Aaron's Company Annual Report 2015

FY2015 Annual Report · Aaron's Company

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Annual Report 2015

YEARS
AND STILL

G
N
T
A
V
O
N
N

1955
1955

OUR FOCUS

Headquartered in Atlanta, Aaron’s, Inc. is a leader in the sales and lease ownership and specialty retailing of
furniture, consumer electronics, home appliances, and accessories through its more than 2,000 Company-
operated and franchised stores in 47 states and Canada. Progressive Leasing, a leading virtual lease-to-own
company, provides lease-purchase solutions through approximately 16,000 retail locations in 46 states.
Dent-A- Med, Inc., d/b/a The HELPcard®, provides a variety of second-look finance products that are originated
through a federally insured bank. Our businesses provide affordable, flexible alternatives to credit-constrained
and under-banked customers needing household goods for their homes and families. Aaron’s was founded in
1955, has been publicly traded since 1982, and owns the Aarons.com, ShopHomeSmart.com, ProgLeasing.com,
and HELPcard.com brands. For more information, visit www.aarons.com.

FINANCIAL HIGHLIGHTS

(Dollar Amounts in Thousands,
Except Per Share Data)

OPERATING RESULTS

Revenues*

Earnings Before Income Taxes

Net Earnings

Earnings Per Share

Earnings Per Share Assuming Dilution

FINANCIAL POSITION

Total Assets

Lease Merchandise, Net

Debt

Shareholders’ Equity

Debt to Capitalization

STORES OPEN AT YEAR-END

Company-operated

Franchised**

Progressive Active Retail Doors***

Year Ended
December 31,
2015

Year Ended
December 31,
2014

$3,179,756

$2,695,033

213,120

135,709

1.87

1.86

121,704

78,233

1.08

$2,658,875

$2,456,844

1,138,938

610,450

1,366,618

1,087,032

606,082

1,223,521

30.9%

33.1%

1,305

734

13,248

1,326

782

12,307

* Effective January 1, 2015, Progressive conformed its policy with that of the traditional

lease-to-own (“core”) business to reflect revenues net of related taxes. For the year ended
December 31, 2014, a reclassification adjustment of $30.2 million, which reduced revenues
and operating expenses, was made to conform to this policy.

** Franchised stores are not owned or operated by Aaron’s, Inc.

*** An active retail door is a retail store location at which at least one virtual lease-to-own

transaction has been completed during the fourth quarter of each year shown. Aaron’s,
Inc. acquired Progressive Leasing on April 14, 2014.

This annual report to shareholders contains forward-looking statements, including forecasts
of our future performance. These statements are subject to the cautionary note regarding
forward-looking statements on page 4 of our 2015 annual report on Form 10-K included with
this annual report to shareholders.

Revenues By Year

Net Earnings By Year

2011
113,767

2012
173,043

2013
120,666

2014
78,233

2015
135,709

2015
3,179,756

2014
2,695,033

2013
2,234,631

2012
2,212,827

2011
2,012,578

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TO OUR
SHARE-
HOLDERS

Dear Fellow Shareholders,

We’re very pleased to have delivered
record performance in 2015 as we
celebrated Aaron’s 60th year in business.

We started 2015 with a goal to increase
revenues, EBITDA, and earnings per
share each by 12% or more over the
prior year. We exceeded these financial
targets and drove impressive gains
across all of our key measures. 2015 was
a record year for revenues, Adjusted
EBITDA, non-GAAP EPS, and customer
count. Most importantly, we sharpened
Aaron’s ability to meet the demands of a
growing and dynamic market for lease-
to-own shoppers. We’re confident these
improvements will help pave the way for
Aaron’s continued leadership, not just in
2016, but for years to come.

Innovating Today for Continued
Leadership Tomorrow
Charlie Loudermilk, Aaron’s founder,
developed a unique lease-to-own model
with a vision to fill a void for the under-
served customer by providing them the
best deal on the highest quality products.
Mr. Loudermilk’s pioneering approach
revolutionized the lease-to-own business.
That same spirit of innovation led Aaron’s
to expand its reach with Progressive
Leasing, and that ingrained sense of
purpose inspires our people and drives
our decision-making today.

Let me share a few examples of how
innovation and collaboration are driving
meaningful new avenues to improve our
business, strengthen relationships, and
create long-term value:

• This past June, we leveraged

Progressive’s technology along
with our system of distribution
centers and stores to launch a fully
transactional lease-to-own website
serving customers across the U.S.
The channel was launched system-

wide mid-summer and by the fourth
quarter generated approximately 6%
of deliveries for our traditional lease-to-
own business, which we refer to as our
“core” business.

• We developed Progressive’s customer

service hubs with the logistics platform
provided by our core business. The
ability to re-lease returned Progressive
merchandise through Aaron’s brick-
and-mortar stores is driving profitable
revenues for both segments.

• We launched Approve.Me, a

groundbreaking system that simplifies
the application process for customers
seeking credit approval and lease
options in a retail environment.
Approve.Me creates a more efficient
process at the point-of-sale for retailers
and customers.

• We acquired Dent-A-Med (DAMI), a
proven “second-look” lender. While
small in scale, DAMI helps expand our
addressable market, provides additional
channels for growth for Progressive,
and advances our strategy to drive
more sales for our retail partners.

We accomplished all of this while
maintaining a conservative financial
position, ending 2015 with net debt to
capitalization of approximately 30%.
We believe our strong balance sheet is
a competitive advantage and expect
it to improve as our core business
continues to generate significant cash.
Furthermore, we expect Progressive to
be cash flow positive in 2016.

As we look forward, our goal is to
increase revenues and invest in future
growth while maintaining discipline
around profitability. We’re focused on
organic growth first as we look for new
ways to grow Progressive and our core
business. We expect to supplement this
growth with opportunistic additions of

new businesses or technologies that
complement our strategic priorities.
Lastly, we also plan to review strategies
for returning excess cash to our
shareholders while at the same time
protecting and maintaining our strong
balance sheet.

We will also continue Aaron’s long
tradition of giving back to the
communities we serve. To highlight
just one example, in 2015, the Aaron’s
Foundation renewed its partnership with
the Boys & Girls Clubs of America with
a three-year, $5 million commitment to
its Keystone program, which provides
young people ages 14 to 18 with activities
focused on academic success, career
preparation, and community service.

Initiatives for 2016
The consumer sector continues to
experience both cyclical and secular
headwinds. Credit-challenged customers
are navigating sluggish wage growth and
tough labor markets, particularly in the
oil industry. At the same time, customers
are changing the way they shop, with a
greater focus on non-traditional channels
that offer new ways to access products
and transact business.

These challenges are not unique to
Aaron’s. What sets us apart is our ability
to meet our customers’ needs, wherever
and however they shop, whether it be in
an Aaron’s store, online at Aarons.com,
or through Progressive’s retail partners.
We made a number of important strides
in 2015 and believe we’re well positioned
to grow the core business, execute on
Progressive’s pipeline, and improve our
customers’ omni-channel experience as
we move ahead.

Improving Consistency
Across Core Stores
Visible progress within our core business
punctuated 2015. We continued the
optimization of our retail footprint and

addressed its cost and pricing structures.
However, we believe there is significant
opportunity to improve executional
consistency across our core business,
and our management team is working
hard to make these improvements. We’ll
continue to manage the division for
stable cash flow, and we firmly believe
our core segment can achieve profitable
growth moving forward.

eCommerce is a central part of that
future growth. We’re reaching new
customers through eCommerce, and
also re-engaging with customers who
have not shopped with Aaron’s in some
time. Our online business performed
well in 2015 and we expect it to grow
to a mid-single digit percentage of core
lease revenues in 2016, consistent with
its contribution to delivery activity in the
fourth quarter.

We’ll look to support our growth
initiatives with a shift in marketing that
will highlight products and reinforce our
value proposition. We hope to tell our
story more effectively with programs
that have a more immediate, measurable
return on our business.

Accelerating Door Growth
at Progressive
Progressive delivered excellent results in
its first full year as a segment of Aaron’s.
Revenues crossed the $1 billion mark,
and profit margins improved over last
year. Progressive’s rapid growth is a
testament to the virtual lease-to-own
opportunity, the Progressive value
proposition, and the Progressive team.

We will continue to lay the groundwork
for partnerships with regional and
national retailers. Aaron’s infrastructure,
balance sheet, and transparency are
important to retailers, and we plan
to benefit from a robust pipeline of
potential new retail partners. DAMI and
Approve.Me are important strategic

assets that enhance the customer
experience and provide a single-
source, below-prime solution to our
retail partners. Progressive will further
expand its product offerings, advance
its customer service hubs, and develop
additional growth opportunities.

Looking to the Future
Innovation and success begin and end
with our people. Very few people have
had as much of an impact on Aaron’s as
Gil Danielson has over the past 26 years.
We’d like to thank Gil, who this February
stepped down as CFO after announcing
plans to retire at the end of 2016. Gil has
been a critical part of Aaron’s success
and a steadying force for the Company
during prosperous as well as challenging
times. He’s a true professional, an
outstanding CFO, and a great person. We
owe him a debt of gratitude.

Although Gil’s presence will be missed
when he retires, one of the Company’s
greatest strengths is the depth and
breadth of experienced, talented people.
Our management team and more
than 12,000 associates have the skills,
creativity, and passion to drive Aaron’s
successfully into the future.

As Aaron’s CEO, I am tremendously
proud of what we accomplished in
2015. The retail sector is going through
significant change driven by sweeping
trends in technology. By adhering to the
discipline and principles that forged our
rich heritage, Aaron’s is as relevant — and
the organization as vibrant — as it’s
ever been. I’m excited about the many
opportunities we have and look forward
to another great year.

John W. Robinson III
President and Chief Executive Officer

INNOVATING
ACCESS AND
AFFORDABIL ITY
FOR ALL

1950s

1960s

1970s

1980s

With a partner and a $500 loan, Charlie Loudermilk buys 300
chairs from an Army surplus store and rents warehouse space and
a truck to make deliveries. The Company is named Aaron Rents to
guarantee first listing in telephone directories. The Company’s slogan
in those early years was “Aaron Rents Almost Everything.”

Aaron Rents establishes a furniture
manufacturing operation that has
been expanded numerous times to
keep up with corporate growth.

The rent-to-own concept,
the predecessor of the
sales and lease ownership
program, is introduced.

1955 — 300 chairs could be
rented for 10 cents per day

1965 — Company
provides four tents for
civil rights march from
Selma to Montgomery, AL

1967 — Store
opens in Baltimore,
the first market
outside of Atlanta

1982 — Initial public
offering of stock

1990s

2000s

2010s

2015

Aaron Rents opens
its 250th store.

1998 — Stock moved
from NASDAQ
to the NYSE
RNT

1999 — Began
NASCAR sponsorship

Aaron Rents opens the
first store in Canada.

Progressive joins the
Aaron’s family.

Aaron’s celebrates its
60th anniversary.

2000 — 500th
store opens

2005 — 50th
anniversary and the
birth of Lucky Dog

2007 — Aaron’s 1,500th store opens

2009 — Aaron Rents changes its
name to Aaron’s, Inc. and NYSE
ticker symbol becomes “AAN”

2012 — Aaron’s
2,000th store opens

2014 — Aaron’s acquires
Progressive Leasing, a
leading virtual lease-
to-own company

2015 — Launched transactional
website, Aarons.com

2015 — Aaron’s acquires Dent-A-Med,
Inc. d/b/a The HELPcard®, a provider
of second look finance products

AARON’S
STORES

Aaron’s founder, Charlie Loudermilk, set the tone
for innovation at Aaron’s. Charlie understood early
on that many people have difficulty getting quality
furniture, electronics, and appliances for their home,
and he developed a lease-to-own model to meet their
demands. He understood the pressures customers
face and evolved the model to address their needs.
Aaron’s is committed to helping our customers achieve
ownership with shorter terms, more flexibility, and a
significantly lower total cost of ownership.

Aaron’s associates across the U.S. and Canada
welcome customers into our stores by creating a
friendly, neighborhood atmosphere. This provides a
comfortable setting for customers to experience first-
hand the quality merchandise available.

CORE BUSINESS

OTHER

COMPUTERS

42%

FURNITURE

24%

APPLIANCES

Company-Operated
Store Revenues

25%

ELECTRONICS

eCOMM Aaron’s extended its reach with the 2015 launch of

a national, fully transactional website for lease-to-
own. By the fourth quarter, Aarons.com represented
approximately 6% of deliveries, many of them to
younger customers new to the lease-to-own model.
In addition to introducing new customers to Aaron’s,
our eCommerce channel is seeing former customers
return to Aaron’s. We’ll continue to improve our omni-
channel experience, and we believe eCommerce can
be a significant driver of future revenues and earnings.

VIRTUAL
INNOVATION
THROUGH
PROGRESSIVE
LEASING

Progressive Leasing, a leading virtual lease-to-
own business, provides lease-to-own solutions
through thousands of retailers across the country.
Progressive has grown from approximately $100
million in revenues in 2011 to more than $1 billion in
revenues in 2015, demonstrating the market need
for Progressive’s unmanned virtual product for large
and small retailers. In October 2015, Progressive
acquired DAMI to leverage Progressive’s best-in-
class point-of-sale presence. DAMI’s product, The
HELPcard®, offers second-look finance programs for
below-prime customers.

Additionally, Progressive developed Approve.Me,
which provides a single application for all customers
seeking both credit approval and lease options. These
additions demonstrate continued innovation and will
expand our addressable market, provide additional
channels for growth, and advance our strategy to drive
more sales for our retail partners.

OTHER

JEWELRY

MOBILE

53%

FURNITURE

Progressive Revenues by
Retail Partner Category

12%

AUTO

20%

BEDDING

“ No Credit
Needed”

Woodhaven manufactures high-quality furniture
and bedding — all designed and built in the U.S.A.
The Woodhaven reputation for quality, on-time
delivery, and great pricing has grown along with
Aaron’s. Woodhaven furniture is now also displayed
in the showrooms of several of America’s largest
furniture retailers.

INNOVATIVE
FURNITURE
MANUFACTURING:
WOODHAVEN
F U R N I T U R E
INDUSTRIES

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended December 31, 2015

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the Transition Period from to

Commission file Number. 1-13941

AARON’S, INC.

(Exact name of registrant as specified in its charter)

GEORGIA
(State or other jurisdiction of
incorporation or organization)

309 E. PACES FERRY ROAD, N.E.
ATLANTA, GEORGIA
(Address of principal executive offices)

58-0687630
(I.R.S. Employer
Identification No.)

30305-2377
(Zip Code)

Registrant’s telephone number, including area code: (404) 231-0011

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Common Stock, $.50 Par Value

Name of each exchange on which registered
New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2
of the Exchange Act.

Large Accelerated Filer

Non-Accelerated Filer

Accelerated Filer

Smaller Reporting Company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes

The aggregate market value of the common stock held by non-affiliates of the registrant as of June 30, 2015 was $1,978,700,976
based on the closing price on that date as reported by the New York Stock Exchange. Solely for the purpose of this calculation and for
no other purpose, the non-affiliates of the registrant are assumed to be all shareholders of the registrant other than (i) directors of the
registrant, (ii) executive officers of the registrant, and (iii) any shareholder that beneficially owns 10% or more of the registrant’s
common shares.

As of February 26, 2016, there were 72,607,843 shares of the Company’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement for the 2016 annual meeting of shareholders, to be filed subsequently with

the Securities and Exchange Commission, or SEC, pursuant to Regulation 14A, are incorporated by reference into Part III of this
Annual Report on Form 10-K.

PART I

ITEM 1. BUSINESS
ITEM 1A. RISK FACTORS
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2. PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. MINE SAFETY DISCLOSURES

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9B. OTHER INFORMATION

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS OF THE REGISTRANT AND CORPORATE
GOVERNANCE

ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES

SIGNATURES

5
5
15
24
25
26
26

27
29

30
48
49

91
91
92

93
93

94
94

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

Certain oral and written statements made by Aaron’s, Inc. (the "Company" or "Aaron's") about future events and expectations,
including statements in this Annual Report on Form 10-K, are forward-looking statements within the meaning of Section 21E
of the Securities Exchange Act of 1934, as amended. For those statements we claim the protection of the safe harbor provisions
for forward-looking statements contained in such section. Forward-looking statements are not statements of historical facts but
are based on management’s current beliefs, assumptions and expectations regarding our future economic performance, taking
into account the information currently available to management.

Generally, the words "anticipate," "believe," "could," "estimate," "expect," "intend," "plan," "project," "would," and similar
expressions identify forward-looking statements. All statements which address operating performance, events or developments
that we expect or anticipate will occur in the future, including growth in store openings, franchises awarded, market share and
statements expressing general optimism about future operating results, are forward-looking statements. Forward-looking
statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the Company’s
historical experience and the Company’s present expectations or projections. Factors that could cause our actual results to differ
materially from any forward-looking statements include changes in general economic conditions, competition, pricing,
customer demand, litigation and regulatory proceedings and those factors discussed in the Risk Factors section of this Annual
Report on Form 10-K. We qualify any forward-looking statements entirely by these cautionary factors.

The above mentioned risk factors are not all-inclusive. Given these uncertainties and that such statements speak only as of the
date made, you should not place undue reliance on forward-looking statements. We undertake no obligation to update publicly
or revise any forward-looking statements, whether as a result of new information, future events, changes in assumptions or
otherwise.

PART I.

ITEM 1. BUSINESS

Unless otherwise indicated or unless the context otherwise requires, all references in this Annual Report on Form 10-K to the
"Company," "we," "us," "our" and similar expressions are references to Aaron’s, Inc. and its consolidated subsidiaries.

General Development of Business

Established in 1955 and incorporated in 1962 as a Georgia corporation, Aaron’s, Inc., is a leading specialty retailer of furniture,
consumer electronics, computers, appliances and household accessories. Our store-based operations engage in the lease
ownership and retail sale of a wide variety of products such as televisions, computers, tablets, mobile phones, living room,
dining room and bedroom furniture, mattresses, washers, dryers and refrigerators. Our stores carry well-known brands such as
Samsung®, Frigidaire®, Hewlett-Packard®, LG®, Whirlpool®, Simmons®, Philips®, JVC®, Sharp® and Magnavox®.

On April 14, 2014, the Company acquired a 100% ownership interest in Progressive Finance Holdings, LLC ("Progressive"), a
leading virtual lease-to-own company. Through our Progressive business, we offer lease-purchase solutions to the customers of
traditional retailers on a variety of products, including furniture and bedding, mobile phones, consumer electronics, appliances
and jewelry. Progressive provides lease-purchase solutions in 46 states.

On October 15, 2015, the Company acquired a 100% ownership interest in Dent-A-Med, Inc., d/b/a the HELPcard®,
(collectively, "DAMI") which is based in Springdale, Arkansas. DAMI partners with merchants to provide a variety of
revolving credit products originated through a federally insured bank to customers that may not qualify for traditional prime
lending. These are commonly referred to as "second-look" credit products. Together with Progressive, DAMI allows the
Company to provide retail and merchant partners one source for financing and leasing transactions with below-prime
customers. The acquisition of DAMI is expected to drive long-term incremental revenue and earnings growth at Progressive,
and DAMI will benefit from Progressive's proprietary technology, infrastructure and financial capacity.

As of December 31, 2015, we had 2,039 stores, comprised of 1,305 Company-operated stores in 28 states, the District of
Columbia and Canada, and 734 independently-owned franchised stores in 47 states and Canada. Included in the Company-
operated store counts are 1,223 Aaron’s Sales & Lease Ownership stores (our monthly and semi-monthly pay concept) and 82
HomeSmart stores (our weekly pay concept).

We own or have rights to various trademarks and trade names used in our business including Aaron’s, Aaron’s Sales & Lease
Ownership, Progressive, HomeSmart, Dent-A-Med, the HELPcard® and Woodhaven Furniture Industries. We intend to file for
additional trade name and trademark protection when appropriate.

Business Environment and Company Outlook

Like many industries, the lease-to-own industry has been transformed by the internet and virtual marketplace. We believe the
Progressive acquisition is strategically transformational for the Company in this respect and will strengthen our business. We
also believe the lease-to-own industry has suffered in recent periods due to economic challenges faced by our traditional lease-
to-own customers. In response to these changing market conditions, we are executing a strategic plan for the traditional lease-
to-own store-based ("core") business that focuses on the following items and that we believe positions us for success over the
long-term:

• Profitably grow our stores – Despite year-over-year declines in same store revenues, our price increases, inventory
reduction, and cost efficiency initiatives led to improvements in operating margins for our stores in 2015, and we
remain committed to driving profitable growth.

• Accelerate our omni-channel platform – We believe Aarons.com represents an opportunity to provide a unique

offering in the lease-to-own industry. We are focused on engaging customers in ways that are convenient for them by
providing them a seamless, direct-to-door platform through which to shop across our product offering.

• Promote communication, coordination and integration – We are focused on driving executional excellence through

enhanced communication, coordination and integration between our stores and support centers. We also believe we
can continue to improve our store operations by facilitating the re-lease or resale of returned product from customers
of Progressive and Aarons.com.

• Champion compliance – Aaron’s, Inc. is a large and diverse company with thousands of daily transactions that are

extensively regulated and subject to the requirements of various federal, state, and local laws and regulations. We
continue to believe and set expectations that long-term success requires all associates to comply with all laws and
regulations governing our company’s behavior.

Business Segments

Our Company-operated stores and franchise operations are located in the United States and Canada. Additional information on
our six reportable segments may be found in (i) Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations and (ii) Item 8. Financial Statements and Supplementary Data.

Sales & Lease Ownership

Our Aaron's Sales & Lease Ownership operation was established in 1987 and employs a monthly and semi-monthly payment
model to provide durable household goods to lower to middle income consumers. Its customer base is comprised primarily of
customers with limited access to traditional credit sources such as bank financing, installment credit or credit cards. Customers
of our Aaron’s Sales & Lease Ownership division take advantage of our services to acquire consumer goods they might not
otherwise be able to without incurring additional debt or long-term obligations.

We have developed a distinctive concept for our sales and lease ownership stores including specific merchandising, store
layout, pricing and agreement terms all designed to appeal to our target consumer market. We believe these features create a
store and a sales and lease ownership concept that is distinct from the operations of the lease-to-own industry generally and
from consumer electronics and home furnishings retailers who finance merchandise.

The typical Aaron’s Sales & Lease Ownership store layout is a combination showroom and warehouse comprising 6,000 to
8,000 square feet, with an average of approximately 7,200 square feet. We select locations for new Aaron’s Sales & Lease
Ownership stores by focusing on neighborhood shopping centers with good access that are located in established working class
communities. In addition to inline space, we also lease and own several free standing buildings in certain markets. We typically
locate the stores in centers with retailers who have similar customer demographics.

Each Aaron’s Sales & Lease Ownership store usually maintains at least two trucks for delivery, service and return of product.
We generally offer same or next day delivery for addresses located within approximately ten miles of the store. Our stores
provide a broad selection of brand name electronics, computers, appliances and furniture, including furniture manufactured by
our Woodhaven Furniture Industries division.

We believe that our Aaron’s Sales & Lease Ownership stores offer prices that are lower than the prices for similar items offered
by traditional lease-to-own operators, and substantially equivalent to the "all-in" contract price of similar items offered by
retailers who finance merchandise. Approximately 97% of our Aaron's Sales & Lease Ownership agreements have monthly
terms and the remaining 3% are semi-monthly. By comparison, weekly agreements are the industry standard.

We may re-lease or sell merchandise that customers return to us prior to the expiration of their agreements. We may also offer
up-front purchase options at prices we believe are competitive. At December 31, 2015, we had 1,223 Company-operated
Aaron’s Sales & Lease Ownership stores in 28 states, the District of Columbia and Canada.

Progressive

Established in 1999, Progressive is a leader in the expanding virtual lease-to-own market. Progressive partners with retailers,
primarily in the furniture and bedding, mobile phones, consumer electronics, appliances and jewelry industries, to offer a lease-
purchase option for customers to acquire goods they might not otherwise have been able to obtain. We serve customers who are
credit challenged and are therefore unlikely to have access to traditional credit-based financing options. We offer a technology-
based application and approval process that does not require Progressive employees to be staffed in a store. Once a customer is
approved, Progressive purchases the merchandise from the retailer and enters into a lease-to-own agreement with the customer.
The contract provides early-buyout options or ownership after a contractual number of renewals. Progressive has retail partners
in 46 states and operates under state-specific regulations in those states.

HomeSmart

Our HomeSmart operation began in 2010 and was developed to serve customers who prefer the flexibility of weekly payments
and renewals. The consumer goods we provide in our HomeSmart division are substantially similar to those available in our
Aaron’s Sales & Lease Ownership stores.

The typical HomeSmart store layout is a combination showroom and warehouse of 4,000 to 6,000 square feet, with an average
of approximately 5,000 square feet. Store site selection, delivery capabilities and lease merchandise product mix are generally
similar to those described above for our Aaron’s Sales & Lease Ownership stores.

We believe that our HomeSmart stores offer prices that are lower than the prices for similar items offered by traditional weekly
lease-to-own operators. Approximately 71% of our HomeSmart agreements have weekly terms, 4% are semi-monthly and the
remaining 25% are monthly. We may also offer an up-front purchase option at prices we believe are competitive. At
December 31, 2015, we had 82 Company-operated HomeSmart stores in 11 states.

DAMI

DAMI was founded in 1983 and primarily serves customers that may not qualify for traditional prime lending who desire to
purchase goods and services from participating merchants. DAMI, which operates as a wholly-owned subsidiary of
Progressive, offers customized programs, with services that include revolving loans, private label cards and access to a unique
processing platform. DAMI’s current network of merchants includes medical markets, beds and fitness equipment. The
Company believes the DAMI product offerings are complementary to those of Progressive and expects to expand the markets
and merchants that DAMI serves.

We extend or decline credit to an applicant through our bank partner based upon the customer's credit rating. Our bank partner
originates the loan by providing financing to the merchant at the point of sale and acquiring the receivable at a discount from
the face value, which represents a pre-negotiated fee between DAMI and the merchant. DAMI then acquires the receivable
from the bank.

Qualifying customers receive a credit card to finance their initial purchase and to use in subsequent purchases at the merchant
or other participating merchants for an initial two year period, which we will renew if the cardholder remains in good standing.
The customer is required to make periodic minimum payments and pay certain annual and other periodic fees.

Franchise

We franchise our Aaron’s Sales & Lease Ownership and HomeSmart stores in markets where we have no immediate plans to
enter. Our franchise program adds value to our Company by allowing us to (i) recognize additional revenues from franchise
fees and royalties, (ii) strategically grow without incurring direct capital or other expenses, (iii) lower our average costs of
purchasing, manufacturing and advertising through economies of scale and (iv) increase customer recognition of our brands.

Franchisees are approved on the basis of the applicant’s business background and financial resources. We enter into agreements
with our franchisees to govern the opening and operations of franchised stores. Under our standard agreement, we receive a
franchise fee from $15,000 to $50,000 per store depending upon market size. Our standard agreement is for a term of ten years,
with one ten-year renewal option. Franchisees are also obligated to remit to us royalty payments of 5% or 6% of the weekly
cash revenue collections from their franchised stores. Most franchisees are involved in the day-to-day operations of their stores.

Because of the importance of location to our store strategy, we assist each franchisee in selecting the proper site for each store.
We typically will visit the intended market and provide guidance to the franchisee through the site selection process. Once the
franchisee selects a site, we provide support in designing the floor plan, including the proper layout of the showroom and
warehouse. In addition, we assist the franchisee in the design and decor of the showroom to ensure consistency with our
requirements. We also lease the exterior signage to the franchisee and provide support with respect to pre-opening advertising,
initial inventory and delivery vehicles.

Qualifying franchisees may take part in a financing arrangement we have established with several financial institutions to assist
the franchisee in establishing and operating their store(s). Although an inventory financing plan is the primary component of
the financing program, we have also arranged, in certain circumstances, for the franchisee to receive a revolving credit line,
allowing them to expand operations. We provide guarantees for amounts outstanding under this franchise financing program.

All franchisees are required to complete a comprehensive training program and to operate their franchised sales and lease
ownership stores in compliance with our policies, standards and specifications. Additionally, each franchise is required to
represent and warrant its compliance with all applicable federal, state and/or local laws, regulations and ordinances with respect
to its business operations. Although franchisees are not generally required to purchase their lease merchandise from our
fulfillment centers, many do so in order to take advantage of Company-sponsored financing, bulk purchasing discounts and
favorable delivery terms.

Our internal audit department conducts annual financial reviews of each franchisee, as well as annual operational audits of each
franchised store. In addition, our proprietary management information system links each Company and franchised store to our
corporate headquarters.

Manufacturing

Woodhaven Furniture Industries, our manufacturing division, was established in 1982, and we believe it makes us the largest
major furniture lease-to-own company in the United States that manufactures its own furniture. Integrated manufacturing
enables us to control critical features such as the quality, cost, delivery, styling, durability and quantity of our furniture
products, and we believe this provides an integration advantage over our competitors. Substantially all produced items continue
to be leased or sold through Company-operated or franchised stores.

Our Woodhaven Furniture Industries division produces upholstered living-room furniture (including contemporary sofas, chairs
and modular sofa and ottoman collections in a variety of natural and synthetic fabrics) and bedding (including standard sizes of
mattresses and box springs). The furniture designed and produced by this division incorporates features that we believe result in
reduced production costs, enhanced durability and improved shipping processes all relative to furniture we would otherwise
purchase from third parties. These features include (i) standardized components, (ii) reduced number of parts and features
susceptible to wear or damage, (iii) more resilient foam, (iv) durable fabrics and sturdy frames which translate to longer life
and higher residual value and (v) devices that allow sofas to stand on end for easier and more efficient transport. The division
also provides replacement covers for all styles and fabrics of its upholstered furniture, as well as other parts, for use in
reconditioning leased furniture that has been returned.

The division consists of five furniture manufacturing plants and nine bedding manufacturing facilities totaling approximately
818,000 square feet of manufacturing capacity.

Operations

Operating Strategy

Our operating strategy is based on distinguishing our brand from those of our competitors along with maximizing our
operational efficiencies. We implement this strategy for our store-based operations by (i) emphasizing the uniqueness of our
sales and lease ownership concept from those in our industry generally, (ii) offering high levels of customer service, (iii)
promoting our vendors' and Aaron’s brand names, (iv) managing merchandise through our manufacturing and distribution
capabilities and (v) utilizing proprietary management information systems.

We believe that the success of our store-based operations is attributable to our distinctive approach to the business that
distinguishes us from both our lease-to-own and credit retail competitors. We have pioneered innovative approaches to meeting
changing customer needs that we believe differ from many of our competitors. These include (i) offering lease ownership
agreements that result in a lower "all-in" price, (ii) maintaining larger and more attractive store showrooms, (iii) offering a
wider selection of higher-quality merchandise, (iv) providing an up-front cash and carry purchase option on select merchandise
at competitive prices and (v) establishing an on-line platform that provides access to our product offering. Many of our sales
and lease ownership customers make their payments in person and we use these frequent visits to strengthen the customer
relationship.

Furthermore, our Progressive and DAMI operating strategies are based on providing excellent service to our retail and
merchant partners and our customers, along with continued development of technology-based solutions. This allows us to
increase our retail and merchant partner’s sales, drive demand for our service, and scale in an efficient manner. Specifically
with Progressive, we believe our ability to service a retailer with limited labor costs allows us to maintain a cost of ownership
for leased merchandise lower than that of other options available to our customers.

Store-Based Operations

As of December 31, 2015, the Company had two senior vice presidents that provide executive leadership of the Aaron's Sales
& Lease Ownership and HomeSmart divisions. Our Sales & Lease Ownership division has 11 divisional vice presidents and
one Canadian director who are responsible for the overall performance of their respective divisions. HomeSmart has two
directors responsible for that division’s performance. Each division is subdivided into geographic groupings of stores overseen
by a total of 155 Aaron’s Sales & Lease Ownership regional managers, including two Canadian regional managers, and 12
HomeSmart regional managers.

At the individual store level, the store manager is primarily responsible for managing and supervising all aspects of store
operations, including (i) customer relations and account management, (ii) deliveries and pickups, (iii) warehouse and inventory
management, (iv) partial merchandise selection, (v) employment decisions, including hiring, training and terminating store
employees and (vi) certain marketing initiatives. Store managers also administer the processing of lease return merchandise
including making determinations with respect to inspection, repairs, sales, reconditioning and subsequent leasing.

Our business philosophy emphasizes safeguarding of Company assets, strict cost containment and financial controls. All
personnel are expected to monitor expenses to contain costs. We pay all material invoices from Company headquarters in order
to enhance financial accountability. We believe that careful monitoring of lease merchandise as well as operational expenses
enables us to maintain financial stability and profitability.

We use computer-based management information systems to facilitate customer orders, collections, merchandise returns and
inventory monitoring. Through the use of proprietary software, each of our stores is network linked directly to corporate
headquarters enabling us to monitor single store performance on a daily basis. This network system assists the store manager in
(i) tracking merchandise on the showroom floor and warehouse, (ii) minimizing delivery times, (iii) assisting with product
purchasing and (iv) matching customer needs with available inventory.

Lease Agreement Approval, Renewal and Collection

One of the factors in the success of our store-based operations is timely cash collections, which are monitored by store
managers. Customers are contacted within a few days after their lease payment due dates to encourage them to keep their
agreement current. Careful attention to cash collections is particularly important in sales and lease ownership operations, where
the customer typically has the option to cancel the agreement at any time and each contractually due payment is generally
considered a renewal of the agreement.

We generally perform no formal credit check with third party service providers with respect to store-based sales and lease
ownership customers. We do, however, verify employment or other reliable sources of income and personal references supplied
by the customer. Generally our agreements for merchandise require payments in advance and the merchandise normally is
recovered if a payment is significantly in arrears. We currently do not extend credit to our customers at store-based operations.

Our Progressive business uses a proprietary decisioning algorithm to determine which customers would meet our leasing
qualifications. The transaction is completed through our online portal or through a point of sale integration with our retail
partners. Contractual renewal payments are based on a customer’s pay frequency and are typically originated through
automated clearing house payments. If the payment is unsuccessful, collections are managed in-house through our call center
and proprietary lease management system. The call center contacts customers within a few days of the lease payment due date
to encourage them to keep their agreement current. If the customer chooses to return the merchandise, arrangements are made
to receive the merchandise from the customer, either through our retail partners, our Draper location, our customer service hubs
or our Company-operated stores.

Company-wide lease merchandise adjustments (or "shrinkage") as a percentage of combined lease revenues were 5.1%, 4.5%
and 3.3% in 2015, 2014 and 2013, respectively. We believe that our collection and recovery policies materially comply with
applicable law and we discipline any employee we determine to have deviated from such policies.

Credit Agreement Approval and Collection

DAMI offers a variety of financing programs to below-prime customers that are originated through a federally insured bank.
We believe DAMI provides the following strategic benefits when combined with Progressive's product offerings:

• Enhanced product for retail partners - DAMI will enhance Progressive's best-in-class point-of-sale product with an
integrated solution for below-prime customers. DAMI has a centralized, scalable decisioning model with a long
operating history, deployed through its established bank partner, and a sophisticated receivable management system.

• Higher consumer credit quality - DAMI primarily serves customers with FICO scores between 600 and 700, which
make up approximately a quarter of the U.S. population. These customers generally have greater purchasing power
with stronger credit profiles than Progressive's current customers.

• Expanded customer base - In addition to complementing Progressive's traditional offering for existing and

prospective retail partners, DAMI's strong relationships in customer services offer an additional channel for longer-
term growth.

DAMI uses an underwriting model that provides standardized credit decisions, including borrowing limit amounts. Credit
decisions are primarily based on the customer’s credit rating and ability-to-pay ratio. Customer credit terms are based on the
underlying agreement with the merchant. Loans receivable are unsecured, and collections on loans receivable are managed in-
house through DAMI's call center and proprietary loans receivable management system.

Customer Service

A critical component of the success in our operations is our commitment to developing good relationships with our customers.
Building a relationship with the customer that ensures customer satisfaction is critical because customers of store-based
operations and Progressive have the option of returning the leased merchandise at any time or after a very short initial term.
Our goal, therefore, is to develop positive associations about the Company and our products, service, and support in the minds
of our customers from the moment they enter our showrooms and the showrooms of our retail partners. We demonstrate our
commitment to superior customer service by providing customers with access to product through multiple channels, including
Aarons.com and Progressive's network of retail partner locations, rapid delivery of leased merchandise (often on same or next
day delivery) and investments in technology that improve the customer experience. Our Progressive business offers centralized
customer and retailer support through contact centers located in Draper, Utah and Glendale, Arizona.

Through Aaron’s Service Plus, customers receive multiple service benefits. These benefits vary according to applicable state
law but generally include the 120-day same-as-cash option, merchandise repair service, lifetime reinstatement and other
discounts and benefits. In order to increase leasing at existing stores, we foster relationships with existing customers to attract
recurring business, and many new agreements are attributable to repeat customers. Similarly, we believe our strong focus on
customer satisfaction at Progressive and DAMI generates repeat business and long-lasting relationships with our retail and
merchant partners.

In the third quarter of 2015, the Company announced the launch of Approve.Me, which is a proprietary platform that integrates
with retailers' point-of-sale systems and provides a single interface for all customers seeking credit approval or lease options,
from prime to second-look financing, or to Progressive's lease offering. The platform combines multiple credit and leasing
providers into one application using a single interface. Approve.Me is compatible with most primary or secondary providers
and is designed to give retailers a faster and more efficient way to service customers seeking to finance transactions or secure a
lease option. We believe Approve.Me provides the following benefits to retail partners:

• Established product - Approve.Me has been successfully piloted and is currently being used in over 7,200 retail doors.
Increased sales - Approve.Me's streamlined approach sends customer applications through each option, from prime to
•
second-look financing, or to Progressive's no-credit-needed lease option, quickly and seamlessly. This more efficient
process typically results in more applications and higher overall approval rates.

• Ease of use - The time a customer spends going through the application and approval process is reduced from about

•

an hour (for multiple applications) to just a few minutes.
Improved analytics - Approve.Me gives retail partners access to a comprehensive view of credit decisioning and lease
options thereby allowing partners to better analyze and improve their overall financing/leasing flow.

Our emphasis on customer service requires that we develop skilled, effective employees who value our customers and project a
genuine desire to serve their needs. To meet this requirement, we have developed a field development program, one of the most
comprehensive employee training programs in the industry. Our field development program is designed to provide a uniform
customer service experience. The primary focus of the field development program is equipping new associates with the
knowledge and skills needed to build strong relationships with our customers. Our learning and development coaches provide
live interactive instruction via webinars and by facilitating hands-on training in designated training stores. The program is also
complemented with a robust e-learning library. Additionally, Aaron’s has a management development program that offers
development for current and future store managers. Also, we periodically produce video-based communications on a variety of
topics pertinent to store associates and regional managers regarding current Company initiatives.

Purchasing and Retail Relationships

For our store-based operations, our product mix is determined by store managers in consultation with regional managers,
divisional vice presidents and our merchandising department based on an analysis of customer demands. The following table
shows the percentage of the Company’s store-based revenues for the years ended December 31, 2015, 2014 and 2013
attributable to different merchandise categories:

Merchandise Category
Furniture
Electronics
Appliances
Computers
Other

2015
42%
25%
24%
7%
2%

2014
39%
26%
24%
9%
2%

2013
36%
29%
22%
9%
4%

We purchase the majority of our merchandise directly from manufacturers, with the balance from local distributors. To a lesser
extent, we also may sell or release certain merchandise returned by our Progressive customers. One of our largest suppliers is
our own Woodhaven Furniture Industries division, which supplies the majority of the upholstered furniture and bedding we
lease or sell. Integrated manufacturing enables us to control the quality, cost, delivery, styling, durability and quantity of a
substantial portion of our furniture and bedding merchandise and provides us with a reliable source of products. We have no
long-term agreements for the purchase of merchandise.

The following table shows the percentage of Progressive’s revenues for the year ended December 31, 2015 and 2014
attributable to different retail partner categories:

Retail Partner Category
Furniture
Mattress
Auto electronics
Mobile
Jewelry
Other

2015
53%
20%
12%
8%
4%
3%

2014
44%
24%
13%
12%
4%
3%

During 2015, approximately 34% of the lease merchandise acquired by Progressive and subsequently leased to customers was
concentrated in two retail partners.

Distribution for Store-based Operations

Sales and lease ownership operations utilize our 17 fulfillment centers to control merchandise. These centers average
approximately 118,000 square feet, giving us approximately 2.0 million square feet of logistical capacity.

We believe that our network of fulfillment centers provides us with a strategic advantage over our competitors. Our distribution
system allows us to deliver merchandise promptly to our stores in order to quickly meet customer demand and effectively
manage inventory levels. Most of our continental U.S. stores are within a 250-mile radius of a fulfillment center, facilitating
timely shipment of products to the stores and fast delivery of orders to customers.

We realize freight savings from bulk discounts and more efficient distribution of merchandise by using fulfillment centers. We
use our own tractor-trailers, local delivery trucks and various contract carriers to make weekly deliveries to individual stores.

Marketing and Advertising

Our marketing for store-based operations targets both current Aaron’s customers and potential customers. We feature brand
name products available through our no-credit-needed lease ownership plans. We reach our customer demographics by utilizing
national and local broadcast, network television, cable television and radio with a combination of brand/image messaging and
product/price promotions. Examples of networks include FOX, TBS, TELEMUNDO, UNIVISION and multiple general
market networks that target our customer. In addition, we have enhanced our broadcast presence with digital marketing and via
social environments such as Facebook and Twitter.

We target new and current customers each month distributing over 29 million, four-page circulars to homes in the United States
and Canada. The circulars advertise brand name merchandise along with the features, options, and benefits of Aaron’s no-
credit-needed lease ownership plans. We also distribute millions of email and direct mail promotions on an annual basis.

Aaron’s sponsors event broadcasts at various levels along with select professional and collegiate sports, such as NFL and NBA
teams. As a long-time supporter of NASCAR, Aaron’s wrapped up its 17th year of sponsoring the Aaron's Dream Machine in
several NASCAR series, which in recent years has included Michael Waltrip Racing in the NASCAR Sprint Cup Series. In
early 2016, Aaron’s announced continued support of NASCAR with a new, multi-year agreement with Michael Waltrip as a
spokesperson. All of Aaron’s sports partnerships are supported with advertising, promotional, marketing and brand activation
initiatives that we believe significantly enhance the Company’s brand awareness and customer loyalty.

Progressive and DAMI execute their marketing strategy in partnership with retailers and other merchants. This is typically
accomplished through in-store signage and marketing material, direct marketing activities, and the education of sales
associates.

Competition

The lease-to-own industry is highly competitive. Our largest competitor for store-based operations is Rent-A-Center, Inc.
("Rent-A-Center"). Aaron’s and Rent-A-Center, which are the two largest lease-to-own industry participants, account for
approximately 4,900 of the 8,900 lease-to-own stores in the United States, Canada and Mexico. Our stores compete with other
national and regional lease-to-own businesses, as well as with rental stores that do not offer their customers a purchase option.
We also compete with retail stores for customers desiring to purchase merchandise for cash or on credit. Competition is based
primarily on store location, product selection and availability, customer service and lease rates and terms.

Although an emerging market, the virtual lease-to-own industry is also competitive. Progressive's largest competitor is
Acceptance Now, a division of Rent-A-Center. Other competition is fragmented and includes regional participants.

Working Capital

We are required to maintain significant levels of lease merchandise in order to provide the service demanded by our customers
and to ensure timely delivery of our products. Consistent and dependable sources of liquidity are required to maintain such
merchandise levels. Failure to maintain appropriate levels of merchandise could materially adversely affect our customer
relationships and our business. We believe our operating cash flows, credit availability under our financing agreements and
other sources of financing are adequate to meet our normal liquidity requirements.

Raw Materials

The principal raw materials we use in furniture manufacturing are fabric, foam, fiber, wire-innerspring assemblies, plywood,
oriented strand board and hardwood. All of these materials are purchased in the open market from unaffiliated sources. We are
not dependent on any single supplier. None of the raw materials we use are in short supply.

Seasonality

Our revenue mix is moderately seasonal for both our store-based operations and our Progressive business. The first quarter of
each year generally has higher revenues than any other quarter. This is primarily due to realizing the full benefit of business that
historically gradually increases in the fourth quarter as a result of the holiday season, as well as the receipt by our customers in
the first quarter of federal and state income tax refunds. Our customers will more frequently exercise the early purchase option
on their existing lease agreements or purchase merchandise off the showroom floor during the first quarter of the year. We tend
to experience slower growth in the number of agreements on lease in the third quarter for store-based operations and in the
second quarter for our Progressive business when compared to the other quarters of the year. We expect these trends to continue
in future periods.

Industry Overview

The Lease-to-Own Industry

The lease-to-own industry offers customers an alternative to traditional methods of obtaining electronics, computers, home
furnishings and appliances. In a standard industry lease-to-own transaction, the customer has the option to acquire ownership of
merchandise over a fixed term, usually 12 to 24 months, normally by making weekly, semi-monthly, or monthly lease
payments. Upon making regular periodic lease payments, the customer may cancel the agreement at any time by returning the
merchandise to the store. If the customer leases the item through the completion of the full term, he or she then obtains
ownership of the item. The customer may also purchase the item at any time by tendering the contractually specified payment.

The lease-to-own model is particularly attractive to customers who are unable to pay the full upfront purchase price for
merchandise or who lack the credit to qualify for conventional financing programs. Other individuals who find the lease-to-
own model attractive are customers who, despite access to credit, do not wish to incur additional debt, have only a temporary
need for the merchandise or desire to field test a particular brand or model before purchasing it.

Aaron’s Sales and Lease Ownership versus Traditional Lease-to-Own

We blend elements of lease-to-own and traditional retailing by providing customers with the option to either lease merchandise
with the opportunity to obtain ownership or to purchase merchandise outright. We believe our sales and lease ownership
program is a more effective method of retailing our merchandise to lower and middle income customers than a typical lease-to-
own business or the traditional method of credit installment sales.

Our model is distinctive from the conventional lease-to-own model in that we encourage our customers to obtain ownership of
their leased merchandise. Based upon our own data and industry data, our customers obtain ownership more often
(approximately 45%) than in the lease-to-own businesses in general (approximately 25%).

We believe our sales and lease ownership model offers the following distinguishing characteristics when compared to
traditional lease-to-own stores:

• Lower total cost - Our agreement terms generally provide a lower cost of ownership to the customer.

• Wider merchandise selection - We generally offer a larger selection of higher-quality merchandise.

• Larger store layout - Aaron's Sales & Lease Ownership stores average 7,200 square feet, which is significantly larger

than the average size of our largest competitor’s lease-to-own stores.

• Fewer payments - Our typical plan offers semi-monthly or monthly payments versus the industry standard of weekly

payments. Our agreements also usually provide for a shorter term for the customer to obtain ownership.

• Flexible payment methods - We offer our customers the opportunity to pay by cash, check, ACH, debit card or credit

card. Our Aaron’s Sales and Lease Ownership stores currently receive approximately 66% of their payment volume (in
dollars) from customers by check, debit card or credit card. For our HomeSmart stores, that percentage is
approximately 57%.

We believe our sales and lease ownership model also compares well against traditional retailers in areas such as store size,
merchandise selection and the latest product offerings. As technology advances and home furnishings and appliances evolve,
we expect to continue offering our customers the latest product at affordable prices.

Unlike transactions with traditional retailers, in which the customer is committed to purchasing the merchandise, our sales and
lease ownership transactions are not credit installment contracts. Therefore, the customer may elect to terminate the transaction
after a short, initial lease period. Our sales and lease ownership stores offer an up-front "cash and carry" purchase option and
generally a 120-day same-as-cash option on most merchandise at prices that we believe are competitive with traditional
retailers. In addition, our Progressive business provides a 90-day buy-out option on lease-purchase solutions offered through
traditional retailers.

Government Regulation

Our operations are extensively regulated by and subject to the requirements of various federal, state and local laws and
regulations. In general, such laws regulate applications for leases, late charges and other fees, the form of disclosure statements,
the substance and sequence of required disclosures, the content of advertising materials and certain collection procedures.
Violations of certain provisions of these laws may result in material penalties. We are unable to predict the nature or effect on
our operations or earnings of unknown future legislation, regulations and judicial decisions or future interpretations of existing
and future legislation or regulations relating to our operations, and there can be no assurance that future laws, decisions or
interpretations will not have a material adverse effect on our operations or earnings.

A summary of certain of the state and federal laws under which we operate follows. This summary does not purport to be a
complete summary of the laws referred to below or of all the laws regulating our operations.

purchase laws limit the total amount that a customer may be charged for an item, or regulate the "cost-of-rental" amount that
lease-to-own companies may charge on lease-to-own transactions, generally defining "cost-of-rental" as lease fees paid in
excess of the "retail" price of the goods. Our long-established policy in all states is to disclose the terms of our lease purchase
transactions as a matter of good business ethics and customer service. We believe we are in material compliance with the
various state lease purchase laws in those states where we use a lease purchase form of agreement. At the present time, no
federal law specifically regulates the lease-to-own industry. Federal legislation to regulate the industry has been proposed from
time to time.

There has been increased legislative attention in the United States, at both the federal and state levels, on consumer debt
transactions in general, which may result in an increase in legislative regulatory efforts directed at the lease-to-own industry.
We cannot predict whether any such legislation will be enacted and what the impact of such legislation would be on us.
Although we are unable to predict the results of any regulatory initiatives, we do not believe that existing and currently
proposed regulations will have a material adverse impact on our sales and lease ownership or other operations.

Our sales and lease ownership franchise program is subject to Federal Trade Commission, or FTC, regulation and various state
laws regulating the offer and sale of franchises. Several state laws also regulate substantive aspects of the franchisor-franchisee
relationship. The FTC requires us to furnish to prospective franchisees a franchise disclosure document containing prescribed
information. A number of states in which we might consider franchising also regulate the sale of franchises and require
registration of the franchise disclosure document with state authorities. We believe we are in material compliance with all
applicable franchise laws in those states in which we do business and with similar laws in Canada.

DAMI is subject to various federal and state laws that address lending regulations, consumer information, consumer rights, and
certain credit card specific requirements, among other things. In addition, DAMI issues credit cards through a bank partner and
therefore is subject to the bank's Federal Deposit Insurance Corporation regulators. Several regulations affecting DAMI have
been updated in recent years through The Credit Card Act and The Dodd-Frank Wall Street Reform and Consumer Protection
Act (the Dodd-Frank Act). Additional regulations are being developed, as the attention placed on consumer debt transactions
has grown significantly. We believe we are in material compliance with all applicable laws and regulations. While we are
unable to predict the results of any regulatory initiatives, we do not believe that existing and currently proposed regulations will
have a material adverse impact on our operations.

Supply Chain Diligence and Transparency

Section 1502 of the Dodd-Frank Act was adopted to further the humanitarian goal of ending the violent conflict and human
rights abuses in the Democratic Republic of the Congo and adjoining countries ("DRC"). This conflict has been partially
financed by the exploitation and trade of tantalum, tin, tungsten and gold, often referred to as conflict minerals, which originate
from mines or smelters in the region. Securities and Exchange Commission ("SEC") rules adopted pursuant to the Dodd-Frank
Act require reporting companies to disclose annually, among other things, whether any such minerals that are necessary to the
functionality or production of products they manufactured during the prior calendar year originated in the DRC and, if so,
whether the related revenues were used to support the conflict and/or abuses.

Some of the products manufactured by Woodhaven Furniture Industries, our manufacturing division, may contain tantalum, tin,
tungsten and/or gold. Consequently, in compliance with SEC rules, we have adopted a policy on conflict minerals, which can
be found on our website. We have also implemented a supply chain due diligence and risk mitigation process with reference to
the Organisation for Economic Co-operation and Development, or the OECD, guidance approved by the SEC to assess and
report annually whether our products are conflict free.

We expect our suppliers to comply with the OECD guidance and industry standards and to ensure that their supply chains
conform to our policy and the OECD guidance. We plan to mitigate identified risks by working with our suppliers and may
alter our sources of supply or modify our product design if circumstances require.

Employees

At December 31, 2015, the Company had approximately 12,700 employees. None of our employees are covered by a collective
bargaining agreement and we believe that our relations with employees are good.

Available Information

We make available free of charge on our Internet website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K and amendments to those reports and the Proxy Statement for our Annual Meeting of
Shareholders. Our Internet address is investor.aarons.com.

ITEM 1A. RISK FACTORS

Aaron’s business is subject to certain risks and uncertainties. Any of the following risk factors could cause our actual results to
differ materially from historical or anticipated results. These risks and uncertainties are not the only ones we face, but represent
the risks that we believe are material. However, there may be additional risks that we currently consider not to be material or of
which we are not currently aware, and any of these risks could cause our actual results to differ materially from historical or
anticipated results.

We may be subject to new or additional federal and state financial services and consumer protection laws and
regulations (or changes in interpretations of existing laws and regulations) that could expose us to government
investigations, significant compliance costs or burdens or force us to change our business practices in a manner that
may be materially adverse to our operations, prospects or financial condition.

Currently, nearly every state, the District of Columbia, and most provinces in Canada specifically regulate lease-to-own
transactions. This includes states in which we currently operate Aaron’s Sales & Lease Ownership stores, as well as states in
which our Progressive business has retail partners. While no federal law currently specifically regulates the lease-to-own
industry, federal legislation to regulate the industry has been proposed in the past and may be proposed in the future. For
example, federal and regulatory authorities such as the Consumer Financial Protection Bureau (the "CFPB") and the FTC are
increasingly focused on the subprime financial marketplace in which the lease-to-own industry operates, and may propose and
adopt new legislation (or interpret existing regulations) that could result in significant adverse changes in the regulatory
landscape for businesses such as ours. Furthermore, our debt collections practices are subject to federal and state laws and
regulations. Many of these laws and regulations are evolving, unclear and inconsistent across various jurisdictions, and
ensuring compliance with them is difficult and costly. For example, with increasing frequency, federal and state regulators are
holding businesses like ours to higher standards of training, monitoring and compliance. Failure by us or those businesses to
comply with the laws and regulations to which we are or may become subject could result in fines, penalties or limitations on
our ability to conduct our business, or federal or state actions, or private litigation, any of which could significantly harm our
reputation with consumers and Progressive’s and DAMI’s retail and merchant partners and could materially and adversely
affect our business, prospects and financial condition.

The risks in Progressive’s virtual lease-to-own business differ in some potentially significant respects from the risks of Aaron’s
store-based lease-to-own business. These risks, whether arising from the offer by third party retailers of Progressive’s lease-
purchase solution alongside traditional cash, check or credit payment options or otherwise, may also be materially adverse to
our operations, prospects or financial condition. Furthermore, Progressive’s business relies on third party retailers (over whom
Progressive cannot exercise the degree of control and oversight that Aaron’s and its franchisees can assert over their own
respective employees) for many important business functions, from advertising through assistance with lease transaction
applications. Accordingly, there is the potential that regulators may target virtual lease-to-own transactions and/or implement
new legislation (or interpret existing regulations) that could negatively impact Progressive’s ability to offer virtual lease-to-own
programs through third party retail partners.

In addition, as we execute on our strategic plans, we may continue to expand into complementary businesses, such as DAMI,
that engage in financial, banking or lending services that are subject to a variety of statutes and regulatory requirements in
addition to those regulations currently applicable to our legacy operations, which may impose significant costs, limitations or
prohibitions on the manner in which we currently conduct our businesses as well as those we may acquire in the future. Any
additional laws or regulations may result in changes in the way our operations are regulated, exposing us to increased
regulatory oversight, more burdensome regulations and increased litigation risk, each of which could have a material adverse
effect on us.

Any proposed rulemaking by the CFPB, the FTC or any other federal or state regulators or other adverse changes in (or
interpretations of) existing laws and regulations, the passage of new adverse legislation or regulations by the federal
government or the states applicable to our traditional lease-to-own business, our Progressive virtual lease-to-own business, our
Aarons.com e-commerce business and any complementary businesses into which we may expand could materially increase
both our compliance costs and the risk that we could be subject to government investigations and subject to sanctions if we are
not in compliance. In addition, new burdensome laws or regulations could force us to modify our business model, expose us to
increased litigation risk, and might reduce the economic potential of our sales and lease ownership operations.

Progressive’s virtual lease-to-own business differs in some potentially significant respects from the risks of Aaron’s
store-based lease-to-own business. The risks could have a material negative effect on Progressive, which could result in a
material adverse effect on our entire business.

As discussed above, our Progressive segment offers its lease-to-own solution through the stores of third party retailers.
Progressive consequently faces some different risks than are associated with Aaron’s sales and lease ownership concept, which
Aaron’s and its franchisees offer through their own stores. These potential risks include, among others, Progressive’s:

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reliance on third party retailers (over whom Progressive cannot exercise the degree of control and oversight that
Aaron’s and its franchisees can assert over their own respective employees) for many important business functions,
from advertising through assistance with lease transaction applications;
revenue concentration in the customers of a relatively small number of retailers, as further discussed below;
lack of control over, and more product diversity within, its lease merchandise inventory relative to Aaron’s sale and
lease ownership business, which can complicate matters such as merchandise repair and disposition of merchandise
that is returned;
possibly different regulatory risks than apply to Aaron’s sales and lease ownership business, whether arising from the
offer by third party retailers of Progressive’s lease-purchase solution alongside traditional cash, check or credit
payment options or otherwise;
reliance on automatic bank account drafts for lease payments, which may become disfavored as a payment method for
these transactions by regulators;
potential that regulators may target the virtual lease-to-own transaction and/or new regulations or legislation could be
adopted (or existing laws and regulations may be interpreted) that negatively impact Progressive’s ability to offer
virtual lease-to-own programs through third party retail partners; and
indemnification obligations to Progressive’s retail partners and their service providers for losses stemming from
Progressive’s failure to perform with respect to its products and services.

These risks could have a material negative effect on Progressive, which could result in a material adverse effect on our entire
business.

We continue to implement a new strategic plan and there is no guarantee that the new strategic plan will produce
results superior to those achieved under the Company’s prior plan.

We have a new strategic plan that, in addition to acquiring Progressive in 2014, includes focusing on profitably growing our
stores; accelerating our omni-channel platform; promoting communication, coordination and integration; and championing
compliance.

While we have always engaged in elements of the new strategy, the new strategy calls for increased emphasis on certain
elements while moderating the focus on new store openings that had traditionally been a central tenet of the Company’s
strategy. There can be no guarantee that the new strategy will yield the results we currently anticipate (or results that will
exceed those that might be obtained under the prior strategy), if we fail to successfully execute on one or more elements of the
new strategy, even if we successfully implement one or more other components.

We may not fully execute on one or more elements of the new strategy due to any number of reasons, including, for instance,
because of the division of management, financial and Company resources among multiple objectives, or other factors beyond
or not completely within our control. The successful execution of our new strategy depends on, among other things, our ability
to:

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improve same store revenues in stores that may be maturing;
drive recurring cost savings to recapture margin;
identify which markets are best suited for more disciplined store growth;
strengthen our franchise network; and
successfully manage and grow our Aarons.com e-commerce platform

If we cannot address these challenges successfully, or overcome other critical obstacles that may emerge as we gain experience
with our new strategy, we may not be able to achieve our revenue or profitability goals at the rates we currently contemplate, if
at all.

Our core business faces many challenges which could materially and adversely affect our overall results of operations.

Our traditional lease-to-own store-based ("core") business faces a number of challenges, particularly from the continued
expansion of digital retail - which includes a wide array of e-commerce retailers that have established far larger digital
operations than our Aarons.com e-commerce platform has been able to achieve to date. Increasing competition from the digital
sector may reduce the market share held by our core business as well as its operating margins, and may materially and
adversely affect our overall results of operations. Furthermore, as our Progressive virtual lease-to-own solution continues to
partner with traditional retailers, including "big box" retailers, those retailers may increasingly compete with our core business,
including our franchisees. For example, our Company-operated stores experienced year to date same store revenue declines of
4.1% and 2.8% in 2015 and 2014, respectively. Additionally, our franchised stores experienced year to date same store revenue
declines of 0.9% and 2.5% in 2015 and 2014, respectively. We calculate same store revenue growth by comparing revenues for
comparable periods for stores open during the entirety of those periods. A number of factors have historically affected our same
store revenues, including:

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changes in competition, particularly from the digital sector;
general economic conditions;
new product introductions;
consumer trends;
changes in our merchandise mix;
timing of promotional events; and
our ability to execute our business strategy effectively.

If our core business is unable to successfully address these challenges, our overall business and results of operations may be
materially and adversely affected as well.

Continuation or worsening of current economic conditions could result in decreased revenues or increased costs. The
geographic concentration of our Sales & Lease Ownership stores, as well as those of Progressive’s retail partners, may
magnify the impact of conditions in a particular region, including economic downturns and other occurrences.

The U.S. economy continues to experience prolonged uncertainty. We believe that the extended duration of current economic
conditions, particularly as they apply to our customer base, may be resulting in our customers curtailing entering into sales and
lease ownership agreements for the types of merchandise we offer, resulting in decreased revenues. Any increases in
unemployment may result in increased defaults on lease payments, resulting in increased merchandise return costs and
merchandise losses.

The concentration of our Sales & Lease Ownership stores, and/or those of our retail partners at Progressive, in one region or a
limited number of markets may expose us to risks of adverse economic developments that are greater than if our store portfolio
and retail partners were more geographically diverse. For example, during 2015, approximately 18% of our core business’s
store-based revenues were generated in Texas. Given our concentration of stores in Texas, the downturn and prolonged
uncertainty in the oil and gas industry could have a material adverse effect on our overall business.

In addition, our store operations, as well as those of our retail partners at Progressive, are subject to the effects of adverse acts
of nature, such as winter storms, hurricanes, hail storms, strong winds, earthquakes and tornados, which have in the past caused
damage such as flooding and other damage to our stores and those of our retail partners in specific geographic locations.
Additionally, we cannot assure you that the amount of our hurricane, windstorm, earthquake, flood, business interruption or
other casualty insurance we maintain from time to time would entirely cover damages caused by any such event.

We could lose our access to data sources, which could cause us competitive harm and have a material adverse effect on
our business, operating results, and financial condition.

We are heavily dependent on data provided by third party providers. For example, our Progressive business employs a
proprietary decisioning algorithm when making lease approval decisions for its customers. This algorithm depends extensively
upon continued access to and receipt of data from external sources, such as third party data vendors. In addition, our
Aarons.com and DAMI businesses are similarly dependent on customer attribute data provided by external sources. Our data
providers could stop providing data, provide untimely, incorrect or incomplete data, or increase the costs for their data for a
variety of reasons, including a perception that our systems are insecure as a result of a data security breach, regulatory concerns
or for competitive reasons. We could also become subject to increased legislative, regulatory or judicial restrictions or mandates
on the collection, disclosure or use of such data, in particular if such data is not collected by our providers in a way that allows
us to legally use the data. If we were to lose access to this external data or if our access or use were restricted or were to

become less economical or desirable, our Progressive, Aarons.com and DAMI businesses would be negatively impacted, which
would adversely affect our operating results and financial condition. We cannot provide assurance that we will be successful in
maintaining our relationships with these external data source providers or that we will be able to continue to obtain data from
them on acceptable terms or at all. Furthermore, we cannot provide assurance that we will be able to obtain data from
alternative sources if our current sources become unavailable.

Progressive’s proprietary algorithm used to approve customers could no longer be indicative of our customer’s ability to
pay.

We believe Progressive’s proprietary, centralized underwriting process to be a key to the success of the Progressive business.
We assume behavior and attributes observed for prior customers, among other factors, are indicative of performance by future
customers. Unexpected changes in behavior caused by macroeconomic conditions, changes in consumer preferences,
availability of alternative products or other factors, however, could lead to increased incidence and costs related to unpaid
leases and/or merchandise losses.

Progressive’s loss of operating revenues from key retail partners could materially and adversely affect our business.

Progressive’s relationship with its largest retail partners will have a significant impact on our operating revenues in future
periods. The loss of any such key retailers would have a material adverse effect on our business. In addition, any publicity
associated with the loss of any of Progressive’s large retail partners could harm our reputation, making it more difficult to
attract and retain consumers and other retail partners, and could lessen Progressive’s negotiating power with its remaining and
prospective retail partners.

Many of Progressive’s contracts with its retail partners can be terminated by them on relatively short notice, and all can be
terminated in limited circumstances, such as our material breach or insolvency, our failure to meet agreed-upon service levels,
certain changes in control of Progressive, and its inability or unwillingness to agree to requested pricing changes. There can be
no assurance that Progressive will be able to continue its relationships with its largest retail partners on the same or more
favorable terms in future periods or that its relationships will continue beyond the terms of our existing contracts with them.
Our operating revenues and operating results could suffer if, among other things, any of Progressive’s retail partners
renegotiates, terminates or fails to renew, or fails to renew on similar or favorable terms, their agreements with Progressive or
otherwise chooses to modify the level of support they provide for Progressive’s lease-purchase option.

Failure to successfully manage and grow our Aarons.com e-commerce platform could materially adversely affect our
business and future prospects.

Our Aarons.com e-commerce platform provides customers the ability to review our product offerings and prices and enter into
lease agreements as well as make payments on existing leases from the comfort of their homes and on their mobile devices.
Our e-commerce platform is a significant component of our strategic plan and we believe will drive future growth of our
business. In order to promote our products and services and allow customers to transact online and reach new customers, we
must effectively create, design, maintain, and improve our e-commerce platform. There can be no assurance that we will be
able to create, design, maintain, and improve or grow our e-commerce platform in a profitable manner.

DAMI’s "second-look" credit programs for below-prime consumers differ in significant respects from the risks of
Aaron’s store-based lease-to-own business. The risks could have a material negative effect on Progressive, which could
result in a material adverse effect on our entire business.

As discussed above, as we execute on our strategic plans, we may continue to expand into complementary businesses that
engage in financial, banking or lending services. For example, DAMI, which through its HELPcard® and other private label
credit products, offers merchant partners one source for a variety of open-end credit programs for below-prime consumers, is a
business that differs in significant respects from our core business. Consequently, DAMI faces different risks than are
associated with Aaron’s sales and lease ownership concept, which Aaron’s and its franchisees offer through their own stores.
Because DAMI is operated as a wholly-owned subsidiary of Progressive, the risks DAMI faces could have a material negative
effect on Progressive, which could result in a material adverse effect on our entire business. These potential risks include,
among others, DAMI’s:

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reliance on third party retailers (over whom DAMI cannot exercise the degree of control and oversight that Aaron’s
core business, including franchisees, can assert over their own respective employees) for many important business
functions, from advertising through assistance with finance applications;

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reliance on a single bank partner to issue DAMI’s HELPcard® and other credit products. The bank’s regulators could
at any time limit or otherwise modify the bank’s ability to continue its relationship with DAMI and any significant
interruption of this relationship would result in DAMI being unable to acquire new receivables and provide other
credit products. It is possible that a regulatory position or action taken with respect to DAMI’s issuing bank might
result in the bank’s inability or unwillingness to originate future credit products on DAMI’s behalf or in partnership
with it, which would adversely affect DAMI’s ability to grow its point-of-sale and direct-to-consumer credit products
and other consumer credit offerings and underlying receivables. In addition, DAMI’s agreement with its issuing bank
partner has a scheduled expiration date. If DAMI is unable to extend or execute a new agreement with its issuing bank
upon the expiration of its current agreement, or if its existing agreement was terminated or otherwise disrupted, there
is a risk that DAMI would not be able to enter into an agreement with an alternative bank provider on terms that
DAMI would consider favorable or in a timely manner without disruption of its business; and

•

different regulatory risks than those applicable to Aaron’s and Progressive's sales and lease ownership businesses,
including risks arising from state credit laws and the offering of open-end credit and the potential that regulators may
target DAMI’s operating model and the interest rates it charges.

These risks could have a material negative effect on Progressive, which could result in a material adverse effect on our entire
business.

If we fail to establish and maintain effective internal control over financial reporting and disclosure controls and
procedures, particularly with respect to our Progressive and DAMI businesses, we may not be able to accurately report
our financial results, or report them in a timely manner.

As a public reporting company subject to the rules and regulations established from time to time by the SEC and the New York
Stock Exchange, we are required to, among other things, establish and periodically evaluate procedures with respect to our
disclosure controls and procedures. In addition, as a public company, we are required to document and test our internal control
over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 so that our management can certify, on an
annual basis, that our internal control over financial reporting is effective.

Prior to their acquisition by us, our Progressive and DAMI businesses were private companies and were not required to
establish disclosure controls and procedures. In particular, unlike our core business, these businesses have not historically
operated under a fully documented and annually tested system for internal control over financial reporting that is required for
public companies by Section 404 of the Sarbanes-Oxley Act.

If we fail to establish and maintain effective internal control over financial reporting and disclosure controls and procedures -
particularly in our Progressive and DAMI businesses - we may not be able to accurately report our financial results, or report
them in a timely manner, which could cause a decline in our stock price and adversely affect our results of operations and
financial condition. In addition, if our senior management is unable to conclude that we have effective internal control over
financial reporting, or to certify the effectiveness of such controls, or if our independent registered public accounting firm
cannot render an unqualified opinion on management’s assessment and the effectiveness of our internal control over financial
reporting, when required, or if material weaknesses in our internal controls are identified, we could be subject to increased
regulatory scrutiny and a loss of public and investor confidence, which could also have a material adverse effect on our
business and our stock price.

If we do not maintain the privacy and security of customer, employee, supplier or Company information, we could
damage our reputation, incur substantial additional costs and become subject to litigation and regulatory enforcement
actions.

Our business involves the storage and transmission of customers’ personal information, consumer preferences and credit card
information, as well as confidential information about our customers, employees, our suppliers and our Company. We also
serve as an information technology provider to our franchisees including storing and processing information related to their
customers on our systems. Our information systems are vulnerable to an increasing threat of continually evolving cybersecurity
risks. Any significant compromise or breach of our data security, whether external or internal, or misuse of employee or
customer data, could significantly damage our reputation, cause the disclosure of confidential customer, associate, supplier or
Company information, and result in significant costs, lost revenues or sales, fines, regulatory enforcement actions and lawsuits.
For example, we are currently subject to settlements with the FTC as well as the State of California and the Commonwealth of
Pennsylvania regarding our business practices and compliance with privacy laws in those states, and data breaches of this
nature could result in additional penalties under the terms of those settlements.

Computer hackers may attempt to penetrate our network security and, if successful, misappropriate confidential customer or
employee information. In addition, one of our employees, contractors or other third parties with whom we do business may
attempt to circumvent our security measures in order to obtain such information, or inadvertently cause a breach involving such
information. While we have implemented systems and processes to protect against unauthorized access to or use of secured
data and to prevent data loss, there is no guarantee that these procedures are adequate to safeguard against all data security
breaches or misuse of the data. The regulatory environment related to information security, data collection and use, and privacy
is increasingly rigorous, with new and constantly changing requirements applicable to our business, and compliance with those
requirements could result in additional costs. These costs associated with information security, such as increased investment in
technology, the costs of compliance with privacy laws, and costs incurred to prevent or remediate information security
breaches, could adversely impact our business.

We have experienced security incidents in the past, including an incident in which customer information was compromised,
although no security incidents have resulted in a material loss to date. We are in the process of improving our system security,
although there can be no assurance that these improvements, or others that we implement from time to time, will be effective to
prevent all security incidents. We maintain network security and private liability insurance intended to help mitigate the
financial risk of such incidents, but there can be no guarantee that insurance will be sufficient to cover all losses related to such
incidents.

A significant compromise of sensitive employee or customer information in our possession could result in legal damages and
regulatory penalties. In addition, the costs of defending such actions or remediating breaches could be material. Security
breaches could also harm our reputation with our customers and retail partners, potentially leading to decreased revenues.

If our information technology systems are impaired, our business could be interrupted, our reputation could be harmed
and we may experience lost revenues and increased costs and expenses.

We rely on our information technology systems to process transactions with our customers, including tracking lease payments
on merchandise, and to manage other important functions of our business. Failures of our systems, such as "bugs," crashes,
operator error or catastrophic events, could seriously impair our ability to operate our business. If our information technology
systems are impaired, our business (and that of our franchisees) could be interrupted, our reputation could be harmed, we may
experience lost revenues or sales and we could experience increased costs and expenses to remediate the problem.

If our independent franchisees fail to meet their debt service payments or other obligations under outstanding loans
guaranteed by us as part of a franchise loan program, we may be required to pay to satisfy these obligations which
could have a material adverse effect on our business and financial condition.

We have guaranteed the borrowings of certain franchisees under a franchise loan program with several banks with a maximum
commitment amount of $175.0 million. In the event these franchisees are unable to meet their debt service payments or
otherwise experience events of default, we would be unconditionally liable for a portion of the outstanding balance of the
franchisees’ debt obligations, which at December 31, 2015 was $81.0 million.

We have had no significant losses associated with the franchise loan and guaranty program since its inception. Although we
believe that any losses associated with defaults would be mitigated through recovery of lease merchandise and other assets, we
cannot guarantee that there will be no significant losses in the future or that we will be able to adequately mitigate any such
losses. If we fail to adequately mitigate any such future losses, our business and financial condition could be materially
adversely impacted.

We are subject to laws that regulate franchisor-franchisee relationships. Our ability to enforce our rights against our
franchisees may be adversely affected by these laws, which could impair our growth strategy and cause our franchise
revenues to decline.

As a franchisor, we are subject to regulation by the FTC, state laws and certain Canadian provincial laws regulating the offer
and sale of franchises. Our failure to comply with applicable franchise regulations could cause us to lose franchise fees and
ongoing royalty revenues. Moreover, state and provincial laws that regulate substantive aspects of our relationships with
franchisees may limit our ability to terminate or otherwise resolve conflicts with our franchisees.

We may engage in litigation with our franchisees.

Although we believe we generally enjoy a positive working relationship with the vast majority of our franchisees, the nature of
the franchisor-franchisee relationship may give rise to litigation with our franchisees. In the ordinary course of business, we are
the subject of complaints or litigation from franchisees, usually related to alleged breaches of contract or wrongful termination
under the franchise arrangements. We may also engage in future litigation with franchisees to enforce the terms of our franchise
agreements and compliance with our brand standards as determined necessary to protect our brand, the consistency of our
products and the customer experience. In addition, we may be subject to claims by our franchisees relating to our Franchise
Disclosure Document (the "FDD"), including claims based on financial information contained in our FDD. Engaging in such
litigation may be costly, time-consuming and may distract management and materially adversely affect our relationships with
franchisees and our ability to attract new franchisees. Any negative outcome of these or any other claims could materially
adversely affect our results of operations as well as our ability to expand our franchise system and may damage our reputation
and brand. Furthermore, existing and future franchise-related legislation could subject us to additional litigation risk in the
event we terminate or fail to renew a franchise relationship.

Changes to the current law with respect to the assignment of liabilities in the franchise business model could adversely
impact our profitability.

One of the legal foundations fundamental to the franchise business model has been that, absent special circumstances, a
franchisor is generally not responsible for the acts, omissions or liabilities of its franchisees. Recently, established law has been
challenged and questioned by the plaintiffs’ bar and certain regulators, and the outcome of these challenges and new regulatory
positions remains unknown. If these challenges and/or new positions are successful in altering currently settled law, it could
significantly change the way we and other franchisors conduct business and adversely impact our profitability.

For example, a determination that we are a joint employer with our franchisees or that franchisees are part of one unified
system with joint and several liability under the National Labor Relations Act, statutes administered by the Equal Employment
Opportunity Commission, Occupational Safety and Health Administration ("OSHA"), regulations and other areas of labor and
employment law could subject us and/or our franchisees to liability for the unfair labor practices, wage-and-hour law
violations, employment discrimination law violations, OSHA regulation violations and other employment-related liabilities of
one or more franchisees. Furthermore, any such change in law would create an increased likelihood that certain franchised
networks would be required to employ unionized labor, which could impact franchisors like us through, among other things,
increased labor costs and difficulty in attracting new franchisees. In addition, if these changes were to be expanded outside of
the employment context, we could be held liable for other claims against franchisees. Therefore, any such regulatory action or
court decisions could impact our ability or desire to grow our franchised base and have a material adverse effect on our results
of operations.

Operational and other failures by our franchisees may adversely impact us.

Qualified franchisees who conform to our standards and requirements are important to the overall success of our business. Our
franchisees, however, are independent businesses and not employees, and consequently we cannot and do not control them to
the same extent as our Company-operated stores. Our franchisees may fail in key areas, which could slow our growth, reduce
our franchise revenues, damage our reputation, expose us to regulatory enforcement actions or private litigation and/or cause us
to incur additional costs.

From time to time we are subject to legal and regulatory proceedings which seek material damages or seek to place
significant restrictions on our business operations. These proceedings may be negatively perceived by the public and
materially and adversely affect our business.

We are subject to legal and regulatory proceedings from time to time which may result in material damages or place significant
restrictions on our business operations. For example, we are currently subject to settlements with the FTC as well as the State
of California and the Commonwealth of Pennsylvania regarding our business practices and compliance with privacy laws in
those states. Although we do not presently believe that any of our current legal or regulatory proceedings will ultimately have a
material adverse impact on our operations, we cannot assure you that we will not incur material damages or penalties in a
lawsuit or other proceeding in the future. Significant adverse judgments, penalties, settlement amounts, amounts needed to post
a bond pending an appeal or defense costs could materially and adversely affect our liquidity and capital resources. It is also
possible that, as a result of a future governmental or other proceeding or settlement, significant restrictions will be placed upon,
or significant changes made to, our business practices, operations or methods, including pricing or similar terms. Any such
restrictions or changes may adversely affect our profitability or increase our compliance costs.

In addition, certain consumer advocacy groups and federal and state legislators have asserted that laws and regulations should
be tightened regarding lease-to-own transactions. The consumer advocacy groups and media reports generally focus on the total
cost to a consumer to acquire an item, which is often alleged to be higher than the interest typically charged by banks or similar
lending institutions to consumers with better credit histories. This "cost-of-rental" amount, which is generally defined as lease
fees paid in excess of the "retail" price of the goods, is from time to time characterized by consumer advocacy groups and
media reports as predatory or abusive without discussing benefits associated with our lease-to-own programs or the lack of
viable alternatives for our customers’ needs. If the negative characterization of these types of lease-to-own transactions
becomes increasingly accepted by consumers or Progressive’s or DAMI’s retail and merchant partners, demand for our
products and services could significantly decrease, which could have a material adverse effect on our business, results of
operations and financial condition. Additionally, if the negative characterization of these types of transactions is accepted by
legislators and regulators, we could become subject to more restrictive laws and regulations, which could have a material
adverse effect on our business, results of operations and financial condition. The vast expansion and reach of technology,
including social media platforms, has increased the risk that our reputation could be significantly impacted by these negative
characterizations in a relatively short amount of time. If we are unable to quickly and effectively respond to such
characterizations, we may experience declines in customer loyalty and traffic and our relationships with our retail partners may
suffer, which could have a material adverse effect on our business, results of operations and financial condition.

The loss of the services of our key executives, or our inability to attract and retain key technical talent in the areas of IT
and analytics, could have a material adverse impact on our operations.

We believe that we have benefited substantially from our current executive leadership and that the unexpected loss of their
services in the future could adversely affect our business and operations. We also depend on the continued services of the rest
of our management team. The loss of these individuals without adequate replacement could adversely affect our business.
Further, we believe that the unexpected loss of certain key technical talent in the areas of information technology and analytics
in the future could adversely affect our business and operations. We do not carry key man life insurance on any of our
personnel. The inability to attract and retain qualified individuals, or a significant increase in the costs to do so, would
materially adversely affect our operations.

Our competitors could impede our ability to attract new customers, or cause current customers to cease doing business
with us.

The industries in which we operate are highly competitive and highly fluid, particularly in light of the sweeping new regulatory
environment we are witnessing from regulators such as the CFPB and the FTC, among others, as discussed above.

In the sales and lease ownership market, our competitors include national, regional and local operators of lease-to-own stores,
virtual lease-to-own companies and traditional and e-commerce retailers. Our competitors in the traditional and virtual sales
and lease ownership and traditional retail markets may have significantly greater financial and operating resources and greater
name recognition in certain markets. Greater financial resources may allow our competitors to grow faster than us, including
through acquisitions. This in turn may enable them to enter new markets before we can, which may decrease our opportunities
in those markets. Greater name recognition, or better public perception of a competitor’s reputation, may help them divert
market share away from us, even in our established markets. Some competitors may be willing to offer competing products on
an unprofitable basis in an effort to gain market share, which could compel us to match their pricing strategy or lose business.

Our Progressive business relies heavily on relationships with retail partners. An increase in competition could cause our retail
partners to no longer offer the Progressive product in favor of our competitors which could slow growth in the Progressive
business and limit profitability.

In addition, as a result of changes to the regulatory framework within which we operate, among other reasons, new competitors
may emerge or current and potential competitors may establish financial or strategic relationships among themselves or with
third parties. Accordingly, it is possible that new competitors or alliances among competitors could emerge and rapidly acquire
significant market share. The occurrence of any of these events could materially adversely impact our business.

We depend on hiring an adequate number of hourly employees to run our business and are subject to government
regulations concerning these and our other employees, including wage and hour regulations.

Our workforce is comprised primarily of employees who work on an hourly basis. In certain areas where we operate, there is
significant competition for employees. The lack of availability of an adequate number of hourly employees or an increase in
wages and benefits to current employees could adversely affect our business, results of operations, cash flows, financial
condition and ability to service our debt obligations. We are subject to applicable rules and regulations relating to our
relationship with our employees, including wage and hour regulations, health benefits, unemployment and sales taxes, overtime
and working conditions and immigration status. Accordingly, legislated increases in the federal minimum wage, as well as
increases in additional labor cost components such as employee benefit costs, workers’ compensation insurance rates,
compliance costs and fines, would increase our labor costs, which could have a material adverse effect on our business,
prospects, results of operations and financial condition.

Our stock price is volatile, and you may not be able to recover your investment if our stock price declines.

The price of our common stock has been volatile and can be expected to be significantly affected by factors such as:

•
•

•
•
•

•
•

our ability to meet market expectations with respect to the growth and profitability of each of our operating segments;
quarterly variations in our results of operations, which may be impacted by, among other things, changes in same store
revenues or when and how many locations we acquire or open;
quarterly variations in our competitors’ results of operations;
changes in earnings estimates or buy/sell recommendations by financial analysts;
state or federal legislative or regulatory proposals, initiatives, actions or changes that are, or are perceived to be,
adverse to our operations;
the stock price performance of comparable companies; and
continuing unpredictable global and regional economic conditions.

In addition, the stock market as a whole historically has experienced price and volume fluctuations that have affected the
market price of many specialty retailers in ways that may have been unrelated to these companies’ operating performance.

We are subject to sales, income and other taxes, which can be difficult and complex to calculate due to the nature of our
various businesses. A failure to correctly calculate and pay such taxes could result in substantial tax liabilities and a
material adverse effect on our results of operations.

The application of indirect taxes, such as sales tax, is a complex and evolving issue, particularly with respect to the lease-to-
own industry generally and our virtual lease-to-own Progressive and Aarons.com businesses more specifically. Many of the
fundamental statutes and regulations that impose these taxes were established before the growth of the lease-to-own industry
and e-commerce and, therefore, in many cases it is not clear how existing statutes apply to our various businesses. In addition,
governments are increasingly looking for ways to increase revenues, which has resulted in discussions about tax reform and
other legislative action to increase tax revenues, including through indirect taxes. This also could result in other adverse
changes in or interpretations of existing sales, income and other tax regulations. For example, from time to time, some taxing
authorities in the United States have notified us that they believe we owe them certain taxes imposed on transactions with our
customers. Although these notifications have not resulted in material tax liabilities to date, there is a risk that one or more
jurisdictions may be successful in the future, which could have a material adverse effect on our results of operations.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

LOCATION
Cairo, Georgia
Cairo, Georgia
Cairo, Georgia
Cairo, Georgia
Coolidge, Georgia
Coolidge, Georgia
Coolidge, Georgia
Coolidge, Georgia
Lewisberry, Pennsylvania
Fairburn, Georgia
Sugarland, Texas
Auburndale, Florida
Kansas City, Kansas
Phoenix, Arizona
Plainfield, Indiana
Cheswick, Pennsylvania
Auburndale, Florida
Belcamp, Maryland
Obetz, Ohio
Dallas, Texas
Fairburn, Georgia
Sugarland, Texas
Huntersville, North Carolina
LaVergne, Tennessee
Oklahoma City, Oklahoma
Phoenix, Arizona
Magnolia, Mississippi
Plainfield, Indiana
Portland, Oregon
Rancho Cucamonga, California
Westfield, Massachusetts
Kansas City, Kansas
Cheswick, Pennsylvania

SEGMENT, PRIMARY USE AND HOW HELD

SQ. FT.

Manufacturing—Furniture Manufacturing – Owned
Manufacturing—Bedding and Furniture Manufacturing – Owned
Warehouse—Furniture Parts – Leased
Warehouse—Furniture Parts – Leased
Manufacturing—Furniture Manufacturing – Owned
Manufacturing—Furniture Manufacturing – Owned
Manufacturing—Furniture Manufacturing – Owned
Manufacturing—Administration and Showroom – Owned
Manufacturing—Bedding Manufacturing – Leased
Manufacturing—Bedding Manufacturing – Leased
Manufacturing—Bedding Manufacturing – Owned
Manufacturing—Bedding Manufacturing – Leased
Manufacturing—Bedding Manufacturing – Leased
Manufacturing—Bedding Manufacturing – Leased
Manufacturing—Bedding Manufacturing – Leased
Manufacturing—Bedding Manufacturing – Leased
Sales and Lease Ownership—Fulfillment Center – Leased
Sales and Lease Ownership—Fulfillment Center – Leased
Sales and Lease Ownership—Fulfillment Center – Leased
Sales and Lease Ownership—Fulfillment Center – Leased
Sales and Lease Ownership—Fulfillment Center – Leased
Sales and Lease Ownership—Fulfillment Center – Owned
Sales and Lease Ownership—Fulfillment Center – Leased
Sales and Lease Ownership—Fulfillment Center – Leased
Sales and Lease Ownership—Fulfillment Center – Leased
Sales and Lease Ownership—Fulfillment Center – Leased
Sales and Lease Ownership—Fulfillment Center – Leased
Sales and Lease Ownership—Fulfillment Center – Leased
Sales and Lease Ownership—Fulfillment Center – Leased
Sales and Lease Ownership—Fulfillment Center – Leased
Sales and Lease Ownership—Fulfillment Center – Leased
Sales and Lease Ownership—Fulfillment Center – Leased
Sales and Lease Ownership—Fulfillment Center – Leased

300,000
147,000
111,000
40,000
81,000
48,000
41,000
10,000
25,000
57,000
23,000
20,000
13,000
20,000
24,000
19,000
131,000
95,000
91,000
133,000
117,000
135,000
214,000
100,000
130,000
89,000
125,000
90,000
98,000
92,000
131,000
103,000
126,000

LOCATION
Auburndale, Florida
Belcamp, Maryland
Cheswick, Pennsylvania
Fairburn, Georgia
Grand Prairie, Texas
Houston, Texas
Huntersville, North Carolina
Kansas City, Kansas
Obetz, Ohio
Oklahoma City, Oklahoma
Phoenix, Arizona
Plainfield, Indiana
Rancho Cucamonga, California
Ridgeland, Mississippi
South Madison, Tennessee
Brooklyn, New York
Draper, Utah
Glendale, Arizona
Springdale, Arkansas
Tulsa, Oklahoma

SEGMENT, PRIMARY USE AND HOW HELD

SQ. FT.

Sales & Lease Ownership—Service Center – Leased
Sales & Lease Ownership—Service Center – Leased
Sales & Lease Ownership—Service Center – Leased
Sales & Lease Ownership—Service Center – Leased
Sales & Lease Ownership—Service Center – Leased
Sales & Lease Ownership—Service Center – Leased
Sales & Lease Ownership—Service Center – Leased
Sales & Lease Ownership—Service Center – Leased
Sales & Lease Ownership—Service Center – Leased
Sales & Lease Ownership—Service Center – Leased
Sales & Lease Ownership—Service Center – Leased
Sales & Lease Ownership—Service Center – Leased
Sales & Lease Ownership—Service Center – Leased
Sales & Lease Ownership—Service Center – Leased
Sales & Lease Ownership—Service Center – Leased
Sales & Lease Ownership—Warehouse – Leased
Progressive—Corporate Management/Call Center – Leased
Progressive—Corporate Management/Call Center – Leased
DAMI—Corporate Management/Call Center – Owned
DAMI—Call Center – Leased

7,000
5,000
10,000
8,000
11,000
15,000
10,000
8,000
7,000
10,000
6,000
6,000
4,000
10,000
4,000
32,000
159,000
52,000
29,000
3,400

Our executive and administrative offices currently occupy approximately 69,000 of the 81,000 usable square feet in a 105,000
square-foot office building in Atlanta, Georgia. We sold this building in January 2016, and entered into a short term lease to
remain in the building while we prepare to move these offices. During 2015, we secured a lease in a different part of Atlanta,
Georgia for approximately 64,000 square feet of a building that we plan to occupy in 2016 and use for our permanent executive
and administrative offices.

We also wholly lease a building with approximately 51,000 square feet and lease 67,000 square feet of a building with
approximately 78,000 square feet in Kennesaw, Georgia. Separately, we lease a building in Marietta, Georgia in which we
currently use approximately 44,000 square feet. These facilities are used for additional administrative functions.

We believe that all of our facilities are well maintained and adequate for their current and reasonably foreseeable uses.

ITEM 3. LEGAL PROCEEDINGS

From time to time, we are party to various legal proceedings arising in the ordinary course of business. While any proceeding
contains an element of uncertainty, we do not currently believe that any of the outstanding legal proceedings to which we are a
party will have a material adverse impact on our business, financial position or results of operations. However, an adverse
resolution of a number of these items may have a material adverse impact on our business, financial position or results of
operations. For further information, see Note 9 to the consolidated financial statements under the heading "Legal Proceedings,"
which discussion is incorporated by reference in response to this Item 3.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES

Market Information, Holders and Dividends

Effective December 13, 2010, all shares of the Company’s common stock began trading as a single class on the New York
Stock Exchange under the ticker symbol "AAN." The CUSIP number of the Company's common stock is 002535300.

The number of shareholders of record of the Company’s common stock at February 26, 2016 was 185. The closing price for the
common stock at February 26, 2016 was $22.64.

The following table shows the range of high and low sales prices per share for the Company’s common stock and the quarterly
cash dividends declared per share for the periods indicated.

Common Stock
Year Ended December 31, 2015
First Quarter
Second Quarter
Third Quarter
Fourth Quarter

Common Stock
Year Ended December 31, 2014
First Quarter
Second Quarter
Third Quarter
Fourth Quarter

High

Low

33.71
36.98
40.06
40.80

32.64
35.82
36.74
31.33

High

27.51
27.40
32.36
21.32

26.18
27.95
24.25
23.25

Low

Cash
Dividends
Per Share

.023
.023
.023
.025

Cash
Dividends
Per Share

.021
.021
.021
.023

Subject to our ongoing ability to generate sufficient income, any future capital needs and other contingencies, we expect to
continue our policy of paying quarterly dividends. Dividends will be payable only when, and if, declared by the Company's
Board of Directors. Under our revolving credit agreement, we may pay cash dividends in any year so long as, after giving pro
forma effect to the dividend payment, we maintain compliance with our financial covenants and no event of default has
occurred or would result from the payment.

Issuer Purchases of Equity Securities

As of December 31, 2015, 10,496,421 shares of common stock remained available for repurchase from time to time under the
purchase authority approved by the Company’s Board of Directors and previously announced. The following table presents our
share repurchase activity for the three months ended December 31, 2015:

Period
October 1 through October 31, 2015
November 1 through November 30, 2015
December 1 through December 31, 2015
Total

Total Number of
Shares Purchased

Average Price
Paid Per Share
—
—
—

— $
—
—
—

Total Number of
Shares Purchased as
Part of Publicly
Announced Plans

—
—
—
—

Maximum Number of
Shares That May Yet Be
Purchased Under the
Publicly Announced Plans1
10,496,421
10,496,421
10,496,421

1 Share repurchases are conducted under authorizations made from time to time by the Company’s Board of Directors. The
most recent authorization was publicly announced on October 4, 2013 and authorized the repurchase of an additional
10,955,345 shares of common stock over the previously authorized repurchase amount of 4,044,655 shares, increasing the
total number of our shares of common stock authorized for repurchase to 15,000,000. These authorizations have no expiration
date, and the Company is not obligated to repurchase any shares. Subject to applicable law, repurchases may be made at such
times and in such amounts as the Company deems appropriate. Repurchases may be discontinued at any time.

Securities Authorized for Issuance Under Equity Compensation Plans

Information concerning the Company’s equity compensation plans is set forth in Item 12 of Part III of this Annual Report on
Form 10-K.

ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain selected consolidated financial data of Aaron’s, Inc., which have been derived from its
Consolidated Financial Statements for each of the five years in the period ended December 31, 2015. Certain reclassifications have
been made to the prior periods to conform to the current period presentation. This historical information may not be indicative of the
Company’s future performance. The information set forth below should be read in conjunction with Management’s Discussion and
Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and the notes thereto.

(Dollar Amounts in Thousands, Except Per Share Data)
OPERATING RESULTS
Revenues:

Lease Revenues and Fees
Retail Sales
Non-Retail Sales
Franchise Royalties and Fees
Interest and Fees on Loans Receivable
Other

Costs and Expenses:

Depreciation of Lease Merchandise
Retail Cost of Sales
Non-Retail Cost of Sales
Operating Expenses
Financial Advisory and Legal Costs
Restructuring Expenses
Retirement and Vacation Charges
Progressive-Related Transaction Costs
Legal and Regulatory (Income) Expense
Other Operating Expense (Income), Net

Operating Profit

Interest Income
Interest Expense
Other Non-Operating (Expense) Income, Net

Earnings Before Income Taxes
Income Taxes
Net Earnings
Earnings Per Share
Earnings Per Share Assuming Dilution

$
$

Dividends Per Share
FINANCIAL POSITION
(Dollar Amounts in Thousands)
Lease Merchandise, Net
Property, Plant and Equipment, Net
Total Assets
Debt
Shareholders’ Equity
AT YEAR END
Stores Open:

Company-operated
Franchised

Lease Agreements in Effect
Number of Employees
Progressive Active Doors1

Year Ended
December 31,
2015

Year Ended
December 31,
2014

Year Ended
December 31,
2013

Year Ended
December 31,
2012

Year Ended
December 31,
2011

$ 2,684,184
32,872
390,137
63,507
2,845
6,211
3,179,756

$ 2,221,574
38,360
363,355
65,902
—
5,842
2,695,033

$ 1,748,699
40,876
371,292
68,575
—
5,189
2,234,631

$ 1,676,391
38,455
425,915
66,655
—
5,411
2,212,827

$ 1,516,508
38,557
388,960
63,255
—
5,298
2,012,578

1,212,644
21,040
351,777
1,357,030
—
—
—
—
—
1,324
2,943,815
235,941
2,185
(23,339)
(1,667)
213,120
77,411
135,709
1.87
1.86

$
$

932,634
24,541
330,057
1,231,801
13,661
9,140
9,094
6,638
(1,200)
(1,176)
2,555,190
139,843
2,921
(19,215)
(1,845)
121,704
43,471
78,233
1.08
1.08

.094

.086

$ 1,138,938
225,836
2,658,875
610,450
1,366,618

$ 1,087,032
219,417
2,456,844
606,082
1,223,521

1,305
734
1,628,000
12,700
13,248

1,326
782
1,665,000
12,400
12,307

628,089
24,318
337,581
1,022,684
—
—
4,917
—
28,400
1,584
2,047,573
187,058
2,998
(5,613)
517
184,960
64,294
120,666
1.59
1.58

.072

869,725
231,293
1,827,176
142,704
1,139,963

1,370
781
1,751,000
12,600
—

$
$

601,552
21,608
387,362
952,617
—
—
10,394
—
(35,500)
(2,235)
1,935,798
277,029
3,541
(6,392)
2,677
276,855
103,812
173,043
2.28
2.25

.062

964,067
230,598
1,812,929
141,528
1,136,126

1,324
749
1,724,000
11,900
—

$
$

547,839
22,619
351,887
866,600
—
—
3,532
—
36,500
(3,550)
1,825,427
187,151
1,718
(4,709)
(783)
183,377
69,610
113,767
1.46
1.43

.054

862,276
226,619
1,731,899
153,789
976,554

1,232
713
1,508,000
11,200
—

$
$

1 Progressive was acquired on April 14, 2014. Active doors represent retail store locations at which at least one virtual lease-to-own transaction has been completed
during the trailing three month period.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Business Overview

Aaron’s, Inc. ("we", "our", "us", "Aaron’s" or the "Company") is a leader in the sales and lease ownership and specialty
retailing of furniture, consumer electronics, computers, and home appliances and accessories throughout the United States and
Canada.

On April 14, 2014, the Company acquired a 100% ownership interest in Progressive Finance Holdings, LLC ("Progressive"), a
leading virtual lease-to-own company, for merger consideration of $700.0 million, net of cash acquired. Progressive provides
lease-purchase solutions in 46 states on a variety of products, including furniture and bedding, mobile phones, consumer
electronics, appliances and jewelry. It does so by purchasing merchandise from third-party retailers desired by those retailers’
customers, and in turn leasing that merchandise to the customers on a lease-to-own basis. Progressive consequently has no
stores of its own, but rather offers lease-purchase solutions to the customers of traditional retailers.

On July 15, 2014, the Company announced that a rigorous evaluation of the Company-operated store portfolio had been
performed, which, along with other cost-reduction initiatives, resulted in the closure of 44 underperforming stores and the
realignment of home office and field support. In the ordinary course of business, we continually review, and as appropriate
adjust, the amount and mix of Company-operated and franchised stores to help optimize overall performance. These
adjustments included closing additional underperforming Company-operated stores during 2015.

On October 15, 2015, the Company acquired a 100% ownership interest in Dent-A-Med, Inc., d/b/a the HELPcard®,
(collectively, "DAMI") for $50.7 million, net of cash acquired. The Company also assumed $44.8 million of debt in the form of
a secured revolving credit facility in connection with the acquisition. DAMI offers a variety of second-look financing programs
for below-prime customers that are originated through a federally insured bank and, along with Progressive's existing
technology-based application and approval process, allows the Company to provide retail partners one source for financing and
leasing transactions with below-prime customers.

Our major operating divisions are Aaron’s Sales & Lease Ownership, Progressive, HomeSmart, DAMI and Woodhaven
Furniture Industries, which manufactures and supplies the majority of the upholstered furniture and bedding leased and sold in
our stores.

Total revenues increased from $2.235 billion in 2013 to $3.180 billion in 2015, primarily as a result of the Progressive
acquisition during 2014. Total revenues for the year ended December 31, 2015 increased $484.7 million, or 18.0%, over the
prior year. Progressive revenues for the twelve months ended December 31, 2015 were $1.0 billion compared to $519.3 million
for the period from the acquisition date to December 31, 2014. The increase in Progressive revenues was partially offset by a
decrease of $48.5 million in revenue from our traditional lease-to-own store-based ("core") business primarily resulting from a
4.1% decrease in Company-operated same store revenues.

The Company’s franchised and Company-operated store activity (unaudited) is summarized as follows:

2015

2014

2013

Franchised stores
Franchised stores open at January 1,
Opened
Purchased from the Company
Purchased by the Company
Closed, sold or merged
Franchised stores open at December 31,
Company-operated Sales & Lease Ownership stores
Company-operated Sales & Lease Ownership stores open at January 1,
Opened
Added through acquisition
Closed, sold or merged
Company-operated Sales & Lease Ownership stores open at December 31,
Company-operated HomeSmart stores
Company-operated HomeSmart stores open at January 1,
Opened
Closed, sold or merged
Company-operated HomeSmart stores open at December 31,
Company-operated RIMCO stores 1
Company-operated RIMCO stores open at January 1,
Opened
Closed, sold or merged
Company-operated RIMCO stores open at December 31,

782
10
16
(25)
(49)
734

1,243
7
25
(52)
1,223

83
—
(1)
82

—
—
—
—

781
23
6
(9)
(19)
782

1,262
30
9
(58)
1,243

81
3
(1)
83

27
—
(27)
—

749
45
2
(10)
(5)
781

1,227
33
10
(8)
1,262

78
3
—
81

19
8
—
27

1 In January 2014, we sold our 27 Company-operated RIMCO stores and the rights to five franchised RIMCO stores.

Same Store Revenues. We believe that changes in same store revenues are a key performance indicator of our core business. For
the year ended December 31, 2015, we calculated this amount by comparing revenues for the year ended December 31, 2015 to
revenues for the year ended December 31, 2014 for all stores open for the entire 24-month period ended December 31, 2015,
excluding stores that received lease agreements from other acquired, closed or merged stores. During the first quarter of 2015,
the Company revised the methodology for calculating same store revenues to reflect a full lifecycle for customer retention after
stores are closed. As a result, revenues for stores that have been consolidated/merged are now included in the comparable same
store calculation after 24 months. Previously, consolidated/merged stores were included in the same store calculation after 15
months. The change in the same store calculation had an immaterial impact on comparable store revenues for 2015, 2014 and
2013.

Active Doors. We believe that active doors are a key performance indicator of our Progressive segment. Active doors represent
retail store locations at which at least one virtual lease-to-own transaction has been completed during the trailing three month
period. The following table presents active doors for the Progressive segment:

Active Doors at December 31 (Unaudited)
Progressive Active Doors

2015

2014

13,248

12,307

Invoice Volume. We also believe that invoice volume is a key performance indicator of our Progressive segment. Invoice
volume is defined as the retail price of lease merchandise acquired and leased by Progressive during the period, excluding
returns. The following table presents invoice volume for the Progressive segment:

For the Year Ended December 31 (Unaudited and In Thousands)
Progressive Invoice Volume

2015
780,038

2014
471,902

Business Environment and Company Outlook

Like many industries, the lease-to-own industry has been transformed by the internet and virtual marketplace. We believe the
Progressive acquisition is strategically transformational for the Company in this respect and will strengthen our business. We
also believe the lease-to-own industry has suffered in recent periods due to economic challenges faced by our core customers.
In response to these changing market conditions, we are executing a strategic plan for the core business that focuses on the
following items and that we believe positions us for success over the long-term:

•

Profitably grow our stores

• Accelerate our omni-channel platform

•

Promote communication, coordination and integration

• Champion compliance

Key Components of Net Earnings

In this management’s discussion and analysis section, we review our consolidated results. For the years ended December 31,
2015, 2014 and 2013, some of the key revenue and cost and expense items that affected earnings were as follows:

Revenues. We separate our total revenues into six components: lease revenues and fees, retail sales, non-retail sales, franchise
royalties and fees, interest and fees on loans receivable and other. Lease revenues and fees include all revenues derived from
lease agreements at Company-operated stores and retail locations serviced by Progressive. Retail sales represent sales of both
new and returned lease merchandise from our Company-operated stores. Non-retail sales mainly represent new merchandise
sales to our Aaron’s Sales & Lease Ownership franchisees. Franchise royalties and fees represent fees from the sale of franchise
rights and royalty payments from franchisees, as well as other related income from our franchised stores. Interest and fees on
loans receivable primarily represents the accretion of the discount on loans acquired in the DAMI acquisition, as well as
finance charges and annual and other fees earned on loans originated since the acquisition. Other revenues primarily relate to
revenues from leasing real estate properties to unrelated third parties, as well as other miscellaneous revenues.

Depreciation of Lease Merchandise. Depreciation of lease merchandise reflects the expense associated with depreciating
merchandise held for lease and leased to customers by our Company-operated stores and Progressive.

Retail Cost of Sales. Retail cost of sales represents the depreciated cost of merchandise sold through our Company-operated
stores.

Non-Retail Cost of Sales. Non-retail cost of sales primarily represents the cost of merchandise sold to our franchisees.

Operating Expenses. Operating expenses include personnel costs, occupancy costs, lease merchandise write-offs, bad debt
expense, and advertising, among other expenses.

Other Operating Expense (Income), Net. Other operating expense (income), net consists of gains or losses on sales of
Company-operated stores and delivery vehicles, fair value adjustments on assets held for sale and gains or losses on other
transactions involving property, plant and equipment.

Critical Accounting Policies

We discuss the most critical accounting policies below. For a discussion of the Company's significant accounting policies, see
Note 1 to the consolidated financial statements.

Revenue Recognition

Lease revenues are recognized in the month they are due on the accrual basis of accounting. For internal management reporting
purposes, lease revenues from sales and lease ownership agreements are recognized by the reportable segments as revenue in
the month the cash is collected. On a monthly basis, we record an accrual for lease revenues due but not yet received, net of
allowances, and a deferral of revenue for lease payments received prior to the month due. Our revenue recognition accounting
policy matches the lease revenue with the corresponding costs, mainly depreciation, associated with the lease merchandise. At
December 31, 2015 and 2014, we had a revenue deferral representing cash collected in advance of being due or otherwise
earned totaling $68.6 million and $60.5 million, respectively, and an accrued revenue receivable, net of allowance for doubtful
accounts, based on historical collection rates of $34.5 million and $30.2 million, respectively.

Revenues from the sale of merchandise to franchisees are recognized at the time of receipt of the merchandise by the franchisee
and revenues from such sales to other customers are recognized at the time of shipment.

Lease Merchandise

Our Aaron’s Sales & Lease Ownership and HomeSmart divisions depreciate merchandise over the applicable agreement period,
generally 12 to 24 months (monthly agreements) or 65 to 104 weeks (weekly agreements) when leased, and generally 36
months when not leased, to a 0% salvage value. The Company's Progressive division depreciates merchandise over the lease
agreement period, which is typically over 12 months, while on lease.

Our policies generally require weekly lease merchandise counts at our store-based operations, which include write-offs for
unsalable, damaged, or missing merchandise inventories. Full physical inventories are generally taken at our fulfillment and
manufacturing facilities one to two times a year with appropriate provisions made for missing, damaged and unsalable
merchandise. In addition, we monitor lease merchandise levels and mix by division, store and fulfillment center, as well as the
average age of merchandise on hand. If unsalable lease merchandise cannot be returned to vendors, its carrying amount is
adjusted to net realizable value or written off.

All lease merchandise is available for lease and sale, excluding merchandise determined to be missing, damaged or unsalable.
We record lease merchandise carrying amount adjustments on the allowance method, which estimates the merchandise losses
incurred but not yet identified by management as of the end of the accounting period based on historical write off experience.
As of December 31, 2015 and 2014, the allowance for lease merchandise write-offs was $33.4 million and $27.6 million,
respectively. Lease merchandise adjustments totaled $136.4 million, $99.9 million and $58.0 million for the years ended
December 31, 2015, 2014 and 2013, respectively.

Acquisition Accounting for Businesses

We account for acquisitions of businesses by recognizing the assets acquired and liabilities assumed at their respective fair
values on the date of acquisition. We estimate the fair value of identifiable intangible assets using discounted cash flow
analyses or estimates of replacement cost based on market participant assumptions. The excess of the purchase price paid over
the estimated fair values of the identifiable net tangible and intangible assets acquired in connection with business acquisitions
is recorded as goodwill. We consider accounting for business combinations critical because management's judgment is used to
determine the estimated fair values assigned to assets acquired and liabilities assumed, as well as the useful life of and
amortization method for intangible assets, which can materially affect the results of our operations. Although management
believes that the judgments and estimates discussed herein are reasonable, actual results could differ, and we may be exposed to
an impairment charge if we are unable to recover the value of the recorded net assets.

Loans acquired in a business acquisition are recorded at their fair value at the acquisition date. The projected net cash flows
from expected payments of principal, interest, fees and servicing costs and anticipated charge-offs are included in the
determination of fair value; therefore, an allowance for loan losses and an amount for unamortized fees is not recognized for
the acquired loans. The difference, or discount, between the expected cash flows to be received and the fair value of the
acquired loans is accreted to revenue based on the effective interest method. At each period end, the Company evaluates the
appropriateness of the accretable discount on the acquired loans based on actual and revised projected future cash receipts.

Goodwill and Other Intangible Assets

Intangible assets are classified into one of three categories: (1) intangible assets with definite lives subject to amortization, (2)
intangible assets with indefinite lives not subject to amortization and (3) goodwill. For intangible assets with definite lives, tests
for impairment must be performed if conditions exist that indicate the carrying amount may not be recoverable. For intangible
assets with indefinite lives and goodwill, tests for impairment must be performed at least annually, and sooner if events or
circumstances indicate that an impairment may have occurred. Factors which could necessitate an interim impairment
assessment include a sustained decline in the Company’s stock price, prolonged negative industry or economic trends and
significant underperformance relative to historical or projected future operating results. As an alternative to this annual
impairment testing for intangible assets with indefinite lives and goodwill, the Company may perform a qualitative assessment
for impairment if it believes it is not more likely than not that the carrying amount of a reporting unit's net assets exceeds the
reporting unit's fair value.

Indefinite-lived intangible assets represent the value of trade names and trademarks acquired as part of the Progressive
acquisition. At the date of acquisition, the Company determined that no legal, regulatory, contractual, competitive, economic or
other factors limit the useful life of the trade name and trademark intangible asset and, therefore, the useful life is considered
indefinite. The Company reassesses this conclusion quarterly and continues to believe the useful life of this asset is indefinite.

We estimate the fair value of indefinite-lived trade name and trademark intangible assets based on projected discounted future
cash flows under a relief from royalty method. The Company completed its indefinite-lived intangible asset impairment test as
of October 1, 2015 and determined that no impairment had occurred.

The following table presents the carrying amount of goodwill and other intangible assets, net as of December 31, 2015:

(In Thousands)
Goodwill

Other Indefinite-Lived Intangible Assets

Definite-Lived Intangible Assets, Net

Goodwill and Other Intangibles, Net

2015
539,475

53,000

222,912

815,387

Management has deemed its operating segments to be reporting units due to the fact that the operations included in each
operating segment have similar economic characteristics. As of December 31, 2015, the Company had six operating segments
and reporting units: Sales and Lease Ownership, Progressive, HomeSmart, DAMI, Franchise and Manufacturing. As of
December 31, 2015, the Company’s Sales and Lease Ownership, Progressive, HomeSmart and DAMI reporting units were the
only reporting units with assigned goodwill balances. The following is a summary of the Company’s goodwill by reporting unit
at December 31, 2015:

(In Thousands)
Sales and Lease Ownership

Progressive

HomeSmart

DAMI
Total

2015
233,851

290,605

14,729

290

539,475

The Company performs its annual goodwill impairment testing as of October 1 each year . When evaluating goodwill for
impairment, the Company may first perform a qualitative assessment to determine whether it is more likely than not that a
reporting unit or intangible asset group is impaired. The decision to perform a qualitative impairment assessment for an
individual reporting unit in a given year is influenced by a number of factors, including the size of the reporting unit's goodwill,
the current and projected operating results, the significance of the excess of the reporting unit's estimated fair value over
carrying amount at the last quantitative assessment date and the amount of time in between quantitative fair value assessments
and the date of acquisition. During 2015, the Company performed a qualitative assessment for the goodwill of the Progressive
reporting unit and concluded no indications of impairment existed.

For the other reporting units, we use a combination of valuation techniques to determine the fair value of our reporting units,
including an income approach and a market approach. Under the income approach, we estimate fair value based on estimated
discounted cash flows, which require assumptions about short-term and long-term revenue growth rates, operating margins,
capital requirements, and a weighted-average cost of capital and/or discount rate. Under the market approach, we use a
combination of valuation techniques to calculate the fair value of our reporting units, including a multiple of gross revenues
approach and a multiple of projected earnings before interest, taxes, depreciation and amortization approach using assumptions
consistent with those we believe a hypothetical marketplace participant would use.

We believe the benchmark companies we evaluate as marketplace participants for each reporting unit serve as an appropriate
reference when calculating fair value because those benchmark companies have similar risks, participate in similar markets,
provide similar products and services for their customers and compete with us directly. The values separately derived from each
of the income and market approach valuation techniques were used to develop an overall estimate of each reporting unit's fair
value. The selection and weighting of the various fair value techniques, which requires the use of management judgment to
determine what is most representative of fair value, may result in a higher or lower fair value.

The Company completed its goodwill impairment testing for reporting units other than Progressive as of October 1, 2015 and
determined that no impairment had occurred. During the performance of the goodwill impairment testing, the Company did not
identify any reporting units that were not substantially in excess of their carrying values, other than the HomeSmart reporting
unit for which the estimated fair value exceeded the carrying value of the reporting unit by approximately 9%. While no
impairment was noted in the impairment testing, if HomeSmart is unable to sustain its recent profitability improvements, there
could be a change in the valuation of the HomeSmart reporting unit that may result in the recognition of an impairment loss in
future periods.

Intangible assets acquired in recent transactions may be more susceptible to impairment, primarily due to the fact that they are
recorded at fair value based on recent operating plans and macroeconomic conditions present at the time of acquisition.
Consequently, if operating results and/or macroeconomic conditions deteriorate shortly after an acquisition, it could result in
the impairment of the acquired assets. A deterioration of macroeconomic conditions may not only negatively impact the
estimated operating cash flows used in our cash flow models, but may also negatively impact other assumptions used in our
analyses, including but not limited to, the estimated cost of capital and/or discount rates. Additionally, as discussed above, in
accordance with accounting principles generally accepted in the United States, we are required to ensure that assumptions used
to determine fair value in our analyses are consistent with the assumptions a hypothetical marketplace participant would use. As
a result, the cost of capital and/or discount rates used in our analyses may increase or decrease based on market conditions and
trends, regardless of whether our actual cost of capital has changed. Therefore, if the cost of capital and/or discount rates
change, we may recognize an impairment of an intangible asset in spite of realizing actual cash flows that are approximately
equal to, or greater than, our previously forecasted amounts.

The Company determined that there were no events that occurred or circumstances that changed in the fourth quarter of 2015
that would more likely than not reduce the fair value of a reporting unit below its carrying amount or that would indicate an
impairment of the other intangible assets. As a result, the Company did not perform interim impairment testing for any
reporting unit or other intangible asset as of December 31, 2015. We will continue to monitor the fair value of goodwill and
other intangible assets in future periods.

Leases and Closed Store Reserves

The majority of our Company-operated stores are operated from leased facilities under operating lease agreements. The
majority of the leases are for periods that do not exceed five years, although lease terms range in length up to approximately 15
years. Leasehold improvements related to these leases are generally amortized over periods that do not exceed the lesser of the
lease term or useful life. For leases which contain escalating payments we record the related lease expense on a straight-line
basis over the lease term. We generally do not obtain significant amounts of lease incentives or allowances from landlords. Any
incentive or allowance amounts we receive are recognized on a straight-line basis over the lease term.

From time to time, we close or consolidate stores. Our primary costs associated with closing stores are the future lease
payments and related commitments. We record an estimate of the future obligation related to closed stores based upon the
present value of the future lease payments and related commitments, net of estimated sublease income based upon historical
experience. As of December 31, 2015 and 2014, our reserve for closed stores was $5.7 million and $5.6 million, respectively.
Due to changes in market conditions, our estimates related to sublease income may change and, as a result, our actual liability
may be more or less than the recorded amount. Excluding estimated sublease income, our future obligations related to closed
stores on an undiscounted basis were $8.1 million and $7.8 million as of December 31, 2015 and 2014, respectively.

Insurance Programs

We maintain insurance contracts to fund workers compensation, vehicle liability, general liability and group health insurance
claims. Using actuarial analyses and projections, we estimate the liabilities associated with open and incurred but not reported
workers compensation, vehicle liability and general liability claims. This analysis is based upon an assessment of the likely
outcome or historical experience, net of any stop loss or other supplementary coverage. We also calculate the projected
outstanding plan liability for our group health insurance program using historical claims runoff data. Our gross estimated
liability for workers compensation insurance claims, vehicle liability, general liability and group health insurance was
$38.6 million and $36.8 million at December 31, 2015 and 2014, respectively. In addition, we have prefunding balances on
deposit with the insurance carriers of $31.8 million and $28.3 million at December 31, 2015 and 2014, respectively.

If we resolve insurance claims for amounts that are in excess of our current estimates and within policy stop loss limits, we will
be required to pay additional amounts beyond those accrued at December 31, 2015.

The assumptions and conditions described above reflect management’s best assumptions and estimates, but these items involve
inherent uncertainties as described above, which may or may not be controllable by management. As a result, the accounting
for such items could result in different amounts if management used different assumptions or if different conditions occur in
future periods.

Legal and Regulatory Reserves

We are subject to various legal and regulatory proceedings arising in the ordinary course of business. Management regularly
assesses the Company’s insurance deductibles, monitors our litigation and regulatory exposure with the Company’s attorneys
and evaluates its loss experience. An accrued liability for legal and regulatory proceedings is established when the Company
determines that a loss is both probable and the amount of the loss can be reasonably estimated. Legal fees and expenses
associated with the defense of all of our litigation are expensed as such fees and expenses are incurred.

Income Taxes

The calculation of our income tax expense requires judgment and the use of estimates. We periodically assess tax positions
based on current tax developments, including enacted statutory, judicial and regulatory guidance. In analyzing our overall tax
position, consideration is given to the amount and timing of recognizing income tax liabilities and benefits. In applying the tax
and accounting guidance to the facts and circumstances, income tax balances are adjusted appropriately through the income tax
provision. Reserves for income tax uncertainties are maintained at levels we believe are adequate to absorb probable payments.
Actual amounts paid, if any, could differ significantly from these estimates.

We use the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or
settled. Valuation allowances are established, when necessary, to reduce deferred tax assets when we expect the amount of tax
benefit to be realized is less than the carrying amount of the deferred tax asset.

Fair Value Measurements

For the valuation techniques used to determine the fair value of financial assets and liabilities on a recurring basis, as well as
assets held for sale, which are recorded at fair value on a nonrecurring basis, refer to Note 4 in the consolidated financial
statements.

Results of Operations

As of December 31, 2015, the Company had six operating and reportable segments: Sales and Lease Ownership, Progressive,
HomeSmart, DAMI, Franchise and Manufacturing. The results of DAMI and Progressive have been included in the Company’s
consolidated results and presented as reportable segments from their October 15, 2015 and April 14, 2014 acquisition dates,
respectively. In January 2014, the Company sold the 27 Company-operated RIMCO stores and the rights to five franchised
RIMCO stores. In all periods presented, RIMCO has been reclassified from the RIMCO segment to Other.

The Company’s Sales and Lease Ownership, Progressive, HomeSmart and Franchise segments accounted for substantially all
of the operations of the Company and, therefore, unless otherwise noted, only material changes within these four segments are
discussed. The production of our Manufacturing segment, consisting of the Woodhaven Furniture Industries division, is
primarily leased or sold through the Company-operated and franchised stores, and consequently, substantially all of that
segment’s revenues and earnings before income taxes are eliminated through the elimination of intersegment revenues and
intersegment profit or loss.

Results of Operations – Years Ended December 31, 2015, 2014 and 2013

(In Thousands)
REVENUES:

Year Ended December 31,

2015 vs. 2014

2014 vs. 2013

2015

2014

2013

Change

Lease Revenues

and Fees
Retail Sales
Non-Retail Sales
Franchise Royalties and

Fees

Interest and Fees on
Loans Receivable

Other

COSTS AND EXPENSES:
Depreciation of Lease

Merchandise
Retail Cost of Sales
Non-Retail Cost of Sales
Operating Expenses
Financial Advisory and

Legal Costs

Restructuring Expenses
Retirement and Vacation

Charges

Progressive-Related
Transaction Costs
Legal and Regulatory
(Income) Expenses
Other Operating Expense

(Income), Net

OPERATING PROFIT
Interest Income
Interest Expense
Other Non-Operating

(Expense) Income, Net

EARNINGS BEFORE
INCOME TAXES

$2,684,184
32,872
390,137

$2,221,574
38,360
363,355

$1,748,699
40,876
371,292

$ 462,610
(5,488)
26,782

20.8% $ 472,875
(2,516)
(14.3)
(7,937)
7.4

27.0 %
(6.2)
(2.1)

63,507

65,902

68,575

(2,395)

(3.6)

(2,673)

(3.9)

2,845
6,211
3,179,756

—
5,842
2,695,033

—
5,189
2,234,631

2,845
369
484,723

1,212,644
21,040
351,777
1,357,030

932,634
24,541
330,057
1,231,801

628,089
24,318
337,581
1,022,684

280,010
(3,501)
21,720
125,229

(13,661)
(9,140)

—
—

4,917

(9,094)

—

(6,638)

13,661
9,140

9,094

6,638

—
—

—

(1,200)

28,400

(1,200)

1,324
2,943,815

(1,176)
2,555,190

1,584
2,047,573

2,500
388,625

235,941
2,185
(23,339)

139,843
2,921
(19,215)

187,058
2,998
(5,613)

96,098
(736)
4,124

nmf
6.3
18.0

30.0
(14.3)
6.6
10.2

nmf
nmf

nmf

212.6
15.2

68.7
(25.2)
21.5

—
653
460,402

304,545
223
(7,524)
209,117

13,661
9,140

nmf
12.6
20.6

48.5
.9
(2.2)
20.4

nmf
nmf

4,177

85.0

6,638

(29,600)

(2,760)
507,617

(47,215)
(77)
13,602

nmf

(174.2)
24.8

(25.2)
(2.6)
242.3

(1,667)

(1,845)

517

(178)

(9.6)

2,362

456.9

INCOME TAXES

77,411

43,471

64,294

33,940

213,120

121,704

184,960

91,416

75.1

78.1

(63,256)

(34.2)

(20,823)

(32.4)

NET EARNINGS

$ 135,709

78,233

$ 120,666

57,476

73.5% $ (42,433)

(35.2)%

nmf—Calculation is not meaningful

Revenues

Information about our revenues by reportable segment is as follows:

(In Thousands)
REVENUES:
Sales and Lease Ownership1
Progressive2
HomeSmart1
DAMI3
Franchise4
Manufacturing
Other
Revenues of Reportable

Segments

Elimination of Intersegment

Revenues

Cash to Accrual Adjustments
Total Revenues from

External Customers

Year Ended December 31,

2015 vs. 2014

2014 vs. 2013

2015

2014

2013

Change

$2,001,682
1,049,681
63,477
2,845
63,507
106,020
1,118

$2,037,101
519,342
64,276
—
65,902
104,058
2,969

$2,076,269
—
62,840
—
68,575
106,523
22,158

$ (35,419)
530,339
(799)
2,845
(2,395)
1,962
(1,851)

(1.7)% $ (39,168)
519,342
1,436
—
(2,673)
(2,465)
(19,189)

102.1
(1.2)
nmf
(3.6)
1.9
(62.3)

3,288,330

2,793,648

2,336,365

494,682

17.7

457,283

(103,890)
(4,684)

(102,296)
3,681

(103,834)
2,100

(1,594)
(8,365)

(1.6)
(227.2)

1,538
1,581

(1.9)%
nmf
2.3
nmf
(3.9)
(2.3)
(86.6)

19.6

1.5
75.3

$3,179,756

$2,695,033

$2,234,631

$ 484,723

18.0 % $ 460,402

20.6 %

nmf—Calculation is not meaningful
1 Segment revenue consists of lease revenues and fees, retail sales and non-retail sales.
2 Segment revenue consists of lease revenues and fees.
3 Segment revenue consists of interest and fees on loans receivable, and excludes the effect of interest expense.
4 Segment revenue consists of franchise royalties and fees.

Year Ended December 31, 2015 Versus Year Ended December 31, 2014

Sales and Lease Ownership. Sales and Lease Ownership segment revenues decreased $35.4 million to $2.002 billion due to a
$57.4 million, or 3.5%, decrease in lease revenues and fees and a $5.3 million, or 14.3%, decrease in retail sales, offset by a
$26.4 million, or 7.3%, increase in non-retail sales. Lease revenues and fees and retail sales decreased partly due to the net
reduction of 39 Sales and Lease Ownership stores since the beginning of 2014. In addition, lease revenues and fees and retail
sales were impacted by a 4.2% decrease in same store revenues. In particular, Texas stores, which represent approximately 18%
of our store-based revenues, have been down considerably in 2015 due to the effects of contractions in the oil industry on that
market. Non-retail sales increased primarily due to increased demand for product by franchisees.

Progressive. Progressive segment revenues increased $530.3 million to $1.0 billion in 2015, partly due to Progressive's results
being included for a full year compared to a partial year in 2014 from the April 14, 2014 acquisition date. Revenues also
increased in 2015 due to increases in invoice volume at existing active doors as well as a net increase of approximately 941
active doors since the beginning of 2015.

HomeSmart. HomeSmart segment revenues decreased $799,000 to $63.5 million due to a $772,000, or 1.2%, decrease in lease
revenues and fees. Lease revenues and fees within the HomeSmart segment decreased due to a decline of 3.7% in same store
revenues, which more than offset the net addition of one HomeSmart store since the beginning of 2014.

Franchise. Franchise segment revenues decreased $2.4 million to $63.5 million primarily due to a .9% decrease in same store
revenues of existing franchised stores and the impact of the net reduction of 47 franchised stores since the beginning of 2014.

Other. Revenues in the Other category are primarily revenues attributable to leasing space to unrelated third parties in the
corporate headquarters building and several minor unrelated activities.

Year Ended December 31, 2014 Versus Year Ended December 31, 2013

Sales and Lease Ownership. Sales and Lease Ownership segment revenues decreased $39.2 million to $2.037 billion due to a
$33.1 million, or 2.0%, decrease in lease revenues and fees, and a $7.0 million, or 1.9%, decrease in non-retail sales. Lease
revenues and fees within the Sales and Lease Ownership segment decreased due to a 3.0% decrease in same store revenues,
which more than offset the net addition of 16 Company-operated stores since the beginning of 2013. Non-retail sales decreased
primarily due to less demand for product by franchisees.

Progressive. Progressive segment revenues were $519.3 million and have been included in the Company's consolidated results
from the April 14, 2014 acquisition date.

HomeSmart. HomeSmart segment revenues increased $1.4 million to $64.3 million due to a $1.3 million, or 2.2%, increase in
lease revenues and fees. Lease revenues and fees within the HomeSmart segment increased primarily due to a net addition of
five HomeSmart stores since the beginning of 2013.

Franchise. Franchise segment revenues decreased $2.7 million to $65.9 million primarily due to a decrease in finance fees
under the franchise loan program.

Other. 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.

Operating Expenses

Information about certain significant components of operating expenses is as follows:

(In Thousands)
Personnel costs
Occupancy costs
Lease merchandise write-offs
Bad debt expense
Advertising
Other operating expenses
Operating Expenses

Year Ended December 31,

2015
$ 619,557
208,927
136,380
122,184
39,334
230,648
$1,357,030

2014
$ 594,246
206,806
99,942
60,514
50,445
219,848
$1,231,801

2013
$ 550,093
199,300
57,989
—
42,956
172,346
$1,022,684

Year Ended December 31, 2015 Versus Year Ended December 31, 2014

Operating expenses increased $125.2 million, or 10.2%, to $1.4 billion in 2015, from $1.2 billion for the comparable period in
2014 due primarily to the consolidation of Progressive’s results from operations from the April 14, 2014 acquisition date.

Personnel costs increased in 2015 compared to 2014 due to hiring to support the growth of Progressive.

Lease merchandise write-offs increased $36.4 million in 2015 compared to 2014 due to the increase in Progressive revenues as
a percentage of total revenues. Progressive's lease merchandise write-offs as a percentage of Progressive's lease revenues
decreased from 8% in 2014 to 7% in 2015. Lease merchandise write-offs as a percentage of lease revenues for our core
business increased from 3% in 2014 to 4% in 2015.

Bad debt expense increased $61.7 million in 2015 compared to 2014 due to the increase in Progressive revenues as a
percentage of total revenues. Progressive's bad debt expense in 2015 was affected by the impact of a temporary interruption of
certain data attributes used to make our approval decisions. We lost access to the attributes in February 2015 and replaced them
in April 2015. Leases generated during the period of interruption, while expected to be profitable, charged off at higher rates
than originally anticipated during the second and third quarters. Nonetheless, Progressive's bad debt expense as a percentage of
Progressive's revenues remained constant at 12% in both years.

In 2015, other operating expenses includes $3.7 million of one-time transaction costs incurred in connection with the
acquisition of DAMI.

As a percentage of total revenues, operating expenses decreased to 42.7% in 2015 from 45.7% in 2014, generally as a result of
the Company's price increases, inventory reduction, and cost initiatives. Operating margin improvements also relate to the
continued growth of Progressive, which has lower operating expenses as a percentage of total revenues than the Company’s
traditional lease-to-own business because it does not have store operations.

Year Ended December 31, 2014 Versus Year Ended December 31, 2013

Operating expenses increased $209.1 million, or 20.4%, to $1.2 billion in 2014 from $1.0 billion for the comparable period in
2013 due primarily to the consolidation of Progressive's results from operations from the April 14, 2014 acquisition date.
Progressive's personnel costs, lease merchandise write-offs, and bad debt expense were $30.2 million, $40.9 million, and $60.5
million, respectively, in 2014 from that date.

As a percentage of total revenues, operating expenses decreased to 45.7% in 2014 from 45.8% in 2013, generally as a result of
the Company's price increases, inventory reduction, and cost initiatives.

Other Costs and Expenses

Year Ended December 31, 2015 Versus Year Ended December 31, 2014

Depreciation of lease merchandise. Depreciation of lease merchandise increased $280.0 million, or 30.0%, to $1.2 billion
during 2015 from $932.6 million during 2014. The Aaron's core business has continued to reduce inventory, while levels of
merchandise on lease have remained consistent year over year, resulting in idle merchandise representing approximately 6% of
total depreciation expense in 2015 and 2014. As a percentage of total lease revenues and fees, depreciation of lease
merchandise increased to 45.2% from 42.0% in the prior year, primarily because of Progressive's continued growth relative to
our core business. Progressive's depreciation as a percentage of lease revenues is higher than the core business because, among
other factors, its merchandise has a shorter average life on lease and a higher rate of early buyouts.

Retail cost of sales. Retail cost of sales decreased $3.5 million, or 14.3%, to $21.0 million in 2015 from $24.5 million for the
comparable period in 2014, and as a percentage of retail sales, remained consistent at 64.0% in both periods.

Non-retail cost of sales. Non-retail cost of sales increased $21.7 million, or 6.6%, to $351.8 million in 2015, from
$330.1 million for the comparable period in 2014, and as a percentage of non-retail sales, decreased to 90.2% from 90.8%.

Financial advisory and legal costs. Financial advisory and legal costs of $13.7 million were incurred during 2014 related to
addressing now-resolved strategic matters, including an unsolicited acquisition offer, two proxy contests and shareholder
proposals.

Restructuring expenses. In connection with the Company’s July 15, 2014 announced closure of 44 Company-operated stores
and restructuring of its home office and field support, charges of $9.1 million were incurred in 2014 and principally consist of
contractual lease obligations, the write-off and impairment of property, plant and equipment and workforce reductions.

Retirement charges. Retirement charges of $9.1 million were incurred during 2014 due to the retirements of both the
Company’s Chief Executive Officer and Chief Operating Officer in 2014.

Progressive-related transaction costs. Financial advisory and legal costs of $6.6 million were incurred in 2014 in connection
with the April 14, 2014 acquisition of Progressive.

Regulatory income. Regulatory income of $1.2 million in 2014 was recorded as a reduction in previously recognized regulatory
expense upon the resolution of the regulatory investigation by the California Attorney General.

Year Ended December 31, 2014 Versus Year Ended December 31, 2013

Depreciation of lease merchandise. Depreciation of lease merchandise increased $304.5 million, or 48.5%, to $932.6 million
during 2014 from $628.1 million during the comparable period in 2013 due primarily to the consolidation of Progressive's
results from operations from the April 14, 2014 acquisition date. Levels of merchandise on lease for the Aaron's core business
remained generally consistent year over year, resulting in idle merchandise representing approximately 6% of total depreciation
expense in 2014 as compared to approximately 7% in 2013. As a percentage of total lease revenues and fees, depreciation of
lease merchandise increased to 42.0% from 35.9% in the prior year, primarily due to the inclusion of Progressive's results of
operations from the April 14, 2014 acquisition date. Progressive's inclusion increased depreciation as a percentage of lease
revenues because, among other factors, its merchandise has a shorter average life on lease, as well as a higher rate of early
buyouts, than our traditional lease-to-own business.

Retail cost of sales. Retail cost of sales increased $223,000, or .9%, to $24.5 million in 2014, from $24.3 million for the
comparable period in 2013, and as a percentage of retail sales, increased to 64.0% from 59.5% due to increased discounting of
pre-leased merchandise.

Non-retail cost of sales. Non-retail cost of sales decreased $7.5 million, or 2.2%, to $330.1 million in 2014, from
$337.6 million for the comparable period in 2013, and as a percentage of non-retail sales, remained consistent at approximately
91% in both periods.

Retirement and vacation charges. Retirement charges during 2014 were $9.1 million due primarily to the retirement of both the
Company’s Chief Executive Officer and Chief Operating Officer in 2014. Retirement and vacation charges during 2013 were
$4.9 million associated with the retirement of the Company’s Chief Operating Officer and a change in the Company's vacation
policies.

Progressive-related transaction costs. Financial advisory and legal costs of $6.6 million were incurred in 2014 in connection
with the April 14, 2014 acquisition of Progressive.

Legal and regulatory (income) expense. Regulatory income of $1.2 million in 2014 was recorded as a reduction in previously
recognized regulatory expense upon the resolution of the regulatory investigation by the California Attorney General. During
2013, regulatory expenses of $28.4 million were incurred related to the then-pending regulatory investigation by the California
Attorney General.

Other Operating Expense (Income), Net

Information about the components of other operating expense (income), net is as follows:

(In Thousands)
Net gains on sales of stores
Net gains on sales of delivery vehicles
Impairment charges and losses on asset dispositions and assets held for sale
Other Operating Expense (Income), Net

Year Ended December 31,

2015
(2,139) $
(1,706)
5,169
1,324

2014
(1,694) $
(1,099)
1,617
(1,176) $

2013

(833)
(1,895)
4,312
1,584

In 2015, other operating expense, net of $1.3 million included a $3.5 million loss related to a lease termination on a Company
aircraft, impairment charges of $757,000 on leasehold improvements related to Company-operated stores that were closed
during the period and impairment of $502,000 on assets held for sale. In addition, the Company recognized gains of
$2.1 million from the sale of 25 Aaron's Sales & Lease Ownership stores during 2015.

In 2014, other operating income, net of $1.2 million included charges of $477,000 related to the impairment of various land
outparcels and buildings that the Company decided not to utilize for future expansion and $762,000 related to the loss on sale
of the RIMCO net assets. In addition, the Company recognized gains of $1.7 million from the sale of six Aaron's Sales & Lease
Ownership stores during 2014.

In 2013, other operating expense, net of $1.6 million included charges of $3.8 million related to the impairment of various land
outparcels and buildings that the Company decided not to utilize for future expansion and the net assets of the RIMCO
operating segment (principally consisting of lease merchandise, office furniture and leasehold improvements) in connection
with the Company's decision to sell the 27 Company-operated RIMCO stores. In addition, the Company recognized gains of
$833,000 from the sale of two Aaron's Sales & Lease Ownership stores during 2013.

Operating Profit

Interest income. Interest income decreased to $2.2 million in 2015 from $2.9 million in 2014 and $3.0 million in 2013 due to
lower average investment and cash equivalent balances.

Interest expense. Interest expense increased to $23.3 million in 2015 from $19.2 million in 2014 and $5.6 million in 2013 due
primarily to approximately $491.3 million of additional debt financing incurred in connection with the April 14, 2014
Progressive acquisition. Interest expense also increased in 2015 due to increased revolving credit borrowings during the year to
finance the acquisition of DAMI and the assumption of $44.8 million of debt in that acquisition.

Other non-operating (expense) income, net. Other non-operating (expense) income, net includes the impact of foreign currency
exchange gains and losses, as well as gains and losses resulting from changes in the cash surrender value of Company-owned
life insurance related to the Company's deferred compensation plan. Included in other non-operating (expense) income, net
were foreign exchange transaction losses of $2.5 million, $2.3 million and $1.0 million during 2015, 2014 and 2013,
respectively. These losses result from the strengthening of the U.S. dollar against the British pound and Canadian dollar during
the period. Gains related to the changes in the cash surrender value of Company-owned life insurance were $831,000, $432,000
and $1.5 million during 2015, 2014 and 2013, respectively.

Earnings (Loss) Before Income Taxes

Information about our earnings (loss) before income taxes by reportable segment is as follows:

(In Thousands)
EARNINGS (LOSS)

BEFORE INCOME
TAXES:

Sales and Lease Ownership
Progressive
HomeSmart
DAMI
Franchise
Manufacturing
Other
Earnings Before Income Taxes
for Reportable Segments
Elimination of Intersegment

Profit

Cash to Accrual and Other

Adjustments

Total

nmf—Calculation is not meaningful

Year Ended December 31,

2015 vs. 2014

2015

2014

2013

2014 vs. 2013

Change

$ 166,838
54,525
771
(1,964)
48,576
2,520
(51,651)

$ 140,854
4,603
(2,643)
—
50,504
860
(75,905)

$ 183,965
—
(3,428)
—
54,171
107
(56,114)

25,984
49,922
3,414
(1,964)
(1,928)
1,660
24,254

18.4% $ (43,111)
4,603
nmf
785
129.2
—
nmf
(3,667)
(3.8)
753
193.0
(19,791)
32.0

(23.4)%
nmf
22.9
nmf
(6.8)
703.7
(35.3)

219,615

118,273

178,701

101,342

85.7

(60,428)

(33.8)

(2,488)

(813)

(94)

(1,675)

(206.0)

(719)

(764.9)

(4,007)
$ 213,120

4,244
$ 121,704

6,353
$ 184,960

(8,251)
91,416

(194.4)

(2,109)
75.1% $ (63,256)

(33.2)
(34.2)%

During 2015, earnings before income taxes increased $91.4 million, or 75.1%, to $213.1 million from $121.7 million in 2014.
In 2015, the results of the Company's operating segments were impacted by the following items:

•

Sales and Lease Ownership earnings before income taxes included a $3.5 million loss related to a lease termination on
a Company aircraft.

Progressive earnings before tax included $3.7 million of transaction costs related to the October 15, 2015 DAMI
acquisition.

During 2014, earnings before income taxes decreased $63.3 million, or 34.2%, to $121.7 million from $185.0 million in 2013.
In 2014, the results of the Company's operating segments were impacted by the following items:

•

Sales and Lease Ownership earnings before income taxes included $4.8 million of restructuring charges related to the
Company's strategic decision to close 44 Company-operated stores and restructure its home office and field support.

• Other category loss before income taxes included $13.7 million in financial and advisory costs related to addressing
now resolved strategic matters, including proxy contests, $4.3 million of restructuring charges in connection with the
store closures noted above, $9.1 million of charges associated with the retirements of both the Company's Chief
Executive Officer and Chief Operating Officer, $6.6 million in transaction costs related to the Progressive acquisition
and $1.2 million of regulatory income that reduced previously recognized regulatory expense upon the resolution of
the regulatory investigation by the California Attorney General.

During 2013, the results of the Company's operating segments were impacted by the following items:

• Other category loss before income taxes included $28.4 million related to an accrual for loss contingencies for the
then-pending regulatory investigation by the California Attorney General and $4.9 million related to retirement
expense and a change in vacation policies.

Income Tax Expense

Income tax expense increased $33.9 million to $77.4 million in 2015, compared with $43.5 million in 2014, representing a
78.1% increase due primarily to a 75.1% increase in earnings before income taxes in 2015. The effective tax rate increased to
36.3% in 2015 from 35.7% in 2014 primarily as a result of reduced federal credits.

Income tax expense decreased $20.8 million to $43.5 million in 2014, compared with $64.3 million in 2013, representing a
32.4% decrease due primarily to a 34.2% decrease in earnings before income taxes in 2014. The effective tax rate increased to
35.7% in 2014 from 34.8% in 2013 as a result of decreased tax benefits related to the Company's furniture manufacturing
operations and reduced federal credits.

Net Earnings

Net earnings increased $57.5 million to $135.7 million in 2015 from $78.2 million in 2014, representing a 73.5% increase. As a
percentage of total revenues, net earnings were 4.3% and 2.9% in 2015 and 2014, respectively.

Net earnings decreased $42.4 million to $78.2 million in 2014 from $120.7 million in 2013, representing a 35.2% decrease. As
a percentage of total revenues, net earnings were 2.9% and 5.4% in 2014 and 2013, respectively.

Overview of Financial Position

The major changes in the consolidated balance sheet from December 31, 2014 to December 31, 2015, are as follows:

• Cash and cash equivalents increased $11.4 million to $14.9 million at December 31, 2015 from $3.5 million at

December 31, 2014. For additional information, refer to the "Liquidity and Capital Resources" section below.

• Lease merchandise, net increased $51.9 million to $1.139 billion at December 31, 2015 primarily due to the growth in

invoice volume at Progressive.

• Loans receivable, net of $85.8 million as of December 31, 2015, resulted from the October 15, 2015 DAMI

acquisition. This amount represents the principal, interest and fees outstanding from DAMI credit cardholders, net of
an allowance for loan losses and unamortized fees. Refer to Notes 1 and 6 to the consolidated financial statements for
further information.

•

Income tax receivable increased $55.1 million due to the enactment of the Protecting Americans From Tax Hikes Act
of 2015 signed into law on December 18, 2015, which retroactively extended 50% bonus depreciation and
reauthorized work opportunity tax credits for 2015. Throughout 2015, the Company made payments based on the
previously enacted law, resulting in an overpayment when the current act was signed.

• Deferred income taxes payable increased $38.9 million due primarily to accelerated bonus depreciation deductions on
lease merchandise on hand at December 31, 2015. Purchases of lease merchandise increased by $310.0 million in
2015 compared to 2014 primarily due to the inclusion of Progressive for a full year in 2015, as well as its continued
growth.

Liquidity and Capital Resources

General

The Company's operating activities provided $166.8 million of cash in 2015, used $49.0 million of cash in 2014 and provided
$308.4 million of cash in 2013. The $215.8 million increase in cash flows from operating activities in 2015 as compared to
2014 was due primarily to revenue growth, operating margin improvements and income tax refunds. Among other changes,
there was a $57.5 million increase in net earnings, a $24.0 million increase related to inventory reduction initiatives, and a
$63.5 million increase related to income taxes receivable. The revenue growth and operating margin improvements were
related primarily to Progressive, which continues to grow and expand invoice volume and active doors, and has lower operating
expenses as a percentage of total revenues than the Company's traditional lease-to-own business because it does not have store
operations. The operating margin improvements also related to price increases, inventory reduction, and cost initiatives at the
Aaron’s Sales & Lease Ownership division. The change in the income tax receivable occurred primarily because of the
enactment of the Tax Increase Prevention Act of 2014 and the Protecting Americans From Tax Hikes Act of 2015, which have
resulted in income tax refunds, as discussed further in the "Commitments" section below. Both acts were signed in December
of the respective years and retroactively extended accelerated depreciation. The Company made payments throughout the year
based on enacted laws resulting in overpayments at the end of the year.

Purchases of sales and lease ownership stores initially have a positive impact on operating cash flows because the lease
merchandise, other assets and intangibles acquired are recognized as investing cash outflows in the period of acquisition.
However, the initial positive impact may not be indicative of the extent to which these stores will contribute positively to
operating cash flows in future periods. The amount of lease merchandise purchased in store acquisitions and shown under
investing activities was $8.5 million and $4.0 million in 2015 and 2013, respectively. The amount of lease merchandise
purchased in acquisitions and shown under investing activities was $144.0 million in 2014, substantially all of which was the
direct result of the April 14, 2014 Progressive acquisition.

Sales of Company-operated stores are an additional source of investing cash flows, and resulted in net cash proceeds of
$14.0 million, $16.5 million and $2.2 million in 2015, 2014 and 2013, respectively. Proceeds from the sales of Company-
operated stores in 2014 included cash consideration of $10.0 million in connection with the sale of the 27 Company-operated
RIMCO stores and the rights to five franchised RIMCO stores in January 2014. The amount of lease merchandise sold in these
sales and shown under investing activities was $8.8 million in 2015, $3.1 million in 2014 and $882,000 in 2013.

Our primary capital requirements consist of buying lease merchandise for sales and lease ownership stores and Progressive's
operations. As we continue to grow, the need for additional lease merchandise is expected to remain our major capital
requirement. Other capital requirements include purchases of property, plant and equipment, expenditures for acquisitions and
income tax payments, and funding of loan receivables for DAMI. Our capital requirements historically have been financed
primarily through:

•

cash flows from operations;

private debt offerings;

bank debt;

trade credit with vendors;

proceeds from the sale of lease return merchandise; and

stock offerings.

Debt Financing

In connection with the Company's acquisition of Progressive on April 14, 2014, the Company amended and restated its
revolving credit agreement, amended certain other financing agreements and entered into two new note purchase agreements.
On December 9, 2014, the Company amended the amended and restated revolving credit agreement, the senior unsecured notes
and the franchise loan agreement. On September 21, 2015, the Company entered into certain amendments related to the DAMI
acquisition. The April 2014, December 2014, and September 2015 amendments are discussed in further detail in Note 7 to the
Company's consolidated financial statements. In connection with acquiring DAMI on October 15, 2015, the Company also
assumed a secured revolving credit facility (the "DAMI credit facility"), which is discussed in further detail in Note 7 to the
Company's consolidated financial statements.

As of December 31, 2015, $109.4 million and $75.0 million of term loans and revolving credit balances, respectively, were
outstanding under the revolving credit agreement. Our current revolving credit facility matures December 9, 2019 and the total
available credit on the facility as of December 31, 2015 was $150.0 million. The revolving credit and term loan agreement
includes an uncommitted incremental facility increase option (an "accordion facility") which, subject to certain terms and
conditions, permits the Company at any time prior to the maturity date to request an increase in extensions of credit available
thereunder by an aggregate additional principal amount of up to $200.0 million.

As of December 31, 2015, $41.8 million was outstanding under the DAMI credit facility. The DAMI credit facility is currently
set to mature on October 15, 2017 and the total available credit on the facility as of December 31, 2015 was $7.3 million, in
addition to letter of credit not to exceed $2.0 million. In addition, the DAMI credit facility includes an accordion facility,
which, subject to certain terms and conditions, permits DAMI at any time prior to the maturity date to request an increase in the
maximum facility of up to $25.0 million.

As of December 31, 2015, the Company had outstanding $300.0 million in aggregate principal amount of senior unsecured
notes issued in a private placement in connection with the April 14, 2014 Progressive acquisition. The notes bear interest at the
rate of 4.75% per year and mature on April 14, 2021. Payments of interest are due quarterly, commencing July 14, 2014, with
principal payments of $60.0 million each due annually commencing April 14, 2017.

As of December 31, 2015, the Company had outstanding $75.0 million in senior unsecured notes originally issued in a private
placement in July 2011. Effective April 28, 2014, the notes bear interest at the rate of 3.95% per year and mature on April 27,
2018. Quarterly payments of interest commenced July 27, 2011, and annual principal payments of $25.0 million commenced
April 27, 2014.

Our revolving credit and term loan agreement and senior unsecured notes, and our franchise loan agreement discussed below,
contain certain financial covenants. These covenants include requirements that the Company maintain ratios of (i) EBITDA
plus lease expense to fixed charges of no less than 1.75:1.00 through December 31, 2015 and 2.00:1.00 thereafter and (ii) total
debt to EBITDA of no greater than 3.25:1.00 through December 31, 2015 and 3.00:1.00 thereafter. In each case, EBITDA
refers to the Company’s consolidated earnings before interest and tax expense, depreciation (other than lease merchandise
depreciation), amortization expense and other non-cash charges. On September 21, 2015, the Company amended the existing
revolving credit and term loan agreement and the senior unsecured note agreements to exclude DAMI financial information
from the calculation of financial debt covenants, among other things. If we fail to comply with these covenants, we will be in
default under these agreements, and all amounts will become due immediately. We are in compliance with these covenants at
December 31, 2015 and we believe that we will continue to be in compliance in the future.

The DAMI credit facility includes financial covenants that, among other things, require DAMI to maintain (i) an EBITDA ratio
of not less than 1.7 to 1.0 and (ii) a senior debt to capital base ratio of not more than 2.0 to 1.0. We are in compliance with these
covenants at December 31, 2015. Furthermore, the DAMI credit facility restricts DAMI's ability to transfer funds by limiting
intercompany dividends to an amount not to exceed the amount of capital the Company has invested in DAMI. The aggregate
amount of such dividends made in a calendar year are limited to 75% of DAMI's net income for the immediately preceding
calendar year.

Share Repurchases

We purchase our stock in the market from time to time as authorized by our Board of Directors. In December 2013, the
Company paid $125.0 million under an accelerated share repurchase program with a third party financial institution and
received an initial delivery of 3,502,627 shares. In February 2014, the accelerated share repurchase program was completed and
the Company received an additional 1,000,952 shares of common stock. As of December 31, 2015, the Company has
10,496,421 shares authorized for repurchase.

Dividends

We have a consistent history of paying dividends, having paid dividends for 28 consecutive years. Our annual common stock
dividend was $.094 per share, $.086 per share and $.072 per share in 2015, 2014 and 2013, respectively, and resulted in
aggregate dividend payments of $6.8 million, $7.8 million and $3.9 million in 2015, 2014 and 2013, respectively. At its
November 2015 meeting, our Board of Directors increased the quarterly dividend by 8.7%, raising it to $.025 per share. The
Company also increased its quarterly dividend rate by 9.5%, to $.023 per share, in November 2014 and by 23.5%, to $.021 per
share, in November 2013. Subject to sufficient operating profits, any future capital needs and other contingencies, we currently
expect to continue our policy of paying dividends.

If we achieve our expected level of growth in our operations, we anticipate we will supplement our expected cash flows from
operations, existing credit facilities, vendor credit and proceeds from the sale of lease return merchandise by expanding our
existing credit facilities, by securing additional debt financing, or by seeking other sources of capital to ensure we will be able
to fund our capital and liquidity needs for at least the next 12 to 24 months.

Commitments

Income Taxes. During the year ended December 31, 2015, we made $91.7 million in income tax payments, net of a $100
million refund. Within the next twelve months, we anticipate that we will make cash payments for federal and state income
taxes of approximately $51.0 million.

The American Taxpayer Relief Act of 2012 allowed for the deduction of 50% of the adjusted basis of qualified property for
assets placed in service from January 1, 2012 through the end of 2013. The Tax Increase Prevention Act of 2014 signed into
law on December 20, 2014 extended bonus depreciation and reauthorized work opportunity tax credits through the end of
2014. The Protecting Americans From Tax Hikes Act of 2015 (the 2015 Act) signed into law on December 18, 2015 extended
50% bonus depreciation and reauthorized work opportunity tax credits through the end of 2019. As a result, the Company
applied for and received a $100 million quick refund from the Internal Revenue Service (the "IRS") for the 2014 tax year
during January 2015, and a $120.0 million quick refund for the 2015 tax year during February 2016. Accordingly, our cash
flow benefited from having a lower cash tax obligation, which, in turn, provided additional cash flow from operations. Because
of our sales and lease ownership model, in which the Company remains the owner of merchandise on lease, we benefit more
from bonus depreciation, relatively, than traditional furniture, electronics and appliance retailers.

In future years, we may have to make increased tax payments on our earnings as a result of expected profitability and the
elimination of the accelerated depreciation deductions that were taken in 2015 and prior periods. While the 2015 Act extended
bonus depreciation through 2019, not considering the effects of bonus depreciation on future qualifying expenditures, we
estimate that at December 31, 2015, the remaining tax deferral associated with the acts described above is approximately
$178.0 million, of which approximately 80% is expected to reverse in 2016 and most of the remainder during 2017 and 2018.

Leases. We lease warehouse and retail store space for most of our store-based operations, call center space, and management
and information technology space for corporate functions under operating leases expiring at various times through 2033. Most
of the leases contain renewal options for additional periods ranging from one to 20 years. We also lease transportation vehicles
under operating leases which generally expire during the next four years. We expect that most leases will be renewed or
replaced by other leases in the normal course of business. Approximate future minimum rental payments required under
operating leases that have initial or remaining non-cancelable terms in excess of one year as of December 31, 2015 are shown
in the below table under "Contractual Obligations and Commitments."

As of December 31, 2015, the Company had 19 remaining capital leases with a limited liability company ("LLC") controlled
by a group of current and former executives. In October and November 2004, the Company sold 11 properties, including
leasehold improvements, to the LLC. The LLC obtained borrowings collateralized by the land and buildings totaling
$6.8 million. The Company occupies the land and buildings collateralizing the borrowings under a 15-year term lease, with a
five-year renewal at the Company’s option, at an aggregate annual rental of $788,000. The transaction has been accounted for
as a financing in the accompanying consolidated financial statements. The rate of interest implicit in the leases is approximately
9.7%. Accordingly, the land and buildings, associated depreciation expense and lease obligations are recorded in the
Company’s consolidated financial statements. No gain or loss was recognized in this transaction.

In December 2002, the Company sold 10 properties, including leasehold improvements, to the LLC. The LLC obtained
borrowings collateralized by the land and buildings totaling $5.0 million. The Company occupies the land and buildings
collateralizing the borrowings under a 15-year term lease at an aggregate annual rental of approximately $1.2 million. The
transaction has been accounted for as a financing in the accompanying consolidated financial statements. The rate of interest
implicit in the leases is approximately 10.1%. Accordingly, the land and buildings, associated depreciation expense and lease
obligations are recorded in the Company’s consolidated financial statements. No gain or loss was recognized in this transaction.

In the past, we financed a small portion of our store expansion through sale-leaseback transactions. The properties were
generally sold at net book value and the resulting leases qualified and are accounted for as operating leases. We do not have any
retained or contingent interests in the stores nor do we provide any guarantees, other than a corporate level guarantee of lease
payments, in connection with the sale-leasebacks. The operating leases that resulted from these transactions are included in the
table below under "Contractual Obligations and Commitments."

Franchise Loan Guaranty. We have guaranteed the borrowings of certain independent franchisees under a franchise loan
agreement with several banks. On December 4, 2015, we amended our third amended and restated loan facility to, among other
things, extend the maturity date to December 8, 2016.

At December 31, 2015, the portion that we might be obligated to repay in the event franchisees defaulted was $81.0 million.
However, due to franchisee borrowing limits, we believe any losses associated with defaults would be mitigated through
recovery of lease merchandise and other assets. Since the inception of the franchise loan program in 1994, we have had no
significant associated losses. We believe the likelihood of any significant amounts being funded in connection with these
commitments to be remote.

Contractual Obligations and Commitments. The following table shows the approximate contractual obligations, including
interest, and commitments to make future payments as of December 31, 2015:

(In Thousands)
Debt, Excluding Capital Leases
Capital Leases
Interest Obligations
Operating Leases
Purchase Obligations
Retirement Obligations
Regulatory
Total Contractual Cash Obligations

Total
601,156
9,294
64,614
540,041
22,556
4,272
4,737
$ 1,246,670

Period Less
Than 1 Year

154,281
2,897
20,210
112,134
6,672
3,022
4,737
303,953

Period 1-3
Years
195,000
3,990
29,611
174,720
11,379
1,202
—
415,902

Period 3-5
Years
191,875
2,070
13,486
117,978
3,937
25
—
329,371

Period Over
5 Years

60,000
337
1,307
135,209
568
23
—
197,444

Purchase obligations are primarily related to certain advertising programs, marketing programs, software licenses, hardware
and software maintenance and support and telecommunications services. The table above includes only those purchase
obligations for which the timing and amount of payments is certain. We also have purchase obligations for certain advertising
and marketing programs with required minimum purchase volumes that are not included in the total contractual obligations
table and that we estimate will result in additional annual spending in each of the next two years of approximately $12.0
million, based on recent history. We have no long-term commitments to purchase merchandise nor do we have significant
purchase agreements that specify minimum quantities or set prices that exceed our expected requirements for three months.

For future interest payments on variable-rate debt, which are based on a specified margin plus a base rate (LIBOR), we used the
variable rate in effect at December 31, 2015 to calculate these payments. Our variable rate debt at December 31, 2015 consisted
of our borrowings under our revolving credit facilities. Future interest payments related to our revolving credit facilities are
based on the borrowings outstanding at December 31, 2015 through their respective maturity dates, assuming such borrowings
are outstanding at that time. The variable portion of the rates at December 31, 2015 ranged between 2.08% and 2.31% for
borrowings under the unsecured revolving credit agreements. The variable rate for the DAMI credit facility was 4.24% at
December 31, 2015. Future interest payments may be different depending on future borrowing activity and interest rates.

The following table shows the Company’s approximate commercial commitments as of December 31, 2015:

(In Thousands)
Guaranteed Borrowings of Franchisees

Total
Amounts
Committed

Period Less
Than 1 Year

Period 1-3
Years

Period 3-5
Years

Period Over
5 Years

81,024

— $

—

Retirement obligations primarily represent future payments associated with the retirement of executive officers during the years
ended December 31, 2014 and December 31, 2012.

Deferred income tax liabilities as of December 31, 2015 were approximately $307.5 million. This amount is not included in the
total contractual obligations table because we believe this presentation would not be meaningful. Deferred income tax liabilities
are calculated based on temporary differences between the tax basis of assets and liabilities and their respective book basis,
which will result in taxable amounts in future years when the liabilities are settled at their reported financial statement amounts.

The results of these calculations do not have a direct connection with the amount of cash taxes to be paid in any future periods.
As a result, scheduling deferred income tax liabilities as payments due by period could be misleading, because this scheduling
would not relate to liquidity needs.

Off-Balance Sheet Risk

The Company, through its DAMI business, is a party to financial instruments (loans receivable) with off-balance-sheet risk in
the normal course of business to meet the financing needs of its cardholders. These financial instruments primarily include
commitments to extend unsecured credit. As of December 31, 2015, there were approximately 82,000 active credit cards
outstanding, of which 81,800 had remaining credit available of $378.7 million. The rates and terms of such commitments to
lend are competitive with others in the market in which the Company operates. As such, the commitment amount above, if
borrowed, is a reasonable estimate of fair value. While these amounts represented the total available unused credit card lines,
the Company does not anticipate that all cardholders will access their entire available line at any given point in time.
Commitments to extend unsecured credit are agreements to lend to a customer so long as there is no violation of any condition
established in the contract. Commitments generally have fixed expiration dates or other termination clauses. Since many of the
commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent
future cash requirements. The Company evaluates cardholder creditworthiness individually.

Recent Accounting Pronouncements

Refer to Note 1 to the Company's consolidated financial statements for a discussion of recently issued accounting
pronouncements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In connection with the acquisition of DAMI in October 2015, the Company made minor amendments to its revolving credit
facility agreements and certain financing agreements, and assumed a new secured revolving credit agreement. Refer to Note 7
to the consolidated financial statements for more information.

As of December 31, 2015, we had $375 million of senior unsecured notes outstanding at a weighted-average fixed rate of 4.6%.
Amounts outstanding under our unsecured revolving credit agreements as of December 31, 2015 consisted of $109.4 million in
term loans and $75.0 million of revolving credit balances. The secured revolving credit agreement had $41.8 million
outstanding as of December 31, 2015. Borrowings under these revolving credit agreements are indexed to LIBOR or the prime
rate, which exposes us to the risk of increased interest costs if interest rates rise. Based on the Company's variable-rate debt
outstanding as of December 31, 2015, a hypothetical 1.0% increase or decrease in interest rates would increase or decrease
interest expense by $2.3 million on an annualized basis.

We do not use any significant market risk sensitive instruments to hedge commodity, foreign currency or other risks, and hold
no market risk sensitive instruments for trading or speculative purposes.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm

The Board of Directors of Aaron’s, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of Aaron’s, Inc. and subsidiaries as of December 31, 2015 and
2014, and the related consolidated statements of earnings, comprehensive income, shareholders’ equity and cash flows for each
of the three years in the period ended December 31, 2015. 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 the standards of the Public Company Accounting Oversight Board (United States).
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’s, Inc. and subsidiaries at December 31, 2015 and 2014, and the consolidated results of their operations and
their cash flows for each of the three years in the period ended December 31, 2015, in conformity with U.S. generally accepted
accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
Aaron’s, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2015, based on criteria established
in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework) and our report dated February 29, 2016 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Atlanta, Georgia
February 29, 2016

Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting

The Board of Directors of Aaron’s, Inc. and Subsidiaries

We have audited Aaron’s, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2015, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) (the COSO criteria). Aaron’s, Inc. and subsidiaries’ management is responsible for
maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control
over financial reporting included in the accompanying Management Report on Internal Control over Financial Reporting. Our
responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s
assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal
controls of Dent-A-Med, Inc., d/b/a the HELPcard®, (collectively, "DAMI") which is included in the 2015 consolidated
financial statements of Aaron’s, Inc. and constituted approximately 3.7% of the Company's consolidated total assets as of
December 31, 2015 and .1% of the Company’s consolidated total revenues for the year then ended. Our audit of the internal
control over financial reporting of Aaron’s, Inc. also did not include an evaluation of the internal control over financial
reporting of DAMI.

In our opinion, Aaron’s, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2015, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated balance sheets of Aaron’s, Inc. and subsidiaries as of December 31, 2015 and 2014 and the related
consolidated statements of earnings, comprehensive income, shareholders’ equity and cash flows for each of the three years in
the period ended December 31, 2015 of Aaron’s, Inc. and subsidiaries and our report dated February 29, 2016 expressed an
unqualified opinion thereon.

/s/ Ernst & Young LLP

Atlanta, Georgia
February 29, 2016

Management Report on Internal Control over Financial Reporting

Management of Aaron’s, Inc. and subsidiaries (the "Company") is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934,
as amended. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with
accounting principles generally accepted in the United States of America.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2015. In making this assessment, the Company’s management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework) in Internal Control-Integrated Framework. Based on
its assessment using those criteria, management concluded that, as of December 31, 2015, the Company’s internal control over
financial reporting was effective.

On October 15, 2015, the Company acquired a 100% ownership interest in Dent-A-Med, Inc., d/b/a the HELPcard®,
(collectively, "DAMI") for a total purchase price of $54.9 million, inclusive of cash acquired of $4.2 million. As permitted by
Securities and Exchange Commission guidance, the scope of management’s evaluation does not include DAMI's internal
control over financial reporting. DAMI represented 3.7% of the Company's consolidated total assets as of December 31, 2015
and .1% of the Company’s consolidated total revenues for the year ended December 31, 2015.

The Company’s internal control over financial reporting as of December 31, 2015 has been audited by Ernst & Young LLP, an
independent registered public accounting firm, as stated in its report dated February 29, 2016, which expresses an unqualified
opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2015.

AARON’S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

ASSETS:
Cash and Cash Equivalents
Investments
Accounts Receivable (net of allowances of $34,861 in 2015 and $27,401 in 2014)
Lease Merchandise (net of accumulated depreciation and allowances of $738,657 in 2015 and
$710,266 in 2014)

Loans Receivable (net of allowances of $2,971 in 2015)
Property, Plant and Equipment, Net
Goodwill
Other Intangibles, Net
Income Tax Receivable
Prepaid Expenses and Other Assets
Assets Held for Sale
Total Assets
LIABILITIES & SHAREHOLDERS’ EQUITY:
Accounts Payable and Accrued Expenses
Accrued Regulatory Expense
Deferred Income Taxes Payable
Customer Deposits and Advance Payments
Debt
Total Liabilities
Commitments and Contingencies (Note 9)
Shareholders’ Equity:

Common Stock, Par Value $.50 Per Share: Authorized: 225,000,000 Shares at December 31,
2015 and December 31, 2014; Shares Issued: 90,752,123 at December 31, 2015 and
December 31, 2014
Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Loss

Less: Treasury Shares at Cost

Common Stock: 18,151,560 Shares at December 31, 2015 and 18,263,589 at December 31,
2014

Total Shareholders’ Equity
Total Liabilities & Shareholders’ Equity

December 31,
2015

December 31,
2014

(In Thousands, Except Share Data)

14,942
22,226
113,439

3,549
21,311
107,383

1,138,938
85,795
225,836
539,475
275,912
179,174
56,162
6,976
2,658,875

300,356
4,737
307,481
69,233
610,450
1,292,257
—

1,087,032
—
219,417
530,670
297,471
124,095
59,560
6,356
2,456,844

270,421
27,200
268,551
61,069
606,082
1,233,323
—

45,376
240,112
1,403,120
(517)
1,688,091

45,376
227,290
1,274,233
(90)
1,546,809

(321,473)
1,366,618
2,658,875

(323,288)
1,223,521
2,456,844

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

AARON’S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS

REVENUES:

Lease Revenues and Fees
Retail Sales
Non-Retail Sales
Franchise Royalties and Fees
Interest and Fees on Loans Receivable
Other

COSTS AND EXPENSES:

OPERATING PROFIT
Interest Income
Interest Expense
Other Non-Operating (Expense) Income, Net

EARNINGS BEFORE INCOME TAXES
INCOME TAXES
NET EARNINGS
EARNINGS PER SHARE
EARNINGS PER SHARE ASSUMING DILUTION

Year Ended
December 31,
2015

Year Ended
December 31,
2014

Year Ended
December 31,
2013

(In Thousands, Except Per Share Data)

$
$
$

2,684,184
32,872
390,137
63,507
2,845
6,211
3,179,756

1,212,644
21,040
351,777
1,357,030
—
—
—
—
—
1,324
2,943,815
235,941
2,185
(23,339)
(1,667)
213,120
77,411
135,709
1.87
1.86

$
$
$

2,221,574
38,360
363,355
65,902
—
5,842
2,695,033

932,634
24,541
330,057
1,231,801
13,661
9,140
9,094
6,638
(1,200)
(1,176)
2,555,190
139,843
2,921
(19,215)
(1,845)
121,704
43,471
78,233
1.08
1.08

$
$
$

1,748,699
40,876
371,292
68,575
—
5,189
2,234,631

628,089
24,318
337,581
1,022,684
—
—
4,917
—
28,400
1,584
2,047,573
187,058
2,998
(5,613)
517
184,960
64,294
120,666
1.59
1.58

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

AARON’S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands)
Net Earnings

Other Comprehensive (Loss) Income:
Foreign Currency Translation:

Foreign Currency Translation Adjustment

Total Other Comprehensive (Loss) Income

Comprehensive Income

Year End December 31,

2015
135,709

2014

78,233

2013
120,666

(427)
(427)
135,282

(26)
(26)
78,207

5
5
120,671

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

AARON’S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In Thousands, Except Per Share)

Amount

Common Stock

Treasury Stock

Additional
Paid-in Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Loss

Balance, January 1, 2013

Dividends, $.072 per share

Stock-Based Compensation

Reissued Shares

Repurchased Shares

Net Earnings

Foreign Currency Translation

Adjustment

Balance, December 31, 2013

Dividends, $.086 per share

Stock-Based Compensation

Reissued Shares

Repurchased Shares

Net Earnings

Foreign Currency Translation

Adjustment

Balance, December 31, 2014

Dividends, $.094 per share

Stock-Based Compensation

Reissued Shares

Net Earnings

Foreign Currency Translation

Adjustment

Balance, December 31, 2015

(15,032) $

(216,575) $

45,376

220,362

1,087,032

(69)

739

(3,502)

10,825

(100,000)

2,250

570

(25,000)

(5,479)

120,666

(17,795)

(305,750)

45,376

198,182

1,202,219

515

300

7,162

(1,001)

(25,000)

10,398

(6,290)

25,000

(6,219)

78,233

(18,264)

(323,288)

45,376

227,290

1,274,233

107

1,726

13,605

(783)

(6,822)

135,709

(18,152) $

(321,473) $

45,376

240,112

1,403,120

(64)

(26)

(90)

(427)

(517)

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

AARON’S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

OPERATING ACTIVITIES:
Net Earnings
Adjustments to Reconcile Net Earnings to Net Cash Provided by (Used in)

Operating Activities:

Depreciation of Lease Merchandise
Other Depreciation and Amortization
Accounts Receivable Provision
Provision for Credit Losses on Loans Receivable
Fee Amortization on Loans Receivable
Stock-Based Compensation
Deferred Income Taxes
Other Changes, Net

Changes in Operating Assets and Liabilities, Net of Effects of Acquisitions

and Dispositions:

Additions to Lease Merchandise
Book Value of Lease Merchandise Sold or Disposed
Accounts Receivable
Prepaid Expenses and Other Assets
Income Tax Receivable
Accounts Payable and Accrued Expenses
Accrued Litigation Expense
Customer Deposits and Advance Payments

Cash Provided by (Used in) Operating Activities

INVESTING ACTIVITIES:
Purchase of Investments
Loans Receivable Originated
Repayments of Loans Receivable
Proceeds from Maturities and Calls of Investments
Additions to Property, Plant and Equipment
Acquisitions of Businesses and Contracts
Proceeds from Dispositions of Businesses and Contracts
Proceeds from Sale of Property, Plant, and Equipment

Cash Used in Investing Activities

FINANCING ACTIVITIES:
Proceeds from Debt
Repayments of Debt
Acquisition of Treasury Stock
Dividends Paid
Excess Tax Benefits From Stock-Based Compensation
Issuance of Stock Under Stock Option Plans
Other

Cash (Used in) Provided by Financing Activities

Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
Cash and Cash Equivalents at End of Year

Cash Paid During the Year:

Interest
Income Taxes

Year Ended
December 31,
2015

Year Ended
December 31,
2014

(In Thousands)

Year Ended
December 31,
2013

135,709

78,233

120,666

1,212,644
80,203
163,111
937
(269)
14,163
38,970
(842)

(1,775,479)
510,657
(173,159)
3,964
(54,351)
25,458
(22,463)
7,508
166,761

—
(11,700)
15,211
—
(60,557)
(73,295)
13,976
7,515
(108,850)

290,090
(330,747)
—
(6,822)
348
1,038
(425)
(46,518)
11,393
3,549
14,942

23,405
91,720

932,634
85,600
99,283
—
—
10,863
(7,157)
2,214

(1,465,501)
456,713
(110,269)
(5,332)
(117,894)
(12,788)
(1,200)
5,639
(48,962)

—
—
—
89,993
(47,565)
(700,509)
16,525
6,032
(635,524)

904,956
(441,603)
—
(7,823)
1,392
4,388
(4,366)
456,944
(227,542)
231,091
3,549

16,344
187,709

628,089
57,016
35,894
—
—
2,342
(36,763)
3,996

(964,072)
425,673
(30,419)
(1,349)
22,688
16,893
28,400
(617)
308,437

(74,845)
—
—
47,930
(58,145)
(10,898)
2,163
6,841
(86,954)

2,598
(4,954)
(125,000)
(3,875)
1,381
9,924
—
(119,926)
101,557
129,534
231,091

5,614
54,027

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

NOTE 1: BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Aaron’s, Inc. (the "Company" or "Aaron’s") is a leader in the sales and lease ownership and specialty retailing of furniture,
consumer electronics, computers, and home appliances and accessories throughout the United States and Canada.

The Company's major operating divisions are the Aaron’s Sales & Lease Ownership division (established as a monthly
payment concept), Progressive, HomeSmart (established as a weekly payment concept), DAMI and Woodhaven Furniture
Industries, which manufactures and supplies the majority of the upholstered furniture and bedding leased and sold in
Company-operated and franchised stores.

The Progressive segment, in which the Company acquired a 100% ownership interest on April 14, 2014, is a leading virtual
lease-to-own company. Progressive provides lease-purchase solutions in 46 states. It does so by purchasing merchandise from
third-party retailers desired by those retailers’ customers and, in turn, leasing that merchandise to the customers on a lease-to-
own basis. Progressive consequently has no stores of its own, but rather offers lease-purchase solutions to the customers of
traditional retailers.

On October 15, 2015, the Company acquired a 100% ownership interest in Dent-A-Med, Inc., d/b/a the HELPcard®,
(collectively, "DAMI") for $50.7 million, net of cash acquired. The Company also assumed $44.8 million of debt in the form
of a secured revolving credit facility in connection with the acquisition. DAMI partners with merchants to provide a variety
of revolving credit products originated through a federally insured bank to customers that may not qualify for traditional
prime lending. These are commonly referred to as "second-look" credit products. Together with Progressive, DAMI will
allow the Company to provide retail and merchant partners one source for financing and leasing transactions with below-
prime customers.

The following table presents store count by ownership type for the Company’s store-based operations:

Stores at December 31 (Unaudited)
Company-operated stores

Sales and Lease Ownership

HomeSmart

RIMCO

Total Company-operated stores
Franchised stores1
Systemwide stores

2015

2014

2013

1,223

—

1,305

734

2,039

1,243

—

1,326

782

2,108

1,262

1,370

781

2,151

1 As of December 31, 2015, 2014 and 2013, 813, 920 and 940 franchises had been awarded, respectively.

The following table presents active doors for the Progressive segment:

Active Doors at December 31 (Unaudited)
Progressive Active Doors1

2015

2014

13,248

12,307

1 An active door is a retail store location at which at least one virtual lease-to-own transaction has been completed during the
trailing three month period.

Basis of Presentation

The preparation of the Company’s consolidated financial statements in conformity with accounting principles generally
accepted in the United States ("U.S. GAAP") requires management to make estimates and assumptions that affect the
amounts reported in these consolidated financial statements and accompanying notes. Actual results could differ from those
estimates. Generally, actual experience has been consistent with management’s prior estimates and assumptions.
Management does not believe these estimates or assumptions will change significantly in the future absent unsurfaced and
unforeseen events.

Reclassifications

Certain reclassifications have been made to the prior periods to conform to the current period presentation.

The Company presents sales net of related taxes for its traditional lease-to-own store-based ("core") business. Prior to 2015,
Progressive presented lease revenues on a gross basis with sales taxes included. Effective January 1, 2015, Progressive
conformed its presentation of sales tax to that of the core business. For the year ended December 31, 2014, a reclassification
adjustment of $30.2 million has been made to present sales net of related taxes on a consolidated basis. This adjustment
reduces lease revenues and fees and operating expenses.

Principles of Consolidation and Variable Interest Entities

The consolidated financial statements include the accounts of Aaron’s, Inc. and its subsidiaries, each of which is wholly
owned. Intercompany balances and transactions between consolidated entities have been eliminated.

The Company holds notes issued by Perfect Home Holdings Limited ("Perfect Home"), a privately-held lease-to-own
company that is primarily financed by share capital and subordinated debt. Perfect Home is based in the U.K. and operates 70
retail stores as of December 31, 2015.

Perfect Home is a variable interest entity ("VIE") because it does not have sufficient equity at risk. However, the Company is
not the primary beneficiary and does not consolidate Perfect Home since the Company lacks the power through voting or
similar rights to direct the activities that most significantly affect Perfect Home's economic performance. The Company’s
maximum exposure to any potential losses associated with this VIE is equal to its total recorded investment which is $22.2
million at December 31, 2015.

Revenue Recognition

Lease Revenues and Fees

The Company provides merchandise, consisting of furniture, consumer electronics, computers, appliances and household
accessories, to its customers for lease under certain terms agreed to by the customer. Two primary store-based lease models
are offered to customers: one through the Company’s Sales & Lease Ownership division (established as a monthly model)
and the other through its HomeSmart division (established as a weekly model). The typical monthly store-based lease model
is 12, 18 or 24 months, while the typical weekly store-based lease model is 65 to 104 weeks. The Company’s Progressive
division offers virtual lease-purchase solutions, typically over 12 months, to the customers of traditional retailers. The
Company does not require deposits upon inception of customer agreements. The customer has the right to acquire title either
through a purchase option or through payment of all required lease payments.

All of the Company’s customer agreements are considered operating leases. Lease revenues are recognized as revenue in the
month they are due. Lease payments received prior to the month due are recorded as deferred lease revenue, and this amount
is included in customer deposits and advance payments in the accompanying consolidated balance sheets. The Company
maintains ownership of the lease merchandise until all payment obligations are satisfied under sales and lease ownership
agreements. Initial direct costs related to the Company’s customer agreements are expensed as incurred and have been
classified as operating expenses in the Company’s consolidated statements of earnings.

Retail and Non-Retail Sales

Revenues from the sale of merchandise to franchisees are recognized when title and risk of ownership transfer to the
franchisee upon its receipt of the merchandise, which is tracked electronically by the Company’s fulfillment system.
Additionally, revenues from the sale of merchandise to other customers are recognized at the time of shipment, at which time
title and risk of ownership are transferred to the customer.

Substantially all of the amounts reported as non-retail sales and non-retail cost of sales in the accompanying consolidated
statements of earnings relate to the sale of lease merchandise to franchisees. The Company classifies the sale of merchandise
to other customers as retail sales in the consolidated statements of earnings.

Franchise Royalties and Fees

The Company franchises its Aaron’s Sales & Lease Ownership and HomeSmart stores in markets where the Company has no
immediate plans to enter. Franchisees pay an ongoing royalty of either 5% or 6% of gross revenues, which are recorded when
due.

In addition, franchisees typically pay a non-refundable initial franchise fee from $15,000 to $50,000 depending upon market
size. Franchise fees and area development fees are generated from the sale of rights to develop, own and operate sales and
lease ownership stores. These fees are recognized as income when substantially all of the Company’s obligations per location
are satisfied, generally at the date of the store opening. The Company guarantees certain debt obligations of some of the
franchisees and receives guarantee fees based on the outstanding debt obligations of such franchisees. The Company
recognizes finance fee revenue as the guarantee obligation is satisfied. Refer to Note 9 for additional discussion of the
Company’s franchise-related guarantee obligation.

Franchise fee revenue was $600,000, $1.0 million and $1.7 million; royalty revenue was $57.7 million, $58.8 million and
$59.1 million; and finance fee revenue was $2.9 million, $3.7 million and $5.1 million for the years ended December 31,
2015, 2014 and 2013, respectively. Deferred franchise and area development agreement fees, included in accounts payable
and accrued expenses in the accompanying consolidated balance sheets, were $1.6 million and $2.8 million at December 31,
2015 and 2014, respectively.

Lease Merchandise

The Company’s lease merchandise consists primarily of furniture, consumer electronics, computers, appliances and
household accessories and is recorded at cost, which includes overhead from production facilities, shipping costs and
warehousing costs. The sales and lease ownership stores depreciate merchandise to a 0% salvage value over the lease
agreement period when on lease, generally 12 to 24 months (monthly agreements) or 65 to 104 weeks (weekly agreements),
and generally 36 months when not on lease. The Company’s Progressive division, at which substantially all merchandise is
on lease, depreciates merchandise over the lease agreement period, which is typically over 12 months.

The Company’s policies require weekly lease merchandise counts at its store-based operations, which include write-offs for
unsalable, damaged, or missing merchandise inventories. Full physical inventories are generally taken at the fulfillment and
manufacturing facilities one to two times per year, and appropriate provisions are made for missing, damaged and unsalable
merchandise. In addition, the Company monitors lease merchandise levels and mix by division, store, and fulfillment center,
as well as the average age of merchandise on hand. If unsalable lease merchandise cannot be returned to vendors, it is
adjusted to its net realizable value or written off.

All lease merchandise is available for lease or sale. On a monthly basis, all damaged, lost or unsalable merchandise identified
is written off. The Company records lease merchandise adjustments on the allowance method, which estimates the
merchandise losses incurred but not yet identified by management as of the end of the accounting period based on historical
write off experience. As of December 31, 2015 and 2014, the allowance for lease merchandise write offs was $33.4 million
and $27.6 million, respectively.

Lease merchandise adjustments totaled $136.4 million, $99.9 million and $58.0 million during the years ended December 31,
2015, 2014 and 2013, respectively, and are included in operating expenses in the accompanying consolidated statements of
earnings.

Retail and Non-Retail Cost of Sales

Included in cost of sales is the net book value of merchandise sold, primarily using specific identification. It is not practicable
to allocate operating expenses between selling and lease operations.

Shipping and Handling Costs

The Company classifies shipping and handling costs as operating expenses in the accompanying consolidated statements of
earnings, and these costs totaled $77.9 million, $81.1 million and $78.6 million in 2015, 2014 and 2013, respectively.

Advertising

The Company expenses advertising costs as incurred. Advertising production costs are initially recognized as a prepaid
advertising asset and are expensed when an advertisement appears for the first time. Total advertising costs amounted to
$39.3 million, $50.5 million and $43.0 million in 2015, 2014 and 2013, respectively. These advertising costs are shown net of
cooperative advertising considerations received from vendors, substantially all of which represent reimbursement of specific,
identifiable and incremental costs incurred in selling those vendors’ products. The amount of cooperative advertising
consideration netted against advertising expense was $36.3 million, $28.3 million and $25.0 million in 2015, 2014 and 2013,
respectively. The prepaid advertising asset was $900,000 and $1.3 million at December 31, 2015 and 2014, respectively.

Stock-Based Compensation

The Company has stock-based employee compensation plans, which are more fully described in Note 12. The Company
estimates the fair value for the options granted on the grant date using a Black-Scholes-Merton option-pricing model. The fair
value of each share of restricted stock units ("RSUs"), restricted stock awards ("RSAs") and performance share units
("PSUs") awarded is equal to the market value of a share of the Company’s common stock on the grant date.

Deferred Income Taxes

Deferred income taxes represent primarily temporary differences between the amounts of assets and liabilities for financial
and tax reporting purposes. The Company’s largest temporary differences arise principally from the use of accelerated
depreciation methods on lease merchandise for tax purposes.

Earnings per Share

Earnings per share is computed by dividing net earnings by the weighted average number of shares of common stock
outstanding during the period. The computation of earnings per share assuming dilution includes the dilutive effect of stock
options, RSUs, RSAs and PSUs as determined under the treasury stock method. The following table shows the calculation of
dilutive share-based awards for the years ended December 31 (shares in thousands):

(Shares In Thousands)
Weighted average shares outstanding
Dilutive effect of share-based awards
Weighted average shares outstanding assuming dilution

2015

2014

2013

72,568
475
73,043

72,384
339
72,723

75,747
643
76,390

Approximately 460,000 and 164,000 share-based awards were excluded from the computations of earnings per share
assuming dilution in 2015 and 2014, respectively, as the awards would have been anti-dilutive for the years presented. No
stock options, RSUs, RSAs or PSUs were anti-dilutive during 2013.

Cash and Cash Equivalents

The Company classifies highly liquid investments with maturity dates of three months or less when purchased as cash
equivalents. The Company maintains its cash and cash equivalents in a limited number of banks. Bank balances typically
exceed coverage provided by the Federal Deposit Insurance Corporation. However, due to the size and strength of the banks
in which the balances are held, any exposure to loss is believed to be minimal.

Investments

At December 31, 2015 and 2014, investments classified as held-to-maturity securities consisted of British pound-
denominated notes issued by Perfect Home. The Perfect Home notes, which totaled £15.1 million ($22.2 million) and £13.7
million ($21.3 million) at December 31, 2015 and December 31, 2014, respectively, are classified as held-to-maturity
securities because the Company has the positive intent and ability to hold the investments to maturity. The Perfect Home
notes are carried at amortized cost in investments in the consolidated balance sheets and mature on June 30, 2016. The
increase in the carrying amount of the notes during 2015 and 2014 relates to accretion of the original discount on the notes,
which had a face value of £10.0 million.

Historically, the Company maintained investments in various corporate debt securities, or bonds, that were classified as held-
to-maturity securities. During the year ended December 31, 2014, the Company sold all of its investments in corporate bonds
due to the Progressive acquisition. The amortized cost of the investments sold was $68.7 million, and a net realized gain of
approximately $95,000 was recorded.

The Company evaluates held-to-maturity securities for other-than-temporary impairment on a quarterly basis, and more
frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and
the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer and
(3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any
anticipated recovery in fair value. The Company does not intend to sell its remaining securities and it is not more likely than
not that the Company will be required to sell the investments before recovery of their amortized cost bases. The Company
has estimated that the carrying amount of its Perfect Home notes approximates fair value and, therefore, no impairment is
considered to have occurred as of December 31, 2015.

Accounts Receivable

Accounts receivable consist primarily of receivables due from customers of Company-operated stores and Progressive,
corporate receivables incurred during the normal course of business and franchisee obligations. Corporate receivables include
receivables for vendor consideration, the secondary escrow described in Note 2 and in-transit credit card amounts related to
customer transactions at Company-operated stores.

Accounts receivable, net of allowances, consists of the following as of December 31:

(In Thousands)
Customers

Corporate

Franchisee

2015

2014

35,153

26,175

52,111

30,438

32,572

44,373

113,439

107,383

The Company maintains an accounts receivable allowance, which primarily relates to its store-based operations and its
Progressive division. For the Company's store-based operations, contractually required lease payments are accrued when due;
however, they are not always collected and customers can terminate the lease agreements at any time. For customers that do
not pay timely, the Company's store-based operations generally focus on obtaining a return of the lease merchandise.
Therefore the Company’s policy for its store-based operations is to accrue a provision for returns and uncollectible
contractually due renewal payments based on historical collection experience, which is recognized as a reduction of revenue.
Store-based operations write off lease receivables that are 60 days or more past due on pre-determined dates occurring twice
monthly.

The Company’s policy for its Progressive division is to accrue for uncollected amounts due based on historical collection
experience. The provision is recognized as bad debt expense classified in operating expenses. The Progressive division writes
off lease receivables that are 120 days or more contractually past due.

The following is a summary of the Company’s accounts receivable allowance as of December 31:

(In Thousands)
Beginning Balance

Accounts written off
Accounts receivable provision

Ending Balance

2015

2014

2013

27,401
(155,651)
163,111
34,861

7,172
(79,054)
99,283
27,401

6,001
(34,723)
35,894
7,172

The following table shows the amounts recognized for bad debt expense and provision for returns and non-renewals for the
years ended December 31:

(In Thousands)

Bad debt expense
Provision for returns and uncollected renewal payments

Accounts receivable provision

2015
122,184
40,927
163,111

2014

2013

60,514
38,769
99,283

—
35,894
35,894

Loans Receivable, Net

Loans receivable, net represents the principal balances of credit card charges at DAMI's participating merchants that remain
outstanding to cardholders, plus unpaid interest, capitalized origination costs and fees due from cardholders, net of an
allowance for uncollectible amounts and unamortized fees (which include merchant fees, promotional fees and deferred
annual card fees).

DAMI extends or declines credit to an applicant through its bank partner based upon the customer's credit rating. Qualifying
customers receive a credit card to finance their initial purchase and to use in subsequent purchases at the merchant or other
subsequent merchants for an initial 24 month privilege period, which DAMI will renew if the cardholder remains in good
standing. DAMI’s bank partner originates the loan by providing financing to the merchant at the point of sale and acquiring
the receivable at a discount from the face value. The discount represents a pre-negotiated, nonrefundable fee between DAMI
and the merchant that generally ranges from 3.5% to 25% (the merchant fee), depending on the product type and any
promotional interest periods offered (e.g., six, 12 or 18 months of deferred or reduced interest). The fee is designed primarily
to cover DAMI’s incremental direct origination costs and the risk of loss related to the portfolio of cardholder charges
received from the merchant. Within a 72 hour period, DAMI acquires the receivable from the bank at the discounted amount.
DAMI offsets the origination costs against the merchant fee, and the net amount is deferred. It is generally amortized into
revenue over the 24 month initial privilege period.

The customer is required to make periodic minimum payments that are generally 3.5% of the outstanding loan balance,
which includes outstanding interest. Fixed and variable interest rates, typically 17.90% to 29.99%, compound daily. Annual
fees may also be charged to the customer at the commencement of the loan and on each subsequent anniversary date. Under
the provisions of the credit card agreements, the Company may assess fees for missed or late payments. Interest and fees are
due in the billing period in which they are assessed.

The Company acquired outstanding credit card loans in the October 15, 2015 DAMI acquisition (the "Acquired Loans").
Loans acquired in a business acquisition are recorded at their fair value at the acquisition date. The projected net cash flows
from expected payments of principal, interest, fees and servicing costs and anticipated charge-offs are included in the
determination of fair value; therefore, an allowance for loan losses and an amount for unamortized fees are not recognized for
the Acquired Loans. The difference, or discount, between the expected cash flows to be received and the fair value of the
Acquired Loans is accreted to revenue based on the effective interest method. The estimated weighted average life of the
Acquired Loans was approximately one year at the acquisition date. At each period end, the Company evaluates the
appropriateness of the accretable discount on the Acquired Loans based on actual and revised projected future cash receipts.

Property, Plant and Equipment

The Company records property, plant and equipment at cost. Depreciation and amortization are computed on a straight-line
basis over the estimated useful lives of the respective assets, which range from five to 40 years for buildings and
improvements and from one to 15 years for other depreciable property and equipment.

Costs incurred to develop software for internal use are capitalized and amortized over the estimated useful life of the
software, which ranges from five to 10 years. The Company primarily develops software for use in its store-based operations.
The Company uses an agile development methodology in which feature-by-feature updates are made to its software. Costs
are capitalized when management, with the relevant authority, authorizes and commits to funding a feature update and it is
probable that the project will be completed and the software will be used to perform the function intended. Capitalization of
costs ceases when the feature update is substantially complete and ready for its intended use. Generally, the life cycle for
each feature update is one month.

Gains and losses related to dispositions and retirements are recognized as incurred. Maintenance and repairs are also
expensed as incurred; renewals and improvements are capitalized. Depreciation expense for property, plant and equipment is
included in operating expenses in the accompanying consolidated statements of earnings and was $52.0 million, $53.7
million and $53.3 million during the years ended December 31, 2015, 2014 and 2013, respectively. Amortization of
previously capitalized internal use software development costs, which is a component of depreciation expense for property,
plant and equipment, was $7.4 million, $5.4 million and $3.3 million during the years ended December 31, 2015, 2014 and
2013, respectively.

The Company assesses its long-lived assets other than goodwill and other indefinite-lived intangible assets for impairment
whenever facts and circumstances indicate that the carrying amount may not be fully recoverable. If it is determined that the
carrying amount of an asset is not recoverable, the Company compares the carrying amount of the asset to its fair value as
estimated using discounted expected future cash flows, market values or replacement values for similar assets. The amount
by which the carrying amount exceeds the fair value of the asset, if any, is recognized as an impairment loss.

Assets Held for Sale

Certain properties, consisting of parcels of land and commercial buildings, met the held for sale classification criteria as of
December 31, 2015 and 2014. After adjustment to fair value, the $7.0 million and $6.4 million carrying amount of these
properties has been classified as assets held for sale in the consolidated balance sheets as of December 31, 2015 and 2014,
respectively. The Company estimated the fair values of real estate properties using the market values for similar properties.
These properties are considered Level 2 assets as defined below.

During the years ended 2015, 2014 and 2013, the Company recorded impairment charges of $459,000, $805,000 and
$3.8 million, respectively. These impairment charges related primarily to the impairment of various parcels of land and
buildings included in the Sales and Lease Ownership segment that the Company decided not to utilize for future expansion,
as well as the sale of the net assets of the RIMCO disposal group in January 2014, and are generally included in other
operating expense (income), net within the consolidated statements of earnings.

Gains and losses on the disposal of assets held for sale were not significant in 2015 or 2013. The disposal of assets held for
sale resulted in the recognition of net losses of $754,000 in 2014.

Goodwill

Goodwill represents the excess of the purchase price paid over the fair value of the identifiable net tangible and intangible
assets acquired in connection with business acquisitions. Impairment occurs when the carrying amount of goodwill is not
recoverable from future cash flows. The Company’s goodwill is not amortized but is subject to an impairment test at the
reporting unit level annually as of October 1 and more frequently if events or circumstances indicate that impairment may
have occurred. Factors which could necessitate an interim impairment assessment include a sustained decline in the
Company’s stock price, prolonged negative industry or economic trends and significant underperformance relative to
historical or projected future operating results.

The Company has deemed its operating segments to be reporting units because the operations included in each operating
segment have similar economic characteristics. As of December 31, 2015, the Company had six operating segments and
reporting units: Sales and Lease Ownership, Progressive, HomeSmart, DAMI, Franchise and Manufacturing. As of
December 31, 2015, the Company’s Sales and Lease Ownership, Progressive, HomeSmart and DAMI reporting units were
the only reporting units with assigned goodwill balances. The following is a summary of the Company’s goodwill by
reporting unit at December 31:

(In Thousands)
Sales and Lease Ownership

Progressive

HomeSmart

DAMI
Total

2015
233,851

290,605

14,729

290

2014
226,828

289,184

14,658

—

539,475

530,670

When evaluating goodwill for impairment, the Company may first perform a qualitative assessment to determine whether it
is more likely than not that a reporting unit or intangible asset group is impaired. The decision to perform a qualitative
impairment assessment for an individual reporting unit in a given year is influenced by a number of factors, including the size
of the reporting unit's goodwill, the current and projected operating results, the significance of the excess of the reporting
unit's estimated fair value over carrying amount at the last quantitative assessment date and the amount of time in between
quantitative fair value assessments and the date of acquisition. During 2015, as part of the annual goodwill impairment
analysis, the Company performed a qualitative assessment for the Progressive reporting unit and concluded no indications of
impairment existed.

If the Company does not perform a qualitative assessment, or if the Company determines that it is not more likely than not
that the fair value of the reporting unit or intangible asset group exceeds its carrying amount, the Company performs a
goodwill impairment test that consists of a two-step process, if necessary. The first step is to calculate the estimated fair value
of the reporting unit and compare its fair value to its carrying amount, including goodwill. The Company uses a combination
of valuation techniques to calculate the fair value of its reporting units, including a multiple of gross projected revenues
approach, a multiple of projected earnings before interest, taxes, depreciation and amortization approach and a discounted
cash flow model that use assumptions consistent with those the Company believes a hypothetical marketplace participant
would use.

If the carrying amount of a reporting unit exceeds its fair value, a second step is performed to determine the amount of
impairment loss, if any. The second step compares the implied fair value of the reporting unit’s goodwill with the carrying
amount of its goodwill. If the carrying amount of the reporting unit’s goodwill exceeds its implied fair value, an impairment
loss is recognized in an amount equal to that excess.

During the performance of the annual assessment of goodwill for impairment in the 2015, 2014 and 2013 fiscal years, the
Company did not identify any reporting units that were not substantially in excess of their carrying values, other than the
HomeSmart reporting unit in 2015 and 2014. While no impairment was noted in the impairment testing, if HomeSmart is
unable to sustain its recent profitability improvements, there could be a change in the valuation of the HomeSmart reporting
unit that may result in the recognition of an impairment loss in future periods.

The goodwill of the DAMI reporting unit was recognized in conjunction with the October 15, 2015 DAMI acquisition.
Therefore, an annual impairment test for this reporting unit was not performed in 2015.

The Company determined that there were no events that occurred or circumstances that changed in the fourth quarter of 2015
that would more likely than not reduce the fair value of a reporting unit below its carrying amount. As a result, the Company
did not perform an interim impairment test for any reporting unit as of December 31, 2015.

Other Intangibles

Other intangibles include customer relationships, non-compete agreements and franchise development rights acquired in
connection with store-based business acquisitions. The customer relationship intangible asset is amortized on a straight-line
basis over a two-year estimated useful life. The non-compete intangible asset is amortized on a straight-line basis over the
life of the agreement (generally two or three years). Acquired franchise development rights are amortized on a straight-line
basis over the unexpired life of the franchisee’s ten year area development agreement.

Other intangibles also include the identifiable intangible assets acquired as a result of the DAMI and Progressive
acquisitions, which the Company recorded at the estimated fair value as of the respective acquisition dates. As more fully
described in Note 2 to these consolidated financial statements, the Company amortizes the definite-lived intangible assets
acquired as a result of the DAMI acquisition on a straight-line basis over five years for the technology asset and non-compete
agreements and ten years for trademarks and tradenames. The Company amortizes the definite-lived intangible assets
acquired as a result of the Progressive acquisition on a straight-line basis over periods ranging from one to three years for
customer lease contracts and internal use software and ten to 12 years for technology and merchant relationships.

Indefinite-lived intangible assets represent the value of trade names and trademarks acquired as part of the Progressive
acquisition. At the date of acquisition, the Company determined that no legal, regulatory, contractual, competitive, economic
or other factors limit the useful life of the trade name and trademark intangible asset and, therefore, the useful life is
considered indefinite. The Company reassesses this conclusion quarterly and continues to believe the useful life of this asset
is indefinite.

Indefinite-lived intangible assets are not amortized but are subject to an impairment test annually and when events or
circumstances indicate that impairment may have occurred. The Company performs the impairment test for its indefinite-
lived intangible assets on October 1 by comparing the asset’s fair value to its carrying amount. The Company estimates the
fair value based on projected discounted future cash flows under a relief from royalty method. An impairment charge is
recognized if the asset’s estimated fair value is less than its carrying amount.

The Company completed its indefinite-lived intangible asset impairment test as of October 1, 2015 and determined that no
impairment had occurred.

Insurance Reserves

Estimated insurance reserves are accrued primarily for workers compensation, vehicle liability, general liability and group
health insurance benefits provided to the Company’s employees. Estimates for these insurance reserves are made based on
actual reported but unpaid claims and actuarial analysis of the projected claims run off for both reported and incurred but not
reported claims.

Asset Retirement Obligations

The Company accrues for asset retirement obligations, which relate to expected costs to remove exterior signage, in the
period in which the obligations are incurred. These costs are accrued at fair value. When the related liability is initially
recorded, the Company capitalizes the cost by increasing the carrying amount of the related long-lived asset. Over time, the
liability is accreted to its settlement value and the capitalized cost is depreciated over the useful life of the related asset. Upon
settlement of the liability, the Company recognizes a gain or loss for any differences between the settlement amount and the
liability recorded. Asset retirement obligations amounted to approximately $2.6 million and $2.7 million as of December 31,
2015 and 2014, respectively.

Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss by component for the year ended December 31, 2015 are as follows:

(In Thousands)
Balance at January 1, 2015
Other comprehensive loss
Balance at December 31, 2015

Foreign Currency

Total

(90) $
(427)
(517) $

(90)
(427)
(517)

There were no reclassifications out of accumulated other comprehensive loss for the year ended December 31, 2015.

Fair Value Measurement

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. To increase the comparability of fair value measures, the following
hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.

Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices
for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in
markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3—Valuations based on unobservable inputs reflecting the Company's own assumptions, consistent with
reasonably available assumptions made by other market participants. These valuations require significant judgment.

The Company measures assets held for sale at fair value on a nonrecurring basis and records impairment charges when they
are deemed to be impaired. The Company maintains certain financial assets and liabilities, including investments and fixed-
rate long term debt, that are not measured at fair value but for which fair value is disclosed.

The fair values of the Company’s other current financial assets and liabilities, including cash and cash equivalents, accounts
receivable and accounts payable, approximate their carrying amounts due to their short-term nature. The fair value for the
loans receivable and the revolving credit borrowings also approximate their carrying amounts.

Foreign Currency

The financial statements of international subsidiaries are translated to U.S. dollars using month-end rates of exchange for
assets and liabilities, and average rates of exchange for revenues, costs and expenses. Translation gains and losses of
international subsidiaries are recorded in accumulated other comprehensive income as a component of shareholders’ equity.

Foreign currency transaction gains and losses are recorded as a component of other non-operating (expense) income, net in
the consolidated statements of earnings and amounted to losses of approximately $2.5 million, $2.3 million and $1.0 million
during 2015, 2014, and 2013 respectively.

Recent Accounting Pronouncements

Revenue Recognition. In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards
Update ("ASU") No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 replaces substantially all existing
revenue recognition guidance with a single, comprehensive revenue recognition model that requires a company to recognize
revenue at the amount to which it expects to be entitled in exchange for transferring goods or services to a customer. ASU
2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows
arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs
incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU 2015-14, Deferral of the Effective Date, which
deferred the effective date for ASU 2014-09 by one year to annual reporting periods, and interim periods within that period,
beginning after December 15, 2017. Companies may use either a full retrospective or a modified retrospective approach to
adopt ASU 2014-09. The Company has not yet determined the potential effects of adopting ASU 2014-09 on its consolidated
financial statements. The Company plans to complete its initial assessment of how it will be affected by this standard in the
second half of 2016.

Debt Issuance Costs. In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs,
which requires debt issuance costs to be presented in the balance sheet as a deduction from the corresponding debt liability
rather than as a separate asset. ASU 2015-03 is effective for fiscal years beginning after December 15, 2015, and interim
periods within those fiscal years. The Company does not expect the provisions of ASU 2015-03 to have a material impact on
its consolidated financial statements.

Cloud Computing. In April 2015, the FASB issued ASU No. 2015-05, Customer's Accounting for Fees Paid in a Cloud
Computing Arrangement. Among other things, ASU 2015-05 clarifies how a customer in a cloud computing arrangement
should determine whether the arrangement includes a software license, and clarifies that the acquisition of a software license
must be accounted for in the same manner as other licenses of intangible assets. ASU 2015-05 is effective for fiscal years
beginning after December 15, 2015, and interim periods within those fiscal years. The Company does not expect the
provisions of ASU 2015-05 to have a material impact on its consolidated financial statements.

Measurement-Period Adjustments. In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for
Measurement-Period Adjustments. ASU 2015-16 eliminates the requirement that an acquirer in a business combination
account for a measurement-period adjustment retrospectively. Instead, acquirers must recognize measurement-period
adjustments during the period in which they determine the adjustment amounts. The adjustment amounts must include the
effect on earnings of any amounts the acquirer would have recorded in previous periods if the accounting had been completed
at the acquisition date. ASU 2015-16 is effective for fiscal years beginning after December 15, 2015, and interim periods
within those fiscal years. ASU 2015-16 is applied prospectively to adjustments to provisional amounts that occur after the
effective date. That is, ASU 2015-16 applies to open measurement periods, regardless of the acquisition date. The Company
does not expect the provisions of ASU 2015-16 to have a material impact on its consolidated financial statements.

Leases. In February 2016, the FASB issued ASU No. 2016-02, Leases, which would require lessees to recognize assets and
liabilities for most leases and would change certain aspects of today’s lessor accounting, among other things. ASU 2016-02 is
effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. The Company
has not yet determined the potential effects of adopting ASU 2016-02 on its consolidated financial statements.

NOTE 2: ACQUISITIONS

During the years ended December 31, 2015 and 2014, net cash payments related to the acquisitions of businesses, including
contracts, were $73.3 million and $700.5 million, respectively. Cash payments made during the year ended December 31, 2015
principally relate to the October 15, 2015 DAMI acquisition as described below. Cash payments made during the year ended
December 31, 2014 principally related to the April 2014 Progressive acquisition as described below.

Acquisitions have been accounted for as business combinations, and the results of operations of the acquired businesses are
included in the Company’s results of operations from their dates of acquisition. The results of DAMI and Progressive have been
presented as reportable segments from their October 15, 2015 and April 14, 2014 acquisition dates, respectively. Refer to Note
13 for more information on their revenues and earnings before income taxes since their respective acquisition dates. The effect
of the Company’s other acquisitions on the consolidated financial statements for the years ended December 31, 2015 and 2014
was not significant.

DAMI Acquisition

On October 15, 2015, Progressive acquired a 100% ownership interest in DAMI for a total purchase price of $54.9 million,
inclusive of cash acquired of $4.2 million. The DAMI subsidiary is expected to enable Progressive to drive long-term
incremental revenue and earnings growth, and in turn will benefit from Progressive's proprietary technology, infrastructure, and
financial capacity. It offers retail partners, along with Progressive's technology-based application and approval process, one
source for financing and leasing transactions with below-prime customers.

Preliminary Acquisition Accounting

The following table presents the summary of the preliminary estimated fair value of the assets acquired and liabilities assumed in
the DAMI acquisition as of the October 15, 2015 acquisition date:

(In Thousands)
Purchase Price

Estimated Fair Value of Identifiable Assets Acquired and Liabilities Assumed

Cash and Cash Equivalents
Loans Receivable1
Receivables

Property, Plant and Equipment
Other Intangibles2
Income Tax Receivable

Prepaid Expenses and Other Assets

Deferred Income Tax Assets

Total Identifiable Assets Acquired

Accounts Payable and Accrued Expenses

Debt

Total Liabilities Assumed

Goodwill

Net Assets Acquired

54,900

4,185

89,186

2,754

3,400

728

671

375

101,344
(1,709)
(45,025)
(46,734)
290

54,900

1 Contractually required amounts due at the acquisition date were $94.2 million.
2 Identifiable intangible assets are further disaggregated in the table below.

The preliminary acquisition accounting presented above is subject to refinement. The Company is still finalizing certain working
capital adjustments with the sellers and gathering information on certain contingencies and other income tax-related matters that
existed at the acquisition date. Estimates for these items have been included in the acquisition accounting and are expected to be
finalized prior to the one year anniversary date of the acquisition.

The estimated intangible assets attributable to the DAMI acquisition are comprised of the following:

Technology

Trade Names and Trademarks

Non-compete Agreements
Total Acquired Intangible Assets1

Fair Value
(in thousands)
2,550
$

500

350

3,400

Weighted Average Life
(in years)

5.0

10.0

5.0

1 Acquired definite-lived intangible assets have a total weighted average life of 5.7 years.

During the year ended December 31, 2015, the Company incurred $3.7 million of transaction costs in connection with the
acquisition of DAMI. These costs were included in the line item operating expenses in the consolidated statements of earnings.
In addition, the Company incurred approximately $425,000 in debt financing costs related to the assumed debt, which has been
capitalized as a component of prepaid expenses and other assets in the consolidated balance sheets.

Progressive Acquisition

On April 14, 2014, the Company acquired a 100% ownership interest in Progressive, a leading virtual lease-to-own company, for
a total purchase price of $705.8 million, inclusive of cash acquired of $5.8 million. Progressive provides lease-purchase
solutions in 46 states. The Company believes the Progressive acquisition will be strategically transformational and will
strengthen its business.

The following table reconciles the total estimated purchase price of the Company’s acquisition of Progressive:

(In Thousands)
Proceeds from Private Placement Note Issuance

Proceeds from Term Loan

Proceeds from Revolving Credit Facility

Cash Consideration

Deferred Cash Consideration

Purchase Price

300,000

126,250

65,000

185,454

29,106

705,810

Refer to Note 7 for additional information regarding the debt incurred to partially finance the Progressive acquisition.

The initial deferred cash consideration had amounts outstanding as of December 31, 2015 of $789,000 in withheld escrow
amounts.

The purchase price includes a primary escrow of $35.8 million to secure indemnification obligations of the sellers relating to the
accuracy of representations, warranties and the satisfaction of covenants. As of December 31, 2015, primary escrow funds of
$8.5 million have been withheld to cover pending litigation.

In addition, the purchase price includes a secondary escrow of $15.8 million to secure indemnification obligations of the sellers
relating to certain acquired tax-related contingent liabilities. The Company believes that $13.4 million is fully recoverable from
the secondary escrow account and included this indemnification asset as a receivable in the Company's acquisition accounting.
$10.0 million had been distributed as of December 31, 2015. Any remaining undisputed balance is payable to the sellers
36 months from the April 14, 2014 closing date.

Acquisition Accounting

The following table presents the summary of the preliminary estimated fair value of the assets acquired and liabilities assumed in
the Progressive acquisition as of the April 14, 2014 acquisition date, as well as adjustments made during the year ended
December 31, 2015 (referred to as the "measurement period adjustments"):

(In Thousands)
Purchase Price

Estimated Fair Value of Identifiable Assets Acquired and Liabilities
Assumed

Cash and Cash Equivalents
Receivables2, 3
Lease Merchandise2
Property, Plant and Equipment
Other Intangibles4
Prepaid Expenses and Other Assets
Total Identifiable Assets Acquired

Accounts Payable and Accrued Expenses2
Deferred Income Taxes Payable2
Customer Deposits and Advance Payments

Total Liabilities Assumed

Goodwill5
Net Assets Acquired

Amounts
Recognized as of
Acquisition Date
(as adjusted)1

Measurement
Period
Adjustments2

Amounts
Recognized as of
Acquisition Date
(as adjusted)

705,810

— $

705,810

5,810

27,581

141,185

4,010

325,000

893
504,479
(29,104)
(48,749)
(10,000)
(87,853)
289,184

—

(4,245)
110

—

—
(4,135)
3,049
(335)
—

2,714

1,421

705,810

— $

5,810

23,336

141,295

4,010

325,000

893
500,344
(26,055)
(49,084)
(10,000)
(85,139)
290,605

705,810

1 As previously reported in the notes to consolidated financial statements included in the Company's Annual Report on Form 10-
K for the year ended December 31, 2014, which includes the effects of certain measurement period adjustments recognized in
2014.
2 The measurement period adjustments recognized in 2015 related to the resolution of income tax uncertainties and sales tax
exposures, which also impacted the fair value estimates of receivables and lease merchandise related to the secondary escrow
amount, subsequent to the acquisition date.
3 Receivables include $13.4 million related to the secondary escrow amount, which the Company expects to recover prior to
termination of the escrow agreement 36 months from the April 14, 2014 closing date. The gross amount due under customer-
related receivables acquired was $22.7 million, of which $10.9 million was expected to be uncollectible.
4 Identifiable intangible assets are further disaggregated in the following table.
5 The total goodwill recognized in conjunction with the Progressive acquisition has been assigned to the Progressive operating
segment. Of the goodwill recognized as part of this acquisition, $247.0 million is expected to be deductible for tax purposes.
The primary reasons the purchase price of the acquisition exceeded the fair value of the net assets acquired, which resulted in
the recognition of goodwill, is related to synergistic value created from the combination of Progressive’s virtual customer
payment capabilities with the Company’s leading traditional lease-to-own model. Goodwill also includes certain other
intangible assets that do not qualify for separate recognition, such as an assembled workforce.

The estimated intangible assets attributable to the Progressive acquisition are comprised of the following:

Internal Use Software

Technology

Trade Names and Trademarks

Customer Lease Contracts

Merchant Relationships
Total Acquired Intangible Assets1

Fair Value
(in thousands)

Weighted Average Life
(in years)

14,000

66,000

53,000

11,000

181,000

325,000

3.0

10.0

Indefinite

1.0

12.0

1 Acquired definite-lived intangible assets have a total weighted average life of 10.6 years.

During the year ended December 31, 2014, the Company incurred $6.6 million of transaction costs in connection with the
acquisition of Progressive. These costs were included in the line item "Progressive-related transaction costs" in the consolidated
statements of earnings. In addition, during the year ended December 31, 2014, the Company incurred approximately
$2.3 million in debt financing costs related to the $491.3 million of new indebtedness incurred to partially finance the
acquisition, which has been capitalized as a component of prepaid expenses and other assets in the consolidated balance sheets.

Pro Forma Financial Information

The following table presents unaudited consolidated pro forma information as if the acquisition of Progressive had occurred on
January 1, 2013:

(In Thousands)
Revenues
Net Earnings

Twelve Months Ended
December 31,

2014

2013

As Reported
$ 2,695,033
78,233

Pro Forma
$ 2,851,631
86,038

As Reported
$ 2,234,631
120,666

Pro Forma
$ 2,607,977
105,682

The unaudited pro forma financial information presented above does not purport to represent what the actual results of the
Company's operations would have been if the acquisition of Progressive had occurred on January 1, 2013, nor is it indicative of
future performance. The unaudited pro forma financial information does not reflect the impact of future events that may occur
after the acquisition, including, but not limited to, anticipated cost savings from operating synergies.

The unaudited pro forma financial information presented in the table above has been adjusted to give effect to adjustments that
are (1) directly related to the business combination; (2) factually supportable; and (3) expected to have a continuing impact.
These adjustments include, but are not limited to, amortization related to fair value adjustments to intangible assets and the
adjustment of interest expense to reflect the additional borrowings of the Company in conjunction with the acquisition.

NOTE 3: GOODWILL AND INTANGIBLE ASSETS

Indefinite-Lived Intangible Assets

The following table summarizes information related to indefinite-lived intangible assets at December 31:

(In Thousands)
Trade Names and Trademarks

Goodwill

Indefinite-lived Intangible Assets

2015

53,000

539,475

592,475

2014

53,000

530,670

583,670

The following table provides information related to the carrying amount of goodwill by operating segment:

(In Thousands)
Balance at January 1, 2014

Acquisitions

Disposals

Acquisition Accounting Adjustments

Balance at December 31, 2014

Acquisitions

Disposals

Acquisition Accounting Adjustments

Sales and Lease
Ownership

224,523

Progressive
$

— $

DAMI

HomeSmart
14,658

— $

Total
$ 239,181

3,629
(1,321)

(3)
226,828

9,529
(2,506)
—

277,958

—

11,226

289,184

—

1,421

—

290

—

14,658

229
(158)
—

281,587
(1,321)

11,223

530,670

10,048
(2,664)
1,421

Balance at December 31, 2015

233,851

$ 290,605

290

14,729

$ 539,475

Definite-Lived Intangible Assets

The following table summarizes information related to definite-lived intangible assets at December 31:

2015

2014

(In Thousands)
Internal Use Software

Technology

Customer Lease Contracts

Merchant Relationships
Other Intangibles1
Total

Gross

14,000

68,550

—

181,000

7,383

$ 270,933

Accumulated
Amortization
$

Net

Gross

6,002

57,131

(7,998) $
(11,419)
—
(25,851)
(2,753)
4,630
(48,021) $ 222,912

155,149

—

14,000

66,000

11,000

181,000

5,721

$ 277,721

Accumulated
Amortization
$

(3,331) $
(4,712)
(11,000)
(10,768)
(3,439)

Net
10,669

61,288

—

170,232

2,282
$ (33,250) $ 244,471

1 Other intangibles primarily includes definite-lived trade names and trademarks, customer relationships, non-compete
agreements, and franchise development rights from business acquisitions.

Total amortization expense of definite-lived intangible assets, included in operating expenses in the accompanying consolidated
statements of earnings, was $28.2 million, $31.9 million and $3.7 million during the years ended December 31, 2015, 2014 and
2013, respectively. As of December 31, 2015, estimated future amortization expense for the next five years related to definite-
lived intangible assets is as follows:

(In Thousands)
2016

2017

2018

2019

2020

28,703

24,602

22,622

22,527

22,374

NOTE 4: FAIR VALUE MEASUREMENT

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes financial liabilities measured at fair value on a recurring basis:

(In Thousands)
Deferred Compensation Liability

Level 1

Level 2
— $ (11,576) $

Level 3

— $

Level 1

Level 2
— $ (12,677) $

Level 3

—

December 31, 2015

December 31, 2014

The Company maintains a deferred compensation plan as described in Note 16 to these consolidated financial statements. The
liability representing benefits accrued for plan participants is valued at the quoted market prices of the participants’ investment
elections, which consist of equity and debt "mirror" funds. As such, the Company has classified the deferred compensation
liability as a Level 2 liability.

Non-Financial Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The following table summarizes non-financial assets measured at fair value on a nonrecurring basis:

(In Thousands)
Assets Held for Sale

December 31, 2015

December 31, 2014

Level 1

Level 2

Level 3

Level 1

Level 2

Level 3

— $

6,976

— $

6,356

—

The highest and best use of these assets held for sale is as real estate land parcels for development or real estate properties for
use or lease; however, the Company has chosen not to develop or use these properties. Assets held for sale are written down to
fair value less cost to sell, and the adjustment is recorded in other operating expense (income), net.

Certain Financial Assets and Liabilities Not Measured at Fair Value

The following table summarizes the fair value of assets (liabilities) that are not measured at fair value in the consolidated
balance sheets, but for which the fair value is disclosed:

(In Thousands)
Perfect Home Notes 1
Fixed-Rate Long Term Debt 2

December 31, 2015

December 31, 2014

Level 1

Level 2

Level 3

Level 1

Level 2

Level 3

— $
— (395,618)

— $

22,226
—

— $
— (429,049)

— $

21,311
—

1 The Perfect Home notes were initially measured at cost. The Company periodically reviews the carrying amount utilizing

company-specific transactions or changes in Perfect Home's financial performance to determine if fair value adjustments are
necessary.

2 The fair value of fixed-rate long term debt is estimated using the present value of underlying cash flows discounted at a

current market yield for similar instruments. The carrying amount of fixed-rate long term debt was $375.0 million and $400.0
million at December 31, 2015 and December 31, 2014, respectively.

NOTE 5: PROPERTY, PLANT AND EQUIPMENT

The following is a summary of the Company’s property, plant, and equipment at December 31:

(In Thousands)
Land
Buildings and Improvements
Leasehold Improvements and Signs
Fixtures and Equipment1
Assets Under Capital Leases:
with Related Parties
with Unrelated Parties

Construction in Progress

Less: Accumulated Depreciation and Amortization

2015

2014

24,300
76,982
98,435
223,382

10,573
11,063
3,853
448,588
(222,752)
225,836

24,861
83,053
107,380
196,965

10,573
10,564
2,086
435,482
(216,065)
219,417

1 Includes internal-use software development costs of $60.7 million and $50.3 million as of December 31, 2015 and 2014,

respectively. Accumulated amortization of internal-use software development costs amounted to $22.2 million and
$14.8 million as of December 31, 2015 and 2014, respectively.

Amortization expense on assets recorded under capital leases is included in operating expenses and was $1.7 million,
$1.7 million and $1.7 million in 2015, 2014 and 2013, respectively. Capital leases consist of buildings and improvements.
Assets under capital leases with related parties included $8.0 million and $6.9 million in accumulated depreciation and
amortization as of December 31, 2015 and 2014, respectively. Assets under capital leases with unrelated parties included
$6.3 million and $5.7 million in accumulated depreciation and amortization as of December 31, 2015 and 2014, respectively.

NOTE 6: LOANS RECEIVABLE

The following is a summary of the Company’s loans receivable, net at December 31:

(In Thousands)
Credit Card Loans

Acquired Loans

Loans Receivable, Gross

Allowance for Loan Losses

Unamortized Fees

Loans Receivable, Net

Included in the table below is an aging of the loans receivable, gross balance at December 31, 2015:

Aging Category
30-59 days past due

60-89 days past due

90 or more days past due

Past due loans receivable

Current loans receivable

2015

13,900

74,866

88,766

(937)
(2,034)
85,795

Percentage1

7.9%

3.3%

4.1%

15.3%

84.7%

Balance of loans receivable 90 or more days past due and still accruing interest and fees
—
1 This aging is based on the contractual amounts outstanding for each loan as of period end, and does not reflect the fair value
adjustments for the Acquired Loans.

NOTE 7: INDEBTEDNESS

Following is a summary of the Company’s debt at December 31:

(In Thousands)
DAMI Credit Facility
Revolving Facility
Senior Unsecured Notes, 3.95%, Due in Installments through April 2018
Term Loan, Due in Installments through December 2019
Senior Unsecured Notes, 4.75%, Due in Installments through April 2021

Capital Lease Obligation:
with Related Parties
with Unrelated Parties

Other Debt

DAMI Credit Facility

2015
$41,781
75,000
75,000
109,375
300,000

4,703
4,591
—
610,450

2014

—
69,116
100,000
121,875
300,000

6,157
5,684
3,250
606,082

In connection with the October 15, 2015 acquisition of DAMI, the Company assumed the loan and security agreement, dated as
of May 18, 2011 (as amended), which provides for a secured revolving credit facility in an amount not to exceed $85.0 million
in outstanding principal balance, including a letter of credit not to exceed $2.0 million (the "DAMI credit facility"). In addition,
the loan and security agreement includes an uncommitted incremental facility increase option (an "accordion facility") which,
subject to certain terms and conditions, permits DAMI at any time prior to the maturity date to request an increase in extensions
of credit available thereunder by an aggregate additional principal amount of up to $25.0 million.

The DAMI credit facility is currently set to mature on the second anniversary of the DAMI acquisition and contains
representations, warranties and covenants consistent with those of other facilities of similar size and type. Collateral under the
loan and security agreement is limited to the assets and operations of DAMI.

Borrowings bear interest at one-month LIBOR plus 4%. The interest rate for secured revolving credit borrowings as of
December 31, 2015 was 4.24%. As of December 31, 2015, $7.3 million was available for borrowing under the DAMI credit
facility.

DAMI pays a non-refundable monthly unused line fee on the line of credit which ranges from .5% to .75% as determined by
DAMI's average daily unused commitments.

Revolving Credit Agreement and Term Loan

The revolving credit and term loan agreement, which expires December 9, 2019, permits the Company to borrow, subject to
certain terms and conditions, on an unsecured basis up to $225.0 million in revolving loans. The revolving credit and term loan
agreement also provides for an accordion facility that permits the Company at any time prior to the maturity date to request an
increase in credit extensions thereunder (whether through additional term loans and/or revolving credit commitments or any
combination thereof) by an aggregate additional principal amount of up to $200.0 million, with such additional credit
extensions provided by one or more lenders thereunder at their sole discretion.

The revolving credit borrowings and term loans bear interest at the lower of the lender's prime rate or one-month LIBOR plus a
margin ranging from 1.75% to 2.25% as determined by the Company's ratio of total debt to EBITDA, and interest is payable
quarterly. The weighted-average interest rate for revolving credit borrowings and term loans outstanding as of December 31,
2015 was approximately 2.24%. For the term loan facility, as amended, installment payments of $3.1 million commenced on
December 31, 2014 and are due quarterly, with the remaining unpaid principal balance due at maturity on December 9, 2019.

The Company pays a commitment fee on unused balances, which ranges from .15% to .30% as determined by the Company's
ratio of total debt to EBITDA. As of December 31, 2015, $150.0 million was available for borrowings under the revolving
credit agreement.

The revolving credit and term loan agreement, senior unsecured notes discussed below and franchise loan program discussed in
Note 9 contain financial covenants. These covenants include requirements that the Company maintain ratios of (i) EBITDA
plus lease expense to fixed charges of no less than 1.75 to 1.00 through December 31, 2015 and 2.00 to 1.00 thereafter and (ii)
total debt to EBITDA of no greater than 3.25 to 1.00 through December 31, 2015 and 3.00 to 1.00 thereafter. In each case,
EBITDA refers to the Company’s consolidated net income before interest and tax expense, depreciation (other than lease
merchandise depreciation), amortization expense and other non-cash charges. On September 21, 2015, the Company amended
the revolving credit and term loan agreement to, among other things, exclude DAMI financial information from the calculation
of financial debt covenants.

If the Company fails to comply with these covenants, the Company will be in default under these agreements, and all amounts
would become due immediately. Under the Company’s revolving credit and term loan agreement, senior unsecured notes and
franchise loan program, the Company may pay cash dividends in any year so long as, after giving pro forma effect to the
dividend payment, the Company maintains compliance with its financial covenants and no event of default has occurred or
would result from the payment.

At December 31, 2015, the Company was in compliance with all covenants related to the revolving credit and term loan
agreement, senior unsecured notes and franchise loan program.

Senior Unsecured Notes

2011 Note Purchase Agreement

Pursuant to the note purchase agreement dated as of July 5, 2011, as amended, the Company and certain of its subsidiaries as
co-obligors previously issued $125.0 million in senior unsecured notes to the purchasers in a private placement. The notes bear
interest at a rate of 3.95% per year and mature on April 27, 2018. Payments of interest commenced on July 27, 2011 and are due
quarterly, and principal payments of $25.0 million commenced on April 27, 2014 and are due annually until maturity.

On April 14, 2014, the Company entered into the third amendment which revised the 2011 note purchase agreement to, among
other things, replace the interest rate of 3.75% per year with an interest rate of 3.95% commencing April 28, 2014, conform the
covenants, representations, warranties and events of default to the changes reflected in the revolving credit and term loan
agreement, to contemplate the acquisition of Progressive and to authorize the new 2014 senior unsecured notes.

2014 Note Purchase Agreements

On April 14, 2014, the Company entered into note purchase agreements, as amended, pursuant to which the Company and
certain of its subsidiaries as co-obligors issued $300.0 million in aggregate principal amount of senior unsecured notes in a
private placement. The notes bear interest at the rate of 4.75% per year and mature on April 14, 2021. Payments of interest are
due quarterly, commencing July 14, 2014, with principal payments of $60.0 million each due annually commencing April 14,
2017.

On September 21, 2015, the Company entered into the fifth amendment to the 2011 note purchase agreement and the second
amendment to the 2014 note purchase agreements to, among other things, exclude DAMI financial information from the
calculation of financial debt covenants.

Capital Leases with Related Parties

As of December 31, 2015, the Company had 19 remaining capital leases with a limited liability company ("LLC") controlled by
a group of current and former executives. In October and November 2004, the Company sold 11 properties, including leasehold
improvements, to the LLC. The LLC obtained borrowings collateralized by the land and buildings totaling $6.8 million. The
Company occupies the land and buildings collateralizing the borrowings under a 15-year term lease, with a five-year renewal at
the Company’s option, at an aggregate annual rental of $788,000. The transaction has been accounted for as a financing in the
accompanying consolidated financial statements. The rate of interest implicit in the leases is approximately 9.7%. Accordingly,
the land and buildings, associated depreciation expense and lease obligations are recorded in the Company’s consolidated
financial statements. No gain or loss was recognized in this transaction.

Other Debt

As of December 31, 2014, other debt included $3.3 million of industrial development corporation revenue bonds. This debt was
repaid during 2015.

Future maturities under the Company’s debt and capital lease obligations are as follows:

(In Thousands)
2016
2017
2018
2019
2020
Thereafter

157,178
100,134
98,856
133,190
60,755
60,337
610,450

NOTE 8: INCOME TAXES

Following is a summary of the Company’s income tax expense for the years ended December 31:

(In Thousands)
Current Income Tax Expense:

Federal
State

Deferred Income Tax Expense (Benefit):

Federal
State

2015

2014

2013

32,999
5,442
38,441

35,413
3,557
38,970
77,411

41,946
8,682
50,628

(3,314)
(3,843)
(7,157)
43,471

91,664
9,393
101,057

(35,941)
(822)
(36,763)
64,294

As a result of the extended bonus depreciation provisions in the Protecting Americans From Tax Hikes Act of 2015 not being
enacted until December 2015, the Company paid more than anticipated for the 2015 federal tax liability. The Company applied
for and received a refund of $120.0 million in February 2016.

Significant components of the Company’s deferred income tax liabilities and assets at December 31 are as follows:

(In Thousands)
Deferred Tax Liabilities:

Lease Merchandise and Property, Plant and Equipment

Goodwill & Other Intangibles
Investment in Partnership
Other, Net

Total Deferred Tax Liabilities
Deferred Tax Assets:

Accrued Liabilities
Advance Payments
Other, Net

Total Deferred Tax Assets
Less Valuation Allowance
Net Deferred Tax Liabilities

2015

2014

228,174
47,421
88,913
2,062
366,570

29,192
15,713
14,936
59,841
(752)
307,481

228,002
40,644
61,342
1,866
331,854

42,024
14,272
7,713
64,009
(706)
268,551

The Company’s effective tax rate differs from the statutory United States Federal income tax rate for the years ended
December 31 as follows:

Statutory Rate
Increases (Decreases) in United States Federal Taxes

Resulting From:

State Income Taxes, Net of Federal Income Tax Benefit
Federal Tax Credits
Other, Net
Effective Tax Rate

2015

2014

2013

35.0%

2.7
(.5)
(.9)
36.3%

2.6
(1.8)
(.1)
35.7%

3.1
(1.7)
(1.6)
34.8%

The Company files a federal consolidated income tax return in the United States and the separate legal entities file in various
states and foreign jurisdictions. With few exceptions, the Company is no longer subject to federal, state and local tax
examinations by tax authorities for years before 2012.

The following table summarizes the activity related to the Company’s uncertain tax positions:

(In Thousands)
Balance at January 1,

Additions Based on Tax Positions Related to the Current Year
Additions for Tax Positions of Prior Years
Prior Year Reductions
Statute Expirations
Settlements

Balance at December 31,

2015

2014

2013

2,644
331
1,176
(1)
(589)
—
3,561

1,960
311
928
(370)
(94)
(91)
2,644

1,258
454
423
(5)
(85)
(85)
1,960

As of December 31, 2015 and 2014, the amount of uncertain tax benefits that, if recognized, would affect the effective tax rate
is $3.1 million and $2.1 million, respectively, including interest and penalties.

The Company recognized interest and penalties of $365,000, $286,000 and $76,000 during the years ended December 31, 2015,
2014 and 2013 respectively. The Company had $1.0 million and $499,000 of accrued interest and penalties at December 31,
2015 and 2014, respectively. The Company recognizes potential interest and penalties related to uncertain tax benefits as a
component of income tax expense.

NOTE 9: COMMITMENTS AND CONTINGENCIES

Leases

The Company leases warehouse and retail store space for most of its store-based operations, call center space, and management
and information technology space for corporate functions under operating leases expiring at various times through 2033. The
Company also leases certain properties under capital or financing type leases that are more fully described in Note 7 to these
consolidated financial statements. Most of the leases contain renewal options for additional periods ranging from one to 20
years. In addition, certain properties occupied under operating leases contain normal purchase options. Leasehold
improvements related to these leases are generally amortized over periods that do not exceed the lesser of the lease term or 15
years. While a majority of leases do not require escalating payments, for the leases which do contain such provisions, the
Company records the related expense on a straight-line basis over the lease term. The Company also leases transportation
vehicles under operating leases. Management expects that most leases will be renewed or replaced by other leases in the normal
course of business.

Future minimum lease payments required under operating leases that have initial or remaining non-cancelable terms in excess
of one year as of December 31, 2015 are as follows:

(In Thousands)
2016
2017
2018
2019
2020
Thereafter

112,134
95,553
79,167
65,342
52,636
135,209
540,041

Rental expense was $116.5 million in 2015, $116.4 million in 2014 and $110.0 million in 2013. Rental expense for the year
ended December 31, 2014 included $4.8 million related to the closure of 44 Company-operated stores in 2014, as discussed in
Note 10 to these consolidated financial statements. These costs were included in the line item "Restructuring expenses" in the
consolidated statements of earnings. All other rental expense was included as a component of operating expenses in the
consolidated statements of earnings.

Sublease income was $4.6 million in 2015, $3.9 million in 2014 and $2.6 million in 2013. The Company has anticipated future
sublease rental income of $5.1 million in 2016, $4.5 million in 2017, $4.0 million in 2018, $3.1 million in 2019, $2.0 million in
2020 and $3.6 million thereafter through 2025. Sublease income is included in other revenues in the consolidated statements of
earnings.

Guarantees

The Company has guaranteed certain debt obligations of some of the franchisees under a franchise loan program with several
banks. On December 4, 2015, the Company amended the third amended and restated loan facility to, among other things,
extend the maturity date to December 8, 2016.

In the event these franchisees are unable to meet their debt service payments or otherwise experience an event of default, the
Company would be unconditionally liable for the outstanding balance of the franchisees’ debt obligations under the franchisee
loan program, which would be due in full within 90 days of the event of default. At December 31, 2015, the maximum amount
that the Company would be obligated to repay in the event franchisees defaulted was $81.0 million. The Company has recourse
rights to franchisee assets securing the debt obligations, which consist primarily of lease merchandise and fixed assets. Since
the inception of the franchise loan program in 1994, the Company has had no significant associated losses. The Company
believes the likelihood of any significant amounts being funded in connection with these commitments to be remote. The
carrying amount of the franchise-related borrowings guarantee, which is included in accounts payable and accrued expenses in
the consolidated balance sheets, is approximately $863,000 as of December 31, 2015.

The maximum facility commitment amount under the franchise loan program is $175.0 million, including a Canadian
subfacility commitment amount for loans to franchisees that operate stores in Canada (other than in the Province of Quebec) of
Cdn $50 million. The Company remains subject to the financial covenants under the franchise loan facility.

Legal Proceedings

From time to time, the Company is party to various legal and regulatory proceedings arising in the ordinary course of business.

Some of the proceedings to which the Company is currently a party are described below. The Company believes it has
meritorious defenses to all of the claims described below, and intends to vigorously defend against the claims. However, these
proceedings are still developing and due to the inherent uncertainty in litigation, regulatory and similar adversarial proceedings,
there can be no guarantee that the Company will ultimately be successful in these proceedings, or in others to which it is
currently a party. Substantial losses from these proceedings or the costs of defending them could have a material adverse impact
upon the Company's business, financial position and results of operations.

The Company establishes an accrued liability for legal and regulatory proceedings when it determines that a loss is both
probable and the amount of the loss can be reasonably estimated. The Company continually monitors its litigation and
regulatory exposure and reviews the adequacy of its legal and regulatory reserves on a quarterly basis in accordance with
applicable accounting rules. The amount of any loss ultimately incurred in relation to matters for which an accrual has been
established may be higher or lower than the amounts accrued for such matters.

At December 31, 2015, the Company had accrued $10.0 million for pending legal and regulatory matters for which it believes
losses are probable, which is the Company's best estimate of its exposure to loss. The Company estimates that the aggregate
range of possible loss in excess of accrued liabilities for such probable loss contingencies is between $0 and $2.9 million.

At December 31, 2015, the Company estimated that the aggregate range of loss for all material pending legal and regulatory
proceedings for which a loss is reasonably possible, but less likely than probable (i.e., excluding the contingencies described in
the preceding paragraph), is between $476,000 to $2.5 million. Those matters for which a reasonable estimate is not possible
are not included within estimated ranges and, therefore, the estimated ranges do not represent the Company’s maximum loss
exposure. The Company’s estimates as to legal and regulatory accruals, as to aggregate probable loss amounts and as to
reasonably possible loss amounts, are all subject to the uncertainties and variables described above.

Consumer

In Margaret Korrow, et al. v. Aaron's, Inc., originally filed in the Superior Court of New Jersey, Middlesex County, Law
Division on October 26, 2010, plaintiff filed suit on behalf of herself and others similarly situated alleging that the Company is
liable in damages to plaintiff and each class member because the Company's lease agreements issued after March 16, 2006
purportedly violated certain New Jersey state consumer statutes. Plaintiff's complaint seeks treble damages under the New
Jersey Consumer Fraud Act, and statutory penalty damages of $100 per violation of all contracts issued in New Jersey, and also
claims that there are multiple violations per contract. The Company removed the lawsuit to the United States District Court for
the District of New Jersey on December 6, 2010 (Civil Action No.: 10-06317(JAP)(LHG)). Plaintiff on behalf of herself and
others similarly situated seeks equitable relief, statutory and treble damages, pre- and post-judgment interest and attorneys' fees.
Discovery on this matter is closed. On July 31, 2013, the Court certified a class comprising all persons who entered into a rent-
to-own contract with the Company in New Jersey from March 16, 2006 through March 31, 2011. In August 2013, the Court of
Appeals denied the Company’s request for an interlocutory appeal of the class certification issue. The Company filed a motion
to allow counterclaims against all newly certified class members who may owe legitimate fees or damages to the Company or
who failed to return merchandise to the Company prior to obtaining ownership. That motion was denied by the magistrate judge
and confirmed by the District Court on November 30, 2015. On August 14, 2015, the Company filed a motion for partial
summary judgment seeking judicial dismissal of a portion of the claims in the case, which remains pending. On December 23,
2015, the Company filed a motion requesting permission for an interlocutory appeal of this denial to the United States Third
Circuit Court of Appeals, which also remains pending.

Privacy and Related Matters

In Crystal and Brian Byrd v. Aaron's, Inc., Aspen Way Enterprises, Inc., John Does (1-100) Aaron's Franchisees and
Designerware, LLC, filed on May 16, 2011, in the United States District Court, Western District of Pennsylvania (Case No.
1:11-CV-00101-SPB), plaintiffs alleged that the Company and its independently owned and operated franchisee Aspen Way
Enterprises ("Aspen Way") knowingly violated plaintiffs' privacy in violation of the Electronic Communications Privacy Act
("ECPA") and the Computer Fraud Abuse Act and sought certification of a putative nationwide class. Plaintiffs based these
claims on Aspen Way's use of a software program called "PC Rental Agent." Although the District Court dismissed the
Company from the original lawsuit on March 20, 2012, after certain procedural motions, on May 23, 2013, the Court granted
plaintiffs' motion for leave to file a third amended complaint, which asserted the claims under the ECPA, common law invasion
of privacy, added a request for injunction, and named additional independently owned and operated Company franchisees as
defendants. Plaintiffs filed the third amended complaint, and the Company moved to dismiss that complaint on substantially the
same grounds as it sought to dismiss plaintiffs' prior complaints. Plaintiffs seek monetary damages as well as injunctive relief.
Plaintiffs filed their motion for class certification on July 1, 2013, and the Company's response was filed in August 2013. On
March 31, 2014, the United States District Judge dismissed all claims against all franchisees other than Aspen Way Enterprises,
LLC. The Court also dismissed claims for invasion of privacy, aiding and abetting, and conspiracy against all defendants. In
addition, the Court denied the plaintiffs’ motion to certify the class. Finally, the Judge denied the Company’s motion to dismiss
the violation of ECPA claims. Plaintiffs requested and received immediate appellate review of these rulings by the United States
Third Circuit Court of Appeals. On April 10, 2015, the Court of Appeals reversed the denial of class certification on the grounds
stated by the District Court, and remanded the case back to the District Court for further consideration of that and the other
elements necessary for class certification. The District Court has not issued a new ruling on those matters.

In Michael Winslow and Fonda Winslow v. Sultan Financial Corporation, Aaron's, Inc., John Does (1-10), Aaron's Franchisees
and Designerware, LLC, filed on March 5, 2013 in the Los Angeles Superior Court (Case No. BC502304), plaintiffs assert
claims against the Company and its independently owned and operated franchisee, Sultan Financial Corporation (as well as
certain John Doe franchisees), for unauthorized wiretapping, eavesdropping, electronic stalking, and violation of California's
Comprehensive Computer Data Access and Fraud Act and its Unfair Competition Law. Each of these claims arises out of the
alleged use of PC Rental Agent software. The plaintiffs are seeking injunctive relief and damages in connection with the
allegations of the complaint. Plaintiffs are also seeking certification of a putative California class. Plaintiffs are represented by

the same counsel as in the above-described Byrd litigation. In April 2013, the Company timely removed this matter to federal
court. On May 8, 2013, the Company filed a motion to stay this litigation pending resolution of the Byrd litigation, a motion to
dismiss for failure to state a claim, and a motion to strike certain allegations in the complaint. The Court subsequently stayed
the case. The Company's motions to dismiss and strike certain allegations remain pending. On June 6, 2015, the plaintiffs filed a
motion to lift the stay, which was denied on July 11, 2015.

In Lomi Price v. Aaron's, Inc. and NW Freedom Corporation, filed on February 27, 2013, in the State Court of Fulton County,
Georgia (Case No. 13-EV-016812B), an individual plaintiff asserts claims against the Company and its independently owned
and operated franchisee, NW Freedom Corporation, for invasion of privacy/intrusion on seclusion, computer invasion of
privacy and infliction of emotional distress. Each of these claims arises out of the alleged use of PC Rental Agent software.
The plaintiff is seeking compensatory and punitive damages of not less than $250,000. On April 3, 2013, the Company filed an
answer and affirmative defenses. On that same day, the Company also filed a motion to stay the litigation pending resolution of
the Byrd litigation, a motion to dismiss for failure to state a claim and a motion to strike certain allegations in the complaint.
The Court stayed the proceeding pending rulings on certain motions in the Byrd case, which expired upon remand of the case
back to the District Court. On April 24, 2015, the Company filed a renewed motion to stay, which was granted on June 15,
2015.

In Michael Peterson v. Aaron’s, Inc. and Aspen Way Enterprises, Inc., filed on June 19, 2014, in the United States District Court
for the Northern District of Georgia (Case No. 1:14-cv-01919-TWT), several plaintiffs allege that they leased computers for use
in their law practice. The plaintiffs claim that the Company and Aspen Way knowingly violated plaintiffs' privacy and the
privacy of plaintiff’s legal clients in violation of the ECPA and the Computer Fraud Abuse Act. Plaintiffs seek certification of a
putative nationwide class. Plaintiffs based these claims on Aspen Way's use of PC Rental Agent software. The plaintiffs claim
that information and data obtained by defendants through PC Rental Agent was attorney-client privileged. The Company has
filed a motion to dismiss plaintiffs' amended complaint. On June 4, 2015, the Court granted the Company’s motion to dismiss
all claims except a claim for aiding and abetting invasion of privacy. Plaintiffs then filed a second amended complaint alleging
only the invasion of privacy claims that survived the June 4, 2015 court order, and adding a claim for unjust enrichment. The
Company filed a motion to dismiss the second amended complaint, and on September 16, 2015, the Court granted the
Company’s motion to dismiss plaintiffs’ unjust enrichment claim. The only remaining claim against the Company is a claim for
aiding and abetting invasion of privacy.

Regulatory Investigations

California Attorney General Investigation. The California Attorney General investigated the Company's retail transactional
practices, including various leasing and marketing practices, information security and privacy policies and practices related to
the alleged use of PC Rental Agent software by certain independently owned and operated Company franchisees. The Company
reached a comprehensive resolution of this matter without litigation. The final settlement and consent order were announced on
October 13, 2014. The Court filed the final judgment on February 10, 2015. The final payment as scheduled under the consent
order was made on January 6, 2016.

Other Matters

In Foster v. Aaron’s, Inc., filed on August 21, 2015, in the United States District Court in Phoenix, Arizona (No. CV-15-1637-
PHX-SRB), the plaintiff in this putative class action alleges that the Company violates the Telephone Consumer Protection Act
("TCPA") by placing automated calls to customer references, or otherwise violates the TCPA in the manner in which the
Company contacts customer references. The Company's initial responsive pleading was filed on October 7, 2015. A Scheduling
Order was entered on January 26, 2016.

Other Commitments

At December 31, 2015, the Company had non-cancelable commitments primarily related to certain advertising and marketing
programs of $22.6 million. Payments under these commitments are scheduled to be $6.7 million in 2016, $7.2 million in 2017,
$4.2 million in 2018 and $2.3 million in 2019, $1.6 million in 2020, and $568,000 thereafter.

The Company maintains a 401(k) savings plan for all its full-time employees who meet certain eligibility requirements.
Effective January 1, 2015, the 401(k) savings plan was amended to allow employees to contribute up to 75% of their annual
compensation in accordance with federal contribution limits with 100% matching by the Company on the first 3% of
compensation and 50% on the next 2% of compensation for a total of 4% matching compensation. The Company’s expense
related to the plan was $4.7 million in 2015, $4.3 million in 2014 and $3.3 million in 2013.

The Company is a party to various claims and legal proceedings arising in the ordinary course of business. Management
regularly assesses the Company’s insurance deductibles, monitors the Company's litigation and regulatory exposure with the
Company’s attorneys and evaluates its loss experience. The Company also enters into various contracts in the normal course of
business that may subject it to risk of financial loss if counterparties fail to perform their contractual obligations.

Off-Balance Sheet Risk

NOTE 10: RESTRUCTURING

On July 15, 2014, the Company announced that a rigorous evaluation of the Company-operated store portfolio had been
performed. As a result of this evaluation and other cost-reduction initiatives, during the year ended December 31, 2014, the
Company closed 44 underperforming Company-operated stores and restructured its home office and field support to more
closely align with current business conditions. The restructuring was completed during the third quarter of 2014 and total
restructuring charges of $9.1 million were recorded during the year ended December 31, 2014, principally comprised of $4.8
million related to contractual lease obligations, $3.3 million related to the write-off and impairment of property, plant and
equipment and $620,000 related to workforce reductions.

During 2014, total restructuring charges of $4.8 million have been included in the Sales and Lease Ownership segment results
and total restructuring charges of $4.3 million have been included in the Other category results. These costs were included in
the line item "Restructuring Expenses" in the consolidated statements of earnings. The Company does not currently anticipate
any remaining costs related to this restructuring plan to be material.

The following table summarizes the balances and activity related to the restructuring charges:

(In Thousands)
Balance at January 1, 2014
Restructuring Expenses
Payments
Impairment and Assets Written Off
Balance at December 31, 2014
Payments
Balance at December 31, 2015

Contractual
Obligations
Under Canceled
Leases

— $

4,797
(1,570)
—
3,227
(1,559)
1,668 $

Severance

Fixed Assets

Other

Total

— $

620
(620)
—
—
—
— $

— $

3,328
—
(3,328)
—
—
— $

— $

395
—
(395)
—
—
— $

—
9,140
(2,190)
(3,723)
3,227
(1,559)
1,668

In the ordinary course of business, the Company continually reviews, and as appropriate adjusts, the amount and mix of
Company-operated and franchised stores to help optimize overall performance. Costs incurred to close stores during 2015 were
not significant.

NOTE 11: SHAREHOLDERS’ EQUITY

The Company held 18,151,560 shares in its treasury and was authorized to purchase an additional 10,496,421 shares at
December 31, 2015. The holders of common stock are entitled to receive dividends and other distributions in cash, stock or
property of the Company as and when declared by its Board of Directors out of legally available funds. The Company
repurchased 1,000,952 shares of its common stock in 2014 and 3,502,627 shares of its common stock in 2013 through an
accelerated share repurchase program. There was no share repurchase activity during 2015.

The Company has 1,000,000 shares of preferred stock authorized. The shares are issuable in series with terms for each series
fixed by, and such issuance subject to approval by, the Board of Directors. As of December 31, 2015, no preferred shares have
been issued.

On October 4, 2013, the Company amended its Amended and Restated Articles of Incorporation to confirm that shares of
common stock the Company repurchases from time to time become treasury shares. As permitted by Georgia corporate law, the
amendment was adopted by the Board of Directors of the Company without shareholder action.

Accelerated Share Repurchase Program

In December 2013, the Company entered into an accelerated share repurchase program with a third-party financial institution to
purchase $125.0 million of the Company’s common stock, as part of its previously announced share repurchase program. The
Company paid $125.0 million at the beginning of the program and received an initial delivery of 3,502,627 shares, estimated to
be approximately 80% of the total number of shares to be repurchased under the agreement, which reduced the Company's
shares outstanding at December 31, 2013. The value of the initial shares received on the date of purchase was $100.0 million,
reflecting a $28.55 price per share, which was recorded as treasury shares. The Company recorded the remaining $25.0 million
as a forward contract indexed to its own common stock in additional paid-in capital for the year ended December 31, 2013.

In February 2014, the accelerated share repurchase program was completed and the Company received 1,000,952 additional
shares determined using a volume weighted average price of the Company's stock (inclusive of a discount) during the trading
period, which resulted in an effective average price per share of $27.76. All amounts initially classified as additional paid-in
capital were reclassified to treasury shares during the first quarter of 2014 upon settlement.

NOTE 12: STOCK OPTIONS AND RESTRICTED STOCK

The Company grants stock options, RSUs, RSAs and PSUs to certain employees and directors of the Company under the 2001
Stock Option and Incentive Award Plan and the 2015 Equity and Incentive Award Plan (the "2001 Plan" and "2015 Plan"). The
2001 Plan was originally approved by the Company’s shareholders in May 2001 and was amended and restated with
shareholder approval in May 2009 and discontinued with the approval of the 2015 Plan on May 6, 2015. The 2015 Plan was
approved by the Company's shareholders on May 6, 2015 and replaces the 2001 Plan. Differences between the 2015 Plan and
the 2001 Plan, include the following:

•

the 2015 Plan does not include liberal share counting methodologies, such as allowing shares tendered or withheld for
taxes to be added back to the shares available under the 2015 Plan;

the 2015 Plan does not permit the grant of stock options at a discounted exercise price, unless required to maintain
intrinsic or economic value in certain corporate transactions (e.g., spin-offs, etc.);

the 2015 Plan prohibits the re-pricing of awards without shareholder approval; and

awards granted under the 2015 Plan will be subject to any clawback policy adopted by the Company.

As of December 31, 2015, the aggregate number of shares of common stock that may be issued or transferred under the 2015
Plan is 4,802,248.

Total stock-based compensation expense was $14.2 million, $10.9 million and $2.3 million in 2015, 2014 and 2013,
respectively. Stock-based compensation expense for the year ended December 31, 2014 included $5.1 million related to the
accelerated vesting of restricted stock and stock options upon the retirement of the Company’s Chief Executive Officer in 2014,
as provided for in his employment agreement. These costs were included in the line item "Retirement and Vacation Charges" in
the consolidated statements of earnings. All other stock-based compensation expense was included as a component of operating
expenses in the consolidated statements of earnings.

The total income tax benefit recognized in the consolidated statements of earnings for stock-based compensation arrangements
was $5.4 million, $3.8 million and $889,000 in 2015, 2014 and 2013, respectively. Benefits of tax deductions in excess of
recognized compensation cost, which are included in financing cash flows, were $348,000, $1.4 million and $1.4 million for the
years ended 2015, 2014 and 2013, respectively.

As of December 31, 2015, there was $23.9 million of total unrecognized compensation expense related to non-vested stock-
based compensation which is expected to be recognized over a period of 1.6 years.

Stock Options

Under the Company's 2001 Plan, options granted to date become exercisable after a period of one to five years and unexercised
options lapse 10 years after the date of grant. Under the Company’s 2015 Plan, options granted to date become exercisable after
a period of one to three years and unexercised options lapse 10 years after the date of the grant. Options are subject to forfeiture
upon termination of service for both plans. Shares are issued from the Company’s treasury shares upon share option exercises.

The Company determines the fair value of stock options on the grant date using a Black-Scholes-Merton option pricing model
that incorporates expected volatility, expected option life, risk-free interest rates and expected dividend yields. The expected
volatility is based on implied volatilities from traded options on the Company’s stock and the historical volatility of the
Company’s common stock over the most recent period generally commensurate with the expected estimated life of each
respective grant. The expected lives of options are based on the Company's historical option exercise experience. The Company
believes that the historical experience method is the best estimate of future exercise patterns. The risk-free interest rates are
determined using the implied yield available for zero-coupon United States government issues with a remaining term equal to
the expected life of the grant. The expected dividend yields are based on the approved annual dividend rate in effect and market
price of the underlying common stock at the time of grant. No assumption for a future dividend rate increase has been included
unless there is an approved plan to increase the dividend in the near term.

The Company granted 338,000 and 351,000 stock options during 2015 and 2014, respectively. No stock options were granted in
2013. The weighted-average fair value of options granted in 2015 and 2014 and the weighted-average assumptions used in the
Black-Scholes-Merton option pricing model for such grants were as follows:

Dividend Yield
Expected Volatility
Risk-free Interest Rate
Expected Term (in years)
Weighted-average Fair Value of Stock Options Granted

2015

2014

.3%
28.9%
1.6%
5.2
8.41

.3%
31.9%
1.9%
6.2
9.61

The following table summarizes information about stock options outstanding at December 31, 2015:

Range of Exercise
Prices
$10.01-15.00
15.01-20.00
20.01-25.00
25.01-30.00
30.01-32.20
10.01-32.20

Number Outstanding
December 31, 2015
199,000
82,500
7,521
380,646
202,687
872,354

Options Outstanding

Weighted Average
Remaining Contractual
Life
(in Years)

Options Exercisable

Weighted Average
Exercise Price

Number Exercisable
December 31, 2015

Weighted Average
Exercise Price

2.79
4.15
8.85
8.91
8.97
7.08

14.11
19.92
24.98
28.23
31.93
25.05

199,000
82,500
—
53,640
—
335,140

14.11
19.92
—
27.80
—
17.73

The table below summarizes option activity for the year ended December 31, 2015:

Outstanding at January 1, 2015

Granted
Exercised
Forfeited/expired

Outstanding at December 31, 2015
Expected to Vest at December 31, 2015
Exercisable at December 31, 2015

Options
(In Thousands)
624
338
(61)
(29)
872
485
335

Weighted Average
Exercise Price

Weighted Average
Remaining
Contractual Term
(in Years)

Aggregate
Intrinsic Value
(in Thousands)

Weighted
Average Fair
Value

21.52
30.17
16.95
28.92
25.05
29.56
17.73

7.08
8.93
4.11

— $
—
1,562

8.31
8.90
7.39

The aggregate intrinsic value amounts in the table above represent the closing price of the Company’s common stock on
December 31, 2015 in excess of the exercise price, multiplied by the number of in-the-money stock options as of that same
date. Options outstanding that are expected to vest are net of estimated future option forfeitures.

The aggregate intrinsic value of options exercised, which represents the value of the Company’s common stock at the time of
exercise in excess of the exercise price, was $844,000, $4.4 million and $11.0 million in 2015, 2014 and 2013, respectively. The
total grant-date fair value of options vested in 2015, 2014 and 2013 was $1.1 million, $1.3 million and $2.7 million,
respectively.

Restricted Stock

Shares of restricted stock or restricted stock units (collectively, "restricted stock") may be granted to employees and directors
under the newly authorized 2015 Plan and typically vest over approximately one to three year periods; under the 2001 Plan
restricted stock typically vests over approximately one to five year periods. Restricted stock grants may be subject to one or
more objective employment, performance or other forfeiture conditions as established at the time of grant. Any shares of
restricted stock that are forfeited may again become available for issuance.

The fair value of restricted stock is based on the fair market value of the Company’s common stock on the date of grant.

In 2011, the Company established a restricted stock program as a component of the 2001 Plan, referred to as the Aaron’s
Management Performance Plan ("AMP Plan"). Under the AMP Plan, which expired on December 31, 2012, restricted shares
were granted quarterly to eligible participants upon achievement of certain pre-tax profit and revenue levels by the employees’
operating units or the overall Company. Restricted stock granted under the AMP Plan vests over four to five years from the date
of grant. Plan participants included certain vice presidents, director level employees and other key personnel in the Company’s
home office, divisional vice presidents and regional managers. These grants will begin vesting in 2016.

During 2013, the Company granted performance-based restricted stock to certain executive officers. The performance-based
restricted stock under this program is vested at the completion of a three-year period only upon the achievement of specific
performance criteria over three annual performance periods. The compensation expense associated with these awards is
amortized ratably over the vesting period based on the Company’s projected assessment of the level of performance that will be
achieved and earned.

The Company granted 261,000, 548,000 and 307,000 shares of restricted stock at weighted-average fair values of $31.78,
$29.11 and $29.23 in 2015, 2014 and 2013, respectively. The following table summarizes information about restricted stock
activity during 2015:

Non-vested at January 1, 2015

Granted
Vested
Forfeited

Non-vested at December 31, 2015

Restricted Stock
(In Thousands)
698
261
(61)
(77)
821

Weighted Average
Fair Value

28.75
31.78
27.07
29.45
29.77

1 The outstanding non-vested restricted stock as of December 31, 2015 includes 37,500 shares that are subject to performance
conditions.

The total vest-date fair value of restricted stock described above and the performance share units described below that vested
during the year was $1.8 million, $11.1 million and $184,000 in 2015, 2014 and 2013, respectively.

Performance Share Units

In 2015, as part of the Company’s long-term incentive compensation program ("LTIP Plan") and pursuant to the Company’s
2001 Plan and 2015 Plan, the Company granted a mix of stock options, time-based restricted stock and performance share units
to key executives and managers. For performance share units, which are generally settled in stock, the number of shares earned
is determined at the end of the one-year performance period based upon achievement of certain earnings before income taxes,
depreciation and amortization (EBITDA), revenue, return on capital and invoice volume levels of the Company. If the
performance criteria are met, the award is earned. One-third of the earned award vests immediately, one third is subject to a one
year service period and one-third of the earned award is subject to a two year service period. The number of performance-based
shares which could potentially be issued ranges from zero to 200% of the target award.

The fair value of performance share units are based on the fair market value of the Company’s common stock on the date of
grant. The compensation expense associated with these awards is amortized ratably over the vesting period based on the
Company’s projected assessment of the level of performance that will be achieved and earned. In the event the Company
determines it is no longer probable that the minimum performance criteria specified in the plan will be achieved, all previously
recognized compensation expense is reversed in the period such a determination is made.

The following table summarizes information about performance share unit activity based on the target share amounts during
2015:

Non-vested at January 1, 2015

Granted
Vested
Forfeited/unearned

Non-vested at December 31, 2015

NOTE 13: SEGMENTS

Performance
Share Units
(In Thousands)
111
358
—
(124)
345

Weighted Average
Fair Value

32.01
32.03
—
29.86
32.80

Description of Products and Services of Reportable Segments

The Aaron’s Sales & Lease Ownership division offers furniture, electronics, appliances and computers to customers primarily
on a monthly payment basis with no credit needed. Progressive is a leading virtual lease-to-own company that provides lease-
purchase solutions on a variety of products, including furniture and bedding, consumer electronics, appliances and jewelry. The
HomeSmart division offers furniture, electronics, appliances and computers to customers primarily on a weekly payment basis
with no credit needed. DAMI offers a variety of second-look financing programs originated through a federally insured bank.
Together with Progressive, DAMI allows the Company to provide retail partners one source for financing and leasing
transactions with below-prime customers. 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 are eliminated through the
elimination of intersegment revenues and intersegment profit or loss.

Measurement of Segment Profit or Loss and Segment Assets

The Company evaluates performance and allocates resources based on revenue growth and pre-tax profit or loss from
operations. Intersegment sales are completed at internally negotiated amounts. Since the intersegment profit affects 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

The Company’s reportable segments are based on the operations of the Company that the chief operating decision maker
regularly reviews to analyze performance and allocate resources among business units of the Company.

Information on segments and a reconciliation to earnings before income taxes are as follows for the years ended December 31:

(In Thousands)
Revenues From External Customers:
Sales and Lease Ownership
Progressive
HomeSmart
DAMI 1
Franchise
Manufacturing
Other

Revenues of Reportable Segments
Elimination of Intersegment Revenues
Cash to Accrual Adjustments
Total Revenues from External Customers

Earnings (Loss) Before Income Taxes:
Sales and Lease Ownership
Progressive
HomeSmart
DAMI
Franchise
Manufacturing
Other

Earnings Before Income Taxes for Reportable Segments
Elimination of Intersegment Profit
Cash to Accrual and Other Adjustments
Total Earnings Before Income Taxes

Assets:

Sales and Lease Ownership
Progressive
HomeSmart
DAMI
Franchise
Manufacturing 2
Other
Total Assets

2015

2014

2013

2,001,682
1,049,681
63,477
2,845
63,507
106,020
1,118
3,288,330
(103,890)
(4,684)
3,179,756

166,838
54,525
771
(1,964)
48,576
2,520
(51,651)
219,615
(2,488)
(4,007)
213,120

1,261,040
878,457
44,429
97,858
53,693
28,986
294,412
2,658,875

2,037,101
519,342
64,276
—
65,902
104,058
2,969
2,793,648
(102,296)
3,681
2,695,033

140,854
4,603
(2,643)
—
50,504
860
(75,905)
118,273
(813)
4,244
121,704

1,246,325
858,159
47,585
—
46,755
23,050
234,970
2,456,844

2,076,269
—
62,840
—
68,575
106,523
22,158
2,336,365
(103,834)
2,100
2,234,631

183,965
—
(3,428)
—
54,171
107
(56,114)
178,701
(94)
6,353
184,960

1,431,720
—
47,970
—
47,788
24,305
275,393
1,827,176

1 Represents interest and fees on loans receivable, and excludes the effect of interest expense.

2 Includes inventory (principally raw materials and work-in-process) that has been classified within lease merchandise in the
consolidated balance sheets of $19.4 million, $13.2 million and $14.0 million as of December 31, 2015, 2014 and 2013,
respectively.

(In Thousands)
Depreciation and Amortization:
Sales and Lease Ownership
Progressive
HomeSmart
DAMI
Franchise
Manufacturing
Other
Total Depreciation and Amortization

Interest Expense:

Sales and Lease Ownership
Progressive
HomeSmart
DAMI
Franchise
Manufacturing
Other
Total Interest Expense

Capital Expenditures:

Sales and Lease Ownership
Progressive
HomeSmart
DAMI
Franchise
Manufacturing
Other
Total Capital Expenditures

Revenues From Canadian Operations (included in totals above):

Sales and Lease Ownership

Assets From Canadian Operations (included in totals above):

Sales and Lease Ownership

2015

2014

2013

592,450
661,646
20,817
218
1,429
1,482
14,805
1,292,847

7,751
21,959
900
764
—
26
(8,061)
23,339

23,082
8,175
374
40
—
387
28,499
60,557

633,119
346,343
22,407
—
1,599
1,649
13,117
1,018,234

7,834
14,992
922
—
—
50
(4,583)
19,215

24,135
1,625
1,020
—
—
1,477
19,308
47,565

639,951
—
23,977
—
1,781
2,081
17,315
685,105

7,070
—
916
—
—
80
(2,453)
5,613

30,831
—
994
—
—
1,531
24,789
58,145

3,384

179

300

8,900

776

1,021

Revenues in the Other category are primarily 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 in the Other category are the result of the activity mentioned above, net of the portion of corporate overhead
not allocated to the reportable segments for management purposes.

In 2015, the results of the Company's operating segments were impacted by the following items:

•

Sales and Lease Ownership earnings before income taxes included a $3.5 million loss related to a lease termination on
a Company aircraft.

Progressive earnings before income taxes included $3.7 million of transaction costs related to the October 15, 2015
DAMI acquisition.

In 2014, the results of the Company's operating segments were impacted by the following items:

•

Sales and Lease Ownership earnings before income taxes included $4.8 million of restructuring charges related to the
Company's strategic decision to close 44 Company-operated stores.

• Other category loss before income taxes included $13.7 million in financial and advisory costs related to addressing

now-resolved strategic matters, including proxy contests, $4.3 million of restructuring charges in connection with the
store closures noted above, $9.1 million of charges associated with the retirements of both the Company's Chief
Executive Officer and Chief Operating Officer, $6.6 million in transaction costs related to the Progressive acquisition
and $1.2 million of regulatory income that reduced previously recognized regulatory expense upon the resolution of
the regulatory investigation by the California Attorney General.

In 2013, the results of the Company's operating segments were impacted by the following items:

The Company determines earnings (loss) before income taxes for all reportable segments in accordance with U.S. GAAP with
the following adjustments:

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

reporting purposes.

• Generally a predetermined amount of each reportable segment’s revenues is charged to the reportable segment as an

allocation of corporate overhead.

• 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.

• 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 is allocated to the Sales and Lease Ownership and HomeSmart segments based a percentage of their revenues.
Interest is allocated to the Progressive segment based on a percentage of the outstanding balances of its intercompany
borrowings and of the debt incurred when it was acquired.

NOTE 14: RELATED PARTY TRANSACTIONS

The Company leases certain properties under capital leases with certain related parties that are more fully described in Note 7
above.

NOTE 15: QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Certain reclassifications have been made to prior quarters to conform to the current period presentation.

(In Thousands, Except Per Share Data)
Year Ended December 31, 2015
Revenues
Gross Profit *
Earnings Before Income Taxes
Net Earnings
Earnings Per Share
Earnings Per Share Assuming Dilution
Year Ended December 31, 2014
Revenues
Gross Profit *
Earnings Before Income Taxes
Net Earnings
Earnings Per Share
Earnings Per Share Assuming Dilution

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

821,814
363,478
77,830
49,243
.68
.68

585,423
292,393
60,710
38,339
.53
.53

769,049
346,110
64,354
40,546
.56
.56

662,490
309,385
13,562
8,505
.12
.12

767,694
331,628
36,556
24,194
.33
.33

698,418
313,540
13,199
9,295
.13
.13

821,199
344,144
34,380
21,726
.30
.30

748,702
320,797
34,233
22,094
.30
.30

* Gross profit is the sum of lease revenues and fees, retail sales and non-retail sales less retail cost of sales, non-retail cost of

sales, depreciation of lease merchandise and write-offs of lease merchandise.

The comparability of the Company's quarterly financial results during 2015 and 2014 was impacted by certain events, as
described below on a pre-tax basis:

• The fourth quarter of 2015 included $2.7 million of transaction costs related to the October 15, 2015 DAMI

acquisition and a $3.5 million loss related to a lease termination on a Company aircraft.

• The first quarter of 2014 included an $872,000 charge for financial advisory and legal costs related to addressing now-
resolved strategic matters, including an unsolicited acquisition offer, two proxy contests and certain other shareholder
proposals and $803,000 in transaction costs related to the Progressive acquisition.

• The second quarter of 2014 included an additional $12.4 million charge for the financial advisory and legal costs
related to now-resolved strategic matters, an additional $5.5 million in transaction costs in connection with the
Progressive acquisition and $2.3 million in leasehold improvement impairment charges related to the closure of 44
Company-operated stores announced July 15, 2014.

• The third quarter of 2014 included an additional $385,000 charge for financial advisory and legal costs related to now-
resolved strategic matters, an additional $6.9 million in restructuring charges related to the store closures noted above,
$9.1 million due to the retirements of both the Company's Chief Executive Officer and Chief Operating Officer, an
additional $371,000 in transaction costs related to the acquisition of Progressive and regulatory income of $1.2 million
that reduced previously recognized regulatory expense upon the resolution of the regulatory investigation by the
California Attorney General.

NOTE 16: DEFERRED COMPENSATION PLAN

The Company maintains the Aaron’s, Inc. Deferred Compensation Plan, an unfunded, nonqualified deferred compensation plan
for a select group of management, highly compensated employees and non-employee directors. On a pre-tax basis, eligible
employees can defer receipt of up to 75% of their base compensation and up to 100% of their incentive pay compensation, and
eligible non-employee directors can defer receipt of up to 100% of both their cash and stock director fees.

Compensation deferred under the plan is credited to each participant’s deferral account and a deferred compensation liability is
recorded in accounts payable and accrued expenses in the consolidated balance sheets. The deferred compensation plan liability
was $11.6 million and $12.7 million as of December 31, 2015 and 2014, respectively. Liabilities under the plan are recorded at
amounts due to participants, based on the fair value of participants’ selected investments. The Company has established a rabbi
trust to fund obligations under the plan with Company-owned life insurance. The obligations are unsecured general obligations
of the Company and the participants have no right, interest or claim in the assets of the Company, except as unsecured general
creditors. The cash surrender value of these policies totaled $15.4 million and $14.5 million as of December 31, 2015 and 2014,
respectively, and is included in prepaid expenses and other assets in the consolidated balance sheets.

Deferred compensation expense charged to operations for the Company’s discretionary matching contributions was not
significant during any of the periods presented. Benefits of $1.7 million, $1.9 million and $1.3 million were paid during the
years ended December 31, 2015, 2014 and 2013, respectively.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

An evaluation of Aaron’s disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, was carried out by management, with the participation of the Chief Executive Officer (CEO) and Chief
Financial Officer (CFO), as of the end of the period covered by this Annual Report on Form 10-K.

During the third quarter of 2015, we concluded that we did not have effective program change management controls over our
Progressive lease management application and that this represented a material weakness in internal control over financial
reporting. Specifically, we concluded at that time that the quality assurance controls over program changes to our lease
management software were not designed sufficiently to detect whether program changes had unintended effects on data fields
that are important to financial reporting. Software issues that occurred during a limited period of time spanning the second and
third quarters of 2015 resulting from this deficiency caused us not to identify a number of lease accounts as being delinquent
and affected our ability to begin prompt collections activities on those accounts. As a result, although not material to either
period, an adjustment was recorded in the third quarter to increase bad debt expense and lease merchandise write-offs by $3.2
million.

During the third quarter, management initiated a remediation plan that included the following actions:

•

Improvements to our quality assurance program were designed and put in place to verify that the potential financial
statement effect of all program changes is thoroughly considered when our lease management software is updated;
• Additional resources were allocated to ensure that our quality assurance procedures are adequately designed and are

operating effectively; and

• Additional review controls were put in place to enhance our existing control framework and ensure that errors of this

nature are detected timely.

The plan was completed and the material weakness was remediated prior to December 31, 2015.

Based on management’s evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were
effective as of December 31, 2015 to provide reasonable assurance that the objectives of disclosure controls and procedures are
met.

On October 15, 2015, the Company acquired a 100% ownership interest in DAMI for a total purchase price of $54.9 million,
inclusive of cash acquired of $4.2 million. As permitted by Securities and Exchange Commission guidance, the scope of
management’s evaluation described above did not include DAMI's internal controls over financial reporting. DAMI represented
3.7% of the Company's consolidated total assets as of December 31, 2015 and .1% of the Company’s consolidated total
revenues for the year ended December 31, 2015.

Reports of Management and Independent Registered Public Accounting Firm on Internal Control Over Financial
Reporting

Management has assessed, and the Company’s independent registered public accounting firm, Ernst & Young LLP, has audited,
the Company’s internal control over financial reporting as of December 31, 2015. The unqualified reports of management and
Ernst & Young LLP thereon are included in Item 8 of this Annual Report on Form 10-K and are incorporated by reference
herein.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting, as defined in Rule 13a-15(f) under the
Securities Exchange Act of 1934, during the Company’s fourth fiscal quarter of 2015 that have materially affected, or are
reasonably likely to materially affect, the Company’s internal control over financial reporting, other than the improvements to
our program change management controls over our Progressive lease management application discussed above.

During the quarter ended December 31, 2015, the Company acquired a 100% ownership interest in DAMI and is in the process
of integrating the acquired business into its overall internal control over financial reporting process. The Company has excluded
DAMI from the assessment of internal control over financial reporting as of December 31, 2015.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS OF THE REGISTRANT AND CORPORATE GOVERNANCE

The information required in response to this Item is contained under the captions "Nominees to Serve as Directors", "Executive
Officers Who Are Not Directors", "Communicating with the Board of Directors and Corporate Governance Documents",
"Composition, Meetings and Committees of the Board of Directors" and "Section 16(a) Beneficial Ownership Reporting
Compliance" in the Proxy Statement to be filed with the SEC pursuant to Regulation 14A. These portions of the Proxy
Statement are hereby incorporated by reference.

We have adopted a written code of business conduct and ethics that applies to all our directors, officers and employees,
including our principal executive officer, principal financial officer, principal accounting officer or controller and other
executive officers identified pursuant to this Item 10 who perform similar functions, which we refer to as the Selected Officers.
The code is posted on our website at http://www.aarons.com. We will disclose any material changes in or waivers from our
code of business conduct and ethics applicable to any Selected Officer on our website at http://www.aarons.com or by filing a
Form 8-K.

ITEM 11. EXECUTIVE COMPENSATION

The information required in response to this Item is contained under the captions "Compensation Discussion and Analysis,"
"Summary Compensation Table," "Grants of Plan Based Awards in Fiscal Year 2015," "Outstanding Equity Awards at 2015
Fiscal Year-End," "Option Exercises and Stock Vested in Fiscal Year 2015," "Non-Qualified Deferred Compensation as of
December 31, 2015," "Potential Payments Upon Termination or Change in Control," "Non-Management Director
Compensation in 2015," "Employment Agreements with Named Executive Officers," "Executive Bonus Plan," "Amended and
Restated 2001 Stock Option and Incentive Award Plan," "Compensation Committee Interlocks and Insider Participation" and
"Compensation Committee Report" in the Proxy Statement. These portions of the Proxy Statement are hereby incorporated by
reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS

The information required in response to this Item is contained under the captions "Beneficial Ownership of Common Stock"
and "Securities Authorized for Issuance under Equity Compensation Plans" in the Proxy Statement. These portions of the Proxy
Statement are hereby incorporated by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required in response to this Item is contained under the captions "Certain Relationships and Related
Transactions" and "Election of Directors" in the Proxy Statement. These portions of the Proxy Statement are hereby
incorporated by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required in response to this Item is contained under the caption "Audit Matters" in the Proxy Statement. This
portion of the Proxy Statement is hereby incorporated by reference.

ITEM 15. EXHIBITS, FINANCIAL STATEMENTS and SCHEDULES

a) 1. FINANCIAL STATEMENTS

PART IV

The following financial statements and notes thereto of Aaron’s, Inc. and Subsidiaries, and the related Reports of Independent
Registered Public Accounting Firm are set forth in Item 8 and Item 9A.

Consolidated Balance Sheets—December 31, 2015 and 2014
Consolidated Statements of Earnings—Years ended December 31, 2015, 2014 and 2013
Consolidated Statement of Comprehensive Income—Years ended December 31, 2015, 2014 and 2013
Consolidated Statements of Shareholders’ Equity—Years ended December 31, 2015, 2014 and 2013
Consolidated Statements of Cash Flows—Years ended December 31, 2015, 2014 and 2013
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

2. FINANCIAL STATEMENT SCHEDULES

All schedules for which provision is made in the applicable accounting regulations of the SEC have been omitted because they
are not applicable or the required information is included in the financial statements or notes thereto.

3. EXHIBITS

EXHIBIT
NO.

DESCRIPTION OF EXHIBIT

2.1†

2.2†

3(i)

3(ii)

10.1

10.2

Plans of Acquisition
Agreement and Plan of Merger, dated April 14, 2014, by and among the Company, Progressive Finance Holdings,
LLC, Virtual Acquisition Company, LLC, and John W. Robinson, III in his capacity as the representative of the
selling unitholders (incorporated by reference to Exhibit 2.1 of the Registrant's Current Report on Form 8-K filed
with the SEC on April 15, 2014).

Purchase Agreement, dated April 14, 2014, by and among the Company, SP GE VIII-B Progressive Blocker Corp.,
SP SD IV-B Progressive Blocker Corp., Summit Partners Growth Equity Fund VIII-B, L.P., and Summit Partners
Subordinated Debt Fund IV-B, L.P. (incorporated by reference to Exhibit 2.2 of the Registrant's Current Report on
Form 8-K filed with the SEC on April 15, 2014).

Articles of Incorporation and Bylaws
Amended and Restated Articles of Incorporation of Aaron's, Inc. (incorporated by reference to Exhibit 3(i) of the
Registrant's Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC on February
24, 2014).

Amended and Restated By-laws of Aaron's, Inc. (incorporated by reference to Exhibit 3.1 of the Registrant's Current
Report on Form 8-K filed with the SEC on January 29, 2016).

Instruments Defining the Rights of Security Holders, Including Indentures
Specimen of Form of Stock Certificate Representing Shares of Common Stock of the Registrant, par value $0.50
per share (incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form 8-A/A filed
with the SEC on December 10, 2010).

Material Contracts
Note Purchase Agreement by and among Aaron’s, Inc. and certain other obligors and the purchasers dated as of July
5, 2011 and Form of Senior Note (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on
Form 8-K filed with the SEC on July 8, 2011).

Amendment No. 1 to Note Purchase Agreement by and among Aaron’s, Inc. and certain other obligors and the
purchasers, dated as of December 19, 2012 (incorporated by reference to Exhibit 10 of the Registrant’s Current Report
on Form 8-K filed with the SEC on December 26, 2012).

10.3

10.4

10.5

10.6

10.7

10.8

10.9

10.10

10.11

10.12

10.13

10.14

10.15

10.16

Amendment No. 2 to Note Purchase Agreement by and among Aaron's, Inc. and certain other obligors and the
purchasers, dated as of October 8, 2013 (incorporated by reference to Exhibit 10.1 of the Registrant’s Current
Report on Form 8-K filed with the SEC on October 15, 2013).

Amendment No. 3 to Note Purchase Agreement by and among Aaron's, Inc. and certain other obligors and the
purchasers, dated as of April 14, 2014 and Form of Senior Note (incorporated by reference to Exhibit 10.4 of the
Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 filed with the SEC on August 8,
2014).

Amendment No. 4 to Note Purchase Agreement by and among Aaron's, Inc. and certain other obligors and the
purchasers, dated as of December 9, 2014 (incorporated by reference to Exhibit 10.7 of the Registrant’s Annual
Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on March 2, 2015).

Amendment No. 5 to Note Purchase Agreement by and among Aaron’s Inc. and certain other obligors and the
purchasers, dated as of September 21, 2015 (incorporated by reference to Exhibit 10.5 of the Registrant’s Quarterly
Report on Form 10-Q for the quarter ended September 30, 2015 filed with the SEC on November 9, 2015).
Note Purchase Agreement by and among Aaron's, Inc. and certain other obligors and the purchasers dated as of
April 14, 2014 with respect to $225 million in aggregate principal amount of the Company's 4.75% Series A Senior
Notes due April 14, 2021 and Form of Senior Note (incorporated by reference to Exhibit 10.2 of the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 filed with the SEC on August 8, 2014).

Amendment No. 1 to Note Purchase Agreement by and among Aaron's, Inc. and certain other obligors and the
purchasers dated as of December 9, 2014 with respect to $225 million in aggregate principal amount of the
Company's 4.75% Series A Senior Notes Due April 14, 2021 and Form of Senior Note (incorporated by reference
to Exhibit 10.9 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014 filed with
the SEC on March 2, 2015).

Amendment No. 2 to Note Purchase Agreement by and among Aaron’s Inc. and certain other obligors and the
purchasers dated as of September 21, 2015 with respect to $225 million in aggregate principal amount of the
Company’s 4.75% Series A Senior Notes due April 14, 2021 and Form of Senior Note (incorporated by reference to
Exhibit 10.3 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 filed
with the SEC on November 9, 2015).
Note Purchase Agreement by and among Aaron's, Inc. and certain other obligors and the purchasers dated as of
April 14, 2014 with respect to $75 million in aggregate principal amount of the Company's 4.75% Series B Senior
Notes due April 14, 2021 and Form of Senior Note (incorporated by reference to Exhibit 10.3 of the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 filed with the SEC on August 8, 2014).

Amendment No. 1 to Note Purchase Agreement by and among Aaron's, Inc. and certain other obligors and
purchasers dated as of December 9, 2014 with respect to $75 million in aggregate principal amount of the
Company's 4.75% Series B Senior Notes due April 14, 2021 and Form of Senior Notes (incorporated by reference
to Exhibit 10.11 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014 filed with
the SEC on March 2, 2015).

Amendment No. 2 to Note Purchase Agreement by and among Aaron’s Inc. and certain other obligors and
purchasers dated as of September 21, 2015 with respect to $75 million in aggregate principal amount of the
Company’s 4.75% Series B Senior Notes due April 14, 2021 and Form of Senior Note (incorporated by reference
to Exhibit 10.4 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 filed
with the SEC on November 9, 2015).
Amended and Restated Revolving Credit and Term Loan Agreement, by and among Aaron's, Inc., as borrower, the
several banks and other financial institutions from time to time party thereto and SunTrust Bank as administrative
agent, dated as of April 14, 2014 (incorporated by reference to Exhibit 10.1 of the Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 2014 filed with the SEC on August 8, 2014).

First Amendment to Amended and Restated Revolving Credit and Term Loan Agreement, by and among Aaron's,
Inc., as borrower, the several banks and other financial institutions from time to time party thereto and SunTrust
Bank as administrative agent, dated December 9, 2014 (incorporated by reference to Exhibit 10.19 of the
Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on March 2,
2015).

Second Amendment to Amended and Restated Revolving Credit and Term Loan Agreement by and among Aaron’s,
Inc., as borrower, the several banks and other financial institutions from time to time party thereto and SunTrust
Bank as administrative agent, dated September 21, 2015 (incorporated by reference to Exhibit 10.2 of the
Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 filed with the SEC on
November 9, 2015).

Third Amended and Restated Loan Facility Agreement and Guaranty, by and among Aaron's, Inc. as sponsor,
SunTrust Bank, as servicer, and each of the other lending institutions party thereto as participants, dated as of April
14, 2014 (incorporated by reference to Exhibit 10.5 of the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2014 filed with the SEC on August 8, 2014).

10.17

10.18

10.19

10.20

10.21

10.22

10.23

10.24

10.25

10.26

10.27

10.28

10.29*

10.30*

10.31

10.32

10.33

10.34

First Amendment to the Third Amended and Restated Loan Facility Agreement and Guaranty among Aaron's, Inc.
as sponsor, SunTrust Bank, as servicer, and each of the other lending institutions party thereto as participants, dated
December 9, 2014 (incorporated by reference to Exhibit 10.29 of the Registrant’s Annual Report on Form 10-K for
the year ended December 31, 2014 filed with the SEC on March 2, 2015).

Second Amendment to the Third Amended and Restated Loan Facility Agreement among Aaron’s Inc. as sponsor,
SunTrust Bank, as servicer, and each of the other lending institutions party thereto as participants, dated September
21, 2015 (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2015 filed with the SEC on November 9, 2015).

Third Amendment to the Third Amended and Restated Loan Facility Agreement and Guaranty among Aaron's, Inc.
as sponsor, SunTrust Bank, as servicer, and each of the other lending institutions party thereto as participants, dated
December 4, 2015 (incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed
with the SEC on December 10, 2015).

Loan and Security Agreement by and among Dent-A-Med Inc., Dent-A-Med Receivables Corporation, HC
Recovery, Inc. and Wells Fargo Preferred Capital, Inc., dated as of May 18, 2011 (incorporated by reference to
Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on October 21, 2015).

First Amendment to Loan and Security Agreement by and among Dent-A-Med Inc., Dent-A-Med Receivables
Corporation, HC Recovery, Inc. and Wells Fargo Preferred Capital, Inc., dated as of August 3, 2011 (incorporated
by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K filed with the SEC on October 21,
2015).

Second Amendment to Loan and Security Agreement by and among Dent-A-Med Inc., Dent-A-Med Receivables
Corporation, HC Recovery, Inc. and Wells Fargo Bank, N.A, dated as of July 26, 2012 (incorporated by reference
to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K filed with the SEC on October 21, 2015).

Third Amendment to Loan and Security Agreement by and among Dent-A-Med Inc., HC Recovery, Inc. and Wells
Fargo Bank, N.A, dated as of June 6, 2013 (incorporated by reference to Exhibit 10.4 of the Registrant’s Current
Report on Form 8-K filed with the SEC on October 21, 2015).

Fourth Amendment to Loan and Security Agreement by and among Dent-A-Med Inc., HC Recovery, Inc. and Wells
Fargo Bank, N.A, dated as of November 7, 2013 (incorporated by reference to Exhibit 10.5 of the Registrant’s
Current Report on Form 8-K filed with the SEC on October 21, 2015).

Fifth Amendment to Loan and Security Agreement by and among Dent-A-Med Inc., HC Recovery, Inc. and Wells
Fargo Bank, N.A, dated as of March 31, 2014 (incorporated by reference to Exhibit 10.6 of the Registrant’s Current
Report on Form 8-K filed with the SEC on October 21, 2015).

Sixth Amendment to Loan and Security Agreement by and among Dent-A-Med Inc., HC Recovery, Inc. and Wells
Fargo Bank, N.A, dated as of October 24, 2014 (incorporated by reference to Exhibit 10.7 of the Registrant’s
Current Report on Form 8-K filed with the SEC on October 21, 2015).

Seventh Amendment to Loan and Security Agreement by and among Dent-A-Med Inc., HC Recovery, Inc. and
Wells Fargo Bank, N.A, dated as of February 3, 2015 (incorporated by reference to Exhibit 10.8 of the Registrant’s
Current Report on Form 8-K filed with the SEC on October 21, 2015).

Eighth Amendment to Loan and Security Agreement by and among Dent-A-Med Inc., HC Recovery, Inc. and Wells
Fargo Bank, N.A, dated as of September 21, 2015 (incorporated by reference to Exhibit 10.9 of the Registrant’s
Current Report on Form 8-K filed with the SEC on October 21, 2015).
Ninth Amendment to the Loan and Security Agreement by and among Dent-A-Med, Inc., HC Recovery, Inc. and
Wells Fargo Bank, N.A, dated as of December 29, 2015.

Tenth Amendment to the Loan and Security Agreement by and among Dent-A-Med, Inc., HC Recovery, Inc. and
Wells Fargo Bank, N.A, dated as of February 23, 2016.

Agreement, dated as of May 13, 2014, by and among Aaron's, Inc., Vintage Capital Management, L.L.C., Kahn
Capital Management, L.L.C., Brian R. Kahn, and Matthew E. Avril (incorporated by reference to Exhibit 10.1 of
the Registrant's Current Report on Form 8-K filed with the SEC on May 14, 2014).

Management Contracts and Compensatory Plans or Arrangements
Aaron’s, Inc. Employees Retirement Plan and Trust, as amended and restated (incorporated by reference to Exhibit
99.3 of the Registrant’s Registration Statement on Form S-8 (333-171113) filed with the SEC on December 10,
2010).

Amendment No. 1 to the Aaron's, Inc. Employees Retirement Plan and Trust, as amended and restated, dated as of
December 1, 2011 (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q
for the quarter ended June 30, 2013 filed with the SEC on August 2, 2013).

Amendment No. 2 to the Aaron's, Inc. Employees Retirement Plan and Trust, as amended and restated, dated as of
December 29, 2011 (incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q
for the quarter ended June 30, 2013 filed with the SEC on August 2, 2013).

10.35

10.36

10.37

10.38

10.39

10.40

10.41

10.42

10.43

10.44

10.45

10.46

10.47

10.48

10.49

10.50

10.51

10.52

10.53

10.54

10.55

Amendment No. 3 to the Aaron's, Inc. Employees Retirement Plan and Trust, as amended and restated, dated as of
December 31, 2012 (incorporated by reference to Exhibit 10.3 of the Registrant’s Quarterly Report on Form 10-Q
for the quarter ended June 30, 2013 filed with the SEC on August 2, 2013).

Amendment No. 4 to the Aaron's, Inc. Employees Retirement Plan and Trust, as amended and restated, dated as of
April 23, 2014 (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q for
the quarter ended June 30, 2015 filed with the SEC on August 6, 2015).

Amendment No. 5 to the Aaron's, Inc. Employees Retirement Plan and Trust, as amended and restated, dated as of
November 12, 2014 (incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q
for the quarter ended June 30, 2015 filed with the SEC on August 6, 2015).
Amended and Restated Aaron Rents, Inc. 2001 Stock Option and Incentive Award Plan (incorporated by reference to
Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 10, 2009).

Form of Restricted Stock Unit Award Agreement for awards made prior to February 2014 (incorporated by reference
to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 filed with
the SEC on May 8, 2012).

Amendment to Form of Restricted Stock Unit Award Agreement for awards made prior to February 2014 (incorporated
by reference to Exhibit 10.11 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015
filed with the SEC on August 6, 2015).

Form of Restricted Stock Unit Award for awards made in or after February 2014 (incorporated by reference to Exhibit
10.29 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC on
February 24, 2013).
Form of Option Award Agreement for awards made prior to February 2014 (incorporated by reference to Exhibit 10.28
of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC on February
24, 2013).

Form of Option Award Agreement for awards made in or after February 2014(incorporated by reference to Exhibit
10.30 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC on
February 24, 2013).

Amendment to Form of Option Award Agreement for awards made in or after February 2014 (incorporated by reference
to Exhibit 10.10 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 filed with
the SEC on August 6, 2015).
Form of Performance Share Award Agreement for awards made in or after February 2014 (incorporated by reference
to Exhibit 10.31 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2013 filed with
the SEC on February 24, 2013).

Amendment to Form of Performance Share Award Agreement for awards made in or after February 2014
(incorporated by reference to Exhibit 10.12 of the Registrant’s Quarterly Report on Form 10-Q for the quarter
ended June 30, 2015 filed with the SEC on August 6, 2015).
Aaron's Management Performance Plan (Summary of terms for Home Office Vice Presidents) (incorporated by
reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the SEC on August 5, 2011).

Aaron's, Inc. 2001 Stock Option and Incentive Award Plan Master Restricted Stock Unit Agreement (Aaron's
Management Performance Plan) (incorporated by reference to Exhibit 10.2 of the Registrant's Current Report on
Form 8-K filed with the SEC on August 5, 2011).

Aaron's, Inc. Deferred Compensation Plan Master Plan Document, Effective July 1, 2009 (incorporated by
reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed with the SEC on June 12, 2009).

Aaron’s, Inc. 2015 Equity and Incentive Plan (incorporated by reference to Appendix A to the Company’s
Definitive Proxy Statement filed on April 7, 2015).

Form of Employee Stock Option Award Agreement under the Aaron’s, Inc. 2015 Equity and Incentive Plan
(incorporated by reference to Exhibit 99.2 of the Company’s Registration Statement on Form S-8 (333-204014)
filed with the SEC on May 8, 2015).

Form of Executive Performance Share Award Agreement under the Aaron’s, Inc. 2015 Equity and Incentive Plan
(incorporated by reference to Exhibit 99.3 of the Company’s Registration Statement on Form S-8 (333-204014)
filed with the SEC on May 8, 2015).

Amendment to Form of Executive Performance Share Award Agreement under the Aaron's, Inc. 2015 Equity and
Incentive Plan (incorporated by reference to Exhibit 10.6 of the Registrant’s Quarterly Report on Form 10-Q for
the quarter ended June 30, 2015 filed with the SEC on August 6, 2015).

Form of Executive Officer Restricted Stock Unit Award Agreement under the Aaron’s, Inc. 2015 Equity and
Incentive Plan (incorporated by reference to Exhibit 99.4 of the Company’s Registration Statement on Form S-8
(333-204014) filed with the SEC on May 8, 2015).

Amendment to Form of Executive Officer Restricted Stock Unit Award Agreement under the Aaron's, Inc. 2015
Equity and Incentive Plan (incorporated by reference to Exhibit 10.8 of the Registrant’s Quarterly Report on Form
10-Q for the quarter ended June 30, 2015 filed with the SEC on August 6, 2015).

10.56

10.57

10.58

10.59

Form of Director Restricted Stock Unit Award Agreement under the Aaron’s, Inc. 2015 Equity and Incentive Plan
(incorporated by reference to Exhibit 99.5 of the Company’s Registration Statement on Form S-8 (333-204014)
filed with the SEC on May 8, 2015).
Employment Agreement, dated as of April 18, 2012, by and between Aaron's, Inc. and Ronald W. Allen
(incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed with the SEC on
April 24, 2012).

Employment Agreement, dated as of April 18, 2012, by and between Aaron's, Inc. and Gilbert L. Danielson
(incorporated by reference to Exhibit 10.2 of the Registrant's Current Report on Form 8-K filed with the SEC on
April 24, 2012).

Employment Agreement, dated as of November 10, 2014, by and between Aaron's, Inc. and John W. Robinson
(incorporated by reference to Exhibit 10.47 of the Registrant’s Annual Report on Form 10-K for the year ended
December 31, 2014 filed with the SEC on March 2, 2015).

10.60*

Amended and Restated Executive Severance Pay Plan of Aaron's, Inc., effective as of August 5, 2015.

10.61

10.62

10.63

10.64

21*

23*

31.1*

31.2*

32.1*

32.2*

101

Waiver and Release Agreement between Aaron's, Inc. and David L. Buck, dated August 22, 2014 (incorporated by
reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed with the SEC on August 26, 2014).

Separation Agreement between Aaron's, Inc. and K. Todd Evans dated as of April 2, 2014 (incorporated by
reference to Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2014
filed with the SEC May 5, 2014).

Retirement Agreement between Aaron's, Inc. and R. Charles Loudermilk, Sr., dated August 24, 2012 (incorporated
by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed with the SEC on August 30, 2012).
Form of Indemnification Agreement (incorporated by reference to Exhibit 10.2 of the Registrant's Current Report on
Form 8-K filed with the SEC on May 14, 2014).

Other Exhibits and Certifications
Subsidiaries of the Registrant.

Consent of Ernst & Young LLP.

Certification of the Chief Executive Officer of Aaron's, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.

Certification of the Chief Financial Officer of Aaron's, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.

Certification of the Chief Executive Officer of Aaron's, Inc. furnished herewith pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

Certification of the Chief Financial Officer of Aaron's, Inc. furnished herewith pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

The following financial information from Aaron's, Inc. Annual Report on Form 10-K for the year ended December
31, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of
December 31, 2015 and December 31, 2014, (ii) Consolidated Statements of Earnings for the Years ended December
31, 2015, 2014 and 2013, (iii) Consolidated Statements of Comprehensive Income for the Years ended December 31,
2015, 2014 and 2013, (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and
2013, (v) Consolidated Statements of Shareholder's Equity for the Years ended December 31, 2015, 2014 and 2013
and (v) the Notes to Consolidated Financial Statements.

† The Company hereby agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon the

request of the SEC.

* Filed herewith.

(b) EXHIBITS

The exhibits listed in Item 15(a)(3) are included elsewhere in this Report.

The financial statements listed in Item 15(a)(1) are included in Item 8 in this Report.

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly

caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 29, 2016.

SIGNATURES

AARON’S, INC.

By:

/s/ STEVEN A. MICHAELS
Steven A. Michaels
Chief Financial Officer and President of Strategic Operations

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following

persons on behalf of the registrant and in the capacities indicated on February 29, 2016.

SIGNATURE
/s/ JOHN W. ROBINSON, III
John W. Robinson III

/s/ STEVEN A. MICHAELS
Steven A. Michaels

/s/ ROBERT P. SINCLAIR, JR.
Robert P. Sinclair, Jr.

/s/ MATTHEW E. AVRIL
Matthew E. Avril

/s/ LEO BENATAR
Leo Benatar

/s/ KATHY T. BETTY
Kathy T. Betty

/s/ DOUGLAS C. CURLING
Douglas C. Curling

/s/ CYNTHIA N. DAY
Cynthia N. Day

/s/ CURTIS L. DOMAN
Curtis L. Doman

/s/ HUBERT L. HARRIS, JR.
Hubert L. Harris, Jr.

/s/ EUGENE H. LOCKHART
Eugene H. Lockhart

/s/ RAY M. ROBINSON
Ray M. Robinson

TITLE

Chief Executive Officer and Director
(Principal Executive Officer)

Chief Financial Officer and President of Strategic
Operations (Principal Financial Officer)

Vice President, Corporate Controller
(Principal Accounting Officer)

Director

Comparison of 5 Year Cumulative Total Return*

Among Aaron’s, Inc., the S&P Midcap 400 Index, and S&P 400 Retailing Index

(cid:2)(cid:10)(cid:16)(cid:9)

(cid:2)(cid:10)(cid:15)(cid:9)

(cid:2)(cid:10)(cid:13)(cid:9)

(cid:2)(cid:10)(cid:11)(cid:9)

(cid:2)(cid:10)(cid:9)(cid:9)

(cid:2)(cid:16)(cid:9)

(cid:2)(cid:15)(cid:9)

(cid:2)(cid:13)(cid:9)

(cid:2)(cid:11)(cid:9)

(cid:2)(cid:9)

(cid:10)(cid:11)(cid:8)(cid:10)(cid:9)

(cid:10)(cid:11)(cid:8)(cid:10)(cid:10)

(cid:10)(cid:11)(cid:8)(cid:10)(cid:11)

(cid:10)(cid:11)(cid:8)(cid:10)(cid:12)

(cid:10)(cid:11)(cid:8)(cid:10)(cid:13)

(cid:10)(cid:11)(cid:8)(cid:10)(cid:14)

(cid:17)(cid:33)(cid:43)(cid:41)(cid:40)(cid:4)(cid:44)(cid:6)(cid:1)(cid:21)(cid:40)(cid:34)(cid:7)

(cid:28)(cid:3)(cid:26)(cid:1)(cid:23)(cid:38)(cid:35)(cid:34)(cid:33)(cid:42)(cid:1) (cid:13)(cid:9)(cid:9)

(cid:28)(cid:3)(cid:26)(cid:1)(cid:13)(cid:9)(cid:9)(cid:1)(cid:27)(cid:36)(cid:45)(cid:33)(cid:38)(cid:39)(cid:38)(cid:40)(cid:37)(cid:1)(cid:21)(cid:40)(cid:35)(cid:36)(cid:46)

The line graph above and the table below compare, for the last five fiscal years of the Company,
the yearly percentage change in the cumulative total shareholder returns (assuming reinvest-
ment of dividends) on the Company’s common stock with that of the S&P Midcap 400 Index
and the S&P 400 Retailing Index.

Aaron’s, Inc.
S&P Midcap 400
S&P 400 Retailing Index

12/10
100.00
100.00
100.00

12/11
131.13
98.27
103.87

12/12
139.30
115.84
117.93

12/13
145.19
154.64
134.69

12/14
151.42
169.75
139.63

12/15
111.25
166.05
124.52

Board of Directors

Corporate Officers

Ray M. Robinson
Chairman
Retired President,
AT&T Southern Region

John W. Robinson III
President and Chief
Executive Officer,
Aaron’s, Inc.

Matthew E. Avril
Former President, Starwood
Hotels & Resorts Worldwide,
Inc. Hotel Group

Leo Benatar
Principal,
Benatar & Associates

Douglas C. Curling
Managing Principal,
New Kent Capital LLC and
New Kent Consulting LLC

Kathy T. Betty
Retired Executive Vice
President and Partner,
Scott Madden, Inc.

Cynthia N. Day
President and Chief
Executive Officer,
Citizens Bancshares
Corporation and Citizens
Trust Bank

Curtis L. Doman
Co-Founder and Chief
Technology Officer,
Progressive Leasing

Hubert L. Harris, Jr.
Retired Chief
Executive Officer,
Invesco North America

H. Eugene Lockhart
Partner and Senior Advisor,
General Atlantic LLC

Chairman Emeritus
R. Charles Loudermilk, Sr.
Founder, Aaron’s, Inc.

* Executive Officer

John W. Robinson III*
President and Chief
Executive Officer

Steven A. Michaels*
Chief Financial Officer
and President, Strategic
Operations

Robert W. Kamerschen*
Executive Vice President,
Chief Administrative Officer,
General Counsel, Corporate
Secretary

Douglas A. Lindsay*
President, Aaron’s Sales &
Lease Ownership

Tristan J. Montanero
Chief Operations Officer,
Aaron’s Sales & Lease
Ownership

Gilbert L. Danielson
Executive Vice President

James L. Cates
Senior Vice President,
Enterprise Risk Management

Russell S. Falkenstein
Vice President, Corporate
Initiatives

Andrea P. Freeman
Vice President, Marketing

Scott L. Harvey
Vice President, Franchising

Michael W. Jarnagin
Vice President,
Manufacturing

David A. Korn
Vice President, Chief
Compliance Officer

Progressive Leasing

Ryan K. Woodley*
Chief Executive Officer

Blake W. Wakefield
President and Chief
Revenue Officer

Sharon J. Lawrence
Vice President, Finance

Paige S. Mamula
Vice President, Real Estate
and Construction

Kimberly R. Rivera
Vice President, Learning and
Development

Christopher B. Ruffino
Vice President, Customer and
Store Experience

Kirby M. Salgado
Vice President,
Merchandising

Ted M. Scartz
Vice President,
Deputy General Counsel

Robert P. Sinclair, Jr.*
Vice President, Corporate
Controller

John T. Trainor
Chief Information Officer and
Senior Vice President, Omni-
Channel

Elizabeth F. Van Loon
Vice President, Associate
Resources

Cory Voglesonger
Vice President, Technology
Strategy and Innovation

Tracey L. Whiston
Vice President, Divisional
Controller

Jill S. Young
Vice President, Internal Audit

Sales & Lease
Ownership Operational
Management

Michael P. Ryan
Senior Vice President,
Operations

David T. Bier
Vice President, Northeastern
Operations

Gregory G. Bellof
Vice President, The Carolinas
Operations

Joseph N. Fedorchak
Vice President, Southeastern
Operations

Justin Hafer
Vice President, Mississippi
Valley Operations

Kevin J. Hrvatin
Vice President, Western
Operations

Steven O. Jackson
Vice President, Central
Operations

Ryan E. Malone
Vice President, Southwestern
Operations

Jason M. McFarland
Vice President, Mid-American
Operations

Henri G. Rogers
Vice President, Northern
Operations

Joseph A. Saez, Jr.
Vice President, Great Lakes
Operations

Curtis L. Doman*
Chief Technology Officer

Frank W. Laura
Chief Information Officer

Marvin A. Fentress
General Counsel and Chief
Compliance Officer

Michael T. Jeffcoat
Chief Financial Officer

Ryan J. Ray
Chief Operations Officer

309 E. Paces Ferry Rd., N.E.
Atlanta, Georgia 30305-2377
(404) 231-0011
www.aarons.com
investor.aarons.com