SEGMENTS

As of March 31, 2015, the Company had five operating and reportable segments: Sales and Lease Ownership, Progressive, HomeSmart, Franchise and Manufacturing. The results of Progressive, which is presented as a reportable segment, have been included in the Company's consolidated results from the April 14, 2014 acquisition date.

The Aaron’s Sales & Lease Ownership division offers furniture, electronics, appliances and computers to consumers primarily on a monthly payment basis with no credit requirements. Progressive is a leading virtual lease-to-own company that provides lease-purchase solutions through over 15,000 retail locations. The HomeSmart division offers furniture, electronics, appliances and computers to consumers primarily on a weekly payment basis with no credit requirements. The Company’s Franchise operation awards franchises and supports franchisees of its sales and lease ownership concept. The Manufacturing segment manufactures upholstered furniture and bedding predominantly for use by Company-operated and franchised stores. Therefore, the Manufacturing segment's revenues and earnings before income taxes are primarily the result of intercompany transactions, substantially all of which revenues and earnings are eliminated through the elimination of intersegment revenues and intersegment profit.



	Three Months Ended March 31,
(In Thousands)	2015			2014
Revenues From External Customers:
Sales and Lease Ownership	$	536,160		$	548,711
Progressive	251,619			—
HomeSmart	16,972			17,404
Franchise	17,004			18,084
Manufacturing	28,806			31,155
Other	368			1,898
Revenues of Reportable Segments	850,929			617,252
Elimination of Intersegment Revenues	(28,289		)	(30,258		)
Cash to Accrual Adjustments	(826		)	(1,571		)
Total Revenues from External Customers	$	821,814		$	585,423
Earnings (Loss) Before Income Taxes:
Sales and Lease Ownership	$	52,575		$	55,619
Progressive	15,830			—
HomeSmart	537			(69		)
Franchise	13,898			14,558
Manufacturing	1,282			547
Other	(11,479		)	(9,927		)
Earnings Before Income Taxes for Reportable Segments	72,643			60,728
Elimination of Intersegment Profit	(1,268		)	(509		)
Cash to Accrual and Other Adjustments	6,455			491
Total Earnings Before Income Taxes	$	77,830		$	60,710

Revenues in the Other category are primarily revenues attributable to (i) the RIMCO segment through the date of sale in January 2014, (ii) leasing space to unrelated third parties in the corporate headquarters building and (iii) several minor unrelated activities. The pre-tax losses or earnings in the Other category are the net result of the activity mentioned above, net of the portion of corporate overhead not allocated to the reportable segments for management purposes.

During the three months ended March 31, 2014, the results of the Other category loss before income taxes included $872,000 in financial and advisory costs related to addressing strategic matters, including proxy contests, and $803,000 in transaction costs related to the Progressive acquisition.



(In Thousands)	March 31, 2015		December 31, 2014
Assets:
Sales and Lease Ownership	$	1,234,425	$	1,246,325
Progressive	880,655		858,159
HomeSmart	44,821		47,585
Franchise	45,071		46,755
Manufacturing¹	21,946		23,050
Other	177,742		234,970
Total Assets	$	2,404,660	$	2,456,844


¹	Includes inventory (principally raw materials and work-in-process) that has been classified within lease merchandise in the condensed consolidated balance sheets of $12.7 million and $13.2 million as of March 31, 2015 and December 31, 2014, respectively.

Earnings (loss) before income taxes for the Progressive reportable segment are determined in accordance with accounting principles generally accepted in the United States. The Company determines earnings (loss) before income taxes for all other reportable segments in accordance with accounting principles generally accepted in the United States with the following adjustments:


•	Revenues in the Sales and Lease Ownership and HomeSmart segments are reported on a cash basis for management reporting purposes.


•	A predetermined amount of each reportable segment’s revenues is charged to the reportable segment as an allocation of corporate overhead. This allocation was approximately 5% in 2015 and 2014.


•	Accruals related to store closures are not recorded on the reportable segments’ financial statements, but are maintained and controlled by corporate headquarters.


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

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Advertising expense in the Sales and Lease Ownership and HomeSmart segments is estimated at the beginning of each year and then allocated to the division ratably over time for management reporting purposes. For financial reporting purposes, advertising expense is recognized when the related advertising activities occur. The difference between these two methods is reflected as part of Cash to Accrual and Other Adjustments.


•	Sales and lease ownership lease merchandise write-offs are recorded using the direct write-off method for management reporting purposes and using the allowance method for financial reporting purposes. The difference between these two methods is reflected as part of Cash to Accrual and Other Adjustments.


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