SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
11-K
Annual
Report Pursuant to Section 15(d) of the
Securities
Exchange Act of 1934
(Mark
One)
ý
|
Annual
report pursuant to Section 15(d) of the Securities Exchange Act of
1934 (No Fee Required)
|
|
For
the fiscal year ended December 31,
2008
|
o
|
Transition
report pursuant to Section 15(d) of the Securities Exchange Act of
1934 (No Fee Required)
|
For
the transition period
from to
.
Commission
file number 0-12385
Aaron
Rents, Inc. Employees Retirement Plan and Trust
Full
title of the plan and the address of the plan, if different
from that
of the issuer named below
AARON’S,
INC.
309
E. PACES FERRY ROAD, N.E.
ATLANTA,
GA 30305-2377
This
report contains a total of 13 sequentially numbered pages.
Exhibit
Index appears on page 12.
Audited
Financial Statements and Supplemental Schedule
Aaron
Rents, Inc. Employees Retirement Plan and Trust
Years
Ended December 31, 2008 and 2007
With
Report of Independent Registered Public Accounting
Firm
|
Aaron
Rents, Inc.
Employees
Retirement Plan and Trust
Audited
Financial Statements and Supplemental Schedule
Years
Ended December 31, 2008 and 2007
Contents
|
|
Report
of Independent Registered Public Accounting Firm
|
1
|
|
|
Audited
Financial Statements
|
|
|
|
Statements
of Net Assets Available for Benefits
|
2
|
Statements
of Changes in Net Assets Available for Benefits
|
3
|
Notes
to Financial Statements
|
4
|
|
|
Supplemental
Schedule
|
|
|
|
Schedule
of Assets (Held at End of Year)
|
10
|
Report
of Independent Registered Public Accounting Firm
The
Employee Benefits Committee
Aaron
Rents, Inc. Employees Retirement Plan and Trust
We have
audited the accompanying statements of net assets available for benefits of
Aaron Rents, Inc. Employees Retirement Plan and Trust as of December 31,
2008 and 2007, and the related statements of changes in net assets available for
benefits for the years then ended. These financial statements are the
responsibility of the Plan’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. We were not engaged to perform an
audit of the Plan’s internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Plan’s
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
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 net assets available for benefits of the Plan at December
31, 2008 and 2007, and the changes in its net assets available for benefits for
the years then ended, in conformity with U.S. generally accepted accounting
principles.
Our
audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedule of assets
(held at end of year) as of December 31, 2008, is presented for purposes of
additional analysis and is not a required part of the financial statements but
is supplementary information required by the Department of Labor’s Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. This supplemental schedule is the responsibility of the
Plan’s management. The supplemental schedule has been subjected to the auditing
procedures applied in our audits of the financial statements and, in our
opinion, is fairly stated in all material respects in relation to the financial
statements taken as a whole.
/s/ Ernst
& Young LLP
Atlanta,
GA
June
25, 2009
Aaron
Rents, Inc.
Employees
Retirement Plan and Trust
Statements
of Net Assets Available for Benefits
|
|
December
31
|
|
|
|
2008
|
|
|
2007
|
|
Assets
|
|
|
|
|
|
|
Investments,
at fair value
|
|
$ |
21,667,384 |
|
|
$ |
25,692,702 |
|
Contributions
receivable:
|
|
|
|
|
|
|
|
|
Employer
|
|
|
5,863 |
|
|
|
37,389 |
|
Participant
|
|
|
15,907 |
|
|
|
108,595 |
|
Net
assets available for benefits
|
|
$ |
21,689,154 |
|
|
$ |
25,838,686 |
|
Aaron
Rents, Inc.
Employees
Retirement Plan and Trust
Statements
of Changes in Net Assets Available for Benefits
|
|
Year
ended December 31
|
|
|
|
2008
|
|
|
2007
|
|
Additions
to net assets attributed to:
|
|
|
|
|
|
|
Interest
and dividend income
|
|
$ |
352,470 |
|
|
$ |
2,730,885 |
|
Contributions:
|
|
|
|
|
|
|
|
|
Participant
|
|
|
2,576,956 |
|
|
|
2,480,116 |
|
Employer
|
|
|
848,119 |
|
|
|
819,712 |
|
Rollover
|
|
|
42,478 |
|
|
|
154,073 |
|
Total
additions
|
|
|
3,820,023 |
|
|
|
6,184,786 |
|
|
|
|
|
|
|
|
|
|
Net
depreciation in fair value of investments
|
|
|
(4,008,722 |
) |
|
|
(4,091,909 |
) |
|
|
|
|
|
|
|
|
|
Deductions
from net assets attributed to:
|
|
|
|
|
|
|
|
|
Distributions
|
|
|
(3,960,833 |
) |
|
|
(2,404,672 |
) |
Net
decrease in net assets available for benefits
|
|
|
(4,149,532 |
) |
|
|
(311,795 |
) |
Net
assets available for benefits at beginning of year
|
|
|
25,838,686 |
|
|
|
26,150,481 |
|
Net
assets available for benefits at end of year
|
|
$ |
21,689,154 |
|
|
$ |
25,838,686 |
|
See
accompanying notes.
Aaron
Rents, Inc.
Employees
Retirement Plan and Trust
Notes to
Financial Statements
December
31, 2008
1.
Description of the Plan
The
following description of the Aaron Rents, Inc. Employees Retirement Plan and
Trust (the Plan) is provided for general information purposes only. More
complete information regarding items such as vesting, benefit provisions, and
Plan termination may be found in the Summary Plan Description, which has been
distributed to all participants, and the Plan document, which is available to
all participants upon request.
The Plan
is a defined contribution plan covering substantially all employees of Aaron’s,
Inc., formerly known as Aaron Rents, Inc., (the Company). Any employee of the
Company who attains 21 years of age and has completed one year of service (as
defined in the Plan document) is eligible to participate in the Plan. The Plan
is subject to the provisions of the Employee Retirement Income Security Act of
1974, as amended (ERISA).
The Plan
is administered by the Employee Benefits Committee (the Committee) appointed by
the Board of Directors of the Company. The duties of the Committee include
interpretation of the Plan Agreement, determination of benefits due to
participants, and authorization of disbursements from the net assets available
for benefits.
Participation
in the Plan is voluntary and participants may contribute up to ten percent of
their annual compensation in the form of a salary deferral, thereby deferring
related income taxes pursuant to Section 401(k) of the Internal Revenue
Code (the Code). Participants may also contribute up to an additional ten
percent of their aggregate annual compensation paid by the Company during all
years they have been a participant under the Plan and any other qualified
retirement plan adopted by the Company; however, income taxes on this additional
portion of the participant’s compensation may not be deferred. The Company
matches 50% of the first 4% of compensation that a participant contributes to
the Plan.
Individual
accounts are maintained for each participant. Investment income earned by the
Plan is allocated to participants’ accounts based upon relative balances of the
individual accounts as of the valuation date for which the allocation is being
made. At the discretion of the Company, forfeitures may reduce the matching
contribution required for the current Plan year or may be allocated to
participants’ accounts pro rata based on compensation. In 2008 and 2007, the
Company elected to reduce its matching contribution by forfeitures of $122,820
and $73,338, respectively. Unallocated forfeiture account balances totaled $3
and $43,443 for the years ended December 31, 2008 and 2007,
respectively.
Participants
are immediately vested in their contributions and earnings thereon. The Plan
provides for 20% vesting of all Company contributions after two years of service
(as defined in the Plan document) are completed with subsequent vesting at an
additional 20% per service year until the participant is fully
vested.
A
participant’s total account balance is payable either in a lump-sum distribution
or by regular periodic installments upon his or her retirement, death, or
disability. Upon termination of service, only the vested portion of the
participant’s account becomes payable. In the event of a participant’s death or
permanent and total disability, his or her interest in the Plan will become
fully vested.
Although
it has not expressed any intent to do so, the Company has the right under the
Plan to discontinue contributions at any time and to terminate the Plan subject
to the provisions of ERISA. In the event of Plan termination (or permanent
discontinuance of contributions to the Plan), all amounts credited to the
accounts of the participants will become 100% vested. The Plan’s assets will be
distributable to the participants in accordance with the respective values of
their accounts.
2.
Summary of Significant Accounting Policies
Basis
of Presentation
The
accompanying financial statements of the Plan have been prepared on the accrual
basis of accounting.
Payment
of Benefits
Benefits
are recorded when paid.
Valuation
of Investments
The
Plan’s investments are stated at fair value. Shares of mutual funds and Aaron’s,
Inc. common stock investments are valued based on quoted market prices in an
active market which represent the net asset value of shares held by the Plan at
year-end.
The Plan
invests in fully benefit-responsive investment contracts through a common
collective trust (SunTrust Retirement Stable Asset Fund). The statements of net
assets available for benefits present the fair value of the Plan’s interest in
the SunTrust Retirement Stable Asset Fund; however, no adjustment from fair
value to contract value was necessary as contract value approximates fair value.
The fair value of the Plan’s interest in the SunTrust Retirement Stable Asset
Fund is based on quoted redemption value reported by the issuer of the common
collective trust at year-end. The contract value of the SunTrust Retirement
Stable Asset Fund represents contributions plus earnings, less participant
withdrawals and administrative expenses.
In
September 2006, the Financial Accounting Standards Board issued Statement on
Financial Accounting Standards No. 157 (SFAS No. 157), Fair Value Measurement. This
standard clarifies the definition of fair value for financial reporting,
establishes a framework for measuring fair value and requires additional
disclosures about the use of fair value measurements. Effective January 1, 2008,
the Plan adopted SFAS No. 157 which defines fair value as the exchange price
that would be received for an asset or paid to transfer a liability
(an exit price) in the principal or most advantageous market for the asset
or liability in an orderly transaction value hierarchy which requires an entity
to maximize the use of observable inputs when measuring fair value. Adoption of
SFAS No. 157 did not impact the valuation of the investments of the
Plan.
The
following provides a description of the three levels of inputs that may be used
to measure fair value under SFAS No. 157:
Level 1 –
Inputs to the valuation methodology are quoted prices available in active
markets for identical investments as of the reporting date.
Level 2 –
Inputs to the valuation methodology are other than quoted prices in active
markets, which are either directly or indirectly observable as of the reporting
date, and fair value can be determined through the use of models or other
valuation methodologies.
Level 3 –
Inputs to the valuation methodology are unobservable inputs in situations where
there is little or no market activity for the asset or liability and the
reporting entity makes estimates and assumptions related to the pricing of the
asset or liability including assumptions regarding risk.
The
following table sets forth by level, within the fair value hierarchy, the Plan’s
assets carried at fair value as of December 31, 2008.
|
|
Assets
at Fair Value as of December 31, 2008
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
stock
|
|
$ |
6,552,430 |
|
|
$ |
– |
|
|
$ |
– |
|
|
$ |
6,552,430 |
|
Common
trust fund
|
|
|
– |
|
|
|
3,751,047 |
|
|
|
– |
|
|
|
3,751,047 |
|
Mutual
funds
|
|
|
11,363,907 |
|
|
|
– |
|
|
|
– |
|
|
|
11,363,907 |
|
Total
assets at fair value
|
|
$ |
17,916,337 |
|
|
$ |
3,751,047 |
|
|
$ |
– |
|
|
$ |
21,667,384 |
|
Purchases
and sales of securities are recorded on a trade-date basis. Interest income is
recorded as earned. Dividends are recorded on the ex-dividend date. Net
appreciation includes the Plan’s gains and losses on investments bought and sold
as well as held during the year.
New
Accounting Pronouncements
In
October 2008, the FASB issued FASB Staff Position 157-3, Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active (FSP 157-3).
FSP 157-3 clarifies the application of SFAS No. 157 in markets that are not
active and provides an example to illustrate key considerations in determining
the fair value of a financial asset when the market for an asset is not active.
The guidance in FSP 157-3 was effective upon issuance, including prior periods
for which financial statements had not been issued. The Plan adopted SFAS No.
157 effective January 1, 2008.
In April
2009, the FASB issued FASB Staff Position 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly (FSP 157-4).
FSP 157-4 supersedes FSP 157-3 and amends SFAS No. 157 to provide
additional guidance on estimating fair value when the volume and level of
activity for an asset or liability have significantly decreased in relation to
normal market activity for the asset or liability. FSP 157-4 also provides
additional guidance on circumstances that may indicate that a transaction is not
orderly and on defining major categories of debt and equity securities in
meeting the disclosure requirements of SFAS 157. FSP 157-4 is effective for
reporting periods ending after June 15, 2009. Plan management is currently
evaluating the effect that the provisions of FSP 157-4 will have on the Plan’s
financial statements.
Administrative
Costs
The
Company pays all administrative costs of the Plan.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
that affect the amounts reported in the financial statements and accompanying
notes and supplemental schedule. Actual results could differ from those
estimates and the differences could be significant.
3.
Investments
During
2008 and 2007, the Plan’s investments (including investments purchased, sold,
and held during the year) appreciated (depreciated) in fair value as determined
by SunTrust Bank (the Trustee):
|
|
December
31
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Mutual
funds (quoted market prices)
|
|
$ |
(6,041,755 |
) |
|
$ |
(1,741,644 |
) |
Aaron’s,
Inc. common stock (quoted market price)
|
|
|
1,917,919 |
|
|
|
(2,507,666 |
) |
Common
trust fund (quoted redemption price)
|
|
|
115,114 |
|
|
|
157,401 |
|
|
|
$ |
(4,008,722 |
) |
|
$ |
(4,091,909 |
) |
Investments
that represent 5% or more of the value of the Plan’s net assets are as
follows:
|
|
December
31
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Aaron’s,
Inc. Common Stock Fund
|
|
$ |
6,552,430 |
|
|
$ |
5,047,797 |
|
SunTrust
Bank:
|
|
|
|
|
|
|
|
|
Ridgeworth
International Equity Fund
|
|
|
864,249 |
* |
|
|
1,700,381 |
|
Alliance
Bernstein Balanced Fund Shares A
|
|
|
1,861,542 |
|
|
|
2,674,106 |
|
Ridgeworth
Large Cap Growth Fund
|
|
|
1,466,511 |
|
|
|
2,521,225 |
|
SunTrust
Retirement Stable Asset Fund B
|
|
|
3,751,047 |
|
|
|
3,538,707 |
|
Ridgeworth
Large Cap Value Fund
|
|
|
2,810,227 |
|
|
|
4,476,384 |
|
Ridgeworth
Small Cap Value Fund
|
|
|
1,527,612 |
|
|
|
2,461,104 |
|
Franklin
Small-Mid Cap Growth Fund
|
|
|
984,339 |
* |
|
|
1,769,548 |
|
Ridgeworth
US Government Securities Fund
|
|
|
1,437,660 |
|
|
|
1,024,785 |
* |
|
*Investment
was less than 5% of net assets.
|
4.
Income Tax Status
The Plan
has received a determination letter from the Internal Revenue Service dated
August 28, 2003, stating that the Plan is qualified under Section 401(a) of
the Code and, therefore, the related trust is exempt from taxation. Subsequent
to this determination by the Internal Revenue Service, the Plan was amended and
restated. The Plan sponsor has indicated that it will take the necessary steps,
if any, to bring the Plan’s operations into compliance with the
Code.
5.
Transactions With Parties in Interest
Certain
Plan investments are shares of funds managed by SunTrust Bank. SunTrust Bank is
the Plan’s Trustee and, therefore, these transactions qualify as
party-in-interest transactions.
The Plan
held 245,504 and 262,358 shares of Aaron’s, Inc. Common Stock valued at
$6,552,430 and $5,047,797 at December 31, 2008 and 2007, respectively. The Plan
received $16,866 and $15,645 in dividends from Aaron’s, Inc. Common Stock in
2008 and 2007, respectively.
6.
Risks and Uncertainties
The Plan
invests in various investment securities. Investment securities are exposed to
various risks, such as interest rate, market, and credit risks. Due to the level
of risk associated with certain investment securities, it is at least reasonably
possible that changes in the values of investment securities will occur in the
near term and that such changes could materially affect participants’ account
balances and the amounts reported in the statements of net assets available for
benefits.
Supplemental
Schedule
Aaron
Rents, Inc.
Employees
Retirement Plan and Trust
EIN
#58-0687630 Plan #001
Schedule
H Line 4i – Schedule of Assets
(Held at
End of Year)
December
31, 2008
(a)
|
|
(b)
Identity
of Issue, Borrower, Lessor, or Similar Party
|
(c)
Description
of Investment
|
|
(e)
Current
Value
|
|
|
|
|
|
|
|
|
|
*
|
|
Aaron’s,
Inc.
|
Aaron’s,
Inc. Common Stock Fund
|
|
$ |
6,552,430 |
|
|
*
|
|
SunTrust
Bank
|
Goldman
Sachs Mid Cap Value Fund
|
|
|
409,458 |
|
|
*
|
|
SunTrust
Bank
|
MFS
Research International R3 Fund
|
|
|
2,034 |
|
|
*
|
|
SunTrust
Bank
|
Franklin
Small-Mid Cap Growth Fund
|
|
|
984,339 |
|
|
*
|
|
SunTrust
Bank
|
T.
Rowe Price Retirement Income Fund - R
|
|
|
275 |
|
|
*
|
|
SunTrust
Bank
|
Ridgeworth
Large Cap Growth Fund
|
|
|
1,466,511 |
|
|
*
|
|
SunTrust
Bank
|
Ridgeworth
US Government Securities Fund
|
|
|
1,437,660 |
|
|
*
|
|
SunTrust
Bank
|
Ridgeworth
International Equity Fund
|
|
|
864,249 |
|
|
*
|
|
SunTrust
Bank
|
SunTrust
Retirement Stable Asset Fund B
|
|
|
3,751,047 |
|
|
*
|
|
SunTrust
Bank
|
Ridgeworth
Small Cap Value Fund
|
|
|
1,527,612 |
|
|
*
|
|
SunTrust
Bank
|
Ridgeworth
Large Cap Value Fund
|
|
|
2,810,227 |
|
|
*
|
|
SunTrust
Bank
|
Alliance
Bernstein Balanced Fund Shares A
|
|
|
1,861,542 |
|
|
|
|
|
|
|
$ |
21,667,384 |
|
*Party in
Interest
Note:
Cost information has not been included in column (d) because all investments are
participant directed.
Pursuant
to the requirements of the Securities Exchange Act of 1934, the trustees (or
other persons who administer the employee benefit plan) have duly caused this
annual report to be signed on its behalf by the undersigned hereunto duly
authorized.
|
|
|
|
|
|
|
|
|
|
Aaron
Rents, Inc. Employees Retirement Plan and Trust
(Name
of Plan)
|
|
|
|
|
|
|
|
|
|
Date
June 29, 2009
|
|
/s/ JAMES
L. CATES
|
|
|
|
Name:
James L. Cates
Title:
Chairman Employee Benefits Committee
|
|
EXHIBIT
INDEX
Exhibit
|
|
Description
|
|
Page
|
|
|
|
|
|
23
|
|
Consent
of Ernst & Young LLP
|
|
13
|