largest franchisee, SEI/Aarons, operates 68 stores
throughout the U.S. and is among the top ten lease ownership operators in
regard to size in the U.S.
When a franchisee is approved to operate an Aarons store, he or she pays the
company an initial fee of $15,000 to $50,000 depending on the location of the
franchise(s). The fee is non-refundable and holds the franchisees spot as a
new store owner.
Franchise agreements are for a term of 10 years and carry one 10-year
renewal option. While operating, franchises are required to remit royalty
payments to Aaron Rents equal to 5% or 6% of the franchises weekly cash
collections. Franchise royalties increased from 5% to 6% for agreements
entered into or renewed after December 31, 2002.
In exchange for the initial fee and royalties, franchisees receive assistance in
selecting proper store sites, floor plan design, and pre-opening planning.
Aarons will also lease exterior signage to the franchisee. The company will
also use its existing bank relationships to assist the franchisees in acquiring
financing for operations.
Franchisees are required to complete extensive training and adhere to strict
operational standards. Dcor, rental agreement terms, hours of operation,
pricing, merchandise, and collection practices all must be compliant with
Aarons strict code. Although franchises are not required to purchase
merchandise from Aaron Rents fulfillment centers, many do in order to take
advantage of company-offered financing and favorable shipping terms.
Many franchisees enjoy the benefits of Aarons heavy marketing campaigns
and industry reputation. The owners also enjoy the fact that one of the
unspoken agreements most Aarons franchises have with the company is that
the corporation will typically repurchase the franchised store from the
franchisee if he or she desires to sell it. Usually, as with most acquisition in the
rent-to-own industry, acquisitions are priced at 9-12x monthly rental fees.
From Aaron Rents perspective, franchises allow the company to grow more
quickly than it would organically. In addition, the increased brand exposure
brings more sales to the company as a whole and the larger scale enables the
company to achieve economies of scale in purchasing, distribution,
advertising, and manufacturing.
Franchise royalties and fees have grown from $12.4 million in 2000 to $45
million in 2008. This represents an annual CAGR of ~18%. The chart below
depicts total annual franchise royalties and fees as well as year-over-year
growth from 2000 to 2008.
Aaron Rents
32
Aaron Rents: Franchise Royalties and Fees and Y/Y Growth

$50
80%
$45
67.2%
$45
70%
18% CAGR 2000-2008
$40
$39
Millions
$35
60%
50%
$34
$30
$30
40%
$25
$25
22.1%
18.4%
13.2%
$20
$14
$15
16.0%
15.4%
$17
30%
20%
$15
10%
$12
9.7%
$10
0%
-9.6%
$5
-10%
$0
-20%
2000
2001
2002
2003
2004
2005
2006
2007
2008
Since franchises require little to no capital investment from Aaron Rents, the
operating margins for this revenue are very high. In 2008, EBIT in the
franchise segment reached $33 million, representing an EBIT margin of 73.1%.
Aaron Rents: Franchise Royalties and Fees EBIT

$50.0
100.0%
90.6%
$45.0
73.1% 90.0%
74.6%
67.7%
$40.0
73.8%
Millions
$35.0
$25.0
65.8%
60.4%
$22
$33
$29
50.0%
40.0%
$14
$15.0
$7
$9
70.0%
60.0%
$24
$18
$20.0
$10.0
71.2%
73.2%
$30.0
80.0%
30.0%
$11
20.0%
$5.0
10.0%
$0.0
0.0%
2000
2001
2002
2003
2004
Franchise
2005
2006
2007
2008
EBIT Margins
Source: Company Filings and Raymond James Research
In addition to growing its franchise program through solicited applications,

Aaron Rents also approaches well-known and successful independent RTO
operators with franchise propositions. Over the years, the company has been
able to secure numerous agreements using this process.
Aaron Rents
33
MacTavish Furniture
Industries
MacTavish Furniture Industries was founded in 1971 and provides Aaron

Rents with the majority of the furniture and mattresses leased and sold in its
stores. Currently, the division operates seven furniture manufacturing plants
which range from 10,000 to 300,000 square feet and five bedding
manufacturing facilities which average roughly 25,000 square feet each.
The company currently has no major plans to expand manufacturing capacity.
Items manufactured in the MacTavish facilities include the following:
Upholstered living-room furniture in a variety of natural and synthetic

fabrics
Standard-sized bedding mattresses and box springs
Office furniture including desks, credenzas, conference tables, bookcases

and chairs
The major raw materials used in production of the above-listed items include
fabric, foam, fiber, wire-innerspring, plywood, and hardwood. The company
does not use hedging instruments for these items and buys them on the open
market from third-party sources.
Sales to company-owned Sales and Lease Ownership stores are accounted
for as intra-company sales and do not impact reported results. Sales to the
franchised stores, however, show up within the non-retail sales portion of the
income statement.
As the franchise base continues to grow, sales of MacTavish should grow
along with it. That said, franchises are not required to purchase their
merchandise from MacTavish, though most do in order to take advantage of
company-offered financing and favorable delivery terms.
Corporate Furnishings
Aarons Corporate Furnishings, the remaining rent-to-rent business in which

Aaron Rents operates, is the companys oldest segment, having been
established more than 50 years ago. On November 10, 2008, however, the
company completed the sale of most of the Aarons Corporate Furnishings
stores to CORT Business Services Corporation, a division of the Berkshire
Hathaway Company.
Aarons received approximately $76.4 million for 33 stores. Remaining will be
approximately 13 stores, of 46 previously, solely dedicated to the rental of
office furniture to commercial clients. The decision to sell Aarons Corporate
Furnishings reaffirms current management commitment to the lease ownership
model.
In 2007, Aarons Corporate Furnishings accounted for approximately 9% of
total company revenue, most of which was represented in the non-retail sales
line item, as well as in a small portion of the rentals and fees.
SALO Organization
Structure
The Aarons Sales and Lease Ownership division currently has 11 regional
vice presidents who are responsible for monitoring individual store
performance and inventory levels within their respective regions. Each
regional vice president reports to the president of the Sales and Lease
Ownership Division. This role is currently filled by Ken Butler, who was
recently promoted to chief operating officer of the company, as well.
Stores are directly supervised by 106 SALO regional managers, four RIMCO
managers and three office furnishings regional managers. At the individual
store level, store managers are responsible for the day-to-day operations of
the company, including but not limited to customer and collection relations,
deliveries and pickups, warehouse and inventory management, and limited
marketing efforts.
Aaron Rents
34

The store manager is also responsible for inspecting returned rental
merchandise and determining whether it should be sold as is, rented again as
is, repaired and sold, or reconditioned for additional rental.
Executive management is responsible for: purchasing; financial planning and
control; franchise operations, manufacturing; employee training; new store site
selection and construction for company-owned stores; strategic planning;
organizational decisions; and acquisitions.
Something of a hot-button topic within the Sales and Lease Ownership industry
are the collection practices of operators. Popular culture depicts the process
as a high pressure, threatening one involving countless phone calls and
occasional acts of physical violence. While this may have been the way of the
past in the industry, and it seems likely that those claims are exaggerated, it is
not so today.
At Aarons, store managers are responsible for collections and customers are
typically contacted within a few days of their lease payment due date in order
to encourage customers to keep agreements current. Cash collections are
particularly important in the SALO operation in which the customer has the
option to return the merchandise at anytime and can mean the difference
between profit and loss in a given week.
Since Aarons performs no formal credit check on its customers, it instead
gathers important information about that customer in order to contact them or a
reference in the event of a missed payment. The important factor to remember
is that, usually, the customer wants to continue renting the merchandise and
the Aarons store usually wants the customer to keep renting it. The store
manager must be flexible and creative in developing solutions for accounts in
many instances.
In 2008, Aaron Rents experienced net company-wide shrinkage as a
percentage of combined rental revenues of 2.6%. This compares to the
industry average for skips and stolens of about 2% to 4%.
A key element of Aarons value proposition is its customer service since the
customer has the option of returning the merchandise at anytime. Entering an
Aarons store will initiate a greeting from one of the members of the staff.
Merchandise is serviced at no charge to the customer and delivery is usually
available at no cost.
The Aarons Sales and Lease Ownership division has acknowledged the
importance of this facet of the customer experience and has developed an elearning program called Aarons E-University. The program consists of a 40course learning program, of which all associates must complete relevant
training for their position.
Competition
Aarons competition consists of both other rent-to-own dealers and some home
furnishings retailers to a lesser extent. Management also notes that it
sometimes competes with apartment landlords who purchase furniture to rent
with apartments.
Despite the perception of competition with other mainline retailers in some
instances, a typical Aarons customer tends to be drawn to RTO because he or
she is usually unable to obtain credit from traditional sources and/or does not
have the necessary cash to make the big-ticket purchase. If, and as, larger
numbers of consumers migrate into this category following the fallout from the
recent economic downturn, Aarons potential market expands.
The rent-to-own industry is fragmented with approximately 8,500 stores
nationwide. Of the ~$6.8 billion in annual revenue, roughly 50% is generated
by the publicly-traded companies, with the other half coming from smaller
mom-and-pop locations. A more detailed industry examination is presented
in our Appendix at the end of this report, for those interested readers.
Aaron Rents
35

Of the pure rent-to-own operators, Aaron Rents largest competitor is Rent-ACenter. In FY08, Rent-A-Center had revenues of $2.8 billion (down 1% yearover-year) and currently operates 3,037 stores including its ColorTyme
franchises. About $2.5 billon of the companys revenue was derived from
rentals and fees.
Typically Rent-A-Center stores are approximately 4,500 square feet, about half
the size of an Aaron Rents stores. Approximately 82% of Rent-A-Centers
2007 lease agreements were on weekly payment terms. The higher frequency
of payments typically attracts a lower income customer due to the lower
payment amounts. The tradeoff is a slightly higher percentage of skips and
stolens, which in 2007 was 3.1% for Rent-A Center.
Rent-A-Center currently offers financial services in approximately 10% of its
stores, a service which Aaron Rents does not offer. The services include
short-term secured and unsecured loans, debit cards, check cashing, and
money transfer services.
While Aarons continues to compete with Rent-A-Center, it has differentiated
its value proposition by offering lower total cost of ownership, shorter periods
of lease terms, and greater merchandise selection. Aarons tends to cater to a
bit higher income consumer who is more focused on quality rather than
payment amount. That said, market niches seem to exist for both companies.
Privately held, independent operators also compete with Aarons in the Sales
and Lease Ownership industry. Typically, Aarons is able to offer lower prices
on its merchandise than privately-held firms since it has the capability to move
greater volume through its stores.
In addition, in many instances, if an independent operator has a strong
foothold within a certain market, Aaron Rents is more likely to invite the
operator to become an Aarons franchise. A certain esteem is held for owners
of Aarons franchises within the industry due to the stringent selection criteria.
Throughout the industry, Aaron Rents is known for its low-price offering as well
as its high-quality merchandise. Since it focuses mainly on monthly rental
payments, a higher-income customer typically chooses Aarons.
More on Regulation
Lease ownership operators are extensively regulated and are subject to

various federal and state laws and regulations. Currently, no federal law
specifically regulates the rent-to-own industry, though legislation has been
proposed from time to time. A more detailed discussion surrounding the
proposed legislation is available in the RTO Industry Overview at the end of
this report, Political Environment section.
Generally, applicable laws regulate leases, late fees, finance rates, disclosure
requirements, advertising materials, and collection procedures. For the most
part, rent-to-own operators, in exchange for the lease ownership being viewed
as a lease, are required to disclose ALL information in regard to the price,
payments, fees, interest, and total cost of merchandise involved in a leaseownership transaction.
Currently, three states label lease ownership transactions as credit sales:
Minnesota, New Jersey, and Wisconsin. Being defined as a credit sale, the
lease ownership companies are subject to state usury laws which limit the
rates of interest which can be charged for purchases.
These rates vary by state, but are lower than most think. For instance, in
Minnesota, the highest rate allowed to be charged on personal loans is 8% per
annum. Generally, most lease ownership operators have abandoned these
regions.
In Aaron Rents case, it has introduced a form of consumer lease as an
alternative to the typical rental purchase agreement in some of these states.
The alternative lease differs from the traditional offering in that it has an initial
Aaron Rents
36

lease term in excess of four months, which is longer than the minimum window
of regulation in most states.
This takes away a small portion of the consumer offering, but allows the
company to continue operating in states where regulation may have disallowed
it.
Senior Management
Aarons senior leadership has a combined 78 years of experience at the

company. Chairman R. Charles Loudermilk stepped down as CEO in June
2008, succeeded by his son Robin Loudermilk, who was then chief operating
officer and began working with Aarons in 1985 as an assistant store manager.
Gilbert Danielson, the chief financial officer, joined the company in 1990,
guiding to successfully completing the common stock offering and three followon offerings. Chief Operating Officer Ken Butler began his career with Aaron
Rents in 1974 as an assistant store manager. The cultivated talent and
extensive experience at Aarons is a major strategic advantage.
R. Charles Loudermilk Sr., (81) Chairman of the Board
Charlie Loudermilk founded Aaron Rents in 1955 and was its chief executive
officer until June 2008. He has been chairman of the board since the
companys incorporation in 1962.
He is a pioneer within the rent-to-rent as well as the rent-to-own industry and
was recently awarded the Association of Progressive Rental Organizations
(APROs) Lifetime Achievement honor for his contributions to the rent-to-own
industry.
In 1982, when the first offering of Class-A, voting stock was made public, Mr.
Loudermilk maintained control of about 65% of the shares, which he still owns
today.
Robert C. Loudermilk, Jr., (49) President and Chief Executive Officer
Robin Loudermilk began his career with Aarons in 1985 as an assistant store
manager and was its chief operating officer from 1997 to June 2008. He is a
graduate of the University of Alabama and has been a member of the board of
directors since 1983.
Gilbert L. Danielson, (62) Executive Vice President and Chief Financial
Officer
Gil Danielson joined Aarons in 1990 as CFO and as a member of the board of
directors. He is also on the board of Servidyne Inc., an office building
optimization consulting firm, and has done so since 2000.
William K. Butler, (56) President and Chief Operating Officer
Ken Butler joined Aaron Rents in 1974 as an assistant store manager. He was
promoted to national merchandising and sales manager in 1983.
In 1987, Charlie Loudermilk tasked him to spearhead the development of the
RTO business and he has led the transition of Aarons from a rent-to-rent
business to the rent-to-own model it uses today. In 1995, Butler was promoted
to president of the Sales and Lease Ownership Division.
Following the promotion of then-COO Robin Loudermilk to CEO in June, Mr.
Butler was promoted to COO.
K. Todd Evans, Vice President, Franchising, Aarons Sales and Lease
Ownership
Elizabeth L. Gibbs, Vice President, General Counsel
Aaron Rents
37
Board of Directors
Aaron Rents 11-member board of directors consists of seven independent

members and four inside members (Loudermilk Sr. and Jr., Danielson, and
Butler).
The independent members are primarily, if not entirely, Atlanta residents who
are well known. At least three were senior leaders of publicly-held companies.
These include Ronald Allen (retired CEO of Delta Airlines), David Kolb (retired
chairman of Mohawk Industries, Inc.), Earl Dolive (retired vice chairman of
Genuine Parts Company), Leo Benatar (variety of past positions), Ray
Robinson (former AT&T regional vice president), John Portman (real estate
developer), and John Schuerholz (president of the Atlanta Braves).
Charlie Loudermilk owns about 64% of the 8.31 million Class-A voting shares
and ~3% of the common shares, which equates to about 13% of the
outstanding shares. Only the Class-A shares are entitled to vote on most
matters that require shareholder consent.
As would be expected, the members of the audit and compensation
committees are independent officers.
Recent Results
Aaron Rents reported 4Q08 results on February 16, 2009.
Aaron Rents - Summary of 4th Quarter 2008 Results

GAAP EPS Variance Analysis
Rentals and fees
Retail sales
Non-retail sales
Franchise royalties and fees
Other revenue
Total revenue
Retail cost of goods sold, reported
Non-retail cost of goods
Depreciation of rental merchandise
Gross Profit, reported
Gross Margin, reported
Operating Expenses, reported
SG&A ratio, reported
Operating Income, reported
Operating Margin, reported
Interest Expense, net
Pre-tax Income, reported
Pre-tax Margin, reported
Income Tax Expense
Tax Rate
Discontinued Operations, Net of Tax
As % of Sales
Net Income, GAAP
Net Margin, GAAP
Diluted Shares Outstanding
Last Year
Reported
265.6
8.8
76.5
10.4
3.4
$364.7
$5.4
$70.4
97.9
$191.0
52.4%
165.9
45.5%
293.2
10.8
87.1
12.0
1.8
$404.9
$6.5
$80.1
106.3
$211.9
52.3%
176.6
43.6%
$25.1
$35.3
6.9%
2.3
$22.8
6.3%
8.5
37.4%
(1.2)
-0.3%
$15.5
4.2%
54.8
8.7%
1.2
$34.1
8.4%
13.1
38.4%
(0.0)
0.0%
$21.0
5.2%
54.2
EPS, GAAP
$0.28
$0.39
Comparable Store Sales

Total company owned stores
Total company onwed square footage (000s)
Retail Sales/Sq. Foot
Inventories, Ending
Inventory per Store
Inventory Turns
Inventory/Gross Retail Foot
3.9%
1,076
9,684
282.3
571.8
0.53
2.23
59.0
6.2%
1,053
9,477
313.2
679.6
0.65
2.14
71.7
Year-over-Year Change
10.4%
22.9%
13.9%
15.0%
-46.6%
11.0%
21.9%
13.8%
8.6%
11.0%
-3 basis pts
EPS vs.
Last Year
$0.02
$0.00
$0.01
$0.00
($0.00)
$0.03
($0.00)
-189 basis pts
$0.09
41.1%
$0.12
186 basis pts

-45.8%
49.7%
218 basis pts
$0.01
103 basis pts
($0.01)
($0.02)
35.6%
94 basis pts
(0.6)
$0.10
$0.00
$0.10
37.1%
230 bps
-2.1%
-2.1%
11.0%
18.8%
0.11
-0.10
12.7
Aaron Rents
38
Variance Analysis, Excluding Unusual Items
Aaron Rents - Summary of 4th Quarter 2008 Results

Non-GAAP EPS Variance Analysis
Last Year
Reported
Rentals and fees

Retail sales
Non-retail sales
Franchise royalties and fees
Other revenue
Total revenue
265.6
8.8
76.5
10.4
3.4
$364.7
293.2
10.8
87.1
12.0
1.8
$404.9
Gross Profit, Reported

Unusual items in Gross Profit
Gross Profit, Normalized
$191.0
0.0
$191.0
$211.9
0.0
$211.9
Gross Margin, Normalized

SG&A, Reported
Restructuring/Other Items
SG&A, Normalized
52.3%
165.6
0.0
165.6
SG&A Ratio, Normalized

Operating Income, Reported
Unusual Items
45.4%
43.6%
$35.3
0.0
$25.4
Operating Margin, Normalized

Interest Expense, Net
7.0%
$35.3
8.7%
2.3
Income Tax Expense
1.2
8.8
Tax Rate
Net Income, GAAP

After-tax Effect of Analytical Items
Net Income, Cont. Ops, Adjusted
Net Margin, Cont. Ops, Adjusted
37.9%
$0.02
$0.00
$0.01
$0.00
($0.00)
$0.03
11.0%
11.0%
-3 basis pts
($0.00)
-181 basis pts
$0.08
39.3%
$0.11
39.3%
177 basis pts
$0.01
-45.8%
13.1
38.4%
$15.5
(1.1)
$14.4
3.9%
EPS vs. Last

Year
176.6
0.0
176.6
$25.4
0.0
Operating Income, Normalized
Diluted Shares Outstanding
52.4%
Year-over-Year Change
10.4%
22.9%
13.9%
15.0%
-46.6%
11.0%
$21.0
(0.0)
$21.0
5.2%
54 basis pts
($0.00)
35.6%
$0.12
46.3%
125 basis pts
54.8
54.2
(0.6)
EPS, GAAP
EPS, Analytical Items
$0.28
(0.02)
$0.39
(0.00)
37.0%
EPS, Cont. Ops, Adjusted
$0.26
$0.39
47.9%
$0.00
$0.13
In its 4Q08 report, management issued guidance for 1Q09 which called for
revenues in excess of $445 million and EPS in the range of $0.49 to $0.54 and
2009 EPS guidance of $1.72 to $1.87. The 2009 guidance was raised higher
when issued with the 4Q08 report.
Model and Estimates
Our modeling discipline is to forecast a minimum of five years of pro forma

results and develop quarterly and yearly financial statements based on our
outlook for the companys forward prospects. In Aaron Rents case, we model
sales on the basis of revenue type (i.e., rentals and fees, retail sales, etc.) and
build the remainder of the income statement from the sales line down.
The other statements are derived from the income statement and from
assumptions made on working capital needs and capital structure decisions.
The most significant component of the sales line we model is the rentals and
fees line item, which is based both on a comparable store percentage change
as well as a new store contribution. The new store contribution varies
depending upon the age of the new stores and our assumed productivity of
stores at different life-stages.
Sales in the retail sales channel are based upon a year-over-year growth rate.
Non-retail sales are based upon the average sales to a franchisee multiplied
by the number of existing and new franchises in a given period. Franchise
royalties and fees are calculated based on our sales estimates for franchise
Aaron Rents
39

stores and a percentage of those revenues paid in royalties. The fee portion is
derived by determining the number of new franchises and assuming the onetime fee is paid once the franchise is set to open.
Gross margins in the retail sales segment are based on a year-over-year
change as are the non-retail gross margins. The company has disclosed on
numerous occasions that the depreciation of rental merchandise typically is
between 36% and 37% of rentals and fees revenue.
We attempt to parse out the components of operating expenses based on our
knowledge of the costs involved at the store level as well as corporate
overhead, for which the company provides data annually. Historically, this
amount has run between 42% and 45% of total revenues. A full detail of our
operating expense assumptions is presented later in this report.
As we discussed earlier in this report, investors interested solely in the
absolute valuation of stocks may not find shares of RNT overly attractive.
Currently (as of 2/24/09), based on consensus estimates, RNT trades at 13.4x
forward EPS. This compares with the approximate 10-year median multiple of
15.4x. On a price-to-sales basis, shares trade at ~0.8x trailing four quarter
sales compared with the 10-year median 0.9x multiple.
Aaron Rents valuation premium to its closest peer is mainly a function of its
faster-than-average revenue and earnings growth. That said, should economic
conditions deteriorate meaningfully over the coming months, the rent-to-own
business, despite its historical resiliency to such slowdowns, would likely
contract, as well.
Another tool we use to measure the value of a companys stock and also as a
sort of check on other valuation metrics is the calculation of intrinsic value.
This is based on the present value of future residual earnings; in our analyses
we use economic free cash flows and economic value added (EVA).
We use the intrinsic value analysis to weigh our forecasting assumptions and
develop a view about a stocks economic worth resulting from the cumulative
impact of those assumptions. More importantly, the accompanying sensitivity
analyses provide a useful tool for judging the relative importance of different
sets of operating and financial assumptions to the calculation of intrinsic value.
One aspect of intrinsic value analysis is that free cash flow (FCF) and EVA
methodologies yield equal result, a theorem that was demonstrated by Nobel
laureates Merton Miller and Franco Modigliani decades ago. We show both
methodologies below. Further, since our discipline often requires 12-month
price targets, we extend the valuation 12 months into the future to project an
intrinsic value at that time.
Our income statement and balance sheet models provide the basis for
developing annual estimates of FCF and EVA. The economic definition of FCF
is net operating profit after tax (NOPAT) less the change in capital. EVA is
defined as NOPAT minus a charge for the capital used to create that NOPAT.
NOPAT and capital typically include several adjustments, including the
incorporation of operating lease economics and non-recurring expense items.
The analysis also requires developing an estimate of the companys weighted
average cost of capital (WACC), which is a blend of the cost of equity and the
after-tax cost of debt.
We use the Capital Asset Pricing Method (CAPM) to develop a cost of equity.
Assuming a 4.5% risk-free rate, 6% equity market risk premium, and a Beta of
1.0, we arrive at a cost of equity for Aaron Rents of 8%. While Beta and equity
market risk premium, in particular, are subjects of extended discussion in
investment literature, we believe our estimates are defensible.
Aaron Rents
40

Our assumed 1.0 Beta is the greater of either 1.0 or the Beta derived from the
average of 60-month betas from two different sources. Bloomberg currently
reports that the 60-month adjusted Beta for RNT is 0.75. That said, the
intrinsic valuation is very sensitive to changes in Beta.
To arrive at an after-tax cost of debt, we apply a 38.2% tax rate to an
estimated 5.2% cost of the next incremental dollar of debt to generate an aftertax cost of debt of 3.2%.
Another critical assumption in developing the WACC is to settle on a target
blend of debt and equity. The two critical issues are how much debt is
appropriate and how best to measure target equity.
In many cases, we use the intrinsic value of equity as the target equity, a
methodology that is typically more conservative and changes only when a
fundamental assumption changes.
Capitalizing Aarons operating leases provides a much different and more
realistic view of its financial leverage. For most of the retailers under coverage,
we capitalize the rents paid at 12.5%. This is the amount we use in Aarons
case.
Since we forecast operating results for a finite period of six years, we must
assume a growth rate at which we believe the company is capable of growing
in perpetuity after this period. In our analysis, we assume a perpetual growth
rate of 1.5%, arguably conservative and about half of the long-run average of
GDP growth.
Using the WACC and a mid-year discounting technique to develop present
value factors and an adjusted beginning capital, we project intrinsic share
values that bracket our $28.00 target price, $26.79 per share now and $30.38
per share in 12 months.
Technical Analysis
Raymond James technical analyst, Art Huprich, CMT, offers the following
commentary about the opportunity in RNT:
While most of the major stock market indices record multi-year lows, RNT
is trading above its October and November 2008 lows and was actually
up in February. This is excellent relative price action versus the S&P 500.
If this trend continues, when the stock market finally starts moving higher,
the odds would favor that RNT is a leading stock.
In the meantime, important short-term buying interest (support) exists
closer to $20.87. Please respect this level.
Aaron Rents
41
Summary and Recommendation

In summary, we initiate coverage on Aaron Rents with an Outperform rating
and $28.00, twelve-month target price. Despite our positive rating, a few
investment risks still remain, but we are comforted by managements stable
and dependable history of growth and profitability.
The rent-to-own industry, a new area of coverage for Raymond James,
appears to present a niche of growth in the retail sector. Customers who are
cash- and/or credit-constrained have found the lease ownership transaction to
be accommodating and enabling. The companys outlook for growth continues
to be strong and its franchising program should allow for a smooth and
somewhat less risky path.
Public companies mentioned in this report.

Company Name
Advance America Cash Advance Centers
Berkshire Hathaway, Inc.
Burger King Holdings Inc.
Cash America Intl Inc
Cost Plus, Inc.
Dell Inc.
Haverty Furniture Companies Inc.
Hewlett-Packard
McDonald`s Corporation
Pier 1 Imports Incorporated
Rent-A-Center Inc.
Sony Corp.
Ticker
AEA
BRK.A
BKC
CSH
CPWM
DELL
HVT
HPQ
MCD
PIR
RCII
SNE
Priced as of
03/02/09
$0.95
75,750.00
21.55
13.54
0.69
8.43
8.13
28.07
51.85
0.20
16.85
16.46
RJ&A Rating
(if Applicable)
Market Perform
Outperform
Market Perform
Strong Buy
Strong Buy
Aaron Rents
42
Aaron Rents
Income Statement Model
$1.41
Dividends:
Common Shares
TFQ Dividends to Common
Class A Common Shares
TFQ Dividends to Class A Common
EBITDA:
EBITDA
TFQ EBITDA
TFQ EBITDA per Share
Gross Margins:
Rental and Fees Gross Margin
As a % of rental and fee sales
Retail Sales Gross Margin
As a % of retail sales
Non-retail Sales Gross Margin
As a % of non-retail sales
Overall Gross Margin
As a % of reported total sales
$0.060
$0.060
162.9
$654.3
62.6%
$13.4
38.7%
$21.8
8.3%
$742.4
53.2%
54.2
55.0
54.5
$1.28
Diluted, Analytically Adjusted
Diluted, As reported by First Call
Weighted Shares Outstanding (basic)

Weighted Shares Outstanding (Diluted)
Actual shares outstanding
$1.48
$1.46
($0.18)
Rest'd
FY07
52
12/31/07
$1,045.8
$34.6
$261.6
$38.8
$14.2
$1,394.9
$21.2
$239.8
$617.1
$391.5
$125.3
$7.6
$117.8
$44.3
$73.4
$6.9
$80.3
($9.9)
$70.3
EPS
Basic GAAP
Diluted GAAP
Impact of Disc Ops and Unusual Items
$(Mil), except EPS

Weeks in Period
Period Ended
Rentals and Fees
Retail Sales
Non-Retail Sales
Other
Total Revenue
Retail Cost of Sales
Non-Retail Cost of Sales
Operating Expense
Depreciation of Rental Merchandise
Operating Income
Interest Expense, net
Pretax Income
Provision for Income Taxes
Net Income, Continuing Operations, GAAP
Discontinued Operations
Net Income, GAAP
Unusual Items, net of tax
Net Income, Analytically Adjusted
$0.016
$0.061
$0.016
$0.061
51.0
159.8
$2.95
$190.0
63.4%
$5.0
40.0%
$7.5
8.8%
$217.6
52.7%
53.5
54.2
53.3
$0.46
$0.42
$0.46
$0.46
($0.04)
Rest'd
1Q08
13
3/31/08
$299.7
12.4
85.4
11.0
4.2
$412.7
7.4
77.9
177.8
109.7
$39.8
2.2
$37.6
15.1
22.6
2.2
$24.8
(2.2)
$22.6
$0.016
$0.062
$0.016
$0.062
48.7
168.8
$3.12
$187.8
63.7%
$3.6
36.9%
$5.5
8.3%
$213.4
55.1%
53.3
54.1
53.3
$0.39
$0.39
$0.44
$0.43
($0.04)
Rest'd
2Q08
13
6/30/08
$294.8
9.7
66.1
10.9
5.5
$387.0
6.1
60.6
175.8
106.9
$37.5
2.2
$35.4
13.0
22.4
0.9
$23.3
(2.2)
$21.1
$0.016
$0.063
$0.016
$0.063
45.0
180.9
$3.34
$184.1
63.3%
$4.0
38.7%
$5.9
8.4%
$210.0
54.1%
53.4
54.2
53.3
$0.39
$0.36
$0.40
$0.39
($0.03)
3Q08
13
9/30/08
$291.1
10.2
70.7
11.1
4.9
$388.0
6.3
64.8
175.3
107.0
$34.7
2.2
$32.5
12.6
19.8
1.2
$21.1
(1.6)
$19.5
$0.016
$0.064
$0.016
$0.064
44.1
188.9
$3.48
$186.9
63.7%
$4.3
39.6%
$7.0
8.0%
$211.9
52.3%
53.4
54.2
53.3
$0.39
$0.39
$0.39
$0.39
($0.00)
4Q08
13
12/31/08
$293.2
10.8
87.1
12.0
1.8
$404.9
6.5
80.1
176.6
106.3
$35.3
1.2
$34.1
13.1
21.0
0.0
$21.0
(0.0)
$21.0
$0.064
$0.064
188.9
$748.8
63.5%
$16.8
38.9%
$26.0
8.4%
$853.0
53.6%
53.4
54.2
53.3
$1.63
$1.55
$1.69
$1.66
($0.11)
FY08
52
12/31/08
$1,178.7
43.2
309.3
$45.0
16.4
$1,592.6
26.4
283.4
705.6
429.9
$147.4
7.8
$139.6
53.8
85.8
4.4
$90.1
(6.0)
$84.1
$0.017
$0.065
$0.017
$0.065
55.3
193.2
$3.56
$200.9
63.5%
$5.0
39.0%
$8.6
8.3%
$232.0
51.5%
53.4
54.2
53.3
$0.49
$0.49
$0.017
$0.066
$0.017
$0.066
52.7
197.1
$3.64
$197.9
63.5%
$3.6
35.9%
$6.5
7.8%
$226.8
53.5%
53.4
54.2
53.3
$0.45
$0.45
$0.46
$0.45
$0.00
$24.4
0.0
$24.4
$26.5
0.0
$26.5
$0.50
$0.49
$0.00
Est.
2Q09
13
6/30/09
$311.6
10.1
83.1
12.3
6.5
$423.6
6.5
76.6
184.9
113.7
$41.8
2.2
$39.6
15.3
24.4
Est.
1Q09
13
3/31/09
$316.5
12.9
103.4
12.3
5.2
$450.1
7.8
94.8
186.9
115.5
$45.1
2.1
$43.0
16.6
26.5
$0.017
$0.067
$0.017
$0.067
51.3
203.4
$3.75
$195.9
63.5%
$4.1
37.7%
$7.1
7.9%
$225.7
52.8%
53.4
54.2
53.3
$0.43
$0.43
$0.44
$0.43
$0.00
$23.6
0.0
$23.6
Est.
3Q09
13
9/30/09
$308.4
10.7
89.9
12.8
5.9
$427.8
6.7
82.8
185.3
112.6
$40.4
2.1
$38.3
14.8
23.6
$0.017
$0.068
$0.017
$0.068
50.4
209.7
$3.87
$201.7
63.5%
$4.5
38.6%
$8.4
7.5%
$231.2
50.5%
53.4
54.2
53.3
$0.42
$0.42
$0.43
$0.42
$0.00
$23.0
0.0
$23.0
Est.
4Q09
13
12/31/09
$317.7
11.7
112.0
13.7
2.8
$457.9
7.2
103.6
191.8
116.0
$39.4
2.1
$37.4
14.4
23.0
$0.068
$0.068
209.7
$796.4
63.5%
$17.2
37.9%
$30.6
7.9%
$915.7
52.0%
53.4
54.2
53.3
$1.80
$1.80
$1.83
$1.80
$0.00
Est.
FY09
52
12/31/09
$1,254.2
45.4
388.4
$51.1
20.4
$1,759.4
28.2
357.8
748.9
457.8
$166.8
8.4
$158.4
61.0
97.4
0.0
$97.4
0.0
$97.4
$0.017
$0.068
$0.017
$0.068
64.7
219.1
$4.04
$214.9
63.5%
$5.6
39.2%
$10.7
8.5%
$251.9
50.4%
53.4
54.2
53.3
$0.56
$0.56
$0.57
$0.56
$0.00
$30.4
0.0
$30.4
Est.
1Q10
13
3/31/10
$338.4
14.2
126.1
15.1
5.7
$499.4
8.6
115.4
200.0
123.5
$51.9
2.5
$49.4
19.0
30.4
$0.017
$0.068
$0.017
$0.068
60.2
226.7
$4.18
$212.5
63.5%
$4.1
36.1%
$8.0
8.0%
$246.3
52.7%
53.4
54.2
53.3
$0.51
$0.51
$0.51
$0.51
$0.00
$27.4
0.0
$27.4
Est.
2Q10
13
6/30/10
$334.6
11.2
99.7
14.7
7.0
$467.3
7.2
91.7
199.3
122.1
$46.9
2.4
$44.5
17.2
27.4
$0.017
$0.068
$0.017
$0.068
58.7
234.2
$4.32
$211.4
63.5%
$4.5
37.9%
$8.7
8.1%
$246.8
52.1%
53.4
54.2
53.3
$0.49
$0.49
$0.50
$0.49
$0.00
$26.7
0.0
$26.7
Est.
3Q10
13
9/30/10
$332.9
11.9
106.9
15.9
6.4
$474.0
7.4
98.3
201.2
121.5
$45.6
2.3
$43.3
16.7
26.7
$0.017
$0.068
$0.017
$0.068
60.2
243.9
$4.50
$217.3
63.5%
$5.0
38.8%
$10.2
7.7%
$252.2
49.8%
53.4
54.2
53.3
$0.51
$0.51
$0.52
$0.51
$0.00
$27.6
0.0
$27.6
Est.
4Q10
13
12/31/10
$342.2
13.0
131.5
16.4
3.2
$506.4
8.0
121.4
205.1
124.9
$47.1
2.2
$44.8
17.3
27.6
$0.068
$0.068
243.9
$856.0
63.5%
$19.2
38.1%
$37.6
8.1%
$997.2
51.2%
53.4
54.2
53.3
$2.07
$2.07
$2.10
$2.07
$0.00
Est.
FY10
52
12/31/10
$1,348.1
50.4
464.3
$62.2
22.3
$1,947.1
31.2
426.7
805.6
492.1
$191.5
9.4
$182.1
70.1
112.0
0.0
$112.0
0.0
$112.0
$0.068
$0.068
268.8
$916.7
63.5%
$21.3
38.2%
$45.5
8.6%
$1,079.8
50.8%
53.4
54.2
53.3
$2.26
$2.26
$2.30
$2.26
$0.00
Est.
FY11
52
12/31/11
$1,443.7
55.7
530.1
$74.0
22.3
$2,125.7
34.4
484.5
871.1
527.0
$208.7
9.2
$199.5
76.8
122.7
0.0
$122.7
0.0
$122.7
$0.068
$0.068
292.3
$979.1
63.5%
$23.5
38.3%
$54.4
9.1%
$1,165.7
50.5%
53.4
54.2
53.3
$2.45
$2.45
$2.49
$2.45
$0.00
Est.
FY12
52
12/31/12
$1,541.9
61.4
598.4
$86.4
22.3
$2,310.3
37.9
544.0
940.0
562.8
$225.7
9.5
$216.2
83.2
133.0
0.0
$133.0
0.0
$133.0
$0.068
$0.068
321.0
$1,044.0
63.5%
$25.9
38.4%
$64.2
9.6%
$1,256.5
50.2%
53.4
54.2
53.3
$2.73
$2.73
$2.78
$2.73
$0.00
Est.
FY13
52
12/31/13
$1,644.2
67.5
669.2
$100.0
22.3
$2,503.2
41.5
605.0
1,007.6
600.2
$248.9
8.0
$240.9
92.7
148.1
0.0
$148.1
0.0
$148.1
Aaron Rents
43
Aaron Rents
1,076
4.36
9.8%
$1,056.4
$88.0
-9.0%
609,519
583.0
-3.1%
927,078
613.8
-0.2%
$147.78
-7.7%
$337.5
5.6%
5.3%
-44.5%
16.5%
15.4%
5.9%
5.2%
-48.6%
15.7%
6.5%
6.5%
7.5%
-6.8%
-22.0%
-5.6%
2.1%
-10.5%
Y/Y Growth:
Comp Store Sales
Rentals and Fees
Retail Sales
Non-Retail Sales
Other, Reported
Total Revenue, Reported
Operating Expense, Reported
Operating Expense, Normalized
EBIT
Interest Expense
Pre-tax Income
Net Income, GAAP
Net Income, Analytically Adjusted
Other Statistics
Number of Company Owned Stores Ending
Period-end Company owned Square Footage (mil)
Yr/Yr Chg in Square Footage
Rentals and Fees per average company owned store (000s)
Monthly rentals and fees per avg store
Y/Y Change
Ending Customer Count - company owned
Customer count per average store - company owned
Y/Y Change
Ending Customer Count - all stores
Customer count per average store - all stores
Y/Y Change
Average rental per customer - company owned
Y/Y Change
Last 4Q Sales/Avg. Sq. Footage
ROIC, Beginning
ROIC Average
75.0%
2.5%
18.8%
2.8%
1.0%
100.0%
1.5%
17.2%
44.2%
44.2%
28.1%
37.4%
9.0%
9.0%
0.5%
8.4%
37.6%
5.8%
-0.7%
5.0%
FY07
52
12/31/07
Rest'd
Weeks in Period
Period Ended
Common Size Income Statement:
Rentals and Fees
Retail Sales
Non-Retail Sales
Other
Total Revenue
Operating Expense, Reported
Operating Expense, Normalized
Depreciation of Rental Merchandise as % of R&F
EBIT Margin, GAAP
EBIT Margin, Normalized
Interest Expense
Pre-tax Margin
Tax Rate
Net Income Margin, GAAP
Unusual Items
Net Income Margin, Analytically Adjusted
Common Size Income Statement Model
4.1%
14.6%
24.5%
16.6%
13.5%
116.8%
15.9%
24.2%
16.2%
17.7%
17.7%
10.2%
24.0%
26.9%
23.8%
18.4%
19.0%
76.2%
2.5%
17.1%
2.8%
1.4%
100.0%
1.6%
15.7%
45.4%
45.4%
27.6%
36.3%
9.7%
9.7%
0.6%
9.1%
36.8%
6.0%
-0.6%
5.5%
2Q08
13
6/30/08
Rest'd
5.7%
13.1%
32.6%
21.6%
25.3%
188.4%
16.3%
37.8%
22.0%
13.5%
13.5%
10.0%
42.2%
15.3%
44.5%
32.4%
37.4%
75.0%
2.6%
18.2%
2.9%
1.3%
100.0%
1.6%
16.7%
45.2%
45.2%
27.6%
36.7%
8.9%
8.9%
0.6%
8.4%
38.9%
5.4%
-0.4%
5.0%
3Q08
13
9/30/08
Prel.
6.2%
10.4%
22.9%
13.9%
15.0%
-46.6%
11.0%
21.9%
13.8%
6.6%
6.6%
8.6%
39.3%
-45.8%
47.7%
35.7%
46.4%
72.4%
2.7%
21.5%
3.0%
0.4%
100.0%
1.6%
19.8%
43.6%
43.6%
26.3%
36.3%
8.7%
8.7%
0.3%
8.4%
38.4%
5.2%
0.0%
5.2%
4Q08
13
12/31/08
Prel.
4.6%
12.7%
24.9%
18.3%
16.0%
15.5%
14.2%
24.4%
18.2%
14.3%
14.3%
9.8%
17.6%
3.0%
18.5%
12.3%
19.6%
74.0%
2.7%
19.4%
2.8%
1.0%
100.0%
1.7%
17.8%
44.3%
44.3%
27.0%
36.5%
9.3%
9.3%
0.5%
8.8%
38.6%
5.7%
-0.4%
5.3%
FY08
52
12/31/08
1,053
1,074
1,084
1,073
1,053
4.54
4.40
4.38
4.60
4.54
8.4%
6.8%
14.6%
4.1%
4.1%
$1,107.3
$278.8
$273.2
$269.9
$275.8
$92.3
$92.9
$91.1
$90.0
$91.9
4.8%
-4.3%
-0.6%
3.1%
8.6%
740,278
634,616
668,718
676,528
740,278
696.4
590.3
619.8
627.3
696.4
19.5%
-2.6%
1.8%
4.7%
19.5%
963,968 1,009,550 1,035,297 1,103,312 1,103,312
702.5
617.3
644.3
656.3
702.5
14.5%
-0.3%
3.7%
7.3%
14.5%
$137.95
$160.58
$150.78
$144.26
$137.95
-1.7%
-1.3%
-2.6%
-6.7%
-6.7%
$355.5
$342.5
$349.3
$350.0
$355.5
9.8%
10.1%
10.3%
10.5%
9.0%
9.2%
9.7%
10.2%
2.6%
12.7%
21.0%
21.6%
11.3%
-36.6%
13.8%
17.1%
21.5%
20.4%
20.4%
10.5%
-12.1%
30.3%
-13.7%
-15.2%
-6.4%
72.6%
3.0%
20.7%
2.7%
1.0%
100.0%
1.8%
18.9%
43.1%
43.1%
26.6%
36.6%
9.6%
9.6%
0.5%
9.1%
40.0%
6.0%
-0.5%
5.5%
1Q08
13
3/31/08
Rest'd
Est.
$357.5
10.8%
10.5%
1,061
4.72
7.3%
$299.4
$99.8
7.4%
5.5%
5.6%
3.7%
21.1%
11.0%
24.0%
9.1%
5.5%
21.7%
5.1%
5.1%
5.3%
13.3%
-6.0%
14.4%
6.9%
17.3%
70.3%
2.9%
23.0%
2.7%
1.1%
100.0%
1.7%
21.1%
41.5%
41.5%
25.7%
36.5%
10.0%
10.0%
0.5%
9.6%
38.5%
5.9%
0.0%
5.9%
1Q09
13
3/31/09
Est.
$354.9
10.4%
10.4%
1,069
4.93
12.5%
$292.6
$97.5
7.1%
5.0%
5.7%
3.6%
25.8%
12.5%
18.1%
9.5%
5.3%
26.5%
5.2%
5.2%
6.4%
11.4%
1.8%
12.0%
4.7%
15.4%
73.6%
2.4%
19.6%
2.9%
1.5%
100.0%
1.5%
18.1%
43.7%
43.7%
26.9%
36.5%
9.9%
9.9%
0.5%
9.4%
38.5%
5.8%
0.0%
5.8%
2Q09
13
6/30/09
Est.
$354.9
11.2%
10.7%
1,087
5.05
9.7%
$286.1
$95.4
6.0%
5.0%
6.0%
5.0%
27.2%
15.5%
20.5%
10.3%
6.7%
27.9%
5.7%
5.7%
5.3%
16.4%
-7.7%
18.1%
11.8%
21.2%
72.1%
2.5%
21.0%
3.0%
1.4%
100.0%
1.6%
19.4%
43.3%
43.3%
26.3%
36.5%
9.4%
9.4%
0.5%
9.0%
38.5%
5.5%
0.0%
5.5%
3Q09
13
9/30/09
Est.
$353.6
11.7%
10.7%
1,105
5.21
14.8%
$289.9
$96.6
5.1%
5.0%
8.4%
8.3%
28.5%
14.4%
55.7%
13.1%
10.1%
29.2%
8.6%
8.6%
9.1%
11.5%
68.5%
9.5%
9.3%
9.3%
69.4%
2.6%
24.5%
3.0%
0.6%
100.0%
1.6%
22.6%
41.9%
41.9%
25.3%
36.5%
8.6%
8.6%
0.5%
8.2%
38.5%
5.0%
0.0%
5.0%
4Q09
13
12/31/09
Est.
$353.6
1,105
5.21
14.8%
$1,162.4
$96.9
5.0%
5.1%
6.4%
5.1%
25.6%
13.4%
24.5%
10.5%
6.8%
26.3%
6.1%
6.1%
6.5%
13.1%
7.3%
13.5%
8.1%
15.7%
71.3%
2.6%
22.1%
2.9%
1.2%
100.0%
1.6%
20.3%
42.6%
42.6%
26.0%
36.5%
9.5%
9.5%
0.5%
9.0%
38.5%
5.5%
0.0%
5.5%
FY09
52
12/31/09
Est.
$352.5
11.3%
10.7%
1,120
5.34
13.2%
$304.2
$101.4
1.6%
5.0%
6.9%
10.5%
21.9%
23.1%
9.7%
11.0%
10.2%
21.7%
7.0%
7.0%
6.9%
15.1%
20.6%
14.8%
14.8%
14.8%
67.8%
2.8%
25.2%
3.0%
1.1%
100.0%
1.7%
23.1%
40.0%
40.0%
24.7%
36.5%
10.4%
10.4%
0.5%
9.9%
38.5%
6.1%
0.0%
6.1%
1Q10
13
3/31/10
Est.
$351.6
11.2%
10.7%
1,135
5.48
11.1%
$296.8
$98.9
1.4%
5.0%
7.4%
11.2%
20.0%
20.1%
7.7%
10.3%
10.8%
19.7%
7.8%
7.8%
7.4%
12.2%
8.0%
12.4%
12.4%
12.4%
71.6%
2.4%
21.3%
3.2%
1.5%
100.0%
1.5%
19.6%
42.7%
42.7%
26.1%
36.5%
10.0%
10.0%
0.5%
9.5%
38.5%
5.9%
0.0%
5.9%
2Q10
13
6/30/10
Est.
$350.9
11.4%
10.7%
1,150
5.61
11.2%
$291.3
$97.1
1.8%
5.0%
7.9%
11.3%
19.0%
23.7%
8.5%
10.8%
10.9%
18.7%
8.5%
8.5%
7.9%
13.0%
11.1%
13.1%
13.1%
13.1%
70.2%
2.5%
22.6%
3.4%
1.3%
100.0%
1.6%
20.7%
42.4%
42.4%
25.6%
36.5%
9.6%
9.6%
0.5%
9.1%
38.5%
5.6%
0.0%
5.6%
3Q10
13
9/30/10
Est.
$351.1
11.6%
10.9%
1,165
5.75
10.4%
$295.7
$98.6
2.0%
5.0%
7.7%
10.9%
17.4%
20.2%
14.3%
10.6%
10.5%
17.2%
6.9%
6.9%
7.7%
19.4%
8.9%
20.0%
20.0%
20.0%
67.6%
2.6%
26.0%
3.2%
0.6%
100.0%
1.6%
24.0%
40.5%
40.5%
24.7%
36.5%
9.3%
9.3%
0.4%
8.9%
38.5%
5.4%
0.0%
5.4%
4Q10
13
12/31/10
Est.
$351.1
1,165
5.75
10.4%
$1,187.7
$99.0
2.2%
5.0%
7.5%
10.9%
19.5%
21.7%
9.3%
10.7%
10.6%
19.3%
7.6%
7.6%
7.5%
14.9%
12.1%
15.0%
15.0%
15.0%
69.2%
2.6%
23.8%
3.2%
1.1%
100.0%
1.6%
21.9%
41.4%
41.4%
25.3%
36.5%
9.8%
9.8%
0.5%
9.4%
38.5%
5.8%
0.0%
5.8%
FY10
52
12/31/10
Est.
$345.5
1,237
6.40
11.3%
$1,202.1
$100.2
1.2%
4.5%
7.1%
10.6%
14.2%
19.1%
0.0%
9.2%
10.4%
13.5%
8.1%
8.1%
7.1%
8.9%
-1.9%
9.5%
9.5%
9.5%
67.9%
2.6%
24.9%
3.5%
1.0%
100.0%
1.6%
22.8%
41.0%
41.0%
24.8%
36.5%
9.8%
9.8%
0.4%
9.4%
38.5%
5.8%
0.0%
5.8%
FY11
52
12/31/11
Est.
$339.7
1,309
7.04
10.1%
$1,211.2
$100.9
0.8%
4.0%
6.8%
10.2%
12.9%
16.8%
0.0%
8.7%
10.1%
12.3%
7.9%
7.9%
6.8%
8.1%
2.4%
8.4%
8.4%
8.4%
66.7%
2.7%
25.9%
3.7%
1.0%
100.0%
1.6%
23.5%
40.7%
40.7%
24.4%
36.5%
9.8%
9.8%
0.4%
9.4%
38.5%
5.8%
0.0%
5.8%
FY12
52
12/31/12
Est.
$336.0
1,381
7.69
9.2%
$1,222.5
$101.9
0.9%
4.0%
6.6%
9.9%
11.8%
15.8%
0.0%
8.3%
9.7%
11.2%
7.2%
7.2%
6.6%
10.3%
-15.5%
11.4%
11.4%
11.4%
65.7%
2.7%
26.7%
4.0%
0.9%
100.0%
1.7%
24.2%
40.3%
40.3%
24.0%
36.5%
9.9%
9.9%
0.3%
9.6%
38.5%
5.9%
0.0%
5.9%
FY13
52
12/31/13
Aaron Rents
44
Aaron Rents
673.4
DuPont Analysis
Profit Margin (TFQ Net Inc/TFQ Sales)
Asset Turnover (TFQ sales / ending assets)
Return on Assets, ending
Financial Leverage Ratio
Return on Equity, ending
Statistics:
A/R, in days sales (qtr annualized)
Net Rental Merchandise, days sales (annualized)
Total Company Owned Stores, End of Pd.
Ending Inventory/Ending Store
Accounts Payable, in days CGS (TFQ)
Accounts Payable % Inventory
Net Working Capital % of TFQ Sales
Cash Conversion Cycle (Annualized, days sales)
Current Ratio
Debt % Capital
Debt/EBITDA
TFQ EBITDA / TFQ Interest Exp
Book Value per share
Tangible Book per share
Allowance for doubtful accounts as % of Sales
5.0%
1.3
6.3%
1.7
10.4%
12
150
1,076
0.5
40.3
24.7%
13.3%
120
1.4
21.6%
5.1
21.5
$12.29
$9.61
1.1%
$1,113.2
TOTAL SHAREHOLDERS' EQUITY
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
141.0
0.9
82.3
27.8
185.8
2.0
439.8
245.9
141.9
4.8
36.9
58.9
$1,113.2
$5.2
47.7
922.6
(350.7)
571.8
624.8
Rest'd
4Q07
13
12/31/07
Liabilities and Shareholders' Equity:

Accounts Payable and Accrued Expenses
Dividends Payable
Deferred Income Taxes Payable
Customer Deposits and Advance Payments
Credit Facilities
Liabilities Held for Sale
TOTAL LIABILITIES
Property Plant and Equipment, Net

Goodwill, Net
Other Intangibles, Net
Prepaid Expenses and Other Assets
Assets Held for Sale
TOTAL ASSETS
$(Mil), except per share data

Weeks in Period
Period Ended
Assets:
Cash
Accounts Receivable , net of allowances
Gross Rental Merchandise
Less: Accumulated Depreciation
Rental Merchandise, Net
TOTAL CURRENT ASSETS
Balance Sheet Model
691.2
4.8%
1.3
6.0%
1.7
10.0%
12
145
1,074
0.6
42.3
23.5%
17.8%
123
1.6
20.8%
3.6
19.7
$12.98
$10.05
0.7%
$1,151.0
4.8%
1.3
6.1%
1.7
10.1%
12
162
1,084
0.6
34.1
18.7%
17.8%
143
1.6
23.1%
4.4
19.7
$13.43
$10.27
0.9%
$1,191.0
715.0
128.9
0.9
101.4
30.6
214.2
0.0
476.0
$1,191.0
$1,151.0
154.5
0.9
91.9
30.7
182.0
0.0
459.8
241.0
162.6
5.5
38.5
$6.0
49.5
1,082.2
(394.4)
687.7
743.3
2Q08
13
6/30/08
246.7
150.6
5.2
30.9
$7.1
53.2
1,028.2
(370.9)
657.3
717.6
1Q08
13
3/31/08
5.0%
1.3
6.6%
1.6
10.5%
11
148
1,073
0.6
32.4
20.1%
16.5%
130
1.6
17.2%
3.4
20.4
$13.89
$10.77
1.0%
$1,169.6
739.8
126.5
0.0
121.1
27.9
153.4
0.8
429.8
212.3
160.8
5.5
45.6
59.8
$1,169.6
$6.6
48.5
1,020.3
(389.9)
630.4
685.5
3Q08
13
9/30/08
5.3%
1.3
6.8%
1.6
11.0%
13
153
1,053
0.6
43.7
25.5%
17.3%
128
1.6
13.1%
2.6
24.2
$14.30
$10.67
1.0%
5.4%
1.3
6.9%
1.6
11.2%
12
145
1,061
0.7
38.3
21.9%
17.5%
125
1.6
16.7%
2.9
25.1
$14.78
$11.11
0.0%
787.0
$1,282.5
761.5
156.0
0.9
148.6
32.1
157.8
0.0
495.5
239.2
188.0
7.5
67.4
0.0
$1,282.5
$9.5
58.0
1,099.4
(386.5)
712.9
780.4
Est.
1Q09
13
3/31/09
$1,233.3
173.9
0.9
148.6
33.4
114.8
0.0
471.7
224.4
186.0
7.5
67.4
0.0
$1,233.3
$7.4
59.5
1,074.8
(393.7)
681.1
748.0
4Q08
13
12/31/08
5.5%
1.3
7.0%
1.6
11.3%
12
155
1,069
0.7
34.0
19.6%
17.5%
136
1.6
17.1%
3.2
25.5
$15.22
$11.51
0.0%
$1,302.8
810.4
141.4
0.9
148.6
34.6
166.8
0.0
492.4
253.3
190.0
7.5
67.4
0.0
$1,302.8
$9.6
54.2
1,122.7
(402.0)
720.8
784.6
Est.
2Q09
13
6/30/09
5.6%
1.3
7.2%
1.6
11.5%
11
155
1,087
0.7
36.1
21.1%
17.5%
134
1.6
15.7%
3.0
26.9
$15.64
$11.90
0.0%
$1,323.1
832.9
153.4
0.9
148.6
32.4
154.8
0.0
490.2
267.5
192.0
7.5
67.4
0.0
$1,323.1
$9.3
53.4
1,097.3
(371.2)
726.0
788.8
Est.
3Q09
13
9/30/09
5.5%
1.3
7.1%
1.6
11.4%
13
149
1,105
0.7
40.2
23.6%
17.3%
127
1.6
15.5%
3.1
25.0
$16.05
$12.27
0.0%
$1,372.7
854.9
176.5
0.9
148.6
34.9
156.8
0.0
517.8
281.5
194.0
7.5
67.4
0.0
$1,372.7
$6.4
67.3
1,097.6
(349.0)
748.6
822.3
Est.
4Q09
13
12/31/09
5.6%
1.3
7.2%
1.6
11.5%
12
143
1,120
0.7
36.3
20.9%
17.7%
124
1.6
17.4%
2.9
24.9
$16.60
$12.78
0.0%
$1,416.9
884.2
163.4
0.9
148.6
32.9
186.8
0.0
532.7
293.6
196.1
7.5
67.4
0.0
$1,416.9
$7.7
64.4
1,108.8
(328.5)
780.3
852.3
Est.
1Q10
13
3/31/10
5.6%
1.3
7.3%
1.6
11.5%
12
153
1,135
0.7
33.5
19.7%
17.9%
134
1.6
16.3%
2.9
25.2
$17.10
$13.24
0.0%
$1,428.8
910.6
154.6
0.9
148.6
37.3
176.8
0.0
518.2
305.3
198.1
7.5
67.4
0.0
$1,428.8
$7.2
59.8
1,123.7
(340.3)
783.5
850.5
Est.
2Q10
13
6/30/10
5.7%
1.3
7.4%
1.6
11.5%
11
153
1,150
0.7
34.2
20.3%
18.1%
133
1.7
15.5%
2.9
25.4
$17.58
$13.68
0.0%
$1,454.1
936.1
161.5
0.9
148.6
35.1
171.8
0.0
517.9
317.2
200.0
7.5
67.4
0.0
$1,454.1
$8.5
59.2
1,086.6
(292.4)
794.2
861.9
Est.
3Q10
13
9/30/10
5.8%
1.3
7.4%
1.6
11.6%
13
149
1,165
0.7
40.6
23.7%
18.3%
127
1.6
14.8%
2.8
25.9
$18.08
$14.14
0.0%
$1,513.7
962.6
196.1
0.9
148.6
38.7
166.8
0.0
551.1
329.1
202.1
7.5
67.4
0.0
$1,513.7
$6.8
74.4
1,079.6
(253.3)
826.3
907.6
Est.
4Q10
13
12/31/10
5.8%
1.3
7.4%
1.5
11.3%
13
152
1,237
0.7
38.5
22.1%
20.5%
132
1.8
14.2%
2.7
29.1
$20.29
$16.21
0.0%
$1,653.1
1,080.8
203.4
0.9
148.6
40.5
178.8
0.0
572.2
369.0
210.2
7.5
57.4
0.0
$1,653.1
$6.8
81.3
1,035.2
(114.3)
920.8
1,008.9
Est.
4Q11
13
12/31/11
5.8%
1.3
7.4%
1.5
11.0%
13
153
1,309
0.8
37.8
21.5%
22.7%
134
1.9
12.6%
2.4
30.9
$22.70
$18.46
0.0%
$1,792.3
1,209.0
216.7
0.9
148.6
43.2
173.8
0.0
583.3
402.3
218.3
7.5
57.4
0.0
$1,792.3
$8.8
88.3
945.6
64.0
1,009.6
1,106.8
Est.
4Q12
13
12/31/12
5.9%
1.3
7.7%
1.4
11.0%
13
153
1,381
0.8
36.5
20.6%
25.2%
135
2.1
9.8%
1.8
40.2
$25.40
$21.00
0.0%
$1,920.2
1,352.4
225.9
0.9
148.6
45.4
146.8
0.0
567.7
430.2
226.4
7.5
57.4
0.0
$1,920.2
$8.5
95.7
809.0
285.5
1,094.5
1,198.7
Est.
4Q12
13
12/31/13
Aaron Rents
45
Aaron Rents
$109.1
($155.7)
($32.4)
($35.7)
($3.6)
8.8
$5.2
Net Change in Cash

Beginning Cash
Ending Cash
Free Cash Flow Calculations:

Operating Cash Flow
Investing Cash Flow
Free Cash Flow (CFO-CapEx)
Cash Flow Available for Repurchase (FCF - Divs)
0.7
(0.6)
$0.1
0.0
55.9
(3.2)
0.0
(13.4)
0.8
2.9
$42.9
Discontinued Operations
Operating Activities
Investing Activities
CASH FLOW FROM DISCONTINUED OPS
Cash Flow from Financing Activities:

Proceeds from Sale of Sr. Notes
Net Borrowings from Credit Facilities
Dividends Paid
Proceeds from Stock Offering
Acquisition of Treasury Stock (Stock Repurchases)
Excess Tax Benefits from Stock Comp
Proceeds from Stock Options
CASH FLOW FROM FINANCING
(141.5)
(57.3)
36.3
6.9
($155.7)
Cash Flow from Investing Activities:

Additions to PP&E (CapEx)
Contracts and other Assets Acquired
Proceeds from Sale of PP&E
Net Proceeds from Asset Dispositions
CASH FLOW FROM INVESTING
$31.8
($18.4)
$9.8
$8.9
$1.8
5.2
$7.1
0.0
0.0
$0.0
0.0
(3.9)
(0.9)
0.0
(7.5)
0.1
0.7
($11.5)
(22.0)
(14.7)
11.5
6.7
($18.4)
109.7
11.2
(238.2)
92.6
9.6
0.0
0.4
(2.3)
(0.5)
12.4
(1.2)
(0.1)
7.9
0.9
0.4
0.3
6.1
$31.8
($13.3)
($20.2)
($25.2)
($26.0)
($1.1)
7.1
$6.0
0.0
0.0
$0.0
0.0
32.2
(0.9)
0.0
0.0
0.1
0.9
$32.4
(11.9)
(22.6)
6.7
7.6
($20.2)
106.9
11.2
(228.3)
92.5
9.6
0.0
0.7
(3.4)
0.5
(27.3)
3.6
(0.1)
(6.8)
(0.0)
0.4
0.0
4.9
($13.3)
$22.4
$22.6
2Q08
13
6/30/08
1Q08
13
3/31/08
$80.3
FY07
52
12/31/07
407.3
37.6
(706.7)
305.0
(11.4)
0.0
(4.7)
(2.9)
0.0
19.9
(8.5)
(0.8)
(8.4)
2.7
2.8
(2.9)
(0.1)
$109.1
Cash Flow Statement Model
$(Mil), except EPS

Weeks in Period
Period Ended
Cash Flow from Operating Activities:
Net Income
Adjustments to reconcile net inc (loss) to CFO
Other Depreciation and Amortization
Additions to Rental Merchandise reported / net
Book Value of Rental Merchandise Sold or Disposed
Change in deferred income taxes
Gain on Marketable securities
Loss (Gain) on Sale of PP&E
Gain on Asset Dispositions
Change in income tax receivable, incl. in ppd. exp. and other
Change in Accounts payable and accrued expenses
Change in accounts receivable
Excess Tax Benefits from Stock Comp
Change in other assets
Change in customer deposits
Stock based compensation
Other Changes, net
Adjustements needed to make restated CF equal to Reported
CASH FLOW FROM OPERATIONS (CFO)
$32.3
$23.9
$17.6
$15.9
$0.6
6.0
$6.6
2.7
(0.3)
$2.4
0.0
(60.7)
(1.7)
0.0
0.0
0.8
3.6
($58.1)
(14.7)
(1.0)
31.8
7.9
$23.9
107.0
10.3
(168.2)
70.8
19.7
0.0
0.4
(2.6)
(7.2)
2.5
(3.2)
(0.8)
(5.4)
(0.8)
0.0
1.0
(11.1)
$32.3
$19.8
3Q08
13
9/30/08
$28.4
$12.5
$2.1
$2.1
$1.3
6.1
$7.4
(6.2)
3.0
($3.2)
0.0
(38.6)
(0.0)
0.0
0.0
0.8
1.3
($36.5)
(26.4)
(42.7)
4.5
77.0
$12.5
106.3
8.8
(231.1)
74.2
27.5
0.0
0.2
(0.1)
(21.3)
47.8
(12.5)
(0.8)
3.4
4.7
0.6
(0.3)
0.1
$28.4
$21.0
4Q08
13
12/31/08
$79.3
($2.2)
$4.3
$0.9
$2.6
$4.8
$7.4
($3.5)
$2.7
($0.8)
$0.0
($71.0)
($3.4)
$0.0
($7.5)
$1.8
$6.5
($73.7)
($74.9)
($80.9)
$54.5
$99.2
($2.2)
$429.9
$41.5
($865.9)
$330.0
$66.3
$0.0
$1.7
($8.5)
($28.4)
$35.4
($13.2)
($1.8)
($0.9)
$4.8
$1.4
$1.1
$0.0
$79.3
$85.8
FY08
52
12/31/08
($12.8)
($27.0)
($37.8)
($38.8)
$2.1
7.4
$9.5
$0.0
43.0
(1.0)
0.0
0.0
0.0
0.0
$42.0
$19.1
($27.0)
($5.9)
($7.0)
$0.1
9.5
$9.6
$0.0
9.0
(1.0)
0.0
0.0
0.0
0.0
$8.0
($27.0)
15.5
$19.1
(7.3)
($12.8)
($27.0)
0.0
2.5
0.0
(1.3)
(25.0)
(2.0)
(14.6)
3.8
(17.9)
1.5
(25.0)
(2.0)
113.7
10.9
(229.6)
92.4
0.0
$24.4
Est.
2Q09
13
6/30/09
115.5
10.2
(251.8)
111.8
0.0
$26.5
Est.
1Q09
13
3/31/09
$39.7
($27.0)
$14.7
$13.7
($0.3)
9.6
$9.3
$0.0
(12.0)
(1.0)
0.0
0.0
0.0
0.0
($13.0)
($27.0)
(25.0)
(2.0)
$39.7
(30.7)
0.0
(2.2)
11.9
0.8
112.6
10.9
(185.8)
98.7
0.0
$23.6
Est.
3Q09
13
9/30/09
$23.2
($27.1)
($1.8)
($2.8)
($2.9)
9.3
$6.4
$0.0
2.0
(1.0)
0.0
0.0
0.0
0.0
$1.0
($27.1)
(25.0)
(2.1)
$23.2
(22.2)
0.0
2.5
23.2
(13.9)
116.0
11.0
(239.6)
123.3
0.0
$23.0
Est.
4Q09
13
12/31/09
$69.1
($108.1)
($30.9)
($34.9)
($1.0)
7.4
$6.4
0.0
0.0
$0.0
0.0
42.0
(4.0)
0.0
0.0
0.0
0.0
$38.0
(100.0)
(8.1)
0.0
0.0
($108.1)
$69.1
457.8
43.0
(906.9)
426.3
0.0
0.0
0.0
0.0
0.0
2.6
(7.8)
0.0
0.0
1.5
0.0
(44.7)
$97.4
Est.
FY09
52
12/31/09
($0.6)
($27.0)
($25.6)
($26.7)
$1.3
6.4
$7.7
$0.0
30.0
(1.1)
0.0
0.0
0.0
0.0
$28.9
($27.0)
(25.0)
(2.0)
($0.6)
(20.5)
0.0
(2.0)
(13.1)
2.9
123.5
12.8
(268.8)
134.1
0.0
$30.4
Est.
1Q10
13
3/31/10
$37.6
($27.0)
$12.6
$11.5
($0.5)
7.7
$7.2
$0.0
(10.0)
(1.1)
0.0
0.0
0.0
0.0
($11.1)
($27.0)
(25.0)
(2.0)
$37.6
11.7
0.0
4.3
(8.8)
4.5
122.1
13.3
(246.0)
108.9
0.0
$27.4
Est.
2Q10
13
6/30/10
$34.3
($27.0)
$9.3
$8.2
$1.3
7.2
$8.5
$0.0
(5.0)
(1.1)
0.0
0.0
0.0
0.0
($6.1)
($27.0)
(25.0)
(2.0)
$34.3
(47.9)
0.0
(2.2)
6.9
0.6
121.5
13.1
(200.0)
115.7
0.0
$26.7
Est.
3Q10
13
9/30/10
$31.5
($27.1)
$6.5
$5.4
($1.7)
8.5
$6.8
$0.0
(5.0)
(1.1)
0.0
0.0
0.0
0.0
($6.1)
($27.1)
(25.0)
(2.1)
$31.5
(39.1)
0.0
3.6
34.6
(15.2)
124.9
13.1
(257.6)
139.6
0.0
$27.6
Est.
4Q10
13
12/31/10
$102.8
($108.1)
$2.8
($1.5)
$0.4
6.4
$6.8
0.0
0.0
$0.0
0.0
10.0
(4.3)
0.0
0.0
0.0
0.0
$5.7
(100.0)
(8.1)
0.0
0.0
($108.1)
$102.8
492.1
52.3
(972.4)
498.3
0.0
0.0
0.0
0.0
0.0
19.6
(7.1)
0.0
0.0
3.7
0.0
(95.7)
$112.0
Est.
FY10
52
12/31/10
$100.6
($108.1)
$0.6
($3.9)
$0.0
6.8
$6.8
0.0
0.0
$0.0
0.0
12.0
(4.5)
0.0
0.0
0.0
0.0
$7.5
(100.0)
(8.1)
0.0
0.0
($108.1)
$100.6
527.0
60.1
(1,044.8)
562.2
0.0
0.0
0.0
0.0
0.0
7.3
(6.8)
0.0
10.0
1.9
0.0
(139.0)
$122.7
Est.
FY11
52
12/31/11
$119.8
($108.1)
$19.8
$15.1
$2.0
6.8
$8.8
0.0
0.0
$0.0
0.0
(5.0)
(4.7)
0.0
0.0
0.0
0.0
($9.7)
(100.0)
(8.1)
0.0
0.0
($108.1)
$119.8
562.8
66.7
(1,101.4)
628.1
0.0
0.0
0.0
0.0
0.0
13.4
(7.1)
0.0
0.0
2.7
0.0
(178.3)
$133.0
Est.
FY12
52
12/31/12
$139.5
($108.1)
$39.5
$34.7
($0.4)
8.8
$8.5
0.0
0.0
$0.0
0.0
(27.0)
(4.7)
0.0
0.0
0.0
0.0
($31.7)
(100.0)
(8.1)
0.0
0.0
($108.1)
$139.5
600.2
72.1
(1,159.4)
695.9
0.0
0.0
0.0
0.0
0.0
9.2
(7.4)
0.0
0.0
2.2
0.0
(221.5)
$148.1
Est.
FY13
52
12/31/13
Aaron Rents
46
Aaron Rents
Aaron Rents
Total SG&A Estimate

As % of Sales
Other Depreciation
New Store operating Expenses per store, Previous 4Q Avg.

Adjustment
Estimated Operating expenses per store, TY
Stores opened in last 12 months
New Store OpEx Drag Estimated $ (mil)
% of sales
Estimated New Store GM during period
Estimated New Store EBT contribution
Tax rate
Estimated new store Net Income Contribution
New Store Drag Estimate, EPS terms
New Store Drag Calculation:

New Store Drag Reported / Estimated (in EPS terms)
New Store Net Income Drag, Reported $ (mil)
Tax Rate
New Store EBT Drag, Reported $ (mil)
Stores opened in last 12 months
R&F per average company owned store in period (mil)
New Store Efficiency Estimate
Estimated New Store Sales per store
R&F of new stores (opened last 12 mos.) in period (mil)
Depreciation of Rental Merchandise %
New Store GM $
Implied New Store Operating Expenses (mil)
New Store operating expenses per new store (mil)
651.9
46.7%
37.6
58.9
4.2%
43.3
64.4
69.1
37.6%
21.1
235
$0.24
297.2
21.3%
192.8
46.7%
186.0
48.1%
11.2
0.092
221
20.3
5.2%
16.0
(4.3)
36.8%
(2.7)
$0.05
11.2
0.092
0.088
215
18.9
4.6%
12.7
(6.3)
40.0%
(3.8)
$0.07
$0.06
3.2
36.8%
5.1
221
0.273
41.7%
0.114
25.1
36.3%
16.0
21.2
0.096
0.018
14.6%
0.020
0.078
84.2
21.8%
0.058
0.0%
0.058
2.4%
7.1
0.088
$0.09
4.9
40.0%
8.1
215
0.279
33.4%
0.093
20.0
36.6%
12.7
20.8
0.097
0.020
12.7%
0.022
0.083
89.6
21.7%
Variable payroll per store $, LY

Y/Y change in rentals and fees, Ty
Variable payroll per store $, TY estimated
Total Payroll per store, TY estimated
Store Payroll
% of Sales
2.5%
7.5
13.4
3.5%
3.7%
14.3
13.3
3.4%
3.0%
11.6
13.3
3.2%
3.0%
12.4
14.3
3.5%
3.7%
15.3
7.1
1.8%
7.1
1.7%
27.5
1,079.0
29.7
27.5
1,075.0
29.6
0.063
-2.0%
0.061
28.2
2.7%
29.0
2.8%
49.6
3.6%
48.1
3.4%
41.8
3.0%
29.4
2.1%
20.1
49.5
3.5%
106.6
7.6%
110.0
7.7
0.0%
8.3
$294.8
$9.7
$387.0
$175.8
$0.39
2Q08
13
6/30/08
0.0%
$299.7
$12.4
$412.7
$177.8
$0.42
1Q08
13
3/31/08
Fixed Payroll per store $, LY

Y/Y Change in fixed payroll
Fixed payroll per store $, TY estimated
Write-offs Reported (mil)

As % of Rentals and Fees
Write-offs (% of Rentals and Fees)
Write-offs (mil), estimated
% of Sales
S&H Expenses Reported (mil)

As % of total sales
Shipping & handling %
S&H expense (mil), estimated
% of Sales
Net Advertising Expenses Reported (mil)

As % of total sales
Cooperative Ad Reimbursements Reported (mil)
Gross Ad Expenses in Period (mil)
As % of total sales
Ad Expenses %
Advertising Expense (mil), estimated
% of Sales
Occupancy per store (000s)

Inflation Impact
Average Company Owned Stores in Period
Occupancy Expense (mil), estimated
% of Sales
32.1
2.3%
$1,045.8
$34.6
$1,394.9
$617.1
$1.28
Rentals and Fees

Retail Sales
Total Sales
Operating Expenses Reported
EPS
Corporate Overhead (mil)

% of Sales
Inflation Impact
FY07
52
12/31/07
Operating Expense Model
$(Mil), except EPS

Weeks in Period
Period Ended
182.4
47.0%
10.3
0.094
194
18.1
4.7%
17.2
(1.0)
38.9%
(0.6)
$0.01
0.094
$0.06
3.0
38.9%
4.9
194
0.270
51.8%
0.140
27.1
36.7%
17.2
22.0
0.114
0.017
13.1%
0.019
0.076
82.2
21.2%
0.057
0.0%
0.057
2.9%
8.4
13.4
3.5%
3.7%
14.4
13.3
3.4%
3.0%
11.6
7.1
1.8%
1,078.5
29.7
27.5
0.0%
7.7
$291.1
$10.2
$388.0
$175.3
$0.36
3Q08
13
9/29/08
182.7
45.1%
8.8
0.100
190
19.1
4.7%
12.9
(6.2)
38.4%
(3.8)
$0.07
0.100
$0.05
2.7
38.4%
4.4
190
0.276
38.7%
0.107
20.3
36.3%
12.9
17.3
0.091
0.017
10.4%
0.019
0.077
82.2
20.3%
0.058
0.0%
0.058
2.7%
7.9
14.0
3.5%
3.7%
15.0
13.3
3.3%
3.0%
12.1
7.1
1.8%
1,063.0
29.2
27.5
0.0%
8.4
$293.2
$10.8
$404.9
$176.6
$0.39
4Q08
13
12/29/08
744.0
46.7%
41.5
76.5
4.8%
58.8
81.3
92.5
38.6%
22.5
190
$0.26
338.2
21.2%
30.9
2.6%
34.5
2.9%
58.9
3.7%
55.1
3.5%
47.8
3.0%
28.5
1.8%
24.7
53.2
3.3%
118.1
7.4%
110.0
32.1
2.0%
$1,178.7
$43.2
$1,592.6
$705.6
$1.55
FY08
52
12/29/08
186.9
41.5%
10.2
0.099
(0.015)
0.084
133
11.2
2.5%
8.4
(2.8)
38.5%
(1.7)
$0.03
$0.03
1.7
38.5%
2.8
133
0.299
33.2%
0.099
13.2
36.5%
8.4
11.2
0.084
0.022
5.6%
0.023
0.082
86.8
19.3%
0.061
-4.0%
0.059
2.9%
9.2
3.6%
16.2
3.0%
13.5
1,057.0
29.4
27.8
0.0%
10.3
$316.5
$12.9
$450.1
$186.9
$0.49
Est.
1Q09
13
3/30/09
184.9
43.7%
10.9
0.096
(0.008)
0.088
117
10.3
2.4%
7.0
(3.3)
38.5%
(2.0)
$0.04
$0.04
2.0
38.5%
3.3
117
0.293
32.4%
0.095
11.1
36.5%
7.0
10.3
0.088
0.020
5.7%
0.024
0.082
87.6
20.7%
0.058
1.0%
0.058
3.0%
9.3
3.7%
15.7
3.0%
12.7
1,065.0
29.6
27.8
2.0%
8.8
$311.6
$10.1
$423.6
$184.9
$0.45
Est.
2Q09
13
6/29/09
185.3
43.3%
10.9
0.094
(0.008)
0.086
115
9.9
2.3%
6.7
(3.3)
38.5%
(2.0)
$0.04
$0.04
2.0
38.5%
3.3
115
0.286
31.9%
0.091
10.5
36.5%
6.7
9.9
0.086
0.019
6.0%
0.025
0.082
88.8
20.8%
0.057
1.0%
0.057
3.0%
9.3
3.7%
15.8
3.0%
12.8
1,078.0
29.9
27.8
2.0%
7.8
$308.4
$10.7
$427.8
$185.3
$0.43
Est.
3Q09
13
9/28/09
191.8
41.9%
11.0
0.087
134
11.7
2.6%
10.5
(1.3)
38.5%
(0.8)
$0.01
0.087
$0.01
0.8
38.5%
1.3
134
0.290
42.4%
0.123
16.5
36.5%
10.5
11.7
0.087
0.019
8.4%
0.024
0.082
89.8
19.6%
0.058
0.0%
0.058
3.0%
9.5
3.7%
16.9
3.0%
13.7
1,096.0
30.4
27.8
2.0%
8.6
$317.7
$11.7
$457.9
$191.8
$0.42
Est.
4Q09
13
12/28/09
748.9
42.6%
43.0
$0.12
43.2
2.5%
$0.12
353.1
20.1%
37.3
3.0%
64.6
3.7%
52.8
3.0%
119.3
6.8%
111.1
1.0%
35.6
2.0%
$1,254.2
$45.4
$1,759.4
$748.9
$1.80
Est.
FY09
52
12/28/09
200.0
40.0%
12.8
0.087
92
8.0
1.6%
6.2
(1.8)
38.5%
(1.1)
$0.02
0.087
$0.02
1.1
38.5%
1.8
92
0.304
34.7%
0.105
9.7
36.5%
6.2
8.0
0.087
0.023
6.9%
0.025
0.084
93.9
18.8%
0.059
1.0%
0.059
3.0%
10.2
3.7%
18.5
3.0%
15.0
1,112.5
31.2
28.1
2.0%
10.6
$338.4
$14.2
$499.4
$200.0
$0.56
Est.
1Q10
13
3/29/10
199.3
42.7%
13.3
0.087
99
8.6
1.8%
6.9
(1.7)
38.5%
(1.0)
$0.02
0.087
$0.02
1.0
38.5%
1.7
99
0.297
37.2%
0.110
10.9
36.5%
6.9
8.6
0.087
0.024
7.4%
0.026
0.085
95.4
20.4%
0.058
1.0%
0.059
3.0%
10.0
3.7%
17.3
3.0%
14.0
1,127.5
31.6
28.1
2.0%
9.0
$334.6
$11.2
$467.3
$199.3
$0.51
Est.
2Q10
13
6/28/10
201.2
42.4%
13.1
0.087
106
9.2
1.9%
7.9
(1.3)
38.5%
(0.8)
$0.01
0.087
$0.01
0.8
38.5%
1.3
106
0.291
40.3%
0.117
12.5
36.5%
7.9
9.2
0.087
0.025
7.9%
0.027
0.085
97.1
20.5%
0.057
1.0%
0.058
3.0%
10.0
3.7%
17.5
3.0%
14.2
1,142.5
32.1
28.1
2.0%
8.0
$332.9
$11.9
$474.0
$201.2
$0.49
Est.
3Q10
13
9/27/10
205.1
40.5%
13.1
0.087
103
9.0
1.8%
7.7
(1.2)
38.5%
(0.8)
$0.01
0.087
$0.01
0.8
38.5%
1.2
103
0.296
39.9%
0.118
12.2
36.5%
7.7
9.0
0.087
0.024
7.7%
0.026
0.084
97.7
19.3%
0.058
1.0%
0.059
3.0%
10.3
3.7%
18.7
3.0%
15.2
1,157.5
32.5
28.1
2.0%
8.7
$342.2
$13.0
$506.4
$205.1
$0.51
Est.
4Q10
13
12/27/10
805.6
41.4%
52.3
34.8
1.8%
$0.07
384.0
19.7%
40.4
3.0%
72.0
3.7%
58.4
3.0%
127.4
6.5%
112.2
1.0%
36.3
1.9%
$1,348.1
$50.4
$1,947.1
$805.6
$2.07
Est.
FY10
52
12/27/10
871.1
41.0%
60.1
37.4
1.8%
$0.07
415.1
19.5%
43.3
3.0%
78.7
3.7%
63.8
3.0%
136.1
6.4%
113.3
1.0%
36.6
1.7%
$1,443.7
$55.7
$2,125.7
$871.1
$2.26
Est.
FY11
52
12/26/11
72.1
40.0
1.6%
$0.06
485.6
19.4%
49.3
3.0%
92.6
3.7%
75.1
3.0%
155.5
6.2%
115.6
1.0%
37.4
1.5%
$1,644.2
$67.5
$2,503.2
$1,007.6
$2.73
Est.
FY12
52
12/23/13
940.0 1,007.6
40.7%
40.3%
66.7
40.0
1.7%
$0.06
449.6
19.5%
46.3
3.0%
85.5
3.7%
69.3
3.0%
145.7
6.3%
114.5
1.0%
37.0
1.6%
$1,541.9
$61.4
$2,310.3
$940.0
$2.45
Est.
FY12
52
12/24/12
47

Aaron Rents
Economic Value Added Worksheet (EVA)
Free Cash Flow Worksheet (FCF)
$Millions
Net Operating Profit After-Tax (NOPAT )
Fiscal Year Ended December
Net Sales
Retail Cost of Goods Sold
Non-retail Cost of Goods Sold
Operating Expense
Reported Operating Expenses
Reported Operating Profit
Option Expense
Add: Called out items pre-tax
Add: Interest Component of Op Leases
Adj Net Oper Profit
Other Expense (Income)
Adjusted EBIT
Cash Operating Taxes
Adjusted NOPAT
Aaron Rents
Employed Capital
Cash
Accounts receivable
Inventories
Other current assets
Total current assets
Non-Interest Bearing Current Liabilities:
Additional Paid-In Capital
Dividends Payable
Deferred Income Taxes Payable
Customer Deposits and Advance Payments
Total Non-Interest Bearing Current Liabs (NIBCLs)
Net Working Capital
Property Plant & Equipment, net
Goodwill and Intangibles
Other Assets
Balance Sheet Capital
Adjustments to Balance Sheet Captial
Capitalized Value of Op Leases
Less: Excess Cash
Economic Capital
Average Capital
Change in Capital
Aaron Rents
Economic Value Added (EVA) Analysis
$Millions
NOPAT
Ending Capital
R (Beginning Capital)
C*
R-C*
2000
$502.9
44.2
61.0
227.6
120.7
453.4
49.5
0.0
0.0
19.6
$69.2
2001
$546.7
44.0
62.0
276.7
137.9
520.6
26.1
0.0
0.0
23.4
$49.5
2002
$640.7
53.9
82.4
293.3
162.7
592.3
48.4
0.0
0.0
24.9
$73.4
2003
$766.8
50.9
111.7
344.9
195.7
703.2
63.6
0.0
0.0
28.2
$91.8
$69.2
$26.6
$42.5
$49.5
$19.0
$30.4
$73.4
$28.2
$45.1
$91.8
$35.4
$56.5
2000
$0.1
23.6
267.7
0.0
$291.4
2001
$0.1
25.4
258.9
0.0
$284.4
2002
$0.1
27.0
317.3
0.0
$344.4
34.7
0.4
21.0
11.0
32.4
259.1
63.2
0.0
25.8
380.4
65.3
0.4
21.0
12.8
34.2
250.3
77.3
22.1
13.4
397.2
245.3
0.0
625.7
Est
2009
$1,759.4
28.2
357.8
748.9
457.8
1,592.7
166.8
0.0
0.0
57.0
$223.8
Est
2010
$1,947.1
31.2
426.7
805.6
492.1
1,755.6
191.5
0.0
0.0
64.4
$256.0
Est
2011
$2,125.7
34.4
484.5
871.1
527.0
1,917.1
208.7
0.0
0.0
73.3
$282.0
Est
2012
$2,310.3
37.9
544.0
940.0
562.8
2,084.7
225.7
0.0
0.0
83.5
$309.1
$193.7
$74.0
$119.7
$223.8
$85.5
$138.3
$256.0
$97.8
$158.2
$282.0
$107.7
$174.3
$309.1
$118.1
$191.0
2007
$5.2
47.7
571.8
0.0
$624.8
2008
$7.4
59.5
681.1
0.0
$748.0
2009
$6.4
67.3
748.6
0.0
$822.3
2010
$6.8
74.4
826.3
0.0
$907.6
2011
$6.8
81.3
920.8
0.0
$1,008.9
2012
$8.8
88.3
1,009.6
0.0
$1,106.8
121.0
0.8
93.7
27.1
121.6
542.9
170.3
115.4
29.4
979.6
141.0
0.9
82.3
27.8
110.9
513.9
245.9
146.7
36.9
1,054.3
173.9
0.9
148.6
33.4
183.0
565.0
224.4
193.5
67.4
1,233.3
176.5
0.9
148.6
34.9
184.5
637.8
281.5
201.5
67.4
1,372.7
196.1
0.9
148.6
38.7
188.2
719.4
329.1
209.6
67.4
1,513.7
203.4
0.9
148.6
40.5
190.1
818.8
369.0
217.7
57.4
1,653.1
216.7
0.9
148.6
43.2
192.8
914.0
402.3
225.8
57.4
1,792.3
479.2
0.0
1,337.7
576.0
0.0
1,555.6
566.4
0.0
1,620.7
654.4
0.0
1,887.7
712.7
0.0
2,085.4
805.6
0.0
2,319.3
915.9
0.0
2,569.0
1,043.2
0.0
2,835.5
1,005.4
194.6
1,220.2
235.0
1,446.7
217.9
1,588.1
65.1
1,754.2
267.0
1,986.5
197.8
2,202.4
233.9
2,444.2
249.7
2,702.3
266.5
2004
$73.0
1,102.7
2005
$87.3
1,337.7
2006
$111.6
1,555.6
2007
$102.4
1,620.7
2008
$119.7
1,887.7
2009
$138.3
2,085.4
2010
$158.2
2,319.3
2011
$174.3
2,569.0
2012
$191.0
2,835.5
2005
$1,125.5
39.1
172.8
507.2
305.6
1,024.6
100.9
0.0
2.8
38.3
$142.0
2006
$1,326.6
41.3
207.2
579.6
364.1
1,192.2
134.4
0.0
0.0
46.1
$180.5
$118.7
$45.7
$73.0
$142.0
$54.7
$87.3
2003
$0.1
30.9
343.0
0.0
$374.0
2004
$5.9
32.7
425.6
0.0
$464.2
64.1
0.4
50.5
14.8
65.7
278.6
87.1
26.0
26.2
483.6
83.9
0.7
55.3
15.7
71.7
302.3
99.6
55.5
26.2
555.3
292.0
0.0
689.2
311.8
0.0
795.4
625.7
657.4
63.6
2000
$42.5
625.7
2001
$30.4
689.2
8.1%
2007
$1,394.9
21.2
239.8
617.1
391.5
1,269.6
125.3
0.0
(4.9)
45.3
$165.8
2008
$1,592.6
26.4
283.4
705.6
429.9
1,445.2
147.4
0.0
(6.0)
52.4
$193.7
$180.5
$69.0
$111.6
$165.8
$63.3
$102.4
2005
$7.0
42.8
550.9
0.0
$600.7
2006
$8.8
43.5
612.1
0.0
$664.5
93.6
0.6
95.2
19.1
114.9
349.3
111.1
74.9
50.1
700.3
112.8
0.7
75.2
23.5
99.4
501.4
133.8
101.1
23.0
858.5
352.8
0.0
908.1
402.4
0.0
1,102.7
742.3
106.2
851.8
112.7
2002
$45.1
795.4
2003
$56.5
908.1
6.5%
8.1%
7.1%
8.1%
8.0%
8.1%
7.9%
8.1%
8.3%
8.1%
6.6%
8.1%
7.4%
8.1%
7.3%
8.1%
7.6%
8.1%
7.5%
8.1%
7.4%
8.1%
-3.2%
-1.6%
-1.0%
-0.1%
-0.2%
0.2%
-1.5%
-0.7%
-0.8%
-0.5%
-0.6%
-0.7%
EVA
Cumulative EVA
($20.3)
($20.3)
($10.8)
($31.1)
($8.0)
($39.1)
($0.6)
($39.7)
($2.1)
($41.7)
$3.1
($38.6)
($23.7)
($62.3)
($11.7)
($74.0)
($14.8)
($88.7)
($10.9)
($99.6)
($13.8)
($113.4)
($17.2)
($130.6)
Incremental NOPAT
Incremental Capital
Incr. NOPAT / Incr. Capital
($12.1)
63.6
-19.0%
$14.7
106.2
13.8%
$11.4
112.7
10.1%
$16.5
194.6
8.5%
$14.3
235.0
6.1%
$24.2
217.9
11.1%
($9.1)
65.1
-14.0%
$17.3
267.0
6.5%
$18.6
197.8
9.4%
$19.9
233.9
8.5%
$16.0
249.7
6.4%
$16.8
266.5
6.3%
2001
$30.4
63.6
($33.2)
2002
$45.1
106.2
($61.0)
2003
$56.5
112.7
($56.2)
2004
$73.0
194.6
($121.6)
2005
$87.3
235.0
($147.7)
2006
$111.6
217.9
($106.3)
2008
$119.7
267.0
($147.3)
2009
$138.3
197.8
($59.5)
2010
$158.2
233.9
($75.7)
2011
$174.3
249.7
($75.4)
2012
$191.0
266.5
($75.5)
1.0%
5.5
0.1
0.0
1.0%
6.4
0.1
0.0
1.0%
7.7
0.1
0.0
1.0%
9.5
5.9
0.0
1.0%
11.3
7.0
0.0
1.0%
13.3
8.8
0.0
1.0%
15.9
7.4
0.0
1.0%
17.6
6.4
0.0
1.0%
19.5
6.8
0.0
1.0%
21.3
6.8
0.0
1.0%
23.1
8.8
0.0
Aaron Rents
Free Cash Flow (FCF) Analysis
$Millions
NOPAT
Change in Capital
Free Cash Flow (FCF)
Operating Cash/Excess Cash Calculation

Operating Cash Needs, as % of sales
Operating Cash
Ending cash and marketable securities
Excess Cash
-8.1%
4.9%
8.1%
2004
$946.5
39.4
149.2
414.5
253.5
856.6
89.9
0.0
(3.4)
32.2
$118.7
2000
$42.5
$42.5
1.0%
5.0
0.1
0.0
2007
$102.4
65.1
$37.4
1.0%
13.9
5.2
0.0
Aaron Rents
48

Aaron Rents
Free Cash Flow Intrinsic Value Calculation
$Millions (Except Per Share)
As of:
January-09
Fiscal Year
Ended Dec
2009
2010
2011
2012
2013
2014
& Beyond
NOPAT
$138
158
174
191
212
Investment
$198
$234
$250
$267
$269
P. V. Factor
FCF
($59)
0.962
($76)
0.890
($75)
0.823
($75)
0.761
($57)
0.704
233
$233
Intrinsic Operating Value
Excess Cash
Total Intrinsic Value
Total Debt & Operating Leases
10.657
($57)
(67)
(62)
(57)
(40)
2,478
$2,194
0
$2,194
769
$1,425
Shares Outstanding
NOPAT
2010
2011
2012
2013
2014
& Beyond
EVA
P.V. Factor
($15)
0.962
($11)
0.890
($14)
0.823
($17)
0.761
($18)
0.704
3,104
$233
(252)
10.657
8.685
Premium (Discount)
Capital
Excess Cash
Intrinsic Total Value
Total Debt & PV Operating Leases
Intrinsic Common Equity Value
2,478
(2,186)
$231
1,963
$2,194
0
$2,194
769
$1,425
Number of Shares Outstanding
$234
$250
$267
$269
($76)
($75)
($75)
($57)
233
$233
Excess Cash
Total Intrinsic Value
Total Debt & Operating Leases
P. V. Factor
Present
Value of
FCF
0.962
0.890
0.823
0.761
11.521
($73)
(67)
(62)
(43)
2,679
$2,433
0
$2,433
809
$1,624
54.2
$29.96
January-10
Fiscal Year Return on

Ended Dec Capital [R]
2010
2011
2012
2013
2014
& Beyond
Begin
Capital
EVA
P.V. Factor
Present
Value of
EVA
7.6%
7.5%
7.4%
7.5%
$2,085
2,319
2,569
2,836
($11)
($14)
($17)
($18)
0.962
0.890
0.823
0.761
($10)
(12)
(14)
(13)
7.5%
3,104
$233
(252)
11.521
9.389
2,679
(2,363)
$265
2,168
$2,433
0
$2,433
809
$1,624
Premium (Discount)
Capital
Excess Cash
Intrinsic Total Value
Total Debt & PV Operating Leases
Intrinsic Common Equity Value
54.2
Intrinsic Share Value
FCF
As of
Present
Value of
EVA
($14)
(10)
(11)
(13)
(12)
158
174
191
212
Investment
Shares Outstanding
$26.27
Economic Value Added Intrinsic Value Calculation

$Millions (Except Per Share)
As of
January-09
Begin
Capital
$1,888
2,085
2,319
2,569
2,836
January-10
54.2
Fiscal Year Return on

Ended Dec Capital [R]
2009
7.3%
2010
7.6%
2011
7.5%
2012
7.4%
2013
7.5%
2014
& Beyond
7.5%
As of:
Fiscal Year
Ended Dec
Number of Shares Outstanding
$26.27
54.2
$29.96
Notes: EVA discounted from mid-year.

Present value of $1 in perpetuity beginning in 2004.
Beginning capital adjusted for mid-year discounting by multiplying by (1+C*)
Beginning Capital=
$1,888
C* =
8.1%
D. Perpetual Growth Rate
1.5%
Capitalization
B/S Debt
Lease Value
Equity Value
Capital
B/S
$115
0
762
$876
B/S Adj
$115
654
762
$1,531
Market
$115
654
1,358
$2,127
Target
$115
654
1,425
$2,194
Equity Risk Premium

Beta
Risk Adjusted Premium
Risk Free Rate
Cost of Equity
Debt % Cap
Equity % Cap
Cap'n
13.1%
86.9%
100.0%
50.3%
49.7%
100.0%
36.2%
63.8%
100.0%
35.1%
64.9%
100.0%
EPS
$1.55
$1.80
$2.07
$2.26
Now
$26.27
16.9
14.6
12.7
11.6
12 mos.
$29.96
19.3
16.7
14.5
13.2
6.0%
1.0
6.0%
4.8%
10.8%
Marginal Cost of Debt

Tax Rate
After-Tax Cost of Debt
5.2%
38.2%
3.2%
Target Debt to Capital
35.1%
Equity Portion
Debt Portion
Weighted Average Cost of Capital
7.0%
1.1%
8.1%
FY
Dec-08
Dec-09
Dec-10
Dec-11
Implied P/E Values

Ended
5-year median
10-year median
17.1
15.3
Aaron Rents
49

Aaron Rents
Operating Assumptions Sensitivity Analysis
Base Assumptions:
NOPAT % Sales
8.1%
Sales Growth Avg.
9.5%
Capital Grth Avg.
10.5%
Avg. Op. Margin
9.7%
Capital/Sales Avg.
120.6%
Variation
From Base
NOPAT
Capital
Margin
Growth
Sales Growth Rate

Variation From Base
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
1.0%
2.0%
1%
-2%
31.15
32.42
33.72
35.03
36.37
39.12
41.96
0%
-2%
24.81
25.95
27.10
28.28
29.48
31.93
34.48
-2%
-2%
12.13
12.13
13.88
14.78
15.69
17.57
19.51
1%
0%
27.97
29.26
30.57
31.90
33.26
36.05
38.94
0%
0%
21.54
22.69
23.86
25.06
26.27
28.77
31.35
-2%
0%
8.68
9.56
10.45
11.36
12.29
14.20
16.17
1%
2%
24.50
25.81
27.14
28.50
29.88
32.71
35.64
0%
2%
17.98
19.15
20.34
21.55
22.79
25.32
27.94
-2%
2%
4.94
5.83
6.74
7.67
8.61
10.54
12.55
Worst Case EVA Valuation

Base Case EVA Valuation
Best Case EVA Valuation
$4.94
$26.27
$41.96
Aaron Rents
Combined Sensitivity Analysis Matrix
Best
Base
Worst
OPERATING ASSUMPTIONS
Sales Growth
NOPAT Margin
11.5%
9.1%
9.5%
8.1%
7.5%
6.1%
Capital Growth
8.5%
10.5%
12.5%
Worst
9.00%
0.50%
$28.14
$14.91
($2.92)
FINANCIAL ASSUMPTIONS
Base
Best
8.11%
7.00% WACC
1.50%
2.50% Perpetual Growth
$71.55
$41.96
$26.27
$50.73
$4.94
$22.03
Aaron Rents
Financial Assumptions Sensitivity Analysis
Base Assumptions:
WACC
Perpetual Growth Rate
WACC Variation
From Base
-1.11%
(Terminal Value % Total Intrinsic)
0.00%
-0.11%
0.89%
Worst Case EVA Valuation

Base Case EVA Valuation
Best Case EVA Valuation
8.11%
1.50%
Perpetual Growth Rate

Variation From Base
-1.0%
-0.5%
0.0%
1.0%
$29.10
$33.16
$37.95
50.73
115%
111%
110%
108%
$20.27
$23.06
$26.27
$34.42
115%
114%
113%
111%
$21.00
$23.89
$27.22
$35.71
115%
114%
113%
111%
14.91
$17.05
$19.47
$25.44
118%
116%
115%
113%
$14.91
$26.27
$50.73
Aaron Rents
50

Aarons Customer Information and Order Form
Aaron Rents
51
Aaron Rents
52

Sample Aarons Lease Agreement & Federal Consumer Leasing Act Disclosures
Aaron Rents
53
Aaron Rents
54
Aaron Rents
55
Rent-to-Own Industry Overview

Origins of RTO
Offering customers an alternative to traditional purchase or lease methods of

acquiring home furnishings, the rent-to-own industry is a relatively new
concept in retail. It was established in the 1960s, a period during which many
consumers aspired to higher standards of living without incurring additional
debt or jeopardizing their families credit standing.
Many observers attribute the creation of the rent-to-own or lease ownership
transaction to Ernie Talley, an industry pioneer. Talley opened his first rentto-own store, Mr.Ts TV Rental, which offered new and pre-leased products in
Tulsa, Oklahoma. In fairness, other reports maintain that the first rent-to-own
operators were two brothers in Texas who rented-to-own home appliances.
In the early days, RTO operators were not governed by any RTO-specific
laws or regulation. With little or no adult supervision, some of the early
dealers were able to exact large profits, while too may times taking advantage
of their customers, who were less sophisticated financially. Much of the
negative consumer and regulatory sentiment surrounding the industry today is
a direct effect of the early years of the industry.
Rent-A-Center, now the largest RTO operator in terms of stores and reported
revenues, was founded in 1986 by its current CEO as Vista Rent-To-Own.
Ernie Talley acquired the controlling interest in 1989, began a roll-up of a
number of RTO operators, changed the company name to Renters Choice,
and went public in early 1995. In mid-1998, Renters Choice acquired 1,400
stores that operated under the Rent-A-Center name that had been owned by
a British conglomerate. Ultimately, the two entities were merged and the
surviving entity was re-named Rent-A-Center. It now operates more than
3,000 stores and employs more than 18,000 people.
The main objection of most industry critics is that the rentor can, and does,
take advantage of the rentee, who is usually financially lacking and/or
unsophisticated, by exacting exorbitant fees for the merchandise.
Industry partisans counter that the RTO transactional structure provides
lower-income consumers with the opportunity to attain necessary and
perceived necessary goods under terms that they can afford.
Three Keys of RTO
The three fundamental features of the RTO transaction are:

1. The transaction is defined as a lease, thereby meaning that the
customer is not incurring a reportable debt obligation;
2. The rentor has the unconditional right to return the merchandise at
anytime during the lease term; and
3. Once the product(s) under lease are returned, the customer has NO
further obligations and is not required to make any future payments to the
rentee.
By contrast, opponents seek to legally classify the RTO transaction as a
conditional sale, which would categorize some or all of the fees paid to the
operator as interest. If that were to occur, the transaction and the operators
would be subject to state usury laws.
Ignoring the value of the rentors return privilege and using traditional financial
discounting technique to equate the cash cost to the rental stream over the
prescribed term yields calculated annual percentage rates of 35% and up.
These eyebrow-raising levels exceed the usury limits in all states.
During the late 1970s and early 1980s, when the prime interest rate
ballooned, the rental and lease ownership industry began to thrive.
Customers that did not want added debt obligations or that could not get
credit due to stricter standards found the availability of the merchandise
through RTO very attractive.
Aaron Rents
56

In a typical lease ownership transaction, the customer has the option to
acquire merchandise over a prescribed, fixed term most often 12 to 24
months by making periodic (most often weekly) lease payments. As noted
earlier, the customer may cancel the transaction at any time for any reason by
returning the merchandise to the store. Once returned, the customer has no
further rental obligation. If the customer rents the merchandise for the entire
term of the lease, ownership of the item passes to the customer. Typically,
customers can choose to buy the merchandise at any time during the lease
term by other provisions of the contract.
Returned merchandise is inspected upon customer relinquishment and either
1) re-furbished and re-rented (usually at a discount to new merchandise) or
sold, or 2) disposed of. For the store operators, re-renting the returned, offlease merchandise becomes a high priority because that merchandise is
depreciating without corresponding revenue when it hits the store floor again.
New merchandise does not begin to depreciate until it is rented or until it has
been on the floor for six months, whichever is sooner.
The Association of Progressive Rental Organizations (APRO), the industrys
trade association and the leading industry source of industry-specific data,
estimates that there were about 8,500 rent-to-own stores in the United States
and Canada at year-end 2007 (data is not yet available for 2008), of which
204 were added in that year. These stores served approximately three million
customers, measured by households, and generated about $6.8 billion in
revenue. The average RTO store generates $716,000 per year in revenue,
serving 360 customers. This equates to an average of nearly $60,000 per
month in rental fees per store (a key metric used to value stores), or about
$165 per month per average customer.
The charts below depict historical RTO total industry revenue data, customer
counts, and store count data from 1995 to 2007, respectively. During this
period, overall rent-to-own industry revenues grew at a 5.0% compound annual
growth rate (CAGR) with no year-over-year declines. The largest year-overyear percentage increases were in 1998 and 1999, with sales up 7.3% and
customer count up 17.9%, respectively.
RTO Industry: Annual Total Revenue

$8.0
$6.8
$7.0
9%
Billions
5% CAGR 1995-2007
$6.0
8%
$5.0
6%
$4.0
5%
$3.0
3%
$2.0
2%
$1.0
$0.0
0%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Annual Total Revenue (bil.)
Y/Y Change
Source: Association of Progressive Rental Organizations and Raymond James Research
Aaron Rents
57
RTO Industry: Annual Customer Count
Millions
3.5
1% CAGR 1995-2007
23%
3.0
3.0
18%
2.5
14%
2.0
9%
1.5
5%
1.0
0%
0.5
-5%
0.0
-9%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Annual Customer Count (mil.)
Y/Y Change
RTO Industry: Store Count

8,600
(000s)
8,400
10%
9%
1% CAGR 1995-2007
8,200
7%
8,000
6%
7,800
4%
7,600
3%
7,400
1%
7,200
-1%
7,000
-2%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Stores (000s)
Y/Y Change
The two publicly traded RTO companies, Rent-a-Center and Aaron Rents,
generate just over 50% of industry revenues. Based on 2007 data, Rent-aCenter had a 38% market share, and Aarons had a 15% share.
Despite the presence of Rent-A-Center and Aaron Rents, a significant portion
of RTO stores are owned by proprietors who operate between one to three
locations (mom and pop stores).
Industry profit margins vary by the size of the rent-to-own company. For
example, operators with 1-5 stores had an average operating profit margin of
12.4% in 2007. Those with 6-10 stores enjoyed an average margin of 14.6%,
11-20 store companies had average margins of 8.5% and those operators
with 21+ stores had average operating margins of 7.0%.
Margin variances are largely attributed to the high operating expenses
incurred from returned merchandise. These items must be either refurbished
and re-rented or discarded. Larger companies also tend to use more
marketing, which also drives up cost.
Aaron Rents
58
2007 RTO Industry Profit Margins

16%
14%
14.6%
12.4%
12%
10%
8.5%
8%
7.0%
6%
4%
2%
0%
1-5 Stores
6-10 Stores
11-20 Stores
Operating Profit Margins
21+ Stores
Mean
Lease ownership stores typically specialize in home furnishings goods.

Furniture continues to be the most popular item that is rented-to-own,
accounting for 40% of overall industry sales. Electronics is one of the fastest
growing product categories and generates about 27% of industry revenues.
Home appliances have 17% of category share, followed by computers, which
account for 11% of sales.
2007 RTO Industry Product Categories
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Appliances
Computers
Overall Industry:
Electronics
Furniture
Independent Companies:
Jewelery
Other
Public Companies:
Referring back to one of the key features discussed earlier, the RTO
transaction is a rental, not a conditional sale or credit transaction.
Accordingly, there are no customer credit checks, nor does the purchase
show as an obligation on the customers personal balance sheet.
The resulting lack of credit scrutiny relieves a large burden from many
customers but also tends to attract lower-credit-quality buyers. Instead of a
formal credit check, most operators use proprietary background check
systems. Necessary information includes items such as current address,
employment information, and three references who may be contacted in the
event of delinquent payments. Much of the RTO model relies on the
discretion of its store managers, who must decide to whom and how much to
lease.
Aaron Rents
59

Implicitly, these transactions tend to be popular with cash-constrained
consumers that cannot pay the full purchase price for merchandise and/or
that lack the credit to qualify under more traditional financing plans. Also,
consumers with credit availability, but who do not wish to indebt themselves
any further, find the rent-to-own option attractive. Finally, consumers who
have only a temporary need for the merchandise, or who wish to try a
particular brand or model prior to purchasing, are drawn to the structure.
Demographics of
RTO Customers
APRO has extensively studied the profile of a typical RTO customer. The
prototypical consumer in a lease ownership transaction is a Caucasian female
between the ages of 35 and 44. She completed high school and earns
between $36,000 and $50,000 per year. She may rent or own her home with
a slight bent towards ownership. The charts below depict the segmentation of
the customer market by age, sex, ethnicity, educational level, income, and
home ownership status.
2007 RTO Industry Customer Age

1.3%
65+
6.8%
55-64
21.7%
45-54
34.2%
35-44
23.2%
25-34
12.8%
Under 25
0%
5%
10%
15%
20%
25%
30%
35%
40%
2007 RTO Industry Customer
Male
36.3%
Female
63.7%
Aaron Rents
60
2007 RTO IndustryCustomer Ethnicity

1.8%
Asian
6.6%
Hispanic
22.5%
African American
69.2%
Caucasian
0%
10%
20%
30%
40%
50%
60%
70%
80%
2007 RTO Industry Customer Education

1.2%
Graduate school
8.3%
College graduate
24.8%
Some college
60.3%
High school graduate
5.3%
Less than high school
0%
10%
20%
30%
40%
50%
60%
70%
2007 RTO Industry Customer Household Income

$75,000+
3.7%
19.5%
$50,000-$74,999
$36,000-$49,999
28.7%
27.8%
$24,000-$35,999
$15,000-$23,999
16.7%
3.6%
$6,000-$14,999
0%
5%
10%
15%
20%
25%
30%
35%
Aaron Rents
61
2007 RTO Industry Customer Home Ownership
Rent
48.0%
Own
52.0%
RTO payment terms vary by company. Operators typically offer weekly, biweekly, monthly, and semi-monthly contracts. Most commonly, customers
pay on a weekly or bi-weekly basis, usually in correspondence with pay
periods. Traditionally, these customers tend to be lower income and more
value-oriented. There also tends to be a higher delinquency rate compared
with monthly or semi-monthly payment agreements (2007: 3.1% at Rent-ACenter weekly, versus 2.7% at Aarons monthly).
Among the two public peers, 86% of Rent-A-Center customers pay weekly
while 82% of Aaron Rents 2007 contracts were monthly rental agreements.
Below we graphically depict the distribution of payment agreements across
the industry and at the major publicly-traded players.
2007 RTO Industry Payment Agreements

100%
90%
86%
80%
70%
82%
75%
70%
60%
50%
40%
28%
30%
20%
25%
17%
14%
10%
2%
1%
0%
0%
0%
Weekly
Overall Industry:
Monthly
Independent Companies
Semi-Monthly
Rent-a-Center
Aaron's
Regulatory and
Political Risk
Political and regulatory risks are threats that are never far out of the thoughts
of RTO operators. The reasons are relatively straightforward. RTO operators
are viewed by some interest groups and politicians are entities that prey on
those consumers who are the financially weakest and financially least
sophisticated members of society.
Aaron Rents
62

The implied annual percentage rate (APR) of interest, if the transaction is only
considered as a credit purchase, is north of 35%. To those that would restrict
the industry, this qualifies as usurious, spurring them to seek government
regulation of industry practice.
Today, there is no federal legislation that regulates the rent-to-own industry
explicitly. States regulate the industry based on laws which apply to either
leases or retail purchases. In only three states, Minnesota, New Jersey, and
Wisconsin, lease-ownership transactions are defined as credit sales.
Not surprisingly, and in response to the restrictions in these states, most RTO
operators have ceased doing business in these states. In some cases, such
as in Aaron Rents, the companies have developed modified consumer
agreements to navigate within the laws of these states.
Currently, the major piece of legislation proposed by the RTO industry is the
Consumer Rental Purchase Agreement Act (R. 1767 in House and S. 1012 in
Senate).
It serves to protect the RTO transaction from a federal level and is the law
that defines the lease ownership transaction as a non-credit impacting item.
Recently, the bill attracted a total of 100 supporters within the House of
Representatives and seems poised to pass through that body.
A major political opponent of the RTO industry, Senator Charles Shumer (D.N.Y.), has proposed The Rent to Own Reform Act (S. 1530). Should a federal
law similar to that proposed by Senator Schumer be enacted and signed, the
result would be severely detrimental to RTO operators. In essence, the
industry would cease to exist in its current form and it would be likely that
most operators would not survive. If the current pricing bills in New York,
New Jersey, Indiana, and Maine are passed, it is likely that RTOs operations
within these states would cease to grow and would likely shrink.
Given the outcomes of the recent Congressional elections, the Democratic
Party has gained further clout, but has fallen short of gaining enough seats for
a filibuster-proof body. That said, any legislative action which goes to
Congress will be debated thoroughly.
Aaron Rents
63

Important Investor Disclosures
The common stock of Aaron Rents currently has an Outperform rating within our four-tiered rating system. Definitions of our
ratings follow:
Strong Buy (SB1) .................Expected to appreciate and produce a total return of at least 15% and outperform the S&P 500
over the next six months. For higher yielding and more conservative equities, such as REITs and
certain MLPs, a total return of at least 15% is expected to be realized over the next 12 months.
Outperform (MO2) ................Expected to appreciate and outperform the S&P 500 over the next 12 months. For higher yielding
and more conservative equities, such as REITs and certain MLPs, an Outperform rating is used
for securities where we are comfortable with the relative safety of the dividend and expect a total
return modestly exceeding the dividend yield over the next 12 months.
Market Perform (MP3)..........Expected to perform generally in line with the S&P 500 over the next 12 months and is potentially
a source of funds for more highly rated securities.
Underperform (MU4) ............Expected to underperform the S&P 500 or its sector over the next six to 12 months and should be
sold.
Out of approximately 714 rated stocks in the Raymond James coverage universe, 49% have Strong Buy or Outperform ratings
(Buy), 42% are rated Market Perform (Hold) and 9% are rated Underperform (Sell). Within those rating categories, 27% of the
Strong Buy- or Outperform (Buy) rated companies either currently are or have been Raymond James Investment Banking
clients within the past three years; 15% of the Market Perform (Hold) rated companies are or have been clients and 6% of the
Underperform (Sell) rated companies are or have been clients.
Suitability ratings are not assigned to stocks rated Underperform (Sell). Projected 12-month price targets are assigned only to
stocks rated Strong Buy or Outperform.
Suitability Categories (SR)

Total Return (TR) .................Lower risk equities possessing dividend yields above that of the S&P 500 and greater stability of
principal.
Growth (G) ............................Low to average risk equities with sound financials, more consistent earnings growth, possibly a
small dividend, and the potential for long-term price appreciation.
Aggressive Growth (AG) .....Medium or higher risk equities of companies in fast growing and competitive industries, with less
predictable earnings and acceptable, but possibly more leveraged balance sheets.
High Risk (HR)......................Companies with less predictable earnings (or losses), rapidly changing market dynamics,
financial and competitive issues, higher price volatility (beta), and risk of principal.
Venture Risk (VR) ................Companies with a short or unprofitable operating history, limited or less predictable revenues,
very high risk associated with success, and a substantial risk of principal.
Analyst Holdings and Compensation: Equity analysts and their staffs at Raymond James are compensated based on a salary
and bonus system. Several factors enter into the bonus determination including quality and performance of research product,
the analyst's success in rating stocks versus an industry index, and support effectiveness to trading and the retail and
institutional sales forces. Other factors may include but are not limited to: overall ratings from internal (other than investment
banking) or external parties and the general productivity and revenue generated in covered stocks. The covering analyst
and/or research associate owns shares of the common stock of Pier 1 Imports Incorporated.
Raymond James Relationships: RJA expects to receive or intends to seek compensation for investment banking services
from the subject companies in the next three months.
Company Name
Disclosure
Cost Plus, Inc.

Dell Inc.
Raymond James & Associates makes a NASDAQ market in shares of CPWM.

Raymond James & Associates received non-investment banking securities-related
compensation from DELL within the past 12 months.
Raymond James & Associates makes a NASDAQ market in shares of DELL.
compensation from HPQ within the past 12 months.
compensation from PIR within the past 12 months.
Hewlett-Packard
Pier 1 Imports Incorporated
Aaron Rents
64
1/13/09
$29.00
Rating
NR
Target
Price
Update
Date
Aaron Rents (RNT) 3 yr. Stock Performance
Closing
Price
Target Prices: The information below indicates our target price and rating changes for RNT stock over the past three years.
$28.00
$27.00
Security Price
$26.00
$25.00
$24.00
$23.00
$22.00
$21.00
$20.00
2/9/09
1/9/09
12/10/08
11/11/08
9/16/08
10/14/08
8/18/08
7/21/08
6/20/08
5/22/08
4/24/08
3/27/08
2/27/08
1/29/08
12/28/07
11/29/07
10/31/07
9/5/07
10/3/07
8/7/07
7/10/07
6/11/07
5/11/07
4/13/07
3/15/07
2/14/07
1/17/07
12/15/06
11/16/06
9/21/06
10/19/06
8/23/06
7/26/06
6/27/06
5/1/06
5/30/06
3/3/06
3/31/06
$19.00
Analyst Recommendations & 12 Month Price Objective

SB1:
Strong Buy
NA:
Not Applicable
MO2:
Outperform
NM:
Not Meaningful
MP3:
Market Perform
UR:
Under Review
MU4:
Underperform
NR :
Not Rated
Date: 02/27/09
Price
Coverage Suspended
Rating Change
Target Price and Rating Change
Target Price Change

Split Adjustment
Valuation Methodology: The Raymond James methodology for assigning ratings and target prices includes a number of
qualitative and quantitative factors including an assessment of industry size, structure, business trends and overall
attractiveness; management effectiveness; competition; visibility; financial condition, and expected total return, among other
factors. These factors are subject to change depending on overall economic conditions or industry- or company-specific
occurrences. For Aaron Rents, our methodology begins with an analysis of the financial statements, which culminates with
projections of the income statement, balance sheet, and cash flow statements. Using these projections, we calculate current and
projected intrinsic value. We also monitor and use standard valuation metrics, including historical and comparable forward P/Es,
MEV/EBITDA and Price/Sales ratios. These calculations and comparisons then form the basis for our judgments.
MP3 NM
MP3 NM
12/4/07
11/17/06
9/28/06
8/18/06
3/28/06
3/3/06
3.09
13.40
11.93
13.18
17.30
18.73
NM
NM
NM
NM
NM
25.00
3
4
3
4
3
1
MU4 NM
$20.00
$18.00
$16.00
$14.00
$12.00
$10.00
$8.00
$6.00
$4.00
$2.00
2/27/09
1/29/09
12/2/08
12/31/08
11/5/08
10/9/08
9/11/08
8/14/08
7/17/08
6/18/08
5/21/08
4/23/08
3/27/08
2/28/08
1/30/08
1/3/08
12/4/07
11/6/07
10/9/07
9/11/07
8/14/07
7/17/07
6/18/07
5/21/07
4/25/07
3/28/07
2/28/07
1/2/07
1/31/07
12/1/06
11/3/06
10/9/06
9/12/06
8/15/06
7/19/06
6/20/06
5/22/06
4/26/06
3/3/06
$0.00
3/29/06
Security Price
Rating
MU4 NM
Target
Price
MP3 NM
Closing
Price
Cost Plus, Inc. (CPWM) 3 yr. Stock Performance

SB1 $25.00
Update
Date
The information below indicates target price and rating changes for other subject companies included in this research.

SB1:
Strong Buy
NA:
Not Applicable
MO2:
Outperform
NM:
Not Meaningful
MP3:
Market Perform
UR:
Under Review
MU4:
Underperform
NR :
Not Rated
Date: 02/27/09
Price
Coverage Suspended
Rating Change
Target Price Change

Split Adjustment
Aaron Rents
65
MO2 $32.00
MO2 $34.00
MO2 $28.00
MO2 $21.00
MO2 $29.00
MO2 $14.00
MO2 $15.00
MO2 $12.00
2/27/09
2/9/09
11/18/08
10/10/08
2/29/08
8/31/07
6/1/07
2/1/07
11/22/06
11/16/06
8/18/06
7/21/06
5/9/06
3/3/06
8.21
9.46
10.52
13.43
20.87
28.46
26.91
24.22
24.82
25.75
22.80
19.02
25.00
29.56
12.00
14.00
15.00
21.00
28.00
34.00
32.00
28.00
29.00
UR
24.00
22.00
30.00
37.00
2
2
2
2
2
2
2
2
2
2
2
2
1
1
MO2 $28.00
$33.00
$31.00
$29.00
$27.00
$25.00
Security Price
Rating
MO2 UR
MO2 $24.00
Target
Price
SB1 $30.00MO2 $22.00
Closing
Price
Dell Inc. (DELL) 3 yr. Stock Performance

SB1 $37.00
Update
Date
$23.00
$21.00
$19.00
$17.00
$15.00
$13.00
$11.00
$9.00
2/25/09
1/28/09
12/29/08
11/3/08
11/28/08
9/9/08
10/7/08
8/13/08
7/16/08
6/17/08
5/21/08
4/23/08
3/28/08
2/29/08
1/2/08
1/31/08
12/4/07
11/7/07
9/14/07
10/12/07
8/20/07
7/23/07
6/26/07
5/1/07
5/30/07
4/2/07
3/5/07
2/5/07
1/8/07
12/7/06
11/10/06
9/15/06
10/13/06
8/18/06
7/21/06
6/23/06
5/1/06
5/25/06
3/3/06
3/31/06
$7.00

SB1:
Strong Buy
NA:
Not Applicable
MO2:
Outperform
NM:
Not Meaningful
MP3:
Market Perform
UR:
Under Review
MU4:
Underperform
NR :
Not Rated
Date: 02/27/09
MO2 UR
MO2 $37.00
MO2 $35.00
$58.00
MO2 $36.00
$56.00
MO2 $46.50 MO2 $50.00

MO2 UR
MO2 $60.00
SB1 $60.00
SB1 $55.00
SB1 $50.00
MO2 $56.00
$52.00
$50.00
$48.00
$46.00
$44.00
$42.00
$40.00
$38.00
$36.00
$34.00
$32.00
2/18/09
1/21/09
12/22/08
11/25/08
10/2/08
10/29/08
9/5/08
8/11/08
7/14/08
6/16/08
5/19/08
4/22/08
3/25/08
2/25/08
1/29/08
12/28/07
12/3/07
11/6/07
10/9/07
9/11/07
8/15/07
7/19/07
6/20/07
5/23/07
4/26/07
3/28/07
2/28/07
2/1/07
1/3/07
12/5/06
11/8/06
10/11/06
9/13/06
8/16/06
7/20/06
6/21/06
5/23/06
4/26/06
3/3/06
$30.00
$28.00
$26.00
3/29/06
2/9/09
11/18/08
7/11/08
11/20/07
6/18/07
5/17/07
2/21/07
11/17/06
10/23/06
8/17/06
5/17/06
3/28/06
3/21/06
3/3/06
36.85
29.34
41.45
49.44
45.76
45.21
43.13
40.13
39.38
34.43
31.11
32.83
33.96
34.19
50.00
55.00
60.00
60.00
56.00
50.00
46.50
45.00
UR
37.00
36.00
35.00
UR
35.00
1
1
1
2
2
2
2
2
2
2
2
2
2
2
MO2 $45.00
$54.00
Security Price
Rating
Hewlett-Packard (HPQ) 3 yr. Stock Performance

MO2 $35.00
Target
Price
Target Price Change

Split Adjustment
Closing
Price
Rating Change
Update
Date
Price
Coverage Suspended

SB1:
Strong Buy
NA:
Not Applicable
MO2:
Outperform
NM:
Not Meaningful
MP3:
Market Perform
UR:
Under Review
MU4:
Underperform
NR :
Not Rated
Date: 02/27/09
MP3 NM
MO2 $17.00
MO2 $13.50
MO2 $12.50
MO2 $13.00
MP3 NM
MP3 NM
8/5/08
5/1/08
12/6/07
7/9/07
12/5/06
11/3/06
9/14/06
9/6/06
3/3/06
11.00
9.13
8.33
11.89
14.71
15.23
17.10
13.95
14.23
NM
13.00
12.50
13.50
NM
NM
NM
17.00
NM
3
2
2
2
3
4
3
2
3
MU4 NM
$18.00
$17.00
$16.00
$15.00
$14.00
$13.00
$12.00
$11.00
$10.00
$9.00
$8.00
2/6/09
1/8/09
12/10/08
11/11/08
9/22/08
10/17/08
8/22/08
7/29/08
7/1/08
6/4/08
5/7/08
4/11/08
3/14/08
2/19/08
1/18/08
12/20/07
11/23/07
10/26/07
10/1/07
9/4/07
8/6/07
7/10/07
6/12/07
5/15/07
4/18/07
3/21/07
2/22/07
1/26/07
12/28/06
11/2/06
11/30/06
10/5/06
9/11/06
8/14/06
7/18/06
6/20/06
5/23/06
4/27/06
3/3/06
$7.00
3/30/06
Security Price
Rating
Haverty Furniture Companies Inc. (HVT) 3 yr. Stock Perform

ance
Performance
MP3 NM
Target
Price
Target Price Change

Split Adjustment
Closing
Price
Rating Change
Update
Date
Price
Coverage Suspended

SB1:
Strong Buy
NA:
Not Applicable
MO2:
Outperform
NM:
Not Meaningful
MP3:
Market Perform
UR:
Under Review
MU4:
Underperform
NR :
Not Rated
Date: 02/27/09
Price
Coverage Suspended
Rating Change
Target Price Change

Split Adjustment
Aaron Rents
66
MO2 $12.00
SB1 $11.00 SB1 $9.00
SB1 $6.00
SB1 $12.00
SB1 $5.50
$14.00
1/13/09
12/19/08
11/19/08
9/3/08
6/20/08
8/6/07
6/22/07
5/5/06
3/3/06
.51
.33
.71
4.13
5.01
5.84
8.30
9.00
10.27
3.50
5.50
6.00
9.00
11.00
12.00
12.00
NM
19.00
1
1
1
1
1
1
2
3
2
SB1 $3.50
$13.00
$12.00
$11.00
$10.00
$9.00
Security Price
Rating
MP3 NM
Target
Price
MO2 $19.00
Closing
Price
Pier 1 Imports Incorporated (PIR) 3 yr. Stock Performance
Update
Date
$8.00
$7.00
$6.00
$5.00
$4.00
$3.00
$2.00
$1.00
2/19/09
1/21/09
12/22/08
11/25/08
10/6/08
10/31/08
9/10/08
8/13/08
7/16/08
6/19/08
5/27/08
4/4/08
4/29/08
3/7/08
2/7/08
1/10/08
12/14/07
11/15/07
9/24/07
10/19/07
8/1/07
8/28/07
7/3/07
6/8/07
5/10/07
4/13/07
3/16/07
2/16/07
1/24/07
12/26/06
11/1/06
11/29/06
10/5/06
9/11/06
8/14/06
7/18/06
6/20/06
5/24/06
4/27/06
3/3/06
3/31/06
$0.00

SB1:
Strong Buy
NA:
Not Applicable
MO2:
Outperform
NM:
Not Meaningful
MP3:
Market Perform
UR:
Under Review
MU4:
Underperform
NR :
Not Rated
Date: 02/27/09
Price
Coverage Suspended
Rating Change
Target Price Change

Split Adjustment
General Risk Factors: Following are some general risk factors that pertain to the projected 12-month target prices included on
our research for stocks rated Strong Buy or Outperform: (1) Industry fundamentals with respect to customer demand or product
/ service pricing could change and adversely impact expected revenues and earnings; (2) Issues relating to major competitors or
market shares or new product expectations could change investor attitudes toward the sector or this stock; (3) Unforeseen
developments with respect to the management, financial condition or accounting policies or practices could alter the prospective
valuation; or (4) External factors that affect the U.S. economy, interest rates, the U.S. dollar or major segments of the economy
could alter investor confidence and investment prospects.
Specific Investment Risks Related to the Industry or Issuer
Consumer Environment
Factors affecting the consumer environment (e.g., unemployment, changes to tax laws, consumer confidence, etc.) and/or
consumers' perceived buying power can impact sales and profitability of retailers through store traffic, product mix, conversion
rates, credit activity, advertising effectiveness, etc.
Comparable-Store Sales
Comparable-store sales results impact share prices, and reports from a given company, its competitors, or market leaders can
sometimes yield a high level of volatility in share prices.
Unit Growth
Retailers often grow sales and profitability through unit expansion. The availability of attractive real estate, the relative
saturation of the U.S. market, the availability of effective management and employees, and the potential expansion into other
countries and/or product lines will impact future results.
Fixed Costs and Uncontrollable Expenses
Retailers face uncontrollable cost volatility in many areas, including freight, medical costs, and insurance premiums, among
others. These may have an outsized impact on results.
Promotional Environment
The level of promotional activity from direct and indirect competitors can impact sales, profitability, and market position.
Company-Specific Risks for Aaron Rents
The consistency of the same-store sales results could begin to deteriorate as the store base ages. To some degree, the high
same-store sales results and the consistency of those results are a by-product of high unit growth. Comparable stores between
one and five years of age grow at a rate faster than the underlying market. As the unit growth rate slows, the proportion of those
younger stores in the comp store base declines.
Franchise Program Uncertainty
The company's future growth will depend heavily upon its ability to attract capable new franchisees. Franchissees must have
both the business acumen and financial wherewithall to operate stores successfully. If the company is unable to attract these
franchisees, for reasons within or outside of its control, results would be impacted.
Aaron Rents
67

Unit Growth
As Aaron Rents' store base expanded rapidly over the past few years, opportunities for future unit expansion are more limited
than in the past. The execution of new store openings will depend upon management's ability to identify and acquire new sites
at attractive rental rates, as well as to allocate staff and resources to those sites.
Merchandise Risk
The company's results depend upon its ability to offer attractive merchandise to its customers. If it fails to do so, customers may
choose to do business with competing entities. Additionally, the company must keep the rate of stolen and damaged
merchandise at or below historical levels. Should the rate of "skips and stolens" rise, inventory productivity would be negatively
impacted.
Additional Risk and Disclosure information, as well as more information on the Raymond James rating system and
suitability categories, is available at www.rjcapitalmarkets.com/SearchForDisclosures_main.asp. Copies of research or
Raymond James summary policies relating to research analyst independence can be obtained by contacting any
Raymond James & Associates or Raymond James Financial Services office (please see www.raymondjames.com for
office locations) or by calling (727) 567-1000, toll free (800) 237-5643 or sending a written request to the Equity
Research Library, Raymond James & Associates, Inc., Tower 3, 6th Floor, 880 Carillon Parkway, St. Petersburg, FL
33716.
The views expressed in this report accurately reflect the personal views of the analyst(s) covering the subject
securities. No part of said person's compensation was, is, or will be directly or indirectly related to the specific
recommendations or views contained in this research report. In addition, said analyst has not received
compensation from any subject company in the last 12 months.
Investors should consider this report as only a single factor in making their investment decision.
For clients in the United Kingdom:
For clients of Raymond James & Associates (RJA) and Raymond James Financial International, Ltd. (RJFI):
This report is for distribution only to persons who fall within Articles 19 or Article 49(2) of the Financial Services and
Markets Act (Financial Promotion) Order 2000 as investment professionals and may not be distributed to, or relied upon,
by any other person.
For clients of Raymond James Investment Services, Ltd.: This report is intended only for clients in receipt of
Raymond James Investment Services, Ltd.s Terms of Business or others to whom it may be lawfully submitted.
For purposes of the Financial Services Authority requirements, this research report is classified as objective with respect
to conflict of interest management. RJA, Raymond James Financial International, Ltd., and Raymond James
Investment Services, Ltd. are authorized and regulated in the U.K. by the Financial Services Authority.
For institutional clients in the European Economic Area (EEA) outside of the United Kingdom:
This document (and any attachments or exhibits hereto) is intended only for EEA institutional clients or others to whom it
may lawfully be submitted.
Additional information is available on request.
Proprietary Rights Notice: By accepting a copy of this report, you acknowledge and agree as follows:
This report is provided to clients of Raymond James & Associates, Inc. (RJA) only for your personal, noncommercial use.
Except as expressly authorized by RJA, you may not copy, reproduce, transmit, sell, display, distribute, publish, broadcast,
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report for any unlawful purpose.
This is RJA client releasable research
This report and its contents are the property of RJA and are protected by applicable copyright, trade secret or other intellectual
property laws (of the United States and other countries). United States law, 17 U.S.C. Sec.501 et seq, provides for civil and
criminal penalties for copyright infringement.
Copyright 2009 Raymond James & Associates, Inc. All rights reserved.
Aaron Rents
68
The Raymond James

Consumer Research Team
Budd Bugatch, CFA
Director of Furnishings Research
(727) 567-2527
Sam Darkatsh
Home & Building Products/Specialty Distribution
(727) 567-2537
Bryan C. Elliott, CFA
Restaurants
(404) 442-5856
Joseph D. Hovorka
Entertainment & Leisure
(404) 442-5863
Samantha Panella
Softline Retailers
(212) 297-5654
Dan Wewer, CFA
Hardline Retailers
(404) 442-5846
Rex Henderson, CFA
Auto Retailers/Home Retailers
(727) 567-2697
Chad Bolen, Sr. Research Associate
Jeffrey Reda, CFA, Sr. Research Associate
Brandon Taylor, Sr. Research Associate
Brian Vaccaro, CFA, Sr. Research Associate
Alex Fuhrman, Research Associate
T.J. McConville, Research Associate
The Raymond James Financial Center

880 Carillon Parkway, St. Petersburg, FL 33716
Institutional clients may call for additional information
Research 800-237-5643 Trading 800-237-8426

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Aaron Rents

Budd Bugatch, CFA

Raymond James & Associates, Inc.

Raymond James & Associates, Inc.

Headquartered in Atlanta, Georgia, Aaron Rents is the second largest participant in

RNT: Initiating Coverage with an Outperform Rating

We initiate coverage of Aaron Rents with an Outperform rating and

Shares Out. (mil.)

Proj. 3-Yr EPS Growth Rate

Raymond James & Associates, Inc.

Raymond James & Associates, Inc.

Expanding Customer Base

Raymond James & Associates, Inc.

Management talent is another of Aarons core advantages. Its senior

The common shares of Aaron Rents have enjoyed a significant valuation

Raymond James & Associates, Inc.

P/E Relative to RCII

RNT Forward P/E Relative to RCII

RNT Forward P/E

Source: Baseline and Raymond James Research.

On the following page, we present a similarly constructed chart that compares

Raymond James & Associates, Inc.

RNT Forward P/E - Compared with S&P 500

P/E Relative to RCII

RNT Forward P/E

RNT Forward P/E Relative to S&P 500

Source: Baseline and Raymond James Research.

P/S Relative to RCII

RNT P/S - Compared with RCII

RNT Price/Sales Relative to RCII

Source: Baseline and Raymond James Research.

Raymond James & Associates, Inc.

P/S Relative to SPX

RNT P/S - Compared With the S&P 500

RNT Price/Sales Relative to S&P 500

Source: Baseline and Raymond James Research.

Below, we extend the valuation comparison analysis to other home furnishings

Rent-to-Own and Other Home Furnishings Retailers

Cash America Int'L

Source: BASELINE, and

Raymond James Research

Budd Bugatch, CFA 727-567-2527

Raymond James & Associates, Inc.

Consensus Forward EPS Estimate

Month End Closing Stock Price

Source; Baseline, Raymond James Research.

Raymond James & Associates, Inc.

Aaron Rents: 10-Year Historical Trailing P/E Bands

Actual Price USD

Source: Bloomberg; Raymond James Research.

Raymond James & Associates, Inc.

Raymond James & Associates, Inc.

Despite the barriers to entry and other positive characteristics discussed

Raymond James & Associates, Inc.

Aaron Rents: A Detailed Examination

The rent-to-rent environment began to change in the mid-1960s when another

Raymond James & Associates, Inc.

Below is a detailed list of Aarons current manufacturing facilities, by location.

Aaron Rents Properties

Raymond James & Associates, Inc.

Aaron Rents: Support and

Below is a listing of Aaron fulfillment centers location and size.

Aaron Rents SALO Fulfillment Centers

Raymond James & Associates, Inc.

Aaron's Initiation 3-3-09

Aaron's Initiation 3-3-09