Aaron's Company Annual Report 1998

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FY1998 Annual Report · Aaron's Company

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S e l e c t e d F i n a n c i a l I n f o r m a t i o n

(Dollar Amounts in Thousands
Except Per Share)

Year Ended
December 31,
1998

Year Ended
December 31,
1997

Year Ended
December 31,
1996

Twelve
Months Ended
December 31,
1995
(unaudited)

Twelve
Months Ended
December 31,
1994
(unaudited)

OPERATING RESULTS

Systemwide Revenues1

$464,175

$364,306

$306,200

$256,500

$233,077

Revenues:

Rentals & Fees

$289,272

$231,207

$208,463

$182,311

$167,093

Sales

Other

Costs & Expenses:

Cost of Sales

Operating Expenses

Depreciation of

Rental Merchandise

Interest

Earnings Before
Income Taxes

Income Taxes

Net Earnings

Earnings Per Share

Assuming Dilution

Dividends Per Share:

Common

Class A

81,561

8,826

73,223

6,321

61,527

4,255

52,999

2,465

53,978

1,686

379,659

310,751

274,245

237,775

222,757

62,017

189,719

89,171

3,561

55,914

149,728

71,151

3,721

46,168

135,012

64,437

3,449

38,274

119,590

55,408

3,172

38,977

112,367

50,966

2,803

344,468

280,514

249,066

216,444

205,113

35,191

13,707

$ 21,484

1.06

1.04

.04

30,237

11,841

$ 18,396

.96

.94

.04

25,179

9,786

$ 15,393

.81

.77

.04

21,331

8,113

$ 13,218

.68

.66

.05

.02

17,644

6,938

$ 10,706

.58

.56

.05

.02

FINANCIAL POSITION

Rental Merchandise, Net

$194,163

$176,968

$149,984

$122,311

$119,781

Property, Plant &
Equipment, Net

Total Assets

Interest-Bearing Debt

Shareholders’ Equity

AT YEAR END

Stores Open:

Company-Operated

Franchised

Rental Agreements in Effect

Number of Employees

50,113

272,174

51,727

168,871

291

136

227,400

3,400

39,757

239,382

76,486

116,455

33,267

198,103

55,365

107,335

23,492

158,645

37,479

91,094

292

101

240

212

219,800

179,600

158,900

3,100

2,550

2,160

23,532

155,914

46,894

81,418

203

152,100

2,150

1Systemwide revenues include rental revenues of franchised Aaron’s Rental Purchase stores.

M a n a g e m e n t ’ s D i s c u s s i o n a n d
A n a l y s i s o f F i n a n c i a l C o n d i t i o n
a n d R e s u l t s o f O p e r a t i o n s

CHANGE IN FISCAL YEAR END

During 1995, the Company changed its fiscal year end from March 31 to December 31, which resulted in a nine month
fiscal year ended December 31, 1995. The decision to change the fiscal year end was made for more convenience in both
internal and external communications. To aid comparative analysis, the Company has elected to present the results of
operations for the twelve months ended December 31, 1995 and 1994 (unaudited), along with the years ended December
31, 1998, December 31, 1997 and December 31, 1996.

RESULTS OF OPERATIONS

Year Ended December 31, 1998 versus Year Ended December 31, 1997
Total revenues for 1998 increased $68.9 million (22.2%) to $379.7 million compared to $310.8 million in 1997 due
primarily to a $58.1 million (25.1%) increase in rentals and fees revenues, plus an $8.3 million (11.4%) increase in
sales. Of this increase in rentals and fees revenues, $46.5 million (80.0%) was attributable to the Aaron’s Rental
Purchase division. Rentals and fees revenues from the Company’s rent-to-rent operations increased $11.5 million
(10.5%) during the same period.

Revenues from retail sales increased $4.0 million (6.8%) to $62.6 million in 1998, from $58.6 million for the same
period last year. This increase was due to increased sales of both new and rental return furniture in the rent-to-rent
and rental purchase divisions. Non-retail sales, which primarily represent merchandise sold to Aaron’s Rental Purchase
franchisees, increased $4.4 million (29.8%) to $19.0 million compared to $14.6 million for the same period last year.
The increased sales are due to the growth of the franchise operations.

Other revenues for 1998 increased $2.5 million (39.6%) to $8.8 million compared to $6.3 million in 1997. This
increase was attributable to franchise fee and royalty income increasing $2.3 million (46.0%) to $7.3 million compared
to $5.0 million last year, reflecting the net addition of 35 new franchised stores in 1998 and improved operating
revenues at mature franchised stores.

Cost of sales from retail sales increased $2.1 million (5.0%) to $44.4 million compared to $42.3 million, and as a
percentage of sales, decreased slightly to 70.9% from 72.1% primarily due to product mix. Cost of sales from non-retail
sales increased $4.0 million (29.2%) to $17.6 million from $13.7 million, and as a percentage of sales, decreased to
92.9% from 93.4%. The decrease in 1998 in cost of sales as a percentage of sales is due to slightly higher margins on
sales through the Company’s distribution centers.

Operating expenses increased $40.0 million (26.7%) to $189.7 million from $149.7 million. As a percentage of total
revenues, operating expenses were 50.0% in 1998 and 48.2% in 1997. Operating expenses increased as a percentage of
total revenues between years primarily due to the Company’s acquisitions of RentMart Rent-To-Own, Inc. and Blackhawk
Convention Services both in December 1997. The RentMart stores were relatively immature and had lower revenues over
which to spread expenses and Blackhawk’s convention furnishings business had higher operating expenses as a percent-
age of revenues than traditional rental purchase and rent-to-rent operations.

Depreciation of rental merchandise increased $18.0 million (25.3%) to $89.2 million, from $71.2 million, and as a

percentage of total rentals and fees, was 30.8% for both years.

Interest expense decreased $160,000 (4.3%) to $3.6 million compared to $3.7 million. As a percentage of total
revenues, interest expense was 0.9% in 1998 compared to 1.2% in 1997. The decrease in interest expense as a per-
centage of revenues was due to the allocation and capitalization of interest in the Company’s manufacturing operation.
The Company manages its exposure to changes in short-term interest rates, particularly to reduce the impact on its
floating-rate term notes, by entering into interest rate swap agreements. The counterparties to these contracts are high
credit quality commercial banks. Consequently, credit risk, which is inherent in all swaps, has been minimized to a large
extent. Interest expense is adjusted for the differential to be paid or received as interest rates change. The effect of
such adjustments on interest expense has not been significant. The level of floating-rate debt not fixed by swap
agreements was not significant during the year and the Company does not expect a significant increase in these

amounts in 1999. Accordingly, the Company does not believe it has material exposure of potential, near-term losses
in future earnings, and/or cash flows from reasonably possible near-term changes in market rates.

Income tax expense increased $1.9 million (15.8%) to $13.7 million compared to $11.8 million. The Company’s

effective tax rate was 39.0% in 1998 compared to 39.2% in 1997, primarily due to lower state income taxes.

As a result, net earnings increased $3.1 million (16.8%) to $21.5 million for 1998 compared to $18.4 million for the

same period in 1997. As a percentage of total revenues, net earnings were 5.7% in 1998 and 5.9% in 1997.

Year Ended December 31, 1997 versus Year Ended December 31, 1996
Total revenues for 1997 increased $36.5 million (13.3%) to $310.8 million compared to $274.2 million in 1996 due
primarily to a $22.7 million (10.9%) increase in rentals and fees revenues, plus an $11.7 million (19.0%) increase
in sales. Of this increase in rentals and fees revenues, $19.2 million (84.4%) was attributable to the Aaron’s Rental
Purchase division. Rentals and fees revenues from the Company’s rent-to-rent operations increased $3.5 million (3.3%)
during the same period.

Revenues from retail sales increased $5.8 million (11.1%) to $58.6 million in 1997, from $52.8 million for the same

period last year. This increase was due to increased sales of both new and rental return furniture in the rent-to-rent
division. Non-retail sales, which primarily represent merchandise sold to Aaron’s Rental Purchase franchisees, increased
$5.9 million (66.7%) to $14.6 million compared to $8.8 million for the same period last year. The increased sales are
due to the growth of the franchise operations.

Other revenues for 1997 increased $2.1 million (48.6%) to $6.3 million compared to $4.3 million in 1996. This
increase was attributable to franchise fee and royalty income increasing $2.1 million (70.8%) to $5.0 million compared
to $2.9 million last year, reflecting the addition of 40 new franchise stores in 1997 and improved operating revenues at
mature franchise stores.

Cost of sales from retail sales increased $4.4 million (11.7%) to $42.3 million compared to $37.8 million, and as a
percentage of sales, increased slightly to 72.1% from 71.7% primarily due to product mix. Cost of sales from non-retail
sales increased $5.3 million (64.1%) to $13.7 million from $8.3 million, and as a percentage of sales, decreased to
93.4% from 94.9%. The decrease in 1997 in cost of sales as a percentage of sales is due to slightly higher margins on
sales through the Company’s distribution centers.

Operating expenses increased $14.7 million (10.9%) to $149.7 million from $135.0 million. As a percentage of total

revenues, operating expenses were 48.2% in 1997 and 49.2% in 1996. Operating expenses declined as a percentage of
total revenues between years due to the spreading of expenses over higher revenues.

Depreciation of rental merchandise increased $6.7 million (10.4%) to $71.2 million, from $64.4 million, and as a

percentage of total rentals and fees, decreased to 30.8% from 30.9%.

Interest expense increased $272,000 (7.9%) to $3.7 million compared to $3.4 million. As a percentage of total
revenues, interest expense was 1.2% in 1997 compared to 1.3% in 1996. The slight decrease in interest expense as a
percentage of revenues was due to the effect of lower debt levels as a percentage of revenues throughout the year
being offset by slightly higher interest rates.

Income tax expense increased $2.1 million (21.0%) to $11.8 million compared to $9.8 million. The Company’s effective

tax rate was 39.2% in 1997 compared to 38.9% in 1996, primarily due to higher state income taxes.

As a result, net earnings increased $3.0 million (19.5%) to $18.4 million for 1997 compared to $15.4 million for the

same period in 1996. As a percentage of total revenues, net earnings were 5.9% in 1997 and 5.6% in 1996.

LIQUIDITY AND CAPITAL RESOURCES

Cash flows from operations for the years ended December 31, 1998 and 1997 were $120.6 million and $105.3 million,
respectively. Such cash flows include profits on the sale of rental return merchandise. The Company’s primary capital
requirements consist of acquiring rental merchandise for both rent-to-rent and Company-operated Aaron’s Rental
Purchase stores. As the Company continues to grow, the need for additional rental merchandise will continue to be
the Company’s major capital requirement. These capital requirements historically have been financed through bank
credit, cash flow from operations, trade credit, proceeds from the sale of rental return merchandise and stock offerings.
The Company has financed its growth through a revolving credit agreement with several banks, trade credit and
internally generated funds. The revolving credit agreement provides for unsecured borrowings up to $90.0 million which
includes a $6.0 million credit line to fund daily working capital requirements. At December 31, 1998, an aggregate of
$50.4 million was outstanding under this facility, bearing interest at a weighted average variable rate of 6.12%. The
Company uses interest rate swap agreements as part of its overall long-term financing program. At December 31, 1998,
the Company had swap agreements with notional principal amounts of $40.0 million which effectively fixed the interest
rates on an equal amount of the Company’s revolving credit agreement at 6.93%.

On April 28, 1998, the Company issued through a public offering 2.1 million shares of Common Stock. The net
proceeds to the Company after deducting underwriting discounts and offering expenses were $40.0 million. The
proceeds were used to reduce bank debt.

YEAR 2000

The Company believes that the expected cash flows from operations, proceeds from the sale of rental return
merchandise, bank borrowings and vendor credit will be sufficient to fund the Company’s capital and liquidity needs
for at least the next 24 months.

In November 1998, the Company’s Board of Directors authorized the repurchase of up to 1,000,000 shares of the

Company’s Common Stock and/or Class A Common Stock. During 1998, 736,400 shares of the Company’s stock were
purchased at an aggregate cost of $10.6 million and the Company was authorized to purchase an additional 471,690
shares at December 31, 1998. Subsequent to year end, in February 1999 the Company’s Board of Directors authorized
the purchase of an additional 2,000,000 shares.

The Company has paid dividends for twelve consecutive years. A $.02 per share dividend on Common Stock and
on Class A Common Stock was paid in January 1998 and July 1998, for a total fiscal year cash outlay of $801,000.
The Company currently expects to continue its policy of paying dividends.

The Year 2000 issue is the result of computer programs being written using two digits rather than four to define the
applicable year. Any of the Company’s computer programs or hardware that have date-sensitive software or embedded
chips may recognize a date using “00” as the year 1900 rather than the year 2000. This could result in a system failure
or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process
transactions, generate invoices, or engage in similar normal business activities. The Company is continuing its assess-
ments of the impact of the Year 2000 across its business and operations, including its customer and vendor base. The
Company has substantially completed its identification of information technology systems (“IT systems”) that are not
Year 2000 compliant and is in the process of implementing a comprehensive plan to make its IT systems and non-
information technology systems (“non-IT systems”), including embedded electronic circuits in equipment and hardware,
products, telecommunication, building security and manufacturing equipment, Year 2000 compliant. The Company’s plan
to resolve the Year 2000 issue involves the following four phases: (1) assessment, (2) remediation, (3) testing, and
(4) implementation. The Company is simultaneously working on all four phases and anticipates that it will substantially
complete phase (1) by the end of the first quarter 1999, (2) and (3) by the end of the second quarter 1999, and (4) by
the end of the third quarter 1999.

The Company is in the process of querying its significant suppliers and subcontractors (external agents). To date, the
Company is not aware of any external agents with a Year 2000 issue that would materially impact the Company’s results
of operations, liquidity, or capital resources. However, the Company has no means of ensuring that external agents will
be Year 2000 compliant. The inability of external agents to complete their Year 2000 resolution process in a timely
fashion could materially impact the Company. The effect of non-compliance by external agents is not determinable.

The Company’s significant IT systems, including financial, accounting, store operating and point-of-sale software,
have recently been or are in the process of being updated. The upgrading and rewriting of the Company’s IT systems is
being completed to gain further strategic advantages over competitors and is not the result of any anticipated Year
2000 issues. In addition, as part of the Company’s continuing process to update IT and non-IT systems, management
has required that vendor-purchased and internally developed systems be Year 2000 compliant. Therefore, management
expects the cost of the Year 2000 project to be less than $300,000. The majority of these costs will be incurred in 1999
as the portion related to 1998 was not significant.

The Company has contingency plans for certain critical applications and is working on such plans for others. These

contingency plans involve, among other actions, manual workarounds and backup vendors.

Management of the Company believes it has an effective program in place to resolve the Year 2000 issue in a
timely manner. As noted above, the Company has not yet completed all necessary phases of the Year 2000 program.
In the event that the Company does not complete any additional phases, the Company may be unable to take customer
orders, manufacture and ship products, invoice customers or collect payments. In addition, disruptions in the economy
generally resulting from Year 2000 issues could also materially adversely affect the Company. The Company could be
subject to litigation for computer systems product failure, for example, equipment shutdown or failure to properly date
business records. The amount of potential liability and lost revenue cannot be reasonably estimated at this time.

C o n s o l i d a t e d B a l a n c e S h e e t s

(In Thousands, Except Share Data)

December 31,
1998

December 31,
1997

ASSETS

Cash

Accounts Receivable

Rental Merchandise

Less: Accumulated Depreciation

Property, Plant & Equipment, Net

Prepaid Expenses & Other Assets

Total Assets

16,226

11,794

277,505

246,498

(83,342)

(69,530)

194,163

176,968

50,113

11,577

39,757

10,767

$272,174

$239,382

LIABILITIES & SHAREHOLDERS’ EQUITY

Accounts Payable & Accrued Expenses

$ 33,461

$ 31,071

Dividends Payable

Deferred Income Taxes Payable

Customer Deposits & Advance Payments

Bank Debt

Other Debt

Total Liabilities

Commitments & Contingencies

Shareholders’ Equity

415

7,811

9,889

50,411

1,316

379

6,687

8,304

75,904

582

103,303

122,927

Common Stock, Par Value $.50 Per Share;

Authorized: 25,000,000 Shares;
Shares Issued: 18,270,987 at December 31, 1998

and 16,170,987 at December 31, 1997

9,135

8,085

Class A Common Stock, Par Value $.50 Per Share;

Authorized: 25,000,000 Shares;
Shares Issued: 5,361,761

Additional Paid-In Capital

Retained Earnings

Less: Treasury Shares at Cost,

Common Stock, 1,558,991 Shares

at December 31, 1998 and 1,058,041 Shares
at December 31, 1997

Class A Common Stock, 1,525,255 Shares at

December 31, 1998 and December 31, 1997

Total Shareholders’ Equity

2,681

54,284

134,511

200,611

2,681

15,484

113,864

140,114

(17,604)

(9,523)

(14,136)

168,871

116,455

Total Liabilities & Shareholders’ Equity

$272,174

$239,382

The accompanying notes are an integral part of the Consolidated Financial Statements.

C o n s o l i d a t e d S t a t e m e n t s
o f E a r n i n g s

(In Thousands,
Except Per Share)

REVENUES

Rentals & Fees

Retail Sales

Non-Retail Sales

Other

COSTS & EXPENSES

Retail Cost of Sales

Non-Retail Cost of Sales

Operating Expenses

Depreciation of Rental Merchandise

Interest

Earnings Before Income Taxes

Income Taxes

Net Earnings

Earnings Per Share

Earnings Per Share Assuming Dilution

Year Ended
December 31,
1998

Year Ended
December 31,
1997

Year Ended
December 31,
1996

$289,272

62,576

18,985

8,826

379,659

44,386

17,631

189,719

89,171

3,561

344,468

35,191

13,707

$ 21,484

1.06

1.04

$231,207

58,602

14,621

6,321

310,751

42,264

13,650

149,728

71,151

3,721

280,514

30,237

11,841

$ 18,396

.96

.94

$208,463

52,757

8,770

4,255

274,245

37,848

8,320

135,012

64,437

3,449

249,066

25,179

9,786

$ 15,393

.81

.77

The accompanying notes are an integral part of the Consolidated Financial Statements.

C o n s o l i d a t e d S t a t e m e n t s
o f S h a r e h o l d e r s’ E q u i t y

(In Thousands)

Treasury Stock

Common Stock

Amount

Common

Class A

Additional
Paid-In
Capital

Retained
Earnings

BALANCE, DECEMBER 31, 1995

(2,360)

($16,640)

$2,681

$15,370

$ 86,365

$3,318

4,767

(164)

(2,889)

689

4,427

Stock Dividend

Reacquired Shares

Dividends

Reissued Shares

Net Earnings

BALANCE, DECEMBER 31, 1996

(1,835)

(15,102)

8,085

2,681

15,445

Reacquired Shares

Dividends

Reissued Shares

Net Earnings

(795)

(8,918)

361

BALANCE, DECEMBER 31, 1997

(2,583)

(23,659)

Stock Offering

Reacquired Shares

Dividends

Reissued Shares

Net Earnings

(736)

(10,560)

235

2,479

8,085

1,050

2,681

15,484

38,908

(108)

(4,767)

(765)

15,393

96,226

(758)

18,396

113,864

(837)

21,484

BALANCE, DECEMBER 31, 1998

(3,084)

($31,740)

$9,135

$2,681

$54,284

$134,511

The accompanying notes are an integral part of the Consolidated Financial Statements.

C o n s o l i d a t e d S t a t e m e n t s
o f C a s h F l o w s

Cash Provided by Operating Activities

120,628

105,295

Year Ended
December 31,
1998

Year Ended
December 31,
1997

Year Ended
December 31,
1996

$ 21,484

$ 18,396

$ 15,393

98,090

1,124

3,109

(4,432)

1,253

77,487

3,805

5,103

(1,083)

1,587

(22,209)

3,521

(174,496)

69,018

(1,841)

(126,007)

157,622

(183,115)

39,958

734

(801)

(10,560)

1,540

5,378

(1)

(15,165)

6,531

(145,262)

58,436

(21,665)

(117,125)

118,545

(97,766)

342

(761)

(8,918)

400

11,842

70,693

(899)

5,695

(2,339)

982

89,525

(17,534)

1,823

(137,023)

48,352

(3,891)

(108,273)

85,299

(67,434)

(765)

(2,889)

4,502

18,734

(14)

(In Thousands)

OPERATING ACTIVITIES

Net Earnings

Depreciation & Amortization

Deferred Income Taxes

Change in Accounts Payable &

Accrued Expenses

Change in Accounts Receivable

Other Changes, Net

INVESTING ACTIVITIES

Additions to Property, Plant & Equipment

Book Value of Property Retired or Sold

Additions to Rental Merchandise

Book Value of Rental Merchandise Sold

Contracts & Other Assets Acquired

Cash Used by Investing Activities

FINANCING ACTIVITIES

Proceeds from Revolving Credit Agreement

Repayments on Revolving Credit Agreement

Proceeds from Common Stock Offering

Increase in Other Debt

Dividends Paid

Acquisition of Treasury Stock

Issuance of Stock Under Stock Option Plan

Cash Provided by Financing Activities

(Decrease) Increase in Cash

Cash at Beginning of Year

Cash at End of Year

Cash Paid During the Year:

Interest

Income Taxes

4,082

10,004

3,713

6,989

3,384

7,531

The accompanying notes are an integral part of the Consolidated Financial Statements.

N o t e s t o C o n s o l i d a t e d
F i n a n c i a l S t a t e m e n t s

As of December 31, 1998 and 1997, and for the Years Ended December 31, 1998, 1997 and 1996.

NOTE A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation — The consolidated financial statements include the accounts of Aaron Rents, Inc. and its wholly-
owned subsidiary, Aaron Investment Company (the Company). All significant intercompany accounts and transactions
have been eliminated. The preparation of the Company’s consolidated financial statements in conformity with generally
accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported
in these financial statements and accompanying notes. Actual results could differ from those estimates.

Line of Business — The Company is engaged in the business of renting and selling residential and office furniture

and other merchandise throughout the U.S. The Company manufactures furniture principally for its rental and
sales operations.

Rental Merchandise consists primarily of residential and office furniture, consumer electronics and other merchandise

and is recorded at cost. Prior to January 1, 1996, depreciation was provided using the straight-line method over the
estimated useful life of the merchandise, principally from 1 to 5 years, after allowing for a salvage value of 5% to 60%.
Effective January 1, 1996, the Company prospectively changed its depreciation method on merchandise in the rental
purchase division acquired after December 31, 1995, from generally 14 months straight-line with a 5% salvage value to
a method that depreciates the merchandise over the agreement period, generally 12 months, when on rent, and 36
months, when not on rent, to a 0% salvage value. This new method is similar to a method referred to as the income
forecasting method in the rental purchase industry. The Company adopted the new method because management
believes that it provides a more systematic and rational allocation of the cost of rental purchase merchandise over its
useful life. The effect for the year ended December 31, 1996 of the change in the depreciation method on merchandise
purchased after December 31, 1995 was to decrease net income by approximately $850,000 ($.04 per share). In addition,
based on an analysis of the average composite life of the division’s rental purchase merchandise on rent or on hand at
December 31, 1995, the Company extended the depreciable lives of that merchandise from generally 14 months to 18
months, and made other refinements to depreciation rates on rental and rental purchase merchandise. The effect of such
change in depreciable lives and other refinements was to increase net income for the year ended December 31, 1996 by
approximately $709,000 ($.04 per share). The Company recognizes rental revenues over the rental period and recognizes
all costs of servicing and maintaining merchandise on rent as incurred.

Property, Plant and Equipment are recorded at cost. Depreciation and amortization are computed on a straight-line

basis over the estimated useful lives of the respective assets, which are from 8 to 27 years for buildings and improve-
ments and from 2 to 5 years for other depreciable property and equipment. Gains and losses related to dispositions and
retirements are included in income. Maintenance and repairs are charged to income as incurred; renewals and better-
ments are capitalized.

Deferred Income Taxes are provided for temporary differences between the amounts of assets and liabilities for
financial and tax reporting purposes. Such temporary differences arise principally from the use of accelerated depreciation
methods on rental merchandise for tax purposes.

Cost of Sales includes the depreciated cost of rental return residential and office merchandise sold and the cost of

new residential and office merchandise sold. It is not practicable to allocate operating expenses between selling and
rental operations.

Advertising — The Company expenses advertising costs as incurred. Such costs aggregated $11,523,000 in 1998,

$9,530,000 in 1997, and $10,422,000 in 1996.

Stock Based Compensation — The Company has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25) and related Interpretations in accounting for its employee stock
options and adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, Accounting
for Stock Based Compensation (FAS 123). The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of grant and, accordingly, recognizes no compen-
sation expense for the stock option grants.

Excess Costs over Net Assets Acquired — Goodwill is amortized on a straight-line basis over a period of twenty
years. Long-lived assets, including goodwill, are periodically reviewed for impairment based on an assessment of
future operations. The Company records impairment losses on long-lived assets used in operations when indicators
of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than
the assets’ carrying amount.

Fair Value of Financial Instruments — The carrying amounts reflected in the consolidated balance sheets for cash,

accounts receivable, bank and other debt approximate their respective fair values.

Revenue Recognition — Rental revenues are recognized as revenue in the month they are due. Rental payments

received prior to the month due are recorded as deferred rental revenue.

Comprehensive Income — As of January 1, 1998, the Company adopted Financial Accounting Standards Board

(“FASB”) Statement No.130, Reporting Comprehensive Income. Statement 130 establishes new rules for the reporting and
display of comprehensive income and its components. Statement 130 requires foreign currency translation adjustments
and other items to be included in other comprehensive income. There were no differences between net income and
comprehensive income in 1998, 1997 or 1996.

Segment Information — In 1998, the Company adopted FASB Statement No.131, Disclosures about Segments of
an Enterprise and Related Information. The new rules establish revised standards for public companies relating to the
reporting of financial and descriptive information about their operating segments in financial statements.

New Accounting Pronouncements — In June 1998, the FASB issued Statement No.133, Accounting for Derivative
Instruments and Hedging Activities. The statement requires the Company to recognize all derivatives on the balance sheet
at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge,
depending on the nature of the hedge, changes in the fair value of derivatives are either offset against the change in
fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in comprehensive income
until the hedged item is recognized in earnings. The ineffective portion of a derivative’s change in fair value will be
immediately recognized in earnings.

The Company plans to adopt Statement 133 in 2000, but has not yet completed its analysis of the impact, if any,

that Statement 133 may have on its consolidated financial statements.

NOTE B: EARNINGS PER SHARE

Earnings per share is computed by dividing net income by the weighted average number of common shares outstanding
during the year which were 20,312,000 shares in 1998, 19,165,000 shares in 1997, and 19,099,000 shares in 1996.
The computation of earnings per share assuming dilution includes the dilutive effect of stock options. Such stock
options had the effect of increasing the weighted average shares outstanding assuming dilution by 421,000, 497,000
and 885,000 in 1998, 1997 and 1996, respectively.

NOTE C: PROPERTY, PLANT & EQUIPMENT

(In Thousands)
Land
Buildings & Improvements
Leasehold Improvements & Signs
Fixtures & Equipment
Construction in Progress

Less: Accumulated Depreciation & Amortization

December 31,
1998
6,342
21,770
27,069
19,450
4,958
79,589
(29,476)
$ 50,113

December 31,
1997
4,643
17,698
19,243
19,402
3,380
64,366
(24,609)
$ 39,757

NOTE D: DEBT

Bank Debt — The Company has a revolving credit agreement with four banks providing for unsecured borrowings up
to $90,000,000, which includes a $6,000,000 credit line to fund daily working capital requirements. Amounts borrowed
bear interest at the lower of the lender’s prime rate, LIBOR plus .50%, or the rate at which certificates of deposit are
offered in the secondary market plus .625%. The pricing under the working capital line is based upon overnight bank
borrowing rates. At December 31, 1998 and 1997, an aggregate of $50,411,000 (bearing interest of 6.12%) and
$75,904,000 (bearing interest at 6.57%), respectively, was outstanding under this agreement. The Company pays a
.22% commitment fee on unused balances. The weighted average interest rate on borrowings under the revolving
credit agreement (before giving effect to interest rate swaps) was 6.41% in 1998, 6.29% in 1997, and 6.17% in 1996.
The effects of interest rate swaps on the weighted average interest rate were not material.

The Company has entered into interest rate swap agreements that effectively fix the interest rate on $20,000,000 of

borrowings under the revolving credit agreement at an average rate of 7.0% until November 2003 and an additional
$20,000,000 at an average rate of 6.85% until June 2005. These swap agreements involve the receipt of amounts when
the floating rates exceed the fixed rates and the payment of amounts when the fixed rates exceed the floating rates in
such agreements over the life of the agreements. The differential to be paid or received is accrued as interest rates
change and is recognized as an adjustment to the floating rate interest expense related to the debt. The related amount
payable to or receivable from counterparties is included in accrued liabilities or other assets. Unrealized losses under the
swap agreements aggregated $2,400,000 at December 31, 1998.

The revolving credit agreement may be terminated on ninety days’ notice by the Company or six months’ notice by
the lenders. The debt is payable in 60 monthly installments following the termination date if terminated by the lenders.
The agreement requires that the Company not permit its consolidated net worth as of the last day of any fiscal
quarter to be less than the sum of (a) $105,000,000 plus (b) 50% of the Company’s consolidated net income (but
not loss) for the period beginning July 1, 1997 and ending on the last day of such fiscal quarter. It also places
other restrictions on additional borrowings and requires the maintenance of certain financial ratios. At December 31,
1998, $48,400,000 of retained earnings were available for dividend payments and stock repurchases under the
debt restrictions.

During 1998, the Company’s allocation of interest to its MacTavish Furniture Industries division was $406,000.

All expenses of MacTavish are capitalized as furniture manufacturing costs.

Other Debt — Other debt of $1,300,000 at December 31, 1998 and $582,000 at December 31, 1997 primarily

represents insurance premium and software financing agreements with interest rates ranging from 4.94% to
6.22%. Other debt matures in 2000.

NOTE E: INCOME TAXES

(In Thousands)
Current Income Tax Expense:
Federal
State

Deferred Income Tax Expense (Benefit):
Federal
State

Year Ended
December 31,
1998

Year Ended
December 31,
1997

Year Ended
December 31,
1996

$11,422
1,161
12,583

949
175
1,124
$13,707

$ 7,375
661
8,036

3,287
518
3,805
$11,841

$ 9,503
1,182
10,685

(889)
(10)
(899)
$ 9,786

Significant components of the Company’s deferred income tax liabilities and assets are as follows:

(In Thousands)
Deferred Tax Liabilities:

Rental Merchandise and Property, Plant & Equipment
Other, Net

Total Deferred Tax Liabilities
Deferred Tax Assets:

Accrued Liabilities
Advance Payments
Other, Net

Total Deferred Tax Assets
Net Deferred Tax Liabilities

December 31,
1998

December 31,
1997

$11,222
1,413
12,635

836
2,725
1,263
4,824
$ 7,811

$ 9,265
1,244
10,509

1,015
2,276
531
3,822
$ 6,687

The Company’s effective tax rate differs from the federal income tax statutory rate as follows:

(In Thousands)
Statutory Rate
Increases in Taxes Resulting From:

Year Ended
December 31,
1998
35.0%

Year Ended
December 31,
1997
35.0%

Year Ended
December 31,
1996
35.0%

State Income Taxes, Net of Federal Income Tax Benefit
Other, Net

Effective Tax Rate

2.4
1.6
39.0%

2.5
1.7
39.2%

3.0
.9
38.9%

NOTE F: COMMITMENTS

The Company leases warehouse and retail store space for substantially all of its operations under operating leases
expiring at various times through 2013. Most of the leases contain renewal options for additional periods ranging from
1 to 15 years or provide for options to purchase the related property at predetermined purchase prices which do not
represent bargain purchase options. The Company also leases transportation equipment under operating leases expiring
during the next 3 years. Management expects that most leases will be renewed or replaced by other leases in the normal
course of business.

Future minimum rental payments, including guaranteed residual values, required under operating leases that have
initial or remaining non-cancelable terms in excess of one year as of December 31, 1998, are as follows: $22,009,000 in
1999; $17,949,000 in 2000; $13,874,000 in 2001; $7,740,000 in 2002; $4,272,000 in 2003; and $8,848,000 thereafter.

Rental expense was $25,563,000 in 1998, $22,146,000 in 1997, and $17,886,000 in 1996.
The Company leases one building from an officer of the Company under a lease expiring in 2008 for annual rentals

aggregating $212,700.

The Company maintains a 401(k) savings plan for all full-time employees with at least one year of service with the

Company and who meet certain eligibility requirements. The plan allows employees to contribute up to 10% of their
annual compensation with 50% matching by the Company on the first 4% of compensation. The Company’s expense
related to the plan was $415,000 in 1998, $357,000 in 1997, and $308,000 in 1996.

NOTE G: SHAREHOLDERS’ EQUITY

On April 28, 1998 the Company issued, through a public offering, 2,100,000 shares of Common Stock. The net proceeds
to the Company after deducting underwriting discounts and offering expenses were $39,958,000. The net proceeds were
used to reduce indebtedness and for general business purposes.

During 1996, the Company declared a 100% stock dividend on its Common Stock and Class A Common Stock. Each

stockholder received one share of Common Stock for each share of Common Stock and Class A Common Stock held.
All share and per share amounts have been restated to reflect the 100% stock dividend. Common Stock is non-voting.
In November 1998, the Company’s Board of Directors authorized the repurchase of up to 1,000,000 shares of the
Company’s Common Stock and/or Class A Common Stock. During 1998, 736,400 shares of the Company’s stock were pur-
chased at an aggregate cost of $10,560,000 and the Company was authorized to purchase an additional 471,690 shares
at December 31, 1998. At December 31, 1998, the Company held a total of 3,084,246 common shares in its treasury.
Subsequent to year end, in February 1999 the Company’s Board of Directors authorized the purchase of an additional
2,000,000 shares.

The Company has 1,000,000 shares of preferred stock authorized. The shares are issuable in series with terms for
each series fixed by the Board and such issuance is subject to approval by the Board of Directors. No preferred shares
have been issued.

NOTE H: STOCK OPTIONS

The Company has stock option plans under which options to purchase shares of the Company’s Common Stock are granted
to certain key employees. Under the plans, options granted become exercisable after a period of two or three years and
unexercised options lapse five or ten years after the date of the grant. Options are subject to forfeiture upon termina-
tion of service. Under the plans, 1,766,000 of the Company shares are reserved for issuance at December 31, 1998. The
weighted average fair value of options granted was $9.26 in 1998, $8.58 in 1997, and $4.99 in 1996.

Pro forma information regarding net earnings and earnings per share is required by FAS 123, and has been deter-
mined as if the Company had accounted for its employee stock options granted in 1998, 1997 and 1996 under the fair
value method. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted average assumptions for 1998, 1997 and 1996, respectively: risk-free interest rates
of 5.36%, 5.88%, and 6.72%; a dividend yield of .26%, .25%, and .40%; a volatility factor of the expected market price
of the Company’s Common Stock of .43, .39, and .34; and a weighted average expected life of the option of 8 years.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which
have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because the Company’s employee stock options
have characteristics significantly different from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not neces-
sarily provide a reliable single measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the

options’ vesting period. The Company’s pro forma information follows:

(In Thousands Except Per Share)
Pro forma net earnings
Pro forma earnings per share
Pro forma earnings per share assuming dilution

1998
$20,076
.99
.97

Years Ended December 31,
1997
$17,508
.91
.89

1996
$14,825
.78
.74

Because Statement 123 is applicable only to options granted subsequent to December 31, 1994, its pro forma effect

will not be fully reflected until future years.

The table below summarizes option activity for the periods indicated in the Company’s stock option plans.

(In Thousands Except Per Share)
Outstanding at December 31, 1995

Granted
Exercised
Forfeited

Outstanding at December 31, 1996

Granted
Exercised
Forfeited

Outstanding at December 31, 1997

Granted
Exercised
Forfeited

Outstanding at December 31, 1998
Exercisable at December 31, 1998

Weighted
Average
Exercise
Price
$ 4.54
9.88
3.00
9.68
8.48
15.95
5.28
10.83
10.07
16.73
6.53
15.47
10.92
$ 6.69

Options
1,248
780
(701)
(8)
1,319
322
(47)
(9)
1,585
133
(235)
(101)
1,382
266

Exercise prices for options outstanding as of December 31, 1998 ranged from $6.00 to $19.00. The weighted average

remaining contractual life of those options is 6.55 years.

NOTE I: FRANCHISING OF AARON’S RENTAL PURCHASE STORES

The Company franchises Aaron’s Rental Purchase stores. As of December 31, 1998 and December 31, 1997, 227 and 186
franchises had been awarded, respectively. Franchisees pay a non-refundable initial franchise fee of $35,000 and an
ongoing royalty of 5% of cash receipts. The Company recognizes this income as earned and includes it in Other Revenues
in the Consolidated Statements of Earnings. The Company has guaranteed certain lease and debt obligations (primarily
extending through 1999) of some of the franchisees amounting to $461,891 and $16,022,964, respectively, at December
31, 1998. The Company receives a guarantee and servicing fee based on such franchisees’ outstanding debt obligations
which it recognizes as income over the fee period. The Company has recourse rights to the leased property and to the
assets securing the debt obligations. As a result, the Company does not expect to incur any significant losses under
these guarantees.

NOTE J: ACQUISITIONS AND DISPOSITIONS

In December 1997, the Company acquired substantially all of the assets of RentMart Rent-To-Own, Inc., a wholly-owned
subsidiary of the Associates Capital Corporation, for $18,012,000 in cash. The excess cost over the fair market value of
tangible assets acquired was approximately $4,300,000. Also, in December 1997, the Company acquired substantially all
of the assets of Blackhawk Convention Services, Inc. for $3,500,000 in cash. The excess cost over the fair market value
of tangible assets acquired was approximately $2,700,000. During 1998, the Company acquired five rental purchase
stores from a franchisee and acquired a lamp designer and manufacturer, Lamps Forever, Inc. The aggregate purchase
price of these 1998 acquisitions was not significant.

These acquisitions were accounted for under the purchase method and, accordingly, the results of operations of the

acquired businesses are included in the Company’s results of operations from their dates of acquisition. The effect of
these acquisitions on the 1998 and 1997 consolidated financial statements was not significant.

In October 1998, the Company sold substantially all of the assets of its convention furnishings division. The effect

of the sale on the 1998 consolidated financial statements was not significant.

NOTE K: SEGMENTS

Description of Products and Services of Reportable Segments
Aaron Rents, Inc. has four reportable segments: rent-to-rent, rental purchase, franchise and manufacturing. The rent-
to-rent division rents and sells residential and office furniture to businesses and consumers who meet certain minimum
credit requirements. The rental purchase division offers residential furniture, appliances, and electronics to consumers on
a monthly payment basis with no credit requirements. The Company’s franchise operation sells and supports franchises of
its rental purchase concept. The manufacturing division manufactures upholstery, bedroom and office furniture, lamps
and accessories, and bedding predominantly for use by the other divisions.

The principal source of revenue in the “Other” category was the Company’s convention furnishings division

which was sold during 1998.

Measurement of Segment Profit or Loss and Segment Assets
The Company evaluates performance and allocates resources based on revenue growth and pretax profit or loss from
operations. The accounting policies of the reportable segments are the same as those described in the summary of
significant accounting policies except that the rental purchase division revenues and certain other items are presented
on a cash basis. Intersegment sales are completed at internally negotiated amounts ensuring competitiveness with
outside vendors. Since the intersegment profit and loss affect inventory valuation, depreciation and cost of goods sold
are adjusted when intersegment profit is eliminated in consolidation.

Factors Used by Management to Identify the Reportable Segments
Aaron Rents, Inc.’s reportable segments are business units that service different customer profiles using distinct
payment arrangements. The reportable segments are each managed separately because of differences in both customer
base and infrastructure.

Information on segments and a reconciliation to earnings before income taxes are as follows:

(In Thousands)
Revenues from external customers:

Rent-to-Rent
Rental Purchase
Franchise
Other

Manufacturing
Elimination of intersegment revenues
Cash to accrual adjustments

Total revenues from external customers

Earnings before income taxes:

Rent-to-Rent
Rental Purchase
Franchise
Other
Manufacturing

Earnings before income taxes for reportable segments
Elimination of intersegment profit
Cash to accrual adjustments
Other allocations and adjustments

Total earnings before income taxes

Assets:

Rent-to-Rent
Rental Purchase
Franchise
Other
Manufacturing
Total assets

Depreciation and amortization:

Rent-to-Rent
Rental Purchase
Franchise
Other
Manufacturing
Elimination of intersegment profit and allocation

Total depreciation and amortization

Interest expense:
Rent-to-Rent
Rental Purchase
Franchise
Other
Manufacturing
Elimination of intersegment allocations

Total interest expense

1998

Years Ended December 31,
1997

1996

$173,657
193,283
7,209
5,470
52,628
(52,067)
(521)
$379,659

$ 19,565
11,668
3,607
(744)
1,068
35,164
(901)
(344)
1,272
$ 35,191

$138,734
103,930
5,415
9,286
14,809
$272,174

$ 29,327
67,401
276
616
524
(54)
$ 98,090

1,698
2,874

234
406
(1,651)
3,561

$163,263
139,893
4,880
2,089
49,302
(48,344)
(332)
$310,751

$ 18,883
10,807
1,880
(743)
2,877
33,704
(2,856)
(271)
(340)
$ 30,237

$135,094
83,742
3,287
5,453
11,806
$239,382

$ 27,685
48,879
197
661
502
(437)
$ 77,487

1,648
1,646
9
19

399
3,721

$149,282
112,304
2,872
8,475
46,978
(45,197)
(469)
$274,245

$ 16,196
6,370
766
589
2,844
26,765
(3,051)
(342)
1,807
$ 25,179

$123,563
56,205
2,064
4,227
12,044
$198,103

$ 24,854
42,631
117
1,503
400
1,188
$ 70,693

1,313
1,712
8
45

371
3,449

NOTE L: QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

(In Thousands Except Per Share)
Year Ended December 31, 1998
Revenues
Gross Profit
Earnings Before Taxes
Net Earnings
Earnings Per Share
Earnings Per Share Assuming Dilution

Year Ended December 31, 1997
Revenues
Gross Profit
Earnings Before Taxes
Net Earnings
Earnings Per Share
Earnings Per Share Assuming Dilution

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

$92,809
54,244
8,680
5,286
.28
.27

$76,480
43,574
7,080
4,312
.22
.22

$93,832
55,020
9,090
5,554
.27
.27

$77,465
44,236
7,608
4,633
.24
.24

$95,882
55,413
8,029
4,906
.23
.23

$76,238
43,996
7,883
4,805
.25
.25

$97,136
54,968
9,392
5,738
.28
.27

$80,568
45,559
7,666
4,646
.25
.24

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders of Aaron Rents, Inc.:
We have audited the accompanying consolidated balance sheets of Aaron Rents, Inc. and Subsidiaries as of December
31, 1998 and 1997, and the related consolidated statements of earnings, shareholders’ equity and cash flows for the
years ended December 31, 1998, 1997 and 1996. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated
financial position of Aaron Rents, Inc. and Subsidiaries as of December 31, 1998 and 1997, and the consolidated results
of their operations and their cash flows for the years ended December 31, 1998, 1997 and 1996, in conformity with gen-
erally accepted accounting principles.

Atlanta, Georgia
March 15, 1999

COMMON STOCK MARKET
PRICES & DIVIDENDS

The following table shows, for the periods
indicated, the range of high and low prices
per share for the Common Stock and Class A
Common Stock and the cash dividends
declared per share.

On March 20, 1998, the Company’s
Common Stock and Class A Common Stock
were listed on the New York Stock Exchange
under the symbols “RNT” and “RNT.A,”
respectively. Previously, the Company’s
Common Stock and Class A Common Stock
were traded on The NASDAQ Stock Market
under the symbols “ARON” and “ARONA,”
respectively.

The approximate number of shareholders
of the Company’s Common Stock and Class A
Common Stock at March 15, 1999, was 5,800.
The closing price for the Common Stock and
Class A Common Stock on March 15, 1999,
was $14.000, and $13.375, respectively.

Common Stock

High

Low

DECEMBER 31, 1998

First Quarter
Second Quarter
Third Quarter
Fourth Quarter

DECEMBER 31, 1997

First Quarter
Second Quarter
Third Quarter
Fourth Quarter

Class A
Common Stock

DECEMBER 31, 1998

First Quarter
Second Quarter
Third Quarter
Fourth Quarter

DECEMBER 31, 1997

First Quarter
Second Quarter
Third Quarter
Fourth Quarter

$24.313
24.125
23.500
15.938

$12.875
13.375
18.250
20.250

$16.375
17.375
11.875
11.125

$10.063
10.375
12.750
15.500

High

Low

$26.000
22.750
21.000
15.125

$14.000
13.750
18.000
18.500

$15.750
18.125
11.500
10.563

$ 9.750
10.000
11.938
14.500

Cash
Dividends
Per Share

.02

Cash
Dividends
Per Share

.02

S t o r e L o c a t i o n M a p

AT DECEMBER 31, 1998

Rent-to-Rent
Company-Operated Rental Purchase
Franchised Rental Purchase
Total Stores

Manufacturing & Distribution Centers

109
182
136
427

BOARD OF DIRECTORS

OFFICERS

CORPORATE INFORMATION

R. Charles Loudermilk, Sr.
Chairman of the Board, Chief Executive
Officer, Aaron Rents, Inc.

R. Charles Loudermilk, Sr.
Chairman of the Board, Chief Executive
Officer

Ronald W. Allen
Retired Chairman, President and Chief
Executive Officer of Delta Air Lines

Leo Benatar (1), (2)
Sr. Partner and Associate Consultant,
A.T. Kearney

Gilbert L. Danielson
Executive Vice President, Chief Financial
Officer, Aaron Rents, Inc.

Earl Dolive (1)
Vice Chairman of the Board, Emeritus,
Genuine Parts Company

J. Rex Fuqua
Vice Chairman, Fuqua Enterprises, Inc.

Keith C. Groen
Vice President, Legal, and Secretary,
Aaron Rents, Inc.

Ingrid Saunders Jones (2)
Vice President, Corporate External Affairs
The Coca-Cola Company

Robert C. Loudermilk, Jr.
President, Chief Operating Officer,
Aaron Rents, Inc.

Lt. Gen. M. Collier Ross (1)
U.S. Army (retired)

Robert C. Loudermilk, Jr.
President, Chief Operating Officer

Gilbert L. Danielson
Executive Vice President, Chief
Financial Officer

William K. Butler, Jr.
President, Aaron’s Rental Purchase Division

Brian E. Stahl
President, Aaron Rents’
Rent-to-Rent Division

Keith C. Groen
Vice President, Legal, and Secretary

James D. Almond
Vice President, Franchise Operations,
Aaron’s Rental Purchase Division

James L. Cates
Vice President, Risk Management

D. Bruce Cox
Vice President, Northeast Residential Region

Bennett E. Creasman
Vice President, East Office Region

David M. Deignan
Vice President, Marketing and
Merchandising, Aaron’s Rental
Purchase Division

Lyle M. Digby
Vice President, Midwest Residential Region

Corporate Headquarters
309 E. Paces Ferry Rd., N.E.
Atlanta, Georgia 30305-2377
(404) 231-0011
http://www.aaronrents.com

Subsidiary
Aaron Investment Company
10th & Market Streets
Mellon Bank Building
2nd Floor
Wilmington, Delaware 19801
(302) 888-2351

SHAREHOLDER INFORMATION

Annual Shareholders Meeting
The annual meeting of the shareholders of
Aaron Rents, Inc. will be held on Tuesday,
May 4, 1999, at 10:00 a.m. E.D.T. on the
12th floor, SunTrust Plaza, 303 Peachtree
Street, Atlanta, Georgia 30303.

Form 10-K
Shareholders may obtain a copy of the
Company’s annual report on Form 10-K
filed with the Securities and Exchange
Commission upon written request, without
charge. Such requests should be sent to
the attention of Gilbert L. Danielson,
Executive Vice President, Chief Financial
Officer, Aaron Rents, Inc., 309 E. Paces Ferry
Rd., N.E., Atlanta, Georgia 30305-2377.

K. Todd Evans
Vice President, Franchise Development,
Aaron’s Rental Purchase Division

Stock Listing

RNT

Aaron Rents Inc.’s Common
Stock and Class A Common
Stock are traded on the New
York Stock Exchange under
the symbols “RNT” and
“RNT.A,” respectively.

Transfer Agent and Registrar
SunTrust Bank, Atlanta
Atlanta, Georgia

General Counsel
Kilpatrick Stockton LLP
Atlanta, Georgia

Richard D. Gaskins
Vice President, West Office Region

Michael B. Hickey
Vice President, Management Development,
Aaron’s Rental Purchase Division

Richard L. Levine
Vice President, Purchasing and Distribution

Mitchell S. Paull
Vice President, Treasurer

Eduardo Quiñones
Vice President, Southeast Residential Region

Sandra W. Richards
Vice President, West Residential Region

Marc S. Rogovin
Vice President, Real Estate and Construction

(1) Member of Audit Committee
(2) Member of Stock Option Committee

Robert P. Sinclair, Jr.
Corporate Controller