ATLANTA, July 29, 2016
/PRNewswire/ --
- Total Revenues $789.4
Million
- Net Earnings $38.5 Million;
Diluted EPS $.53
- Non-GAAP Diluted EPS $.59
- Progressive Revenues Up 17%; Active Doors Up 19%
- Updates 2016 Outlook
Aaron's, Inc. (NYSE: AAN), a leader in the sales and lease
ownership and specialty retailing of furniture, consumer
electronics, home appliances and accessories, today announced
financial results for the three and six month periods ended
June 30, 2016.
For the second quarter of 2016, revenues increased 2.6% to
$789.4 million compared with
$769.0 million for the second quarter
of 2015. Net earnings decreased 5.0% to $38.5 million compared with $40.5 million in the prior year period. Diluted
earnings per share were $.53 compared
with $.56 per share a year ago.
Non-GAAP diluted EPS were $.59
compared with $.61 last year. The
results for the second quarter ended June 30, 2016 include the
effects of a $2.3 million loss before
income taxes at the Company's Dent-A-Med ("DAMI") segment, which
was acquired in October 2015.
"We are pleased with our overall quarterly results and the
progress we are making on our strategic objectives. Revenues
increased, as compared to the second quarter of 2015, fueled by
strong growth at Progressive," said John
Robinson, President and Chief Executive Officer of Aaron's.
"We achieved solid margins in the quarter, underscoring our
commitment to profitably grow our business."
"Progressive had an exceptional quarter," continued Mr.
Robinson. "Invoice volume and door growth each increased at double
digit rates, and the EBITDA margin reached 14%, aided by strong
lease portfolio performance. The team is executing well across all
aspects of the business, and we believe the acceleration in door
growth is a positive indicator of future revenue."
"A soft demand environment for the core business continued to
impact lease activity, which was below our expectations," said Mr.
Robinson. "In light of the core results, we're taking steps to
further address our expense structure, including a thorough review
of our store base. We are encouraged by stabilizing trends in
comparable store revenues and merchandise write offs over the last
few quarters. During the quarter, we also completed the sale of the
assets of HomeSmart, which will enable us to sharpen our focus on
the performance of our Aaron's store business."
"Our balance sheet remains strong. We ended the quarter with
$242 million in available cash and
net debt to capitalization of approximately 13%, which leaves us
well positioned to invest in future growth and increase shareholder
value," Mr. Robinson concluded.
Financial Summary
During the first six months of 2016, revenues increased 3.3% to
$1.644 billion compared with
$1.591 billion for the prior year
period. Net earnings were $88.2
million versus $89.8 million
last year. Diluted earnings per share were $1.20 compared with $1.23 per share a year ago. The results for the
six months ended June 30, 2016 include the effects of a
$5.2 million loss before income taxes
at our DAMI segment. The effective tax rate for the comparable
quarters ending on June 30 was 37.0%
in both periods.
On a non-GAAP basis, net earnings for the first six months of
2016 were $95.3 million compared with
$98.1 million for the same period in
2015 and diluted earnings per share were $1.30 compared with $1.35 in 2015. Non-GAAP net earnings and diluted
earnings per share in 2016 exclude the effects of amortization
expense resulting from the 2014 acquisition of Progressive, a gain
on the sale of the Company's headquarters building, retirement and
severance charges and loss resulting from the Company's previously
announced disposition of the assets of its HomeSmart business. In
2015, non-GAAP results exclude the effects of Progressive
amortization. See "Use of Non-GAAP Financial Information" and the
related non-GAAP reconciliation accompanying this press
release.
Adjusted EBITDA for the Company, which excludes the
aforementioned other charges and adjustments, was $192.2 million for the six months ended
June 30, 2016 compared with $193.5
million for the same period in 2015. Adjusted EBITDA is a
non-GAAP measure that is calculated as the Company's earnings
before interest, depreciation on property, plant and equipment,
amortization of intangible assets, income taxes and other charges
and adjustments.
Core Results
For the second quarter of 2016, overall revenues for the core
business decreased 5.4% to $485.5
million from $513.1 million in
the second quarter of 2015. Revenues for the first six months of
2016 decreased 5.1% to $1.028 billion
compared with $1.083 billion for the
same period a year ago. The core business is our traditional
lease-to-own store-based business, and represents all of the
operations of Aaron's, Inc., excluding Progressive and DAMI.
On May 13, 2016, the Company
completed the sale of the assets of its HomeSmart division.
Revenues for the HomeSmart business through May 13, 2016 were $7.5
million for the second quarter and $25.4 million for the year-to-date period through
May 13, 2016, compared with
$15.5 million and $32.3 million, respectively, for the three and
six months ended June 30, 2015. Additionally, the Company
recognized charges in connection with the sale totaling
$5.6 million, of which $1.0 million were recognized during the second
quarter. The charges recognized during the quarter primarily
related to the write-down to fair value of certain HomeSmart assets
that were not included in the May
13th disposition, but that are expected to be sold in the
near future.
Revenues of the Aaron's Sales & Lease Ownership division
decreased 4.1% in the second quarter of 2016 to $476.2 million compared with $496.7 million in the second quarter of 2015.
This decline was driven by a 1.7% decrease in store revenues and a
15.1% decline in non-retail sales. Non-retail sales are primarily
sales of merchandise to Aaron's Sales & Lease Ownership
franchisees.
Earnings before income taxes for the core business were
$34.3 million and $95.0 million for the three and six months ended
June 30, 2016, respectively, compared with $41.0 million and $103.0
million for the same periods a year ago. Adjusted EBITDA for
the core business in the three and six months ended June 30,
2016 was $47.5 million and
$118.4 million, respectively,
compared with $53.8 million and
$129.2 million for the same periods a
year ago. As a percentage of revenues, Adjusted EBITDA was 9.8% and
11.5% for the three and six months ended June 30, 2016,
respectively, compared with 10.5% and 11.9% for the same periods in
2015. Write offs for damaged, lost or unsaleable merchandise were
3.7% of revenues in the quarter compared to 3.6% in the year ago
period.
Same store revenues (revenues earned in Company-operated stores
open for the entirety of both quarters) decreased 1.2% during the
second quarter of 2016, compared with the second quarter of 2015,
and customer count on a same store basis was down 0.6%.
Company-operated Aaron's stores had 1,004,000 customers at
June 30, 2016, a 1.1% decline from
the end of the second quarter a year ago, excluding Homesmart
customers for both periods.
Progressive Results
Progressive's revenues in the second quarter of 2016 increased
16.7% to $298.6 million from
$255.9 million in the second quarter
of 2015. Progressive's revenues for the first six months of 2016
increased 19.2% to $605.2 million
from $507.6 million for the same
period of 2015. Invoice volume per active door declined 3.6% as the
segment experienced a 19% increase in the number of active doors in
the quarter to 13,930, up from 11,749 last year. Progressive had
526,000 customers at June 30, 2016, an 11% increase from the
second quarter a year ago.
Earnings before income taxes for the Progressive business were
$29.1 million and $51.0 million for the three and six months ended
June 30, 2016, respectively, compared with $23.3 million and $39.1
million for the same periods a year ago. EBITDA for the
second quarter and first six months of 2016 were $41.8 million and $76.5
million, respectively, compared with $36.0 million and $64.3
million, for the same periods of 2015. As a percentage of
revenues, EBITDA was 14.0% and 12.6%, respectively, for the second
quarter and first six months of 2016 compared with 14.0% and 12.7%
for the same periods in 2015. Write offs for damaged, lost or
unsaleable merchandise were 4.5% of revenues in the second quarter
compared to 6.1% in the same period of 2015.
DAMI Results
Revenues for DAMI were $5.3
million in the second quarter of 2016 and $10.1 million for the first six months of 2016.
DAMI's loss before income taxes was $2.3
million for the quarter and $5.2
million for the six months ending June 30, 2016, in
line with our expectations. Its pre-tax, pre-provision loss was
$773,000 in the quarter and
$2.0 million for the first six months
of the year. Pre-tax, pre-provision loss is a non-GAAP measure that
represents loss before income taxes adjusted so that loan
charge-offs and recoveries are recognized in earnings as they occur
by excluding the effect on earnings of changes to management's
provision for estimated future loan losses. See "Use of Non-GAAP
Financial Information" and the related non-GAAP reconciliation
accompanying this press release for more information regarding the
calculation of pre-tax, pre-provision loss.
Significant Components of Revenue
Consolidated lease revenues and fees for the second quarter and
first six months of 2016 increased 4.3% and 5.5%, respectively,
over the same prior year periods. In addition, franchise royalties
and fees decreased 4.6% in the second quarter of 2016 and 4.4% for
the first six months of 2016 compared to the same periods a year
ago. The decrease in the Company's franchise royalties and fees are
the result of a decrease in revenues of the Company's franchisees,
which collectively had revenues of $228.1
million during the second quarter and $477.8 million during the first six months of
2016, a decrease of 3.8% and 4.0%, respectively, from the same
periods last year. Same store revenues for franchised stores were
up 0.4% and same store customer counts were up 1.4% for the second
quarter of 2016 compared with the same quarter last year.
Franchised stores had 560,000 customers at the end of the second
quarter of 2016, a 3.3% decline from a year ago (revenues and
customers of franchisees are not revenues and customers of Aaron's,
Inc.). Non-retail sales, which are primarily sales of merchandise
to Aaron's Sales & Lease Ownership franchisees, decreased 14.0%
for the second quarter and decreased 15.8% for the first six months
of 2016 compared with the prior-year periods.
Store Count
During the second quarter of 2016, three Company-operated
Aaron's Sales & Lease Ownership stores, five franchised Aaron's
Sales & Lease Ownership stores and one franchised HomeSmart
store were consolidated or closed. The Company acquired one
franchised store and sold 82 Company-operated HomeSmart stores.
At June 30, 2016, the Company had 1,221 Company-operated
Aaron's Sales & Lease Ownership stores, 721 franchised Aaron's
Sales & Lease Ownership stores, and one remaining franchised
HomeSmart store. The total number of stores open at June 30,
2016 was 1,943.
2016 Outlook Update
The Company is updating its outlook for the 2016 year to reflect
the sale of the assets of HomeSmart and current trends in the
business. The Company currently expects to achieve the
following:
Core Business
- Total revenues of approximately $1.95
billion to $2.05 billion compared with the previous outlook
of $2.05 billion to $2.15
billion;
- Lease revenues for 2016 in the range of $1.50 billion to $1.60 billion compared with the
previous outlook of $1.55 billion to $1.65
billion;
- Quarterly same store revenues of approximately negative 3% to
flat for the remainder of 2016;
- Adjusted EBITDA in the range of $195
million to $215 million compared with the previous outlook
of $210 million to $230 million;
Progressive
- EBITDA in the range of $135 million to
$145 million compared with the previous outlook of
$125 million to $135 million;
Consolidated Results
- Revenues for 2016 in the range of $3.15
billion to $3.35 billion compared with the previous outlook
of $3.25 billion to $3.45 billion,
excluding revenues of franchisees;
- Adjusted EBITDA in the range of $325
million to $355 million compared with the previous outlook
of $330 million to $360 million;
- GAAP diluted earnings per share in the range of $1.92 to $2.12 compared with the previous outlook
of $2.03 to $2.23; and
- Non-GAAP diluted earnings per share in the range of
$2.13 to $2.33 compared with the
previous outlook of $2.20 to
$2.40.
The above outlook does not include the impact of any store
consolidations or closures resulting from the review of our store
base.
Conference Call and Webcast
Aaron's will hold a conference call to discuss its quarterly
financial results on Friday, July 29, 2016, at 8:30 a.m. Eastern Time. The public is invited to
listen to the conference call by webcast accessible through the
Company's Investor Relations website, investor.aarons.com. The
webcast will be archived for playback at that same site.
About Aaron's, Inc.
Headquartered in Atlanta,
Aaron's, Inc. (NYSE: AAN) is a leader in the sales and lease
ownership and specialty retailing of furniture, consumer
electronics, home appliances and accessories, and currently has
more than 1,940 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 17,000 retail locations in 46 states. Dent-A-Med,
Inc. (DAMI), d/b/a the HELPcard®, provides a variety of second-look
credit products that are originated through a federally insured
bank. Aaron's was founded in 1955, has been publicly traded
since 1982 and owns the Aarons.com, ProgLeasing.com, and
HELPcard.com brands. For more information, visit
www.aarons.com.
"Safe Harbor" Statement under the Private Securities
Litigation Reform Act of 1995: Statements in this news release
regarding Aaron's, Inc.'s business that are not historical facts
are "forward-looking statements" that involve risks and
uncertainties which could cause actual results to differ materially
from those contained in the forward-looking statements. Such
forward-looking statements generally can be identified by the use
of forward-looking terminology, such as "may," "expect,"
"expectations," "forecast," "guidance," "intend," "believe,"
"could," "project," "estimate," "anticipate," "should" and similar
terminology. These risks and uncertainties include factors such as
changes in general economic conditions, competition, pricing, legal
and regulatory proceedings, customer privacy, information security,
customer demand, the integration of the Dent-A-Med
acquisition, the execution and results of our new strategy
and expense reduction initiatives, risks related to Progressive's
"virtual" lease-to-own business, the outcome of Progressive's pilot
or test programs with various retailers, and the other risks and
uncertainties discussed under "Risk Factors" in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2015 as updated in its Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31, 2016. Statements in this release that
are "forward-looking" include without limitation: Aaron's projected
results (including Progressive's results) for future periods, the
statements in this press release under the heading 2016 Outlook
Update, statements on cash flow, cost and leverage reductions
and strategic initiatives, expectations regarding our ability to
invest in future growth, and expectations regarding shareholder
value. You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this
press release. Except as required by law, the Company undertakes no
obligation to update these forward-looking statements to reflect
subsequent events or circumstances after the date of this press
release.
Aaron's, Inc. and
Subsidiaries
|
Consolidated
Statements of Earnings
|
(In thousands,
except per share amounts)
|
|
|
|
|
|
|
(Unaudited)
Three Months Ended
|
(Unaudited)
Six Months Ended
|
|
|
June 30,
|
June 30,
|
|
|
2016
|
2015
|
2016
|
2015
|
Revenues:
|
|
|
|
|
|
Lease Revenues and
Fees
|
|
$
|
688,677
|
|
$
|
660,472
|
|
$
|
1,430,288
|
|
$
|
1,355,754
|
|
Retail
Sales
|
|
6,460
|
|
7,073
|
|
17,415
|
|
19,067
|
|
Non-Retail
Sales
|
|
72,610
|
|
84,449
|
|
151,915
|
|
180,486
|
|
Franchise Royalties
and Fees
|
|
14,772
|
|
15,491
|
|
31,067
|
|
32,495
|
|
Interest and Fees on
Loans Receivable
|
|
5,302
|
|
—
|
|
10,065
|
|
—
|
|
Other
|
|
1,532
|
|
1,564
|
|
3,030
|
|
3,061
|
|
Total
|
|
789,353
|
|
769,049
|
|
1,643,780
|
|
1,590,863
|
|
|
|
|
|
|
|
Costs and
Expenses:
|
|
|
|
|
|
Depreciation of Lease
Merchandise
|
|
321,969
|
|
294,362
|
|
670,271
|
|
610,348
|
|
Retail Cost of
Sales
|
|
3,892
|
|
4,849
|
|
10,957
|
|
12,553
|
|
Non-Retail Cost of
Sales
|
|
63,984
|
|
76,463
|
|
135,369
|
|
163,315
|
|
Operating
Expenses
|
|
330,601
|
|
325,555
|
|
679,025
|
|
653,475
|
|
Other Operating
Expense (Income), Net
|
|
755
|
|
277
|
|
(5,974)
|
|
(1,183)
|
|
Total
|
|
721,201
|
|
701,506
|
|
1,489,648
|
|
1,438,508
|
|
|
|
|
|
|
|
Operating
Profit
|
|
68,152
|
|
67,543
|
|
154,132
|
|
152,355
|
|
Interest
Income
|
|
507
|
|
792
|
|
928
|
|
1,231
|
|
Interest
Expense
|
|
(5,904)
|
|
(5,622)
|
|
(12,216)
|
|
(11,591)
|
|
Other Non-Operating
(Expense) Income, Net
|
|
(1,631)
|
|
1,641
|
|
(1,992)
|
|
189
|
|
Earnings Before
Income Taxes
|
|
61,124
|
|
64,354
|
|
140,852
|
|
142,184
|
|
|
|
|
|
|
|
Income
Taxes
|
|
22,623
|
|
23,808
|
|
52,664
|
|
52,395
|
|
|
|
|
|
|
|
Net
Earnings
|
|
$
|
38,501
|
|
$
|
40,546
|
|
$
|
88,188
|
|
$
|
89,789
|
|
|
|
|
|
|
|
Earnings Per
Share
|
|
$
|
.53
|
|
$
|
.56
|
|
$
|
1.21
|
|
$
|
1.24
|
|
Earnings Per Share
Assuming Dilution
|
|
$
|
.53
|
|
$
|
.56
|
|
$
|
1.20
|
|
$
|
1.23
|
|
|
|
|
|
|
|
Weighted Average
Shares Outstanding
|
|
72,761
|
|
72,572
|
|
72,697
|
|
72,544
|
|
Weighted Average
Shares Outstanding
Assuming Dilution
|
|
73,279
|
|
72,965
|
|
73,248
|
|
72,910
|
|
Selected Balance
Sheet Data
(In thousands)
|
|
|
|
|
|
(Unaudited)
|
|
|
|
June 30,
2016
|
|
December 31, 2015
1
|
|
|
|
|
|
|
|
Cash and Cash
Equivalents
|
|
$
|
242,239
|
|
|
$
|
14,942
|
|
|
Investments
|
|
20,863
|
|
|
22,226
|
|
|
Accounts Receivable,
Net
|
|
84,091
|
|
|
113,439
|
|
|
Loans Receivable,
Net
|
|
83,260
|
|
|
85,795
|
|
|
Lease Merchandise,
Net
|
|
1,027,635
|
|
|
1,138,938
|
|
|
Property, Plant and
Equipment, Net
|
|
214,623
|
|
|
225,836
|
|
|
Other Assets,
Net
|
|
868,736
|
|
|
1,053,995
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
2,541,447
|
|
|
2,655,171
|
|
|
|
|
|
|
|
|
Debt
|
|
493,507
|
|
|
606,746
|
|
|
Total
Liabilities
|
|
1,081,799
|
|
|
1,288,553
|
|
|
|
|
|
|
|
|
Shareholders'
Equity
|
|
$
|
1,459,648
|
|
|
$
|
1,366,618
|
|
|
|
1 $3.7
million of capitalized deferred debt issuance costs were
reclassified from Other Assets, Net to be a deduction from Debt as
of December 31, 2015 to conform with the current period
presentation upon adoption of ASU 2015-03, Simplifying the
Presentation of Debt Issuance Costs in the first quarter of
2016.
|
Selected Cash Flow
Data
|
(In
thousands)
|
|
|
|
|
|
(Unaudited)
Six Months Ended
|
|
|
June 30,
|
|
|
2016
|
|
2015
|
|
|
|
|
|
Cash Provided by
Operating Activities
|
|
324,339
|
|
|
219,347
|
|
Cash Provided/(Used)
by Investing Activities
|
|
20,874
|
|
|
(20,046)
|
|
Cash (Used)/Provided
by Financing Activities
|
|
(117,916)
|
|
|
(111,706)
|
|
|
|
|
|
|
Increase in Cash and
Cash Equivalents
|
|
227,297
|
|
|
87,595
|
|
Cash and Cash
Equivalents at Beginning of Period
|
|
14,942
|
|
|
3,549
|
|
Cash and Cash
Equivalents at End of Period
|
|
$
|
242,239
|
|
|
$
|
91,144
|
|
Aaron's, Inc. and
Subsidiaries
|
Quarterly Revenues
by Component & Segment
|
(In
thousands)
|
(Unaudited)
|
|
THREE MONTHS
ENDED
|
June 30,
2016
|
|
Sales and
Lease
Ownership
|
Progressive
|
HomeSmart
|
DAMI
|
Franchise
|
Manufacturing
|
Other
|
Consolidated
Total
|
Lease Revenues and
Fees
|
$
|
382,705
|
|
$
|
298,574
|
|
$
|
7,398
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
688,677
|
|
Retail
Sales
|
6,314
|
|
—
|
|
146
|
|
—
|
|
—
|
|
—
|
|
—
|
|
6,460
|
|
Non-Retail
Sales
|
71,266
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,344
|
|
—
|
|
72,610
|
|
Franchise Royalties
and
Fees
|
—
|
|
—
|
|
—
|
|
—
|
|
14,772
|
|
—
|
|
—
|
|
14,772
|
|
Manufacturing
Revenue
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
20,246
|
|
(20,246)
|
|
—
|
|
Interest and Fees
on
Loans Receivable
|
—
|
|
—
|
|
—
|
|
5,302
|
|
—
|
|
—
|
|
—
|
|
5,302
|
|
Other
|
1,179
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
353
|
|
1,532
|
|
|
$
|
461,464
|
|
$
|
298,574
|
|
$
|
7,544
|
|
$
|
5,302
|
|
$
|
14,772
|
|
$
|
21,590
|
|
$
|
(19,893)
|
|
$
|
789,353
|
|
THREE MONTHS
ENDED
|
June 30,
2015
|
|
Sales and
Lease
Ownership
|
Progressive
|
HomeSmart
|
DAMI
|
Franchise
|
Manufacturing
|
Other
|
Consolidated
Total
|
Lease Revenues and
Fees
|
$
|
389,240
|
|
$
|
255,946
|
|
$
|
15,286
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
660,472
|
|
Retail
Sales
|
6,817
|
|
—
|
|
256
|
|
—
|
|
—
|
|
—
|
|
—
|
|
7,073
|
|
Non-Retail
Sales
|
83,913
|
|
—
|
|
—
|
|
—
|
|
—
|
|
536
|
|
—
|
|
84,449
|
|
Franchise Royalties
and
Fees
|
—
|
|
—
|
|
—
|
|
—
|
|
15,491
|
|
—
|
|
—
|
|
15,491
|
|
Manufacturing
Revenue
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
24,692
|
|
(24,692)
|
|
—
|
|
Interest and Fees
on
Loans Receivable
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Other
|
1,238
|
|
—
|
|
(1)
|
|
—
|
|
—
|
|
—
|
|
327
|
|
1,564
|
|
|
$
|
481,208
|
|
$
|
255,946
|
|
$
|
15,541
|
|
$
|
—
|
|
$
|
15,491
|
|
$
|
25,228
|
|
$
|
(24,365)
|
|
$
|
769,049
|
|
Aaron's, Inc. and
Subsidiaries
Six Months Revenues by Component & Segment
(In thousands)
(Unaudited)
|
|
SIX MONTHS
ENDED
June 30, 2016
|
|
Sales and
Lease
Ownership
|
Progressive
|
HomeSmart
|
DAMI
|
Franchise
|
Manufacturing
|
Other
|
Consolidated
Total
|
Lease Revenues and
Fees
|
$
|
800,261
|
|
$
|
605,239
|
|
$
|
24,664
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
124
|
|
$
|
1,430,288
|
|
Retail
Sales
|
16,687
|
|
—
|
|
728
|
|
—
|
|
—
|
|
—
|
|
—
|
|
17,415
|
|
Non-Retail
Sales
|
149,450
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2,465
|
|
—
|
|
151,915
|
|
Franchise Royalties
and
Fees
|
—
|
|
—
|
|
—
|
|
—
|
|
31,067
|
|
—
|
|
—
|
|
31,067
|
|
Manufacturing
Revenue
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
44,048
|
|
(44,048)
|
|
—
|
|
Interest and Fees
on
Loans Receivable
|
—
|
|
—
|
|
—
|
|
10,065
|
|
—
|
|
—
|
|
—
|
|
10,065
|
|
Other
|
2,517
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
513
|
|
3,030
|
|
|
$
|
968,915
|
|
$
|
605,239
|
|
$
|
25,392
|
|
$
|
10,065
|
|
$
|
31,067
|
|
$
|
46,513
|
|
$
|
(43,411)
|
|
$
|
1,643,780
|
|
SIX MONTHS
ENDED
|
June 30,
2015
|
|
Sales and
Lease
Ownership
|
Progressive
|
HomeSmart
|
DAMI
|
Franchise
|
Manufacturing
|
Other
|
Consolidated
Total
|
Lease Revenues and
Fees
|
$
|
816,732
|
|
$
|
507,565
|
|
$
|
31,457
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,355,754
|
|
Retail
Sales
|
18,207
|
|
—
|
|
860
|
|
—
|
|
—
|
|
—
|
|
—
|
|
19,067
|
|
Non-Retail
Sales
|
179,433
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,053
|
|
—
|
|
180,486
|
|
Franchise Royalties
and
Fees
|
—
|
|
—
|
|
—
|
|
—
|
|
32,495
|
|
—
|
|
—
|
|
32,495
|
|
Manufacturing
Revenue
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
52,981
|
|
(52,981)
|
|
—
|
|
Interest and Fees
on
Loans Receivable
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Other
|
2,367
|
|
—
|
|
(1)
|
|
—
|
|
—
|
|
—
|
|
695
|
|
3,061
|
|
|
$
|
1,016,739
|
|
$
|
507,565
|
|
$
|
32,316
|
|
$
|
—
|
|
$
|
32,495
|
|
$
|
54,034
|
|
$
|
(52,286)
|
|
$
|
1,590,863
|
|
Use of Non-GAAP Financial Information:
Non-GAAP net earnings, non-GAAP diluted earnings per share,
EBITDA and Adjusted EBITDA are supplemental measures of our
performance that are not calculated in accordance with generally
accepted accounting principles in the
United States ("GAAP"). Non-GAAP net earnings and non-GAAP
diluted earnings per share for the second quarter of 2016 each
exclude $6.6 million in
Progressive-related intangible amortization expense and a
$1.0 million loss related to the
HomeSmart asset sale. For the first six months of 2016 Non-GAAP net
earnings and non-GAAP diluted earnings per share exclude
$13.2 million in Progressive-related
intangible amortization expense, an $11.1
million gain from the sale of the Company's headquarters
building, $3.7 million in retirement
and severance charges and a $5.6
million loss related to the HomeSmart asset sale. Non-GAAP
net earnings and non-GAAP diluted earnings per share for 2015
exclude $6.6 million and $13.2 million in Progressive-related intangible
amortization expense for the second quarter and first six months of
2015, respectively.
The EBITDA and Adjusted EBITDA figures presented in this press
release are calculated as the Company's earnings before interest,
depreciation on property, plant and equipment, amortization of
intangible assets and income taxes. Adjusted EBITDA also excludes
the other adjustments described in the calculation of Non-GAAP net
earnings above.
Management believes that Non-GAAP net earnings, non-GAAP diluted
earnings per share, EBITDA and Adjusted EBITDA provide relevant and
useful information, and are widely used by analysts, investors and
competitors in our industry as well as by our management in
assessing both consolidated and business unit performance.
Non-GAAP net earnings and non-GAAP diluted earnings provides us
with an understanding of the results from the primary operations of
our business by excluding the effects of certain items that
generally arose from larger, one-time transactions that are not
reflective of the ordinary earnings activity of our operations.
This measure may be useful to an investor in evaluating the
underlying operating performance of our business.
EBITDA and Adjusted EBITDA also provides us with an
understanding of one aspect of earnings before the impact of
investing and financing charges and income taxes. These measures
may be useful to an investor in evaluating our operating
performance and liquidity because the measures:
- Are widely used by investors to measure a company's operating
performance without regard to items excluded from the calculation
of such measure, which can vary substantially from company to
company depending upon accounting methods, book value of assets,
capital structure and the method by which assets were acquired,
among other factors.
- Are a financial measurement that is used by rating agencies,
lenders and other parties to evaluate our creditworthiness.
- Are used by our management for various purposes, including as a
measure of performance of our operating entities and as a basis for
strategic planning and forecasting.
Finally, this press release presents pre-tax, pre-provision loss
for DAMI, which is also a supplemental measure not calculated in
accordance with GAAP. Management believes this measure is useful
because it gives management and investors an additional,
supplemental metric to assess DAMI's underlying operational
performance for the period, particularly for periods in which we
expect growth in DAMI's loan portfolio and corresponding growth in
our provisioning for future loan losses. Management uses this
measure as one of its bases for strategic planning and forecasting
for DAMI.
Non-GAAP financial measures, however, should not be used as a
substitute for, or considered superior to, measures of financial
performance prepared in accordance with GAAP, such as the Company's
GAAP basis net earnings and diluted earnings per share and the GAAP
earnings before income taxes of the Company's segments, which are
also presented in the press release. Further, we caution investors
that amounts presented in accordance with our definitions of
non-GAAP net earnings, non-GAAP diluted earnings per share, EBITDA,
Adjusted EBITDA and pre-tax, pre-provision loss may not be
comparable to similar measures disclosed by other companies,
because not all companies and analysts calculate these measures in
the same manner.
Reconciliation of
Net Earnings and Earnings Per Share Assuming Dilution to
Non-GAAP
|
Net Earnings and
Earnings Per Share Assuming Dilution
|
(In thousands,
except earnings per share)
|
|
|
|
|
(Unaudited)
Three Months Ended
|
(Unaudited)
Six Months Ended
|
|
June 30,
|
June 30,
|
|
2016
|
2015
|
2016
|
2015
|
Net
Earnings
|
$
|
38,501
|
|
$
|
40,546
|
|
$
|
88,188
|
|
$
|
89,789
|
|
Add
Progressive-Related Intangible Amortization Expense
(1)(2)
|
4,150
|
|
4,150
|
|
8,249
|
|
8,320
|
|
Less Gain on Sale of
Building (3)
|
—
|
|
—
|
|
(6,932)
|
|
—
|
|
Add Retirement and
Severance Charges (4)
|
—
|
|
—
|
|
2,306
|
|
—
|
|
Add Loss on Sale of
HomeSmart (5)
|
619
|
|
—
|
|
3,509
|
|
—
|
|
Non-GAAP Net
Earnings
|
$
|
43,270
|
|
$
|
44,696
|
|
$
|
95,320
|
|
$
|
98,109
|
|
|
|
|
|
|
Earnings Per Share
Assuming Dilution
|
$
|
.53
|
|
$
|
.56
|
|
$
|
1.20
|
|
$
|
1.23
|
|
Add
Progressive-Related Intangible Amortization Expense
(1)(2)
|
.05
|
|
.05
|
|
.11
|
|
.12
|
|
Less Gain on Sale of
Building (3)
|
—
|
|
—
|
|
(.09)
|
|
—
|
|
Add Retirement and
Severance Charges (4)
|
—
|
|
—
|
|
.03
|
|
—
|
|
Add Loss on Sale of
HomeSmart (5)
|
.01
|
|
—
|
|
.05
|
|
—
|
|
Non-GAAP Earnings Per
Share Assuming Dilution (6)
|
$
|
.59
|
|
$
|
.61
|
|
$
|
1.30
|
|
$
|
1.35
|
|
Weighted Average
Shares Outstanding Assuming Dilution
|
73,279
|
|
72,965
|
|
73,248
|
|
72,910
|
|
|
|
|
|
|
|
|
|
|
(1) Net of taxes of $2,438 and
$4,926 for the three and six months ended June 30, 2016
calculated using the effective tax rate for the three and six
months ended June 30, 2016.
|
|
(2) Net of taxes of $2,437 and
$4,855 for the three and six months ended June 30, 2015
calculated using the effective tax rate for the three and six
months ended June 30, 2015.
|
|
(3) Net of taxes of
$4,139 for the six months ended June 30, 2016 calculated using
the effective tax rate for the six months ended June 30,
2016.
|
|
(4) Net of taxes of
$1,377 for the six months ended June 30, 2016 calculated using
the effective tax rate for the six months ended June 30,
2016.
|
|
(5) Net of taxes of $363 and
$2,096 for the three and six months ended June 30, 2016
calculated using the effective tax rate for the three and six
months ended June 30, 2016.
|
|
(6) In some cases the sum of
individual EPS amounts may not equal total EPS
calculations.
|
|
DAMI Pre-tax,
Pre-provision Loss
|
(In
thousands)
|
|
|
|
|
(Unaudited)
Three Months Ended
|
(Unaudited)
Six Months Ended
|
|
June 30,
|
June 30,
|
|
2016
|
2015
|
2016
|
2015
|
Loss Before Income
Taxes
|
$
|
(2,280)
|
|
$
|
—
|
|
$
|
(5,162)
|
|
$
|
—
|
|
Add: Adjustment to
Increase Allowance for Loan Losses
During Period
|
1,507
|
|
—
|
|
3,159
|
|
—
|
|
Pre-tax,
Pre-provision Loss
|
$
|
(773)
|
|
$
|
—
|
|
$
|
(2,003)
|
|
$
|
—
|
|
Aaron's, Inc. and
Subsidiaries
|
Non-GAAP Financial
Information
|
Quarterly Segment
EBITDA
|
(In
thousands)
|
(Unaudited)
|
|
Three Months Ended
June 30, 2016
|
|
Sales and Lease
Ownership
|
Progressive
|
HomeSmart
|
DAMI
|
Franchise
|
Manufacturing
|
Other1
|
Consolidated
Total
|
Net
Earnings
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
38,501
|
|
Income
Taxes
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
22,623
|
|
Earnings
(Loss)
Before Income
Taxes
|
38,947
|
|
29,083
|
|
(694)
|
|
(2,280)
|
|
11,781
|
|
536
|
|
(16,249)
|
|
61,124
|
|
Interest Expense
(Income)
|
2,067
|
|
5,090
|
|
73
|
|
988
|
|
—
|
|
2
|
|
(2,316)
|
|
5,904
|
|
Depreciation
|
7,156
|
|
990
|
|
198
|
|
101
|
|
297
|
|
318
|
|
3,964
|
|
13,024
|
|
Amortization
|
448
|
|
6,588
|
|
8
|
|
145
|
|
—
|
|
—
|
|
—
|
|
7,189
|
|
EBITDA
|
$
|
48,618
|
|
$
|
41,751
|
|
$
|
(415)
|
|
$
|
(1,046)
|
|
$
|
12,078
|
|
$
|
856
|
|
$
|
(14,601)
|
|
$
|
87,241
|
|
Loss on Sale of
HomeSmart
|
—
|
|
—
|
|
982
|
|
—
|
|
—
|
|
—
|
|
—
|
|
982
|
|
Adjusted
EBITDA
|
$
|
48,618
|
|
$
|
41,751
|
|
$
|
567
|
|
$
|
(1,046)
|
|
$
|
12,078
|
|
$
|
856
|
|
$
|
(14,601)
|
|
$
|
88,223
|
|
Three Months Ended
June 30, 2015
|
|
Sales and
Lease
Ownership
|
Progressive
|
HomeSmart
|
DAMI
|
Franchise
|
Manufacturing
|
Other1
|
Consolidated
Total
|
Net
Earnings
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
40,546
|
|
Income
Taxes
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
23,808
|
|
Earnings
(Loss)
Before Income
Taxes
|
40,690
|
|
23,314
|
|
48
|
|
—
|
|
11,993
|
|
376
|
|
(12,067)
|
|
64,354
|
|
Interest Expense
(Income)
|
1,949
|
|
5,595
|
|
214
|
|
—
|
|
—
|
|
7
|
|
(2,143)
|
|
5,622
|
|
Depreciation
|
7,328
|
|
464
|
|
619
|
|
—
|
|
375
|
|
351
|
|
3,722
|
|
12,859
|
|
Amortization
|
363
|
|
6,587
|
|
3
|
|
—
|
|
—
|
|
—
|
|
—
|
|
6,953
|
|
EBITDA
|
$
|
50,330
|
|
$
|
35,960
|
|
$
|
884
|
|
$
|
—
|
|
$
|
12,368
|
|
$
|
734
|
|
$
|
(10,488)
|
|
$
|
89,788
|
|
|
1Other
segment is primarily revenues attributable to (i) leasing space to
unrelated third parties in the corporate headquarters building and
(ii) several minor unrelated activities. The pre-tax losses or
earnings in the Other segment are the net result of the activity
mentioned above, net of the portion of corporate overhead not
allocated to the reportable segments for management
purposes.
|
Aaron's, Inc. and
Subsidiaries
|
Non-GAAP Financial
Information
|
Six Months Segment
EBITDA
|
(In
thousands)
|
(Unaudited)
|
|
Six Months Ended June
30, 2016
|
|
Sales and
Lease
Ownership
|
Progressive
|
HomeSmart
|
DAMI
|
Franchise
|
Manufacturing
|
Other1
|
Consolidated
Total
|
Net
Earnings
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
88,188
|
|
Income
Taxes
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
52,664
|
|
Earnings
(Loss)
Before Income
Taxes
|
$
|
95,525
|
|
$
|
50,997
|
|
$
|
(3,653)
|
|
$
|
(5,162)
|
|
$
|
24,900
|
|
$
|
1,404
|
|
$
|
(23,159)
|
|
$
|
140,852
|
|
Interest Expense
(Income)
|
3,994
|
|
10,292
|
|
294
|
|
1,985
|
|
—
|
|
2
|
|
(4,351)
|
|
12,216
|
|
Depreciation
|
14,331
|
|
2,065
|
|
810
|
|
203
|
|
610
|
|
660
|
|
7,935
|
|
26,614
|
|
Amortization
|
868
|
|
13,175
|
|
19
|
|
280
|
|
—
|
|
—
|
|
—
|
|
14,342
|
|
EBITDA
|
$
|
114,718
|
|
$
|
76,529
|
|
$
|
(2,530)
|
|
$
|
(2,694)
|
|
$
|
25,510
|
|
$
|
2,066
|
|
$
|
(19,575)
|
|
$
|
194,024
|
|
Gain on Sale of
Building
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(11,071)
|
|
$
|
(11,071)
|
|
Retirement
Charges
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3,683
|
|
3,683
|
|
Loss on Sale of
HomeSmart
|
—
|
|
—
|
|
5,605
|
|
—
|
|
—
|
|
—
|
|
—
|
|
5,605
|
|
Adjusted
EBITDA
|
$
|
114,718
|
|
$
|
76,529
|
|
$
|
3,075
|
|
$
|
(2,694)
|
|
$
|
25,510
|
|
$
|
2,066
|
|
$
|
(26,963)
|
|
$
|
192,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June
30, 2015
|
|
Sales and
Lease
Ownership
|
Progressive
|
HomeSmart
|
DAMI
|
Franchise
|
Manufacturing
|
Other1
|
Consolidated
Total
|
Net
Earnings
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
89,789
|
|
Income
Taxes
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
52,395
|
|
Earnings
(Loss)
Before Income
Taxes
|
$
|
99,731
|
|
$
|
39,144
|
|
$
|
574
|
|
$
|
—
|
|
$
|
25,891
|
|
$
|
1,658
|
|
$
|
(24,814)
|
|
$
|
142,184
|
|
Interest Expense
(Income)
|
3,881
|
|
11,064
|
|
454
|
|
—
|
|
—
|
|
17
|
|
(3,825)
|
|
11,591
|
|
Depreciation
|
15,037
|
|
918
|
|
1,247
|
|
—
|
|
741
|
|
733
|
|
7,165
|
|
25,841
|
|
Amortization
|
731
|
|
13,175
|
|
9
|
|
—
|
|
—
|
|
—
|
|
—
|
|
13,915
|
|
EBITDA
|
$
|
119,380
|
|
$
|
64,301
|
|
$
|
2,284
|
|
$
|
—
|
|
$
|
26,632
|
|
$
|
2,408
|
|
$
|
(21,474)
|
|
$
|
193,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1Other
segment is primarily attributable to (i) leasing space to unrelated
third parties in the corporate headquarters building and (ii)
several minor unrelated activities. The pre-tax losses or earnings
in the Other segment are the net result of the activity mentioned
above, net of the portion of corporate overhead not allocated to
the reportable segments for management purposes.
|
Reconciliation of
2016 Projected Outlook for EBITDA
|
|
|
|
Fiscal Year
2016
|
|
Aaron's Sales
&
Lease Ownership
|
Progressive
|
Consolidated2
|
(in
thousands)
|
Range
|
Range
|
Range
|
Estimated Net
Earnings
|
|
|
140,000 -
157,000
|
Taxes1
|
—
|
—
|
80,000 -
93,000
|
Projected Earnings
Before Taxes
|
145,000 -
165,000
|
84,000 -
94,000
|
220,000 -
250,000
|
Interest Expense
(Income)
|
—
|
21,000
|
24,000
|
Depreciation
|
50,000
|
4,000
|
54,000
|
Amortization
|
2,000
|
26,000
|
29,000
|
Projected
EBITDA
|
197,000 -
217,000
|
135,000 -
145,000
|
327,000 -
357,000
|
Projected Other
Adjustments, Net
|
(2,000)
|
—
|
(2,000)
|
Projected Adjusted
EBITDA
|
195,000 -
215,000
|
135,000 -
145,000
|
325,000 -
355,000
|
|
|
|
|
|
|
1 Taxes
are calculated on a consolidated basis and are not identifiable by
company divisions.
|
2 For the
reconciliation above Consolidated data includes other divisions and
is not the sum of Aaron's Sales & Lease Ownership and
Progressive data.
|
Reconciliation of
2016 Projected Outlook for Earnings Per Share
|
Assuming Dilution
to Non-GAAP Earnings Per Share Assuming Dilution
|
|
|
Fiscal Year
2016
|
|
Low Range
|
High Range
|
Projected Earnings
Per Share Assuming Dilution
|
$
|
1.92
|
|
$
|
2.12
|
|
Add Projected
Progressive-Related Intangible Amortization Expense
|
.23
|
|
.23
|
|
Less Sum of Other
Adjustments
|
(.02)
|
|
(.02)
|
|
Projected Non-GAAP
Earnings Per Share Assuming Dilution
|
$
|
2.13
|
|
$
|
2.33
|
|
Logo
- http://photos.prnewswire.com/prnh/20130826/CL69318LOGO
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/aarons-inc-reports-second-quarter-2016-results-300306131.html
SOURCE Aaron's, Inc.