11-K Retirement Plan and Trust 2014
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
|
| |
ý |
Annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934 |
|
| |
|
For the fiscal year ended December 31, 2014 |
|
| |
¨ |
Transition report pursuant to Section 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to .
Commission file number 1-13941
A. Full title of the plan and the address of the plan, if different from that of the issuer named below:
Aaron’s, Inc. Employees Retirement Plan and Trust
B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
Aaron’s, Inc.
309 E. Paces Ferry Road, N.E.
Atlanta, GA 30305-2377
Aaron’s, Inc. Employees Retirement Plan and Trust
Audited Financial Statements and Supplemental Schedules
Years Ended December 31, 2014 and 2013
Contents |
| |
| |
Report of Independent Registered Public Accounting Firm | |
| |
Audited Financial Statements | |
| |
Statements of Net Assets Available for Benefits | |
| |
Statements of Changes in Net Assets Available for Benefits | |
| |
Notes to Financial Statements | |
| |
Supplemental Schedules | |
| |
Schedule H, Line 4a - Schedule of Delinquent Participant Contributions | |
| |
Schedule H, Line 4i - Schedule of Assets (Held At End of Year) | |
| |
Exhibit | |
| |
Exhibit Index | |
| |
Exhibit 23.1 Consent of Independent Registered Public Accounting Firm | 16 |
| |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Employee Benefits Committee
Aaron’s, Inc. Employees Retirement Plan and Trust
We have audited the accompanying statements of net assets available for benefits of the Aaron’s, Inc. Employees Retirement Plan and Trust (the Plan) as of December 31, 2014 and 2013, 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. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit 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 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, 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 net assets available for benefits of the Plan as of December 31, 2014 and 2013, and the changes in net assets available for benefits for the years then ended, in conformity with accounting principles generally accepted in the United States.
The supplemental information in the accompanying schedule H, line 4i - schedule of assets (held at end of year) as of December 31, 2014 and schedule H, line 4a - schedule of delinquent participant contributions for the year then ended has been subjected to audit procedures performed in conjunction with the audit of the Plan’s financial statements. The supplemental information is presented for the purpose 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 information is the responsibility of the Plan’s management. Our audit procedures included determining whether the supplemental information reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental information. In forming our opinion on the supplemental information in the accompanying schedules, we evaluated
whether the supplemental information, including its form and content, is presented in conformity with the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the supplemental information in the accompanying schedules is fairly stated in all material respects in relation to the financial statements as a whole.
/s/ Windham Brannon, P.C.
Atlanta, Georgia
June 26, 2015
Aaron’s, Inc. Employees Retirement Plan and Trust
Statements of Net Assets Available for Benefits
|
| | | | | | |
| December 31, |
| 2014 | 2013 |
Assets | | |
Investments, at Fair Value: | | |
Mutual Funds | $ | 47,671,440 |
| $ | 37,839,259 |
|
Common Stock | 8,701,015 |
| 8,628,153 |
|
Total Investments | 56,372,455 |
| 46,467,412 |
|
| | |
Receivables: | | |
Participant Contributions | 22,068 |
| 246,722 |
|
Employer Contributions | 12,139 |
| 133,323 |
|
Notes Receivable From Participants | 2,367,526 |
| 1,720,009 |
|
Total Receivables | 2,401,733 |
| 2,100,054 |
|
| | |
Net Assets Available for Benefits | $ | 58,774,188 |
| $ | 48,567,466 |
|
See accompanying notes to the financial statements.
Aaron’s, Inc. Employees Retirement Plan and Trust
Statements of Changes in Net Assets Available for Benefits
|
| | | | | | |
| Year Ended December 31, |
| 2014 | 2013 |
Additions: | | |
Investment Income: | | |
Net Appreciation in Fair Value of Mutual Funds | $ | 351,757 |
| $ | 4,368,731 |
|
Net Appreciation in Fair Value of Common Stock | 355,300 |
| 333,142 |
|
Interest and Dividends on Mutual Funds | 2,291,689 |
| 1,799,656 |
|
Dividends on Common Stock | 24,387 |
| 20,741 |
|
Total Investment Income | 3,023,133 |
| 6,522,270 |
|
| | |
Interest Income on Notes Receivable from Participants | 80,959 |
| 40,144 |
|
| | |
Contributions: | | |
Employer, Net of Forfeitures | 4,046,055 |
| 3,243,609 |
|
Participants | 7,261,201 |
| 5,731,218 |
|
Rollovers | 1,233,208 |
| 987,812 |
|
Total Contributions | 12,540,464 |
| 9,962,639 |
|
| | |
Total Additions | 15,644,556 |
| 16,525,053 |
|
| | |
Deductions: | | |
Benefits Paid to Participants | 5,424,215 |
| 4,140,807 |
|
Administrative Expenses | 13,619 |
| 3,512 |
|
Total Deductions | 5,437,834 |
| 4,144,319 |
|
| | |
Net Increase | 10,206,722 |
| 12,380,734 |
|
| | |
Net Assets Available for Benefits: | | |
Beginning of Year | 48,567,466 |
| 36,186,732 |
|
End of Year | $ | 58,774,188 |
| $ | 48,567,466 |
|
See accompanying notes to the financial statements.
Aaron’s, Inc. Employees Retirement Plan and Trust
Notes to Financial Statements
December 31, 2014 and 2013
1. Description of the Plan
The following description of the Aaron’s, Inc. Employees Retirement Plan and Trust (the "Plan") is provided for general information purposes only. More complete information regarding the Plan may be found in the Plan document, which is available to all participants upon request.
General
The Plan is a defined contribution plan covering all employees of Aaron’s, Inc. (the "Company"). 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.
Contributions
Participation in the Plan is voluntary and participants may make before-tax, Roth and/or after-tax contributions up to 100% of their annual compensation, as defined in the Plan document, in the form of a salary deferral, pursuant to Section 401(k) of the Internal Revenue Code (the "Code"). Participants who have attained age 50 before the end of the Plan year are eligible to make catch-up contributions, up to a maximum of $5,500 in 2014. The Company matches, after one year of service and 1,000 hours of service, 100% of the first 3% and 50% of the next 2% of the elective salary deferral of annual compensation that a participant contributes to the Plan.
Participant Accounts
Individual accounts are maintained for each participant. Participants direct their contributions into various investment options offered by the Plan and can change their options on a daily basis. The Company currently offers nineteen mutual funds and the Company’s common stock via the Aaron’s, Inc. Common Stock Fund, as investment options for participants. Each participant’s account is credited with the participant’s contribution, rollovers, the Company’s contribution and earnings on the investments in their accounts and charged with specific transaction fees. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.
Vesting
Participants are immediately vested in their contributions and earnings thereon. Effective January 1, 2013 the Plan was amended to allow for immediate vesting of the Company's matching contributions and earnings thereon made on or after January 1, 2013. Company matching contributions made prior to January 1, 2013 continue to vest at the prior vesting schedule rates of 20% after two years of service and 20% per year thereafter until the participant is fully vested.
Forfeitures
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. For the years ended December 31, 2014 and 2013, the Company elected to reduce its matching contribution by forfeitures of $28,664 and $93,172, respectively. Unallocated forfeiture account balances totaled $13,870 and $1,589 as of December 31, 2014 and 2013, respectively.
Notes Receivable from Participants
Participants may borrow from their vested balances in the Plan, subject to certain restrictions and limitations set forth in the Plan document and the Code. Loan terms can range from one to five years, or 15 years if used for the purchase of a residence. Maturities at December 31, 2014 ranged from one to five years. The loans are secured by the vested balance in the participant's account and bear interest at the Prime Rate plus 1%. The interest rate on outstanding loans for the years ended December 31, 2014 and 2013 was 4.25%. Principal and interest are paid ratably through weekly or semi-monthly payroll deductions.
Payment of Benefits
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.
In-service withdrawals are available in certain limited circumstances, as defined by the Plan. Hardship withdrawals are allowed for participants incurring an immediate and heavy financial need, as defined by the Plan. Hardship withdrawals are strictly regulated by the Internal Revenue Service (IRS) and all requirements must be met before requesting a hardship withdrawal.
Expenses
Certain expenses of maintaining the Plan are paid directly by the Company and are excluded from the financial statements. Fees related to the administration of notes receivable from participants and distributions are charged directly to the participant's account and are included in administrative expenses. Investment related expenses are included in the net appreciation in fair value of investments. Many of the investment funds provide for a revenue sharing arrangement with the Plan in which fund expenses are credited to the Plan to pay for certain administrative expenses, such as record keeping and investment advisory fees.
Company Stock Fund
The Plan invests in common stock of the Company through its Company Stock Fund. The Company Stock Fund may also hold cash or other short-term securities, although these are expected to be a small percentage of the fund. Dividends received by the Company Stock Fund are reinvested in Company common stock.
The Plan limits the amount a participant can invest in the Company Stock Fund to encourage diversification of participants’ accounts. Each payroll period, a participant can direct up to a maximum of 25% of their contributions in the Company Stock Fund. No more than 25% of future contributions may be directed into the Company Stock Fund. In addition, a participant may not transfer amounts from other investment funds into the Company Stock Fund to the extent the transfer would result in more than 25% of the participant’s total account balance being invested in the Company Stock Fund.
Each participant is entitled to exercise voting rights attributable to the shares allocated to their account and is notified by the Company prior to the time that such rights may be exercised. The trustee is not permitted to vote any allocated shares for which instructions have not been given by a participant. The trustee votes any unallocated shares in the same proportion as those shares that were allocated, unless the Committee directs the trustee otherwise. Participants also have the opportunity to direct the trustee whether they wish to participate in a tender or exchange offer.
Plan Termination
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.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Valuation of Investments
Investments are stated at fair value. 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 (an exit price). Refer to Note 4 for further discussion of fair value measurements.
Purchases and sales of common stock are recorded on a trade-date basis. Interest income is recorded as earned. Dividends on common stock 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.
Notes Receivable from Participants
Notes receivable from participants are measured at their unpaid principal balance. Interest income on notes receivable from participants is recorded when it is received. No allowance for credit losses has been recorded as of December 31, 2014 and 2013. If a participant ceases to make loan repayments and the plan administrator deems the participant loan to be in default, the participant loan balance is reduced and a benefit payment is recorded.
Payment of Benefits
Benefits are recorded when paid.
3. Investments
Investments that represent 5% or more of the value of the Plan’s net assets are as follows:
|
| | | | | | |
| December 31, |
| 2014 | 2013 |
| | |
Aaron’s, Inc. Common Stock Fund | $ | 8,701,015 |
| $ | 8,628,153 |
|
Wells Fargo Adv Prem Large Co Growth A | 6,616,721 |
| 5,153,079 |
|
Goldman Sachs Mid Cap Value A | 3,307,852 |
| 2,438,847 |
|
Goldman Sachs Growth Opportunities A | 5,006,303 |
| 3,863,323 |
|
MFS Research International R3 Fund | 3,122,574 |
| 2,665,522 |
|
SunTrust Bank FDIC Insured Account | 5,049,090 |
| 5,118,560 |
|
J P Morgan Equity Income A 1 | 6,864,209 |
| — |
|
Vanguard Small Cap Index Fund - Admiral 1 | 5,457,801 |
| — |
|
Vanguard Target Retirement Income Inv 1 | 5,629,307 |
| — |
|
RidgeWorth Large Cap Value Equity I 2 | — |
| 6,193,471 |
|
RidgeWorth Small Cap Value Equity I 2 | — |
| 5,061,410 |
|
T. Rowe Price Retirement Income Fund – R 2 | — |
| 4,241,240 |
|
| |
1 | Investment option added to the Plan during the year. |
| |
2 | Investment option removed from the Plan during the year. |
4. Fair Value Measurements
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 (i.e., an exit price). The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
Level 1 – Unadjusted quoted prices in active markets that are accessible to the reporting entity at the measurement date for identical assets and liabilities.
Level 2 – Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:
| |
• | quoted prices for similar assets and liabilities in active markets |
| |
• | quoted prices for identical or similar assets or liabilities in markets that are not active |
| |
• | observable inputs other than quoted prices that are used in the valuation of the asset or liability (e.g., interest rate and yield curve quotes at commonly quoted intervals) |
| |
• | inputs that are derived principally from or corroborated by observable market data by correlation or other means |
Level 3 – Unobservable inputs for the asset or liability (i.e., supported by little or no market activity). Level 3 inputs include management’s own assumption about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).
The level in the fair value hierarchy within which the fair value measurement is classified is determined based on the lowest level input that is significant to the fair value measure in its entirety.
The following tables set forth by level, within the fair value hierarchy, the Plan’s assets carried at fair value.
|
| | | | | | | | | | | | |
| Assets at Fair Value as of December 31, 2014 |
| Level 1 | Level 2 | Level 3 | Total |
| | | | |
Company Stock | $ | 8,701,015 |
| $ | — |
| $ | — |
| $ | 8,701,015 |
|
Mutual Funds: | | | | |
U.S. Securities | 41,442,146 |
| — |
| — |
| 41,442,146 |
|
International Securities | 3,122,574 |
| — |
| — |
| 3,122,574 |
|
Bonds | 3,106,720 |
| — |
| — |
| 3,106,720 |
|
Total Assets at Fair Value | $ | 56,372,455 |
| $ | — |
| $ | — |
| $ | 56,372,455 |
|
|
| | | | | | | | | | | | |
| Assets at Fair Value as of December 31, 2013 |
| Level 1 | Level 2 | Level 3 | Total |
| | | | |
Company Stock | $ | 8,628,153 |
| $ | — |
| $ | — |
| $ | 8,628,153 |
|
Mutual Funds: | | | | |
U.S. Securities | 32,752,619 |
| — |
| — |
| 32,752,619 |
|
International Securities | 2,665,522 |
| — |
| — |
| 2,665,522 |
|
Bonds | 2,421,118 |
| — |
| — |
| 2,421,118 |
|
Total Assets at Fair Value | $ | 46,467,412 |
| $ | — |
| $ | — |
| $ | 46,467,412 |
|
5. Income Tax Status
The Plan has received a determination letter from the IRS dated September 28, 2011, stating that the Plan is qualified under Section 401(a) of the Code and, therefore, the related trust is exempt from taxation. Subsequent to the determination by the IRS, the Plan was amended. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualified status. The Plan administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes the Plan, as amended, is qualified and the related trust is tax-exempt.
U.S. generally accepted accounting principles require Plan management to evaluate uncertain tax positions taken by the Plan. The financial statement effects of a tax position are recognized when the position is more likely than not, based on the technical merits, to be sustained upon examination by the IRS. The Plan administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2014, there are no uncertain positions taken or expected to be taken. The Plan has recognized no interest or penalties related to uncertain tax positions. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The Plan administrator believes it is no longer subject to income tax examinations for years prior to 2011.
6. Transactions With Parties-in-Interest
The Plan’s investments in RidgeWorth Small Cap Value Equity I, RidgeWorth Large Cap Value Equity I and SunTrust Bank FDIC Insured Account, as well as the notes receivable from participants, are managed by SunTrust Bank. SunTrust Bank is the Plan’s Trustee and, therefore, these transactions qualify as party-in-interest transactions; however, they are exempt from the prohibited transactions rules under ERISA.
The Plan held 284,625 and 293,474 shares of Company common stock valued at $8,701,015 and $8,628,153 at December 31, 2014 and 2013, respectively. The Plan received $24,387 and $20,741 in common stock dividends from the Company in 2014 and 2013, respectively. These transactions also qualify as party-in-interest transactions; however, they are exempt from the prohibited transactions rules under ERISA.
7. Risks and Uncertainties
The Plan invests in various investment securities. Investment securities are exposed to various risks, such as interest rate, currency, 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.
8. Subsequent Event
Effective January 1, 2015, the Plan was amended to (1) change the definition of permanent and total disability; (2) add a statute of limitations and a forum selection provision relating to civil actions for benefits under the Plan; and (3) limit elective deferrals and non-tax-deductible voluntary contributions to 75% of annual compensation. These amendments will have no effect on the Plan’s net assets.
Aaron’s, Inc. Employees Retirement Plan and Trust
EIN #58-0687630 Plan #001
Schedule H, Line 4a - Schedule of Delinquent Participant Contributions
For the Year Ended December 31, 2014
|
| | | | | | | | |
Participant Contributions Transferred Late to Plan | Total that Constitute Nonexempt Prohibited Transactions | Total Fully Corrected Under VFCP and PTE 2002-51 |
Check here if Late Participant Loan Repayments are included: þ | Contributions Not Corrected | Contributions Corrected Outside VFCP | Contributions Pending Correction in VFCP |
$ | 16.10 |
| | $ | 16.10 |
| | |
| | | | |
Aaron’s, Inc. Employees Retirement Plan and Trust
Schedule H, Line 4i – Schedule of Assets
(Held at End of Year)
EIN #58-0687630 Plan #001
December 31, 2014
|
| | | | | |
(a) | (b) Identity of Issue, Borrower, Lessor, or Similar Party | (c) Description of Investment | (e) Current Value |
* | Aaron’s, Inc. Common Stock Fund | Common Stock | $ | 8,701,015 |
|
* | SunTrust Bank FDIC Insured Account | Mutual Fund | 5,049,090 |
|
| BlackRock Inflation Protection Bond A | Mutual Fund | 659,742 |
|
| Wells Fargo Adv Prem Large Co Growth A | Mutual Fund | 6,616,721 |
|
| Goldman Sachs Growth Opportunities A | Mutual Fund | 5,006,303 |
|
| Goldman Sachs Mid Cap Value A | Mutual Fund | 3,307,852 |
|
| MFS Research International R3 Fund | Mutual Fund | 3,122,574 |
|
| MFS Massachusetts Investors Tr R3 | Mutual Fund | 1,296,648 |
|
| J P Morgan Equity Income A | Mutual Fund | 6,864,209 |
|
| Federated Total Return Bond Svc | Mutual Fund | 2,446,980 |
|
| Vanguard Total Bond Market Index Admiral | Mutual Fund | 62,014 |
|
| Vanguard 500 Index Fund - Admiral | Mutual Fund | 942,693 |
|
| Vanguard Target Retirement 2050 Inv | Mutual Fund | 72,552 |
|
| Vanguard Target Retirement 2040 Inv | Mutual Fund | 67,806 |
|
| Vanguard Mid Cap Index Adm | Mutual Fund | 526,134 |
|
| Vanguard Small Cap Index Fund - Admiral | Mutual Fund | 5,457,801 |
|
| Vanguard Target Retirement 2030 Inv | Mutual Fund | 476,728 |
|
| Vanguard Target Retirement Income Inv | Mutual Fund | 5,629,307 |
|
| Vanguard Target Retirement 2020 Inv | Mutual Fund | 48,770 |
|
| Vanguard Target Retirement 2015 Inv | Mutual Fund | 3,646 |
|
* | Participant loans | Interest rates were 4.25% | 2,367,526 |
|
| | | $ | 58,726,111 |
|
| |
Note: | Cost information has not been included in column (d) because all investments are participant directed. |
SIGNATURES
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’s, Inc. Employees Retirement Plan and Trust |
|
| | | |
Date: | June 26, 2015 |
| /s/ James L. Cates |
| | | Name: James L. Cates Title: Chairman Employee Benefits Committee |
EXHIBIT INDEX
|
| | | | |
Exhibit | | Description | | Page |
23.1 | | Consent of Windham Brannon, P.C. | | 16 |