ATLANTA, Oct. 28, 2016
/PRNewswire/ -- 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 nine month periods
ended September 30, 2016.
For the third quarter of 2016, revenues increased to
$769.0 million compared with
$767.7 million for the third quarter
of 2015. Net earnings increased to $29.5
million compared with $24.2
million in the prior year period. Diluted earnings per share
were $.40 compared with $.33 per share a year ago. Non-GAAP diluted EPS
were $.50 compared with $.39 last year.
"Our third quarter results benefited from strong lease portfolio
performance at Progressive and disciplined execution in our core
business," said John Robinson, Chief
Executive Officer. "Consolidated EBITDA increased 23% on an
adjusted basis, representing a 9.9% adjusted EBITDA margin compared
with 8.1% a year ago. Total revenue gained slightly, impacted by a
soft environment for our core business."
"Progressive had an outstanding quarter, with revenues up 16%
and a 28% increase in active doors as it continues to expand with
existing and new retail partners," continued Mr. Robinson.
"Progressive is achieving solid revenue growth with consistent
profitability. The strong increase in new doors demonstrates our
compelling value proposition for customers and retailers."
"The core business remains challenging. Ongoing efforts to
manage costs and control inventory levels helped offset a decline
in same store revenues, and we're taking additional steps to
rightsize our store base. We believe these actions will better
position the core business for long-term profitability."
"We continue to generate strong cash flow and ended the quarter
with $320 million in cash and a net
debt to capitalization ratio of 9%," continued Mr. Robinson. "We
repurchased $34.5 million of our
common stock in the quarter, and we have ample financial
flexibility to support our strategic priorities. We will continue
to manage the core business for EBITDA and will deploy our capital
to invest in the business and enhance shareholder returns," Mr.
Robinson concluded.
Further Steps to Restructure Core Business
During the third quarter, the Company implemented a range of
expense reductions to drive further cost efficiencies in the core
business. In addition, as previously disclosed, the Company
continues to review its store base and plans to close
underperforming stores, including the closure of 56 stores by the
end of October. Additional stores are expected to be closed in
2017.
The restructuring expense and store closure initiatives resulted
in a pre-tax charge of approximately $4.7
million in the third quarter of fiscal 2016. The Company
expects to incur an additional pre-tax charge of approximately
$13 million in the fourth quarter of
2016 to complete the closure of the 56 stores discussed above.
Financial Summary
During the first nine months of 2016, revenues increased 2.3% to
$2.413 billion compared with
$2.359 billion for the prior year
period. Net earnings were $117.7
million versus $114.0 million
last year. Diluted earnings per share were $1.61 compared with $1.56 per share a year ago. The results for the
nine months ended September 30, 2016 include the previously
mentioned pre-tax charge related to store closures and cost
initiatives, as well as a $7.7
million loss before income taxes at the DAMI segment. The
effective tax rate for the three months ended September 30,
2016 was 34.9% compared with 33.8% for the prior year period.
On a non-GAAP basis, net earnings for the first nine months of
2016 were $132.0 million compared
with $126.6 million for the same
period in 2015 and diluted earnings per share were $1.80 compared with $1.73 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, a loss resulting from the Company's previously
announced disposition of the assets of its HomeSmart business and
the core business restructuring. 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 $268.6 million for the nine months ended
September 30, 2016 compared with $255.5
million for the same period in 2015. Adjusted EBITDA is a
non-GAAP measure that is calculated as the Company's earnings
before interest, income taxes, depreciation on property, plant and
equipment, amortization of intangible assets and other charges and
adjustments.
The Company generated $460.5
million in cash from operations during the first nine months
of 2016 and ended the third quarter of 2016 with $319.5 million in cash compared with $14.9 million at the end of 2015. The Company
repurchased 1,372,700 shares during the third quarter of 2016 and
has authorization to purchase an additional 9,123,721 shares.
Core Results
For the third quarter of 2016, overall revenues for the core
business decreased 9.5% to $454.1
million from $501.7 million in
the third quarter of 2015. Revenues for the first nine months of
2016 decreased 6.5% to $1.483 billion
compared with $1.585 billion for the
same period a year ago. The core business is the traditional
lease-to-own store-based business, and represents current
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 $25.4
million, compared with $15.1
million and $47.5 million,
respectively, for the three and nine months ended
September 30, 2015. Excluding the sale of HomeSmart, revenues
for the core business decreased 6.7% and 5.2% for the three and
nine months, respectively.
Earnings before income taxes for the core business were
$23.2 million and $118.2 million for the three and nine months
ended September 30, 2016, respectively, compared with
$30.9 million and $134.0 million for the same periods a year ago.
Adjusted EBITDA in the three and nine months ended
September 30, 2016 was $40.4
million and $158.8 million,
respectively, compared with $43.7
million and $172.9 million for
the same periods a year ago. As a percentage of revenues, Adjusted
EBITDA was 8.9% and 10.7% for the three and nine months ended
September 30, 2016, respectively, compared with 8.7% and 10.9%
for the same periods in 2015. Write offs for damaged, lost or
unsaleable merchandise were 4.9% of revenues in the quarter
compared to 4.1% in the year ago period.
Same store revenues (revenues earned in Company-operated stores
open for the entirety of both quarters) decreased 4.6% during the
third quarter of 2016, compared with the third quarter of 2015, and
customer count on a same store basis was down 1.6%.
Company-operated Aaron's stores had 981,000 customers at
September 30, 2016, a 1.9% decrease
from the end of the third quarter a year ago, excluding HomeSmart
customers for both periods.
Progressive Results
Progressive's revenues in the third quarter of 2016 increased
15.9% to $308.4 million from
$266.0 million in the third quarter
of 2015. Progressive's revenues for the first nine months of 2016
were $913.6 million compared with
$773.6 million in the prior year
period. Active doors increased 28% in the quarter to 15,500.
Invoice volume per active door declined 13% in the quarter driven
in large part by the strong growth in active doors towards the end
of the quarter. Progressive had 540,000 customers at
September 30, 2016, a 12% increase from the third quarter a
year ago.
Earnings before income taxes for the Progressive business were
$24.7 million and $75.7 million for the three and nine months ended
September 30, 2016, respectively, compared with $5.6 million and $44.8
million for the same periods a year ago. EBITDA for the
third quarter and first nine months of 2016 were $37.2 million and $113.7
million, respectively, compared with $18.3 million and $82.6
million, for the same periods of 2015. As a percentage of
revenues, EBITDA was 12.1% and 12.4%, respectively, for the third
quarter and first nine months of 2016 compared with 6.9% and 10.7%
for the same periods in 2015. Write offs for damaged, lost or
unsaleable merchandise were 6.1% of revenues in the third quarter
compared to 8.5% in the same period of 2015.
DAMI Results
Revenues for DAMI were $6.5
million in the third quarter of 2016 and $16.5 million for the first nine months of 2016.
DAMI's loss before income taxes was $2.5
million for the quarter and $7.7
million for the nine months ending September 30, 2016.
Its pre-tax, pre-provision loss was $1.0
million in the quarter and $3.0
million for the first nine 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. Results for DAMI were in line with
expectations. 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 third quarter and
first nine months of 2016 increased 1.8% and 4.3%, respectively,
over the same prior year periods. In addition, franchise royalties
and fees decreased 10.8% in the third quarter of 2016 and 6.5% for
the first nine months of 2016 compared to the same periods a year
ago. The decrease in the Company's franchise royalties and fees are
the combined result of a decrease in revenues and the number of
franchised stores. The Company's franchisees collectively had
revenues of $225.2 million during the
third quarter and $703.1 million
during the first nine months of 2016, a decrease of 4.5% and 4.2%,
respectively, from the same periods last year. Same store revenues
for franchised stores were down .4% and same store customer counts
were up .3% for the third quarter of 2016 compared with the same
quarter last year. Franchised stores had 542,000 customers at the
end of the third quarter of 2016, a 4.1% decline from a year ago
(revenues and customers of franchisees are not revenues and
customers of Aaron's, Inc.). Non-retail sales, which primarily
consist of merchandise sales to the Company's franchisees,
decreased 17.6% for the third quarter and 16.4% for the first
nine months of 2016 compared with the prior-year periods.
Store Count
During the third quarter of 2016, five Company-operated Aaron's
Sales & Lease Ownership stores, four franchised Aaron's Sales
& Lease Ownership stores and one franchised HomeSmart store
were consolidated or closed. The Company acquired 15 franchised
stores and sold three Company-operated stores to franchisees which
were merged with existing stores.
At September 30, 2016, the Company had 1,228
Company-operated stores and 703 franchised Aaron's Sales &
Lease Ownership stores.
2016 Outlook Update
The Company is updating certain elements of its outlook for the
2016 year to reflect the restructuring expense and store closure
initiatives announced today and current trends in the business. The
Company currently expects to achieve the following:
Core Business
- Quarterly same store revenues of approximately negative 5% to
negative 3% for the remainder of 2016;
- Adjusted EBITDA in the range of $195
million to $205 million, compared with the previous outlook
of $195 million to $215 million;
Progressive
- EBITDA in the range of $140 million to
$150 million compared with the previous outlook of
$135 million to $145 million;
Consolidated Results
- Adjusted EBITDA in the range of $330
million to $350 million compared with the previous outlook
of $325 million to $355 million;
- GAAP diluted earnings per share in the range of $1.79 to $1.93 compared with the previous outlook
of $1.92 to $2.12; and
- Non-GAAP diluted earnings per share in the range of
$2.16 to $2.30 compared with the
previous outlook of $2.13 to
$2.33.
Conference Call and Webcast
Aaron's will hold a conference call to discuss its quarterly
financial results on Friday, October 28, 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 1,930 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 19,000 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 and
store closure 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 results of Progressive's
efforts to expand its relationships with existing retailer partners
and establish new partnerships with additional 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 Reports on Form 10-Q for the fiscal quarters ended
March 31, 2016 and June 30, 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, core
business store closures 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)
Nine Months Ended
|
|
|
September
30,
|
September
30,
|
|
|
2016
|
2015
|
2016
|
2015
|
Revenues:
|
|
|
|
|
|
Lease Revenues and
Fees
|
|
$
|
673,869
|
|
$
|
661,856
|
|
$
|
2,104,157
|
|
$
|
2,017,610
|
|
Retail
Sales
|
|
6,131
|
|
6,988
|
|
23,546
|
|
26,055
|
|
Non-Retail
Sales
|
|
67,349
|
|
81,708
|
|
219,264
|
|
262,194
|
|
Franchise Royalties
and Fees
|
|
13,898
|
|
15,574
|
|
44,965
|
|
48,069
|
|
Interest and Fees on
Loans Receivable
|
|
6,480
|
|
—
|
|
16,545
|
|
—
|
|
Other
|
|
1,255
|
|
1,568
|
|
4,285
|
|
4,629
|
|
Total
|
|
768,982
|
|
767,694
|
|
2,412,762
|
|
2,358,557
|
|
|
|
|
|
|
|
Costs and
Expenses:
|
|
|
|
|
|
Depreciation of Lease
Merchandise
|
|
317,127
|
|
302,029
|
|
987,398
|
|
912,377
|
|
Retail Cost of
Sales
|
|
4,093
|
|
4,537
|
|
15,050
|
|
17,090
|
|
Non-Retail Cost of
Sales
|
|
60,316
|
|
73,567
|
|
195,685
|
|
236,882
|
|
Operating
Expenses
|
|
331,977
|
|
345,514
|
|
1,011,002
|
|
998,989
|
|
Restructuring
|
|
4,658
|
|
—
|
|
4,658
|
|
—
|
|
Other Operating
Expense (Income), Net
|
|
2
|
|
(962)
|
|
(5,972)
|
|
(2,145)
|
|
Total
|
|
718,173
|
|
724,685
|
|
2,207,821
|
|
2,163,193
|
|
|
|
|
|
|
|
Operating
Profit
|
|
50,809
|
|
43,009
|
|
204,941
|
|
195,364
|
|
Interest
Income
|
|
868
|
|
483
|
|
1,796
|
|
1,714
|
|
Interest
Expense
|
|
(5,745)
|
|
(5,524)
|
|
(17,961)
|
|
(17,115)
|
|
Other Non-Operating
Expense, Net
|
|
(650)
|
|
(1,412)
|
|
(2,642)
|
|
(1,223)
|
|
Earnings Before
Income Taxes
|
|
45,282
|
|
36,556
|
|
186,134
|
|
178,740
|
|
|
|
|
|
|
|
Income
Taxes
|
|
15,818
|
|
12,362
|
|
68,482
|
|
64,757
|
|
|
|
|
|
|
|
Net
Earnings
|
|
$
|
29,464
|
|
$
|
24,194
|
|
$
|
117,652
|
|
$
|
113,983
|
|
|
|
|
|
|
|
Earnings Per
Share
|
|
$
|
.41
|
|
$
|
.33
|
|
$
|
1.62
|
|
$
|
1.57
|
|
Earnings Per Share
Assuming Dilution
|
|
$
|
.40
|
|
$
|
.33
|
|
$
|
1.61
|
|
$
|
1.56
|
|
|
|
|
|
|
|
Weighted Average
Shares Outstanding
|
|
72,608
|
|
72,586
|
|
72,667
|
|
72,558
|
|
Weighted Average
Shares Outstanding Assuming
Dilution
|
|
73,199
|
|
73,076
|
|
73,231
|
|
72,966
|
|
Selected Balance
Sheet Data
|
(In
thousands)
|
|
|
|
(Unaudited)
|
|
|
|
September 30,
2016
|
|
December 31,
20151
|
|
|
|
|
|
|
|
Cash and Cash
Equivalents
|
|
$
|
319,486
|
|
|
$
|
14,942
|
|
|
Investments
|
|
20,948
|
|
|
22,226
|
|
|
Accounts Receivable,
Net
|
|
86,784
|
|
|
113,439
|
|
|
Loans Receivable,
Net
|
|
83,548
|
|
|
85,795
|
|
|
Lease Merchandise,
Net
|
|
957,981
|
|
|
1,138,938
|
|
|
Property, Plant and
Equipment, Net
|
|
213,163
|
|
|
225,836
|
|
|
Other Assets,
Net
|
|
869,480
|
|
|
1,053,995
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
2,551,390
|
|
|
2,655,171
|
|
|
|
|
|
|
|
|
Debt
|
|
496,170
|
|
|
606,746
|
|
|
Total
Liabilities
|
|
1,094,294
|
|
|
1,288,553
|
|
|
|
|
|
|
|
|
Shareholders'
Equity
|
|
$
|
1,457,096
|
|
|
$
|
1,366,618
|
|
|
|
|
|
|
|
|
1 $3.7
million of capitalized deferred debt issuance costs were
reclassified in the first quarter of 2016 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.
|
Selected Cash Flow
Data
|
(In
thousands)
|
|
|
|
(Unaudited)
Nine Months Ended
|
|
|
September
30,
|
|
|
2016
|
|
2015
|
|
|
|
|
|
Cash Provided by
Operating Activities
|
|
$
|
460,460
|
|
|
$
|
213,310
|
|
Cash Provided/(Used)
by Investing Activities
|
|
(3,991)
|
|
|
(34,342)
|
|
Cash (Used)/Provided
by Financing Activities
|
|
(151,925)
|
|
|
(115,605)
|
|
|
|
|
|
|
Increase in Cash and
Cash Equivalents
|
|
304,544
|
|
|
63,363
|
|
Cash and Cash
Equivalents at Beginning of Period
|
|
14,942
|
|
|
3,549
|
|
Cash and Cash
Equivalents at End of Period
|
|
$
|
319,486
|
|
|
$
|
66,912
|
|
Aaron's, Inc. and
Subsidiaries
|
Quarterly Revenues
by Component & Segment
|
(In
thousands)
|
(Unaudited)
|
|
THREE MONTHS
ENDED
|
September 30,
2016
|
|
Sales and Lease
Ownership
|
Progressive
|
HomeSmart
|
DAMI
|
Franchise
|
Manufacturing
|
Other
|
Consolidated
Total
|
Lease Revenues and
Fees
|
$
|
365,472
|
|
$
|
308,397
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
673,869
|
|
Retail
Sales
|
6,131
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
6,131
|
|
Non-Retail
Sales
|
64,319
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3,030
|
|
—
|
|
67,349
|
|
Franchise Royalties
and Fees
|
—
|
|
—
|
|
—
|
|
—
|
|
13,898
|
|
—
|
|
—
|
|
13,898
|
|
Manufacturing
Revenue
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
18,021
|
|
(18,021)
|
|
—
|
|
Interest and Fees on
Loans Receivable
|
—
|
|
—
|
|
—
|
|
6,480
|
|
—
|
|
—
|
|
—
|
|
6,480
|
|
Other
|
1,153
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
102
|
|
1,255
|
|
|
$
|
437,075
|
|
$
|
308,397
|
|
$
|
—
|
|
$
|
6,480
|
|
$
|
13,898
|
|
$
|
21,051
|
|
$
|
(17,919)
|
|
$
|
768,982
|
|
|
|
THREE MONTHS
ENDED
|
September 30,
2015
|
|
Sales and Lease
Ownership
|
Progressive
|
HomeSmart
|
DAMI
|
Franchise
|
Manufacturing
|
Other
|
Consolidated
Total
|
Lease Revenues and
Fees
|
$
|
380,962
|
|
$
|
265,986
|
|
$
|
14,908
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
661,856
|
|
Retail
Sales
|
6,760
|
|
—
|
|
228
|
|
—
|
|
—
|
|
—
|
|
—
|
|
6,988
|
|
Non-Retail
Sales
|
81,496
|
|
—
|
|
—
|
|
—
|
|
—
|
|
212
|
|
—
|
|
81,708
|
|
Franchise Royalties
and Fees
|
—
|
|
—
|
|
—
|
|
—
|
|
15,574
|
|
—
|
|
—
|
|
15,574
|
|
Manufacturing
Revenue
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
23,802
|
|
(23,802)
|
|
—
|
|
Interest and Fees on
Loans Receivable
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Other
|
1,260
|
|
—
|
|
1
|
|
—
|
|
—
|
|
—
|
|
307
|
|
1,568
|
|
|
$
|
470,478
|
|
$
|
265,986
|
|
$
|
15,137
|
|
$
|
—
|
|
$
|
15,574
|
|
$
|
24,014
|
|
$
|
(23,495)
|
|
$
|
767,694
|
|
Aaron's, Inc. and
Subsidiaries
|
Nine Months
Revenues by Component & Segment
|
(In
thousands)
|
(Unaudited)
|
|
NINE MONTHS
ENDED
|
September 30,
2016
|
|
Sales and Lease
Ownership
|
Progressive
|
HomeSmart
|
DAMI
|
Franchise
|
Manufacturing
|
Other
|
Consolidated
Total
|
Lease Revenues and
Fees
|
$
|
1,165,733
|
|
$
|
913,636
|
|
$
|
24,664
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
124
|
|
$
|
2,104,157
|
|
Retail
Sales
|
22,818
|
|
—
|
|
728
|
|
—
|
|
—
|
|
—
|
|
—
|
|
23,546
|
|
Non-Retail
Sales
|
213,769
|
|
—
|
|
—
|
|
—
|
|
—
|
|
5,495
|
|
—
|
|
219,264
|
|
Franchise Royalties
and Fees
|
—
|
|
—
|
|
—
|
|
—
|
|
44,965
|
|
—
|
|
—
|
|
44,965
|
|
Manufacturing
Revenue
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
62,069
|
|
(62,069)
|
|
—
|
|
Interest and Fees on
Loans Receivable
|
—
|
|
—
|
|
—
|
|
16,545
|
|
—
|
|
—
|
|
—
|
|
16,545
|
|
Other
|
3,670
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
615
|
|
4,285
|
|
|
$
|
1,405,990
|
|
$
|
913,636
|
|
$
|
25,392
|
|
$
|
16,545
|
|
$
|
44,965
|
|
$
|
67,564
|
|
$
|
(61,330)
|
|
$
|
2,412,762
|
|
|
|
NINE MONTHS
ENDED
|
September 30,
2015
|
|
Sales and Lease
Ownership
|
Progressive
|
HomeSmart
|
DAMI
|
Franchise
|
Manufacturing
|
Other
|
Consolidated
Total
|
Lease Revenues and
Fees
|
$
|
1,197,694
|
|
$
|
773,551
|
|
$
|
46,365
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2,017,610
|
|
Retail
Sales
|
24,967
|
|
—
|
|
1,088
|
|
—
|
|
—
|
|
—
|
|
—
|
|
26,055
|
|
Non-Retail
Sales
|
260,929
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,265
|
|
—
|
|
262,194
|
|
Franchise Royalties
and Fees
|
—
|
|
—
|
|
—
|
|
—
|
|
48,069
|
|
—
|
|
—
|
|
48,069
|
|
Manufacturing
Revenue
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
76,783
|
|
(76,783)
|
|
—
|
|
Interest and Fees on
Loans Receivable
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Other
|
3,627
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,002
|
|
4,629
|
|
|
$
|
1,487,217
|
|
$
|
773,551
|
|
$
|
47,453
|
|
$
|
—
|
|
$
|
48,069
|
|
$
|
78,048
|
|
$
|
(75,781)
|
|
$
|
2,358,557
|
|
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 third quarter of 2016 each
exclude $6.6 million in
Progressive-related intangible amortization expense, $40,000 of loss related to the HomeSmart asset
sale and $4.7 million in core
business restructuring charges and cost reduction initiatives. For
the first nine months of 2016 non-GAAP net earnings and non-GAAP
diluted earnings per share exclude $19.8
million in Progressive-related intangible amortization
expense, an $11.1 million gain from
the sale of the Company's former headquarters building,
$3.7 million in retirement and
severance charges, a $5.6 million
loss related to the HomeSmart asset sale and $4.7 million in core business restructuring
charges and cost reduction initiatives. Non-GAAP net earnings and
non-GAAP diluted earnings per share for 2015 exclude $6.6 million and $19.8
million in Progressive-related intangible amortization
expense for the third quarter and first nine 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
management and investors 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 management and
investors 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)
Nine Months Ended
|
|
|
September
30,
|
September
30,
|
|
|
2016
|
2015
|
2016
|
2015
|
|
Net
Earnings
|
$
|
29,464
|
|
$
|
24,194
|
|
$
|
117,652
|
|
$
|
113,983
|
|
|
Add
Progressive-Related Intangible Amortization Expense
(1)(2)
|
4,286
|
|
4,359
|
|
12,492
|
|
12,603
|
|
|
Less Gain on Sale of
Building (3)
|
—
|
|
—
|
|
(6,998)
|
|
—
|
|
|
Add Retirement and
Severance Charges (4)
|
—
|
|
—
|
|
2,328
|
|
—
|
|
|
Add Loss on Sale of
HomeSmart (5)
|
26
|
|
—
|
|
3,568
|
|
—
|
|
|
Add Restructuring
(6)
|
3,031
|
|
—
|
|
2,944
|
|
—
|
|
|
Non-GAAP Net
Earnings
|
$
|
36,807
|
|
$
|
28,553
|
|
$
|
131,986
|
|
$
|
126,586
|
|
|
|
|
|
|
|
|
Earnings Per Share
Assuming Dilution
|
$
|
.40
|
|
$
|
.33
|
|
$
|
1.61
|
|
$
|
1.56
|
|
|
Add
Progressive-Related Intangible Amortization Expense
(1)(2)
|
.06
|
|
.06
|
|
.17
|
|
.17
|
|
|
Less Gain on Sale of
Building (3)
|
—
|
|
—
|
|
(.10)
|
|
—
|
|
|
Add Retirement and
Severance Charges (4)
|
—
|
|
—
|
|
.03
|
|
—
|
|
|
Add Loss on Sale of
HomeSmart (5)
|
—
|
|
—
|
|
.05
|
|
—
|
|
|
Add Restructuring
(6)
|
.04
|
|
—
|
|
.04
|
|
—
|
|
|
Non-GAAP Earnings Per
Share Assuming Dilution (7)
|
$
|
.50
|
|
$
|
.39
|
|
$
|
1.80
|
|
$
|
1.73
|
|
|
Weighted Average
Shares Outstanding Assuming Dilution
|
73,199
|
|
73,076
|
|
73,231
|
|
72,966
|
|
|
|
(1)
|
Net of taxes of
$2,301 and $7,270 for the three and nine months ended
September 30, 2016 calculated using the effective tax rate for
the three and nine months ended September 30, 2016.
|
(2)
|
Net of taxes of
$2,228 and $7,160 for the three and nine months ended
September 30, 2015 calculated using the effective tax rate for
the three and nine months ended September 30, 2015.
|
(3)
|
Net of taxes of
$4,073 for the nine months ended September 30, 2016 calculated
using the effective tax rate for the nine months ended
September 30, 2016.
|
(4)
|
Net of taxes of
$1,355 for the nine months ended September 30, 2016 calculated
using the effective tax rate for the nine months ended
September 30, 2016.
|
(5)
|
Net of taxes of $14
and $2,077 for the three and nine months ended September 30,
2016 calculated using the effective tax rate for the three and nine
months ended September 30, 2016.
|
(6)
|
Net of taxes of
$1,627 and $1,714 for the three and nine months ended
September 30, 2016 calculated using the effective tax rate for
the three and nine months ended September 30, 2016
|
(7)
|
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)
Nine Months Ended
|
|
September
30,
|
September
30,
|
|
2016
|
2015
|
2016
|
2015
|
Loss Before Income
Taxes
|
$
|
(2,524)
|
|
$
|
—
|
|
$
|
(7,686)
|
|
$
|
—
|
|
Add: Adjustment to
Increase Allowance for Loan Losses During Period
|
1,493
|
|
—
|
|
4,652
|
|
—
|
|
Pre-tax,
Pre-provision Loss
|
$
|
(1,031)
|
|
$
|
—
|
|
$
|
(3,034)
|
|
$
|
—
|
|
Aaron's, Inc. and
Subsidiaries
|
Non-GAAP Financial
Information
|
Quarterly Segment
EBITDA
|
(In
thousands)
|
(Unaudited)
|
|
Three Months Ended
September 30, 2016
|
|
Sales and Lease
Ownership
|
Progressive
|
HomeSmart
|
DAMI
|
Franchise
|
Manufacturing
|
Other1
|
Consolidated
Total
|
Net
Earnings
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
29,464
|
|
Income
Taxes
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
15,818
|
|
Earnings
(Loss) Before Income
Taxes
|
23,385
|
|
24,655
|
|
(40)
|
|
(2,524)
|
|
11,022
|
|
(545)
|
|
(10,671)
|
|
45,282
|
|
Interest Expense
(Income)
|
2,133
|
|
4,933
|
|
—
|
|
1,056
|
|
—
|
|
—
|
|
(2,377)
|
|
5,745
|
|
Depreciation
|
7,132
|
|
1,030
|
|
—
|
|
99
|
|
287
|
|
325
|
|
4,550
|
|
13,423
|
|
Amortization
|
482
|
|
6,587
|
|
—
|
|
145
|
|
—
|
|
—
|
|
—
|
|
7,214
|
|
EBITDA
|
$
|
33,132
|
|
$
|
37,205
|
|
$
|
(40)
|
|
$
|
(1,224)
|
|
$
|
11,309
|
|
$
|
(220)
|
|
$
|
(8,498)
|
|
$
|
71,664
|
|
Loss on Sale of
HomeSmart
|
—
|
|
—
|
|
40
|
|
—
|
|
—
|
|
—
|
|
—
|
|
40
|
|
Restructuring
|
2,571
|
|
—
|
|
—
|
|
—
|
|
88
|
|
—
|
|
1,999
|
|
4,658
|
|
Adjusted
EBITDA
|
$
|
35,703
|
|
$
|
37,205
|
|
$
|
—
|
|
$
|
(1,224)
|
|
$
|
11,397
|
|
$
|
(220)
|
|
$
|
(6,499)
|
|
$
|
76,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, 2015
|
|
Sales and Lease
Ownership
|
Progressive
|
HomeSmart
|
DAMI
|
Franchise
|
Manufacturing
|
Other1
|
Consolidated
Total
|
Net
Earnings
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
24,194
|
|
Income
Taxes
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
12,362
|
|
Earnings
(Loss) Before Income
Taxes
|
32,348
|
|
5,617
|
|
(335)
|
|
—
|
|
11,327
|
|
349
|
|
(12,750)
|
|
36,556
|
|
Interest Expense
(Income)
|
1,950
|
|
5,556
|
|
213
|
|
—
|
|
—
|
|
5
|
|
(2,200)
|
|
5,524
|
|
Depreciation
|
7,169
|
|
572
|
|
612
|
|
—
|
|
358
|
|
396
|
|
3,778
|
|
12,885
|
|
Amortization
|
419
|
|
6,587
|
|
12
|
|
—
|
|
—
|
|
—
|
|
—
|
|
7,018
|
|
EBITDA
|
$
|
41,886
|
|
$
|
18,332
|
|
$
|
502
|
|
$
|
—
|
|
$
|
11,685
|
|
$
|
750
|
|
$
|
(11,172)
|
|
$
|
61,983
|
|
|
|
|
|
|
|
|
|
|
1Other
segment is primarily revenues attributable to (i) leasing space to
unrelated third parties in the corporate headquarters building
during 2015 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
|
Nine Months
Segment EBITDA
|
(In
thousands)
|
(Unaudited)
|
|
Nine Months Ended
September 30, 2016
|
|
Sales and Lease
Ownership
|
Progressive
|
HomeSmart
|
DAMI
|
Franchise
|
Manufacturing
|
Other1
|
Consolidated
Total
|
Net
Earnings
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
117,652
|
|
Income
Taxes
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
68,482
|
|
Earnings
(Loss) Before Income
Taxes
|
$
|
118,910
|
|
$
|
75,652
|
|
$
|
(3,693)
|
|
$
|
(7,686)
|
|
$
|
35,922
|
|
$
|
859
|
|
$
|
(33,830)
|
|
$
|
186,134
|
|
Interest Expense
(Income)
|
6,127
|
|
15,225
|
|
294
|
|
3,041
|
|
—
|
|
2
|
|
(6,728)
|
|
17,961
|
|
Depreciation
|
21,462
|
|
3,095
|
|
810
|
|
302
|
|
897
|
|
985
|
|
12,486
|
|
40,037
|
|
Amortization
|
1,349
|
|
19,762
|
|
19
|
|
425
|
|
—
|
|
—
|
|
—
|
|
21,555
|
|
EBITDA
|
$
|
147,848
|
|
$
|
113,734
|
|
$
|
(2,570)
|
|
$
|
(3,918)
|
|
$
|
36,819
|
|
$
|
1,846
|
|
$
|
(28,072)
|
|
$
|
265,687
|
|
Gain on Sale of
Building
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(11,071)
|
|
$
|
(11,071)
|
|
Retirement
Charges
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3,683
|
|
3,683
|
|
Loss on Sale of
HomeSmart
|
—
|
|
—
|
|
5,645
|
|
—
|
|
—
|
|
—
|
|
—
|
|
5,645
|
|
Restructuring
|
2,571
|
|
—
|
|
—
|
|
|
88
|
|
—
|
|
1,999
|
|
4,658
|
|
Adjusted
EBITDA
|
$
|
150,419
|
|
$
|
113,734
|
|
$
|
3,075
|
|
$
|
(3,918)
|
|
$
|
36,907
|
|
$
|
1,846
|
|
$
|
(33,461)
|
|
$
|
268,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2015
|
|
Sales and Lease
Ownership
|
Progressive
|
HomeSmart
|
DAMI
|
Franchise
|
Manufacturing
|
Other1
|
Consolidated
Total
|
Net
Earnings
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
113,983
|
|
Income
Taxes
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
64,757
|
|
Earnings
(Loss) Before Income
Taxes
|
$
|
132,079
|
|
$
|
44,761
|
|
$
|
239
|
|
$
|
—
|
|
$
|
37,218
|
|
$
|
2,007
|
|
$
|
(37,564)
|
|
$
|
178,740
|
|
Interest Expense
(Income)
|
5,831
|
|
16,620
|
|
667
|
|
—
|
|
—
|
|
22
|
|
(6,025)
|
|
17,115
|
|
Depreciation
|
22,206
|
|
1,490
|
|
1,859
|
|
—
|
|
1,099
|
|
1,129
|
|
10,942
|
|
38,725
|
|
Amortization
|
1,150
|
|
19,763
|
|
21
|
|
—
|
|
—
|
|
—
|
|
—
|
|
20,934
|
|
EBITDA
|
$
|
161,266
|
|
$
|
82,634
|
|
$
|
2,786
|
|
$
|
—
|
|
$
|
38,317
|
|
$
|
3,158
|
|
$
|
(32,647)
|
|
$
|
255,514
|
|
|
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
|
|
|
$132,000 -
$144,000
|
|
Taxes1
|
—
|
—
|
76,000 -
84,000
|
|
Projected Earnings
Before Taxes
|
$127,000 -
$137,000
|
$89,000 -
$99,000
|
208,000 -
228,000
|
|
Interest Expense
(Income)
|
—
|
21,000
|
23,000
|
|
Depreciation
|
50,000
|
4,000
|
54,000
|
|
Amortization
|
2,000
|
26,000
|
29,000
|
|
Projected
EBITDA
|
179,000 -
189,000
|
140,000 -
150,000
|
314,000 -
334,000
|
|
Projected Other
Adjustments, Net3
|
16,000
|
—
|
16,000
|
|
Projected Adjusted
EBITDA
|
$195,000 -
$205,000
|
$140,000 -
$150,000
|
$330,000 -
$350,000
|
|
|
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.
|
3
|
Projected Other
Adjustments include the non-GAAP charges related to the sale of
building, severance and retirement, loss on sale of HomeSmart and
the core business restructuring and cost reduction
initiative.
|
|
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
|
$
|
1.79
|
|
$
|
1.93
|
|
|
Add Projected
Progressive-Related Intangible Amortization Expense
|
.23
|
|
.23
|
|
|
Add Sum of Other
Adjustments1
|
.14
|
|
.14
|
|
|
Projected Non-GAAP
Earnings Per Share Assuming Dilution
|
$
|
2.16
|
|
$
|
2.30
|
|
|
|
1
|
Projected Other
Adjustments include the non-GAAP charges related to the sale of
building, severance and retirement, loss on sale of HomeSmart and
the core business restructuring and cost reduction
initiative.
|
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SOURCE Aaron's, Inc.