ATLANTA, April 25, 2019
/PRNewswire/ -- Aaron's, Inc. (NYSE: AAN), a leading
omnichannel provider of lease-purchase solutions, today announced
financial results for the three months ended March 31,
2019.
"We are pleased to report a strong start to the year, achieving
over $1 billion in quarterly revenues
for the first time and 33% growth in non-GAAP earnings per share,"
said John Robinson, Chief Executive
Officer. "Progressive continues to perform at a high level
and is executing well with its new and existing retail partners. At
the same time, it continues to make meaningful investments ahead of
expected strong revenue growth and pipeline conversion. The Aaron's
Business reported results in-line with our expectations and
achieved positive same store revenues. We are encouraged by the
success the Aaron's Business is experiencing in its business
transformation initiatives," concluded Mr. Robinson.
Consolidated Results
For the first quarter of 2019, consolidated revenues were
$1.012 billion compared with
$954.8 million for the first quarter
of 2018. Calculated on a basis consistent with the 2019 adoption of
ASC 842 related to lease accounting, revenues increased
$103.8 million, or 11.4%,
compared to the prior year period. Additionally, the Aaron's
Business same store revenues were positive 0.7% which was a
continuation of the improving trend in same store revenues
experienced throughout 2018. The increase in consolidated revenues
was primarily due to the 19.0% increase in revenues at Progressive,
calculated on a basis consistent with the 2019 adoption of ASC 842,
and the contributions of 152 franchised locations acquired by the
Aaron's Business in 2018.
Net earnings for the first quarter of 2019 were $56.1 million compared to $52.2 million in the prior year period. Net
earnings in the first quarter were burdened with approximately
$13.3 million in pretax charges
related to the closure of 84 underperforming company-owned
stores. Adjusted EBITDA for the Company was $115.2 million for the first quarter of 2019,
compared with $94.1 million for the
same period in 2018, an increase of $21.1
million, or 22.4%, due primarily to the strong growth in our
Progressive segment. As a percentage of revenues, Adjusted EBITDA
was 11.4% in the first quarter of 2019, an increase of 100 basis
points from the first quarter of 2018 on a consistent accounting
basis, resulting from higher consolidated gross margin. See
"Use of Non-GAAP Financial Information" and the related non-GAAP
reconciliation accompanying this press release.
Diluted earnings per share for the first quarter of 2019 were
$0.82 compared with $0.73 in the year ago period. On a non-GAAP
basis, earnings per share assuming dilution were $1.08 in the first quarter of 2019 compared with
$0.81 for the same quarter in 2018,
an increase of $0.27 or 33.3%.
The Company generated $164.7 million in cash from operations
during the three months ended March 31, 2019 and ended the
first quarter with $124.2 million in
cash, compared with a cash balance of $15.3
million at the end of 2018.
Progressive Leasing Segment Results
Progressive Leasing's revenues in the first quarter of 2019 were
$523.4 million compared to reported
revenues of $486.5 million in the
first quarter of 2018. Calculated on a basis consistent with the
2019 adoption of ASC 842, revenues increased $83.4 million or 19.0%. Invoice volume increased
14.2% in the quarter, driven by a 17.9% increase in invoice volume
per active door, partially offset by a 3.1% decrease in active
doors to approximately 19,800. The decrease in active door count
was primarily due a reduction in mattress and mobile doors, which
was partially offset by additions in other verticals. Progressive
Leasing had 863,000 customers at March 31, 2019, a 19.2%
increase from March 31, 2018.
Earnings before income taxes for the first quarter of 2019 were
$55.4 million. EBITDA for the first
quarter of 2019 was $65.3 million
compared with $46.2 million for the
same period of 2018, an increase of 41.2%. As a percentage of
revenues, EBITDA was 12.5% for the first quarter of 2019, an
increase of 200 basis points compared to the first quarter of 2018,
when calculated on a basis consistent with the 2019 adoption of ASC
842. This increase was due primarily to somewhat lower 90-day early
buyout activity, and the improved leverage of SG&A on higher
revenues.
The provision for lease merchandise write-offs was 7.0% of
revenues in the first quarter of 2019, compared with 6.8% in the
same period of 2018, on a basis consistent with the 2019 adoption
of ASC 842.
The Aaron's Business Segment Results
For the first quarter of 2019, total revenues for the Aaron's
Business increased 4.6% to $480.1
million from $458.8 million in
the first quarter of 2018. The increase was primarily due to the
contributions from 152 franchised locations acquired throughout
2018. Same store revenues were up 0.7% in the first quarter of
2019, continuing the trend of improvement experienced throughout
2018. Customer count on a same store basis was down 3.9% during the
first quarter of 2019 compared to the same period in 2018.
Company-operated Aaron's stores had 992,000 customers at
March 31, 2019, a 4.1% increase from
March 31, 2018.
Lease revenue and fees for the three months ended March 31,
2019 increased 9.7% compared with the same period in
2018. Non-retail sales, which primarily consist of
merchandise sales to the Company's franchisees, decreased 30.5% for
the first quarter of 2019 compared with the same period of the
prior year. The decline is attributed primarily to the
franchise acquisitions completed in 2018.
Earnings before income taxes for the first quarter of 2019 were
$17.6 million. Adjusted EBITDA for
the three months ended March 31, 2019 was $51.4 million compared with $48.0 million for the same period in 2018, an
increase of $3.4 million or 7.0%. As
a percentage of revenues, Adjusted EBITDA improved 20 basis points
to 10.7% for the three months ended March 31, 2019, compared
with 10.5% for the same period last year.
Write-offs for damaged, lost or unsaleable merchandise were 4.8%
of revenues in the first quarter of 2019, compared with 3.8% for
the same period last year.
At March 31, 2019, the Aaron's Business had 1,230
Company-operated stores and 369 franchised stores. During the
first quarter of 2019, the Company acquired four franchised stores
and closed 85 Company-operated stores. Additionally, during
the quarter, three franchised stores closed and one franchised
store was sold to a third party.
Significant Components of Revenue
Consolidated lease revenues and fees for the three months ended
March 31, 2019 increased 14.6% over the same period of the
prior year, calculated on a basis consistent with the 2019 adoption
of ASC 842 related to accounting for leases. Franchise
royalties and fees decreased 28.4% in the first quarter of 2019
compared with the same period a year ago, primarily as a result of
the lower number of franchised stores. Franchise revenues
totaled $120.2 million for the three
months ended March 31, 2019, a decrease of 32.1% from the same
period for the prior year. Same store revenues for franchised
stores were up 1.3% and same store customer counts were down 0.8%
for the first quarter of 2019 compared with the same quarter in
2018. Franchised stores had 259,000 customers at the end of
the first quarter of 2019. Revenues and customers of
franchisees are not revenues and customers of the Aaron's Business
or the Company.
2019 Outlook
The Company is reiterating its outlook for 2019.
Conference Call and Webcast
The Company will hold a conference call to discuss its quarterly
results on Thursday, April 25, 2019, at 8:30 a.m. Eastern Time. The public is
invited to listen to the conference call by webcast accessible
through the Investor Relations section of the Company's website,
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 leading omnichannel provider of
lease-purchase solutions. Progressive Leasing provides
lease-purchase solutions through approximately 20,000 retail
partner locations in 46 states. The Aaron's Business engages
in the sales and lease ownership and specialty retailing of
furniture, consumer electronics, home appliances and accessories
through its 1,599 Company-operated and franchised stores in
47 states, Puerto Rico and
Canada, as well as its e-commerce
platform, Aarons.com. Dent-A-Med, Inc., d/b/a the HELPcard®,
provides a variety of second-look credit products that are
originated through federally-insured banks. For more
information, visit investor.aarons.com, Aarons.com,
ProgLeasing.com, and HELPcard.com.
"Safe Harbor" Statement under the Private Securities
Litigation Reform Act of 1995: Statements in this news release
regarding our 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 "believe," "guidance,"
"outlook," "expect," "will," "expectations," and "trends" and
similar terminology. These risks and uncertainties include
factors such as changes in general economic conditions,
competition, pricing, legal and regulatory proceedings and
investigations, customer privacy, information security, customer
demand, the execution and results of our strategy and expense
reduction and store closure and consolidation initiatives
(including the risk that the costs associated with these
initiatives exceeds expectations), risks related to M&A
activities, including our recent franchisee acquisitions and the
risk that the financial performance from those acquisitions and
from M&A activities do not meet our expectations, risks related
to Progressive Leasing's "virtual" lease-to-own business, the
outcome of Progressive Leasing's pilot or test programs with
various retailers and the results of Progressive Leasing's efforts
to expand its relationships with existing retailer partners and
establish new partnerships with additional retailers, increases in
lease merchandise write-offs and bad debt expense associated with
Progressive Leasing's growth in doors and customers and changes in
product mix, 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, 2018.
Statements in this release that are "forward-looking" include
without limitation statements about our expectations regarding: the
strength of our lease-to-own businesses; the results of our
investments in the Aaron's Business and Progressive Leasing; the
results of our business transformation initiatives in the Aaron's
Business; revenue growth and pipeline conversions for Progressive
Leasing; same store sales for the Aaron's Business and the
reiteration in this press release of the 2019 fiscal year Outlook
set forth in the Company's press release on February 14, 2019, for the Company on a
consolidated basis, and for Progressive Leasing, the Aaron's
Business and DAMI. 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
|
|
|
March 31,
|
|
|
2019
|
2018
|
Revenues:
|
|
|
|
Lease Revenues and
Fees
|
|
$
|
944,157
|
|
$
|
870,067
|
|
Retail
Sales
|
|
12,809
|
|
8,516
|
|
Non-Retail
Sales
|
|
36,981
|
|
53,230
|
|
Franchise Royalties
and Fees
|
|
9,207
|
|
12,862
|
|
Interest and Fees on
Loans Receivable
|
|
8,646
|
|
9,542
|
|
Other
|
|
303
|
|
592
|
|
Total
|
|
$
|
1,012,103
|
|
$
|
954,809
|
|
|
|
|
|
Costs and
Expenses:
|
|
|
|
Depreciation of Lease
Merchandise
|
|
500,820
|
|
440,008
|
|
Retail Cost of
Sales
|
|
8,632
|
|
5,662
|
|
Non-Retail Cost of
Sales
|
|
29,196
|
|
48,020
|
|
Operating
Expenses
|
|
387,216
|
|
390,232
|
|
Restructuring
Expenses, Net
|
|
13,281
|
|
906
|
|
Other Operating
Income, Net
|
|
(897)
|
|
(83)
|
|
Total
|
|
$
|
938,248
|
|
$
|
884,745
|
|
|
|
|
|
Operating
Profit
|
|
73,855
|
|
70,064
|
|
Interest
Income
|
|
101
|
|
202
|
|
Interest
Expense
|
|
(4,956)
|
|
(4,326)
|
|
Other Non-Operating
Income, Net
|
|
1,308
|
|
812
|
|
Earnings Before
Income Tax Expense
|
|
$
|
70,308
|
|
$
|
66,752
|
|
|
|
|
|
Income Tax
Expense
|
|
14,230
|
|
14,506
|
|
Net
Earnings
|
|
$
|
56,078
|
|
$
|
52,246
|
|
|
|
|
|
Earnings Per
Share
|
|
$
|
0.83
|
|
$
|
0.75
|
|
Earnings Per Share
Assuming Dilution
|
|
$
|
0.82
|
|
$
|
0.73
|
|
|
|
|
|
Weighted Average
Shares Outstanding
|
|
67,294
|
|
70,105
|
|
Weighted Average
Shares Outstanding Assuming Dilution
|
|
68,773
|
|
72,018
|
|
Aaron's,
Inc. and Subsidiaries
Consolidated
Balance Sheets
(In
thousands)
|
|
|
|
(Unaudited)
|
|
|
March 31,
2019
|
|
December 31,
2018
|
ASSETS:
|
|
|
|
|
Cash and Cash
Equivalents
|
|
$
|
124,154
|
|
|
$
|
15,278
|
|
Accounts Receivable
(net of allowances of $56,785 in 2019
and $62,704 in 2018)
|
|
84,037
|
|
|
98,159
|
|
Lease Merchandise
(net of accumulated depreciation and
allowances of $808,056 in 2019 and $816,928 in 2018)
|
|
1,301,066
|
|
|
1,318,470
|
|
Loans Receivable (net
of allowances and unamortized fees of
$18,925 in 2019 and $19,941 in 2018)
|
|
72,564
|
|
|
76,153
|
|
Property, Plant and
Equipment at Cost (net of accumulated
depreciation of $291,750 in 2019 and $284,287 in 2018)
|
|
228,864
|
|
|
229,492
|
|
Operating Lease
Right-of-Use Assets
|
|
370,282
|
|
|
—
|
|
Goodwill
|
|
734,558
|
|
|
733,170
|
|
Other Intangibles
(net of accumulated amortization of
$138,308 in 2019 and $130,116 in 2018)
|
|
216,559
|
|
|
228,600
|
|
Income Tax
Receivable
|
|
13,401
|
|
|
29,148
|
|
Prepaid Expenses and
Other Assets
|
|
92,481
|
|
|
98,222
|
|
Total
Assets
|
|
$
|
3,237,966
|
|
|
$
|
2,826,692
|
|
LIABILITIES & SHAREHOLDERS'
EQUITY:
|
|
|
|
|
Accounts Payable and
Accrued Expenses
|
|
$
|
246,779
|
|
|
$
|
293,153
|
|
Deferred Income Taxes
Payable
|
|
279,224
|
|
|
267,500
|
|
Customer Deposits and
Advance Payments
|
|
83,610
|
|
|
80,579
|
|
Operating Lease
Liabilities
|
|
406,559
|
|
|
—
|
|
Debt
|
|
408,286
|
|
|
424,752
|
|
Total
Liabilities
|
|
1,424,458
|
|
|
1,065,984
|
|
SHAREHOLDERS'
EQUITY:
|
|
|
|
|
Common Stock, Par
Value $0.50 Per Share: Authorized:
225,000,000 Shares at March 31, 2019 and December 31,
2018; Shares Issued: 90,752,123 at March 31, 2019 and
December 31, 2018
|
|
45,376
|
|
|
45,376
|
|
Additional Paid-in
Capital
|
|
270,727
|
|
|
278,922
|
|
Retained
Earnings
|
|
2,061,651
|
|
|
2,005,344
|
|
Accumulated Other
Comprehensive Loss
|
|
(663)
|
|
|
(1,087)
|
|
|
|
|
|
|
Less: Treasury Shares
at Cost
|
|
|
|
|
Common Stock:
23,074,674 Shares at March 31, 2019 and
23,567,979 at December 31, 2018
|
|
(563,583)
|
|
|
(567,847)
|
|
Total Shareholders'
Equity
|
|
1,813,508
|
|
|
1,760,708
|
|
Total Liabilities and
Shareholders' Equity
|
|
$
|
3,237,966
|
|
|
2,826,692
|
|
Aaron's, Inc. and
Subsidiaries
Consolidated
Statements of Cash Flows
|
|
|
|
(Unaudited)
Three Months Ended
|
|
March 31,
|
(In
Thousands)
|
2019
|
|
2018
|
OPERATING
ACTIVITIES:
|
|
|
|
Net
Earnings
|
$
|
56,078
|
|
|
$
|
52,246
|
|
Adjustments to
Reconcile Net Earnings to Cash Provided by Operating
Activities:
|
|
|
|
Depreciation of Lease
Merchandise
|
500,820
|
|
|
440,008
|
|
Other Depreciation
and Amortization
|
26,562
|
|
|
22,115
|
|
Accounts Receivable
Provision
|
63,235
|
|
|
51,458
|
|
Provision for Credit
Losses on Loans Receivable
|
4,255
|
|
|
4,492
|
|
Stock-Based
Compensation
|
7,549
|
|
|
8,519
|
|
Deferred Income
Taxes
|
10,861
|
|
|
23,201
|
|
Impairment of
Assets
|
10,492
|
|
|
—
|
|
Amortization of Right
of Use Assets
|
25,802
|
|
|
—
|
|
Other Changes,
Net
|
883
|
|
|
(1,014)
|
|
Changes in Operating
Assets and Liabilities, Net of Effects of
Acquisitions and Dispositions:
|
|
|
|
Additions to Lease
Merchandise
|
(580,089)
|
|
|
(514,055)
|
|
Book Value of Lease
Merchandise Sold or Disposed
|
98,257
|
|
|
98,797
|
|
Accounts
Receivable
|
(50,467)
|
|
|
(33,591)
|
|
Prepaid Expenses and
Other Assets
|
1,550
|
|
|
(6,022)
|
|
Income Tax
Receivable
|
15,747
|
|
|
68,214
|
|
Operating Lease
Liabilities
|
(27,890)
|
|
|
—
|
|
Accounts Payable and
Accrued Expenses
|
(1,854)
|
|
|
(21,598)
|
|
Customer Deposits and
Advance Payments
|
2,947
|
|
|
3,806
|
|
Cash Provided by
Operating Activities
|
164,738
|
|
|
196,576
|
|
INVESTING
ACTIVITIES:
|
|
|
|
Investments in Loans
Receivable
|
(14,493)
|
|
|
(14,598)
|
|
Proceeds from Loans
Receivable
|
14,482
|
|
|
15,135
|
|
Proceeds from
Investments
|
—
|
|
|
666
|
|
Outflows on Purchases
of Property, Plant and Equipment
|
(23,807)
|
|
|
(17,254)
|
|
Proceeds from
Property, Plant and Equipment
|
511
|
|
|
2,731
|
|
Outflows on
Acquisitions of Businesses and Customer Agreements, Net
of Cash Acquired
|
(3,470)
|
|
|
(4,774)
|
|
Proceeds from
Dispositions of Businesses and Customer Agreements,
Net of Cash Disposed
|
755
|
|
|
144
|
|
Cash Used in
Investing Activities
|
(26,022)
|
|
|
(17,950)
|
|
FINANCING
ACTIVITIES:
|
|
|
|
Repayments on
Revolving Facility, Net
|
(16,000)
|
|
|
—
|
|
Repayments on
Debt
|
(575)
|
|
|
(10,511)
|
|
Dividends
Paid
|
(2,366)
|
|
|
(2,111)
|
|
Acquisition of
Treasury Stock
|
—
|
|
|
(18,407)
|
|
Issuance of Stock
Under Stock Option Plans
|
1,996
|
|
|
3,182
|
|
Shares Withheld for
Tax Payments
|
(12,977)
|
|
|
(12,343)
|
|
Debt Issuance
Costs
|
—
|
|
|
(55)
|
|
Cash Used in
Financing Activities
|
(29,922)
|
|
|
(40,245)
|
|
EFFECT OF EXCHANGE
RATE CHANGES ON CASH AND CASH
EQUIVALENTS
|
82
|
|
|
(8)
|
|
Increase in Cash and
Cash Equivalents
|
108,876
|
|
|
138,373
|
|
Cash and Cash
Equivalents at Beginning of Period
|
15,278
|
|
|
51,037
|
|
Cash and Cash
Equivalents at End of Period
|
$
|
124,154
|
|
|
$
|
189,410
|
|
Aaron's, Inc. and
Subsidiaries
Quarterly Revenues
by Segment
(In
thousands)
|
|
|
|
(Unaudited)
|
|
Three Months
Ended
|
|
March 31,
2019
|
|
Progressive
Leasing1
|
The Aaron's
Business
|
DAMI
|
Consolidated
Total
|
Lease Revenues and
Fees
|
$
|
523,401
|
|
$
|
420,756
|
|
$
|
—
|
|
$
|
944,157
|
|
Retail
Sales
|
—
|
|
12,809
|
|
—
|
|
12,809
|
|
Non-Retail
Sales
|
—
|
|
36,981
|
|
—
|
|
36,981
|
|
Franchise Royalties
and Fees
|
—
|
|
9,207
|
|
—
|
|
9,207
|
|
Interest and Fees on
Loans Receivable
|
—
|
|
—
|
|
8,646
|
|
8,646
|
|
Other
|
—
|
|
303
|
|
—
|
|
303
|
|
Total
Revenues
|
$
|
523,401
|
|
$
|
480,056
|
|
$
|
8,646
|
|
$
|
1,012,103
|
|
|
1 For the
three months ended March 31, 2019, Progressive Leasing
incurred bad debt expense of $56,070 which was recorded as a
reduction to Lease Revenues and Fees as a result of the Company's
adoption of ASC 842, Leases.
|
|
(Unaudited)
|
|
Three Months
Ended
|
|
March 31,
2018
|
|
Progressive
Leasing
|
The Aaron's
Business
|
DAMI
|
Consolidated
Total
|
Lease Revenues and
Fees
|
$
|
486,517
|
|
$
|
383,550
|
|
$
|
—
|
|
$
|
870,067
|
|
Retail
Sales
|
—
|
|
8,516
|
|
—
|
|
8,516
|
|
Non-Retail
Sales
|
—
|
|
53,230
|
|
—
|
|
53,230
|
|
Franchise Royalties
and Fees
|
—
|
|
12,862
|
|
—
|
|
12,862
|
|
Interest and Fees on
Loans Receivable
|
—
|
|
—
|
|
9,542
|
|
9,542
|
|
Other
|
—
|
|
592
|
|
—
|
|
592
|
|
Total
Revenues
|
$
|
486,517
|
|
$
|
458,750
|
|
$
|
9,542
|
|
$
|
954,809
|
|
Progressive Bad Debt
Expense
|
46,525
|
|
—
|
|
—
|
|
46,525
|
|
Total Revenues, net
of Progressive
Bad Debt Expense1
|
$
|
439,992
|
|
$
|
458,750
|
|
$
|
9,542
|
|
$
|
908,284
|
|
|
1 See the
"Use of Non-GAAP Financial Information" section accompanying this
press release.
|
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 first quarter of 2019
each exclude $5.4 million in
Progressive Leasing-related intangible amortization expense,
$4.0 million in amortization expense
resulting from franchisee acquisitions, $0.1
million in acquisition transaction and transition costs
related to franchisee acquisitions and $13.3
million in restructuring charges. Non-GAAP net earnings and
non-GAAP diluted earnings per share for the first quarter of 2018
exclude $5.4 million in Progressive
Leasing-related intangible amortization expense, $1.2 million in amortization expense resulting
from franchisee acquisitions, $0.9
million in restructuring charges and $0.2 million in tax effects related to a Tax Act
adjustment.
The EBITDA and Adjusted EBITDA figures presented in this press
release are calculated as the Company's earnings before interest
expense, 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.
This press release also discloses non-GAAP revenues for periods
prior to January 1, 2019 as if the
lessor accounting impacts of ASC 842 were in effect during the
three months ended March 31, 2018.
"Total Revenues, net of Progressive Bad Debt Expense" and the
related percentages for the comparable prior year period are a
supplemental measure of our performance that are not calculated in
accordance with GAAP in place during 2018. These non-GAAP measures
assume that Progressive bad debt expense is recorded as a reduction
to lease revenues and fees instead of within operating expenses in
2018. Please see Note 1 to the condensed consolidated financial
statements and the "Results of Operations" section of our Form 10-Q
for the quarter ended March 31, 2019
for a more comprehensive disclosure of bad debt expense and the
impact of the adoption of ASC 842 related to accounting for leases
for the prospective periods beginning with the first quarter of
2019.
Management believes these non-GAAP measures for 2018 provide
relevant and useful information for users of our financial
statements, as it provides comparability with the financial results
we are reporting beginning in 2019 when ASC 842 became effective
and we began reporting Progressive bad debt expense as a reduction
to lease revenues and fees. We believe these non-GAAP measures
provide management and investors the ability to better understand
the results from the primary operations of our business in 2019
compared with 2018 by classifying Progressive bad debt expense
consistently between the periods.
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. Due to the growth of our
originated credit card loan portfolio after our October 2015 acquisition of DAMI, we believe
pre-provision, pre-tax loss helps investors to assess DAMI's
operating performance until such time as the credit card portfolio
reaches levels which management believes will be normal and
recurring. Management uses this measure as one of its bases
for strategic planning and forecasting for DAMI. Our use of
pre-provision, pre-tax 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.
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, Total revenues net of Progressive bad debt
expense and the related percentages for the comparable prior year
period, 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 per share)
|
|
|
|
(Unaudited)
Three Months Ended
|
|
March 31,
|
|
2019
|
2018
|
Net
Earnings
|
$
|
56,078
|
|
$
|
52,246
|
|
Add Progressive
Leasing-Related Intangible Amortization Expense
(1)(2)
|
4,324
|
|
4,243
|
|
Add
Franchisee-Related Intangible Amortization
Expense(3)(4)
|
3,226
|
|
953
|
|
Add Restructuring
Expense, net (5)(6)
|
10,593
|
|
709
|
|
Add Acquisition
Transaction and Transition Costs(7)
|
90
|
|
—
|
|
Tax Act
Adjustments
|
—
|
|
193
|
|
Non-GAAP Net
Earnings
|
$
|
74,311
|
|
$
|
58,344
|
|
|
|
|
Earnings Per Share
Assuming Dilution
|
$
|
0.82
|
|
$
|
0.73
|
|
Add Progressive
Leasing-Related Intangible Amortization Expense
(1)(2)
|
0.06
|
|
0.06
|
|
Add
Franchisee-Related Intangible Amortization
Expense(3)(4)
|
0.05
|
|
0.01
|
|
Add Restructuring
Expense, net(5)(6)
|
0.15
|
|
0.01
|
|
Add Acquisition
Transaction and Transition Costs(7)
|
—
|
|
—
|
|
Tax Act
Adjustments
|
—
|
|
—
|
|
Non-GAAP Earnings Per
Share Assuming Dilution(8)
|
$
|
1.08
|
|
$
|
0.81
|
|
|
|
|
Weighted Average
Shares Outstanding Assuming Dilution
|
68,773
|
|
72,018
|
|
|
|
(1)
|
Net of taxes of
$1,097 for the three months ended March 31, 2019 calculated
using the effective tax rate for the period.
|
(2)
|
Net of taxes of
$1,178 for the three months ended March 31, 2018 calculated
using the estimated tax rate of 21.73% for the period.
|
(3)
|
Net of taxes of $819
for the three months ended March 31, 2019 calculated using the
effective tax rate for the period.
|
(4)
|
Net of taxes of $264
for the three months ended March 31, 2018 calculated using the
estimated tax rate of 21.73% for the period.
|
(5)
|
Net of taxes of
$2,688 for the three months ended March 31, 2019 calculated
using the effective tax rate for the period.
|
(6)
|
Net of taxes of $197
for the three months ended March 31, 2018 calculated using the
estimated tax rate of 21.73% for the period.
|
(7)
|
Net of taxes of $23
for the three months ended March 31, 2019 calculated using the
effective tax rate for the period.
|
(8)
|
In some cases, the
sum of individual EPS amounts may not equal total non-GAAP EPS
calculations due to rounding.
|
DAMI Pre-tax,
Pre-provision Loss
(In
thousands)
|
|
|
|
(Unaudited)
Three Months Ended
|
|
March 31,
|
|
2019
|
2018
|
Loss Before Income
Taxes
|
$
|
(2,668)
|
|
$
|
(1,306)
|
|
Adjustment to
Increase Allowance for Loan Losses During Period
|
(607)
|
|
(755)
|
|
Pre-tax,
Pre-provision Loss
|
$
|
(3,275)
|
|
$
|
(2,061)
|
|
Aaron's, Inc. and
Subsidiaries
Non-GAAP Financial
Information
Quarterly Segment
EBITDA
(In
thousands)
|
|
|
|
(Unaudited)
|
|
Three Months
Ended
|
|
March 31,
2019
|
|
Progressive
Leasing
|
The Aaron's
Business
|
DAMI
|
Consolidated
Total
|
Net
Earnings
|
|
|
|
$
|
56,078
|
|
Income
Taxes1
|
|
|
|
14,230
|
|
Earnings (Loss)
Before Income Taxes
|
55,388
|
|
17,588
|
|
(2,668)
|
|
70,308
|
|
Interest
Expense
|
2,722
|
|
1,354
|
|
880
|
|
4,956
|
|
Depreciation
|
1,787
|
|
14,588
|
|
190
|
|
16,565
|
|
Amortization
|
5,421
|
|
4,431
|
|
145
|
|
9,997
|
|
EBITDA
|
$
|
65,318
|
|
$
|
37,961
|
|
$
|
(1,453)
|
|
$
|
101,826
|
|
Restructuring
Expenses
|
—
|
|
13,281
|
|
—
|
|
13,281
|
|
Acquisition
Transaction and Transition Costs
|
—
|
|
113
|
|
—
|
|
113
|
|
Adjusted
EBITDA
|
$
|
65,318
|
|
$
|
51,355
|
|
$
|
(1,453)
|
|
$
|
115,220
|
|
|
|
(Unaudited)
|
|
Three Months
Ended
|
|
March 31,
2018
|
|
Progressive
Leasing
|
The Aaron's
Business
|
DAMI
|
Consolidated
Total
|
Net
Earnings
|
|
|
|
$
|
52,246
|
|
Income
Taxes1
|
|
|
|
14,506
|
|
Earnings (Loss)
Before Income Taxes
|
34,979
|
|
33,079
|
|
(1,306)
|
|
66,752
|
|
Interest
Expense
|
4,375
|
|
(823)
|
|
774
|
|
4,326
|
|
Depreciation
|
1,468
|
|
13,086
|
|
242
|
|
14,796
|
|
Amortization
|
5,421
|
|
1,753
|
|
145
|
|
7,319
|
|
EBITDA
|
$
|
46,243
|
|
$
|
47,095
|
|
$
|
(145)
|
|
$
|
93,193
|
|
Restructuring
Expenses
|
—
|
|
906
|
|
—
|
|
906
|
|
Adjusted
EBITDA
|
$
|
46,243
|
|
$
|
48,001
|
|
$
|
(145)
|
|
$
|
94,099
|
|
|
(1) Taxes are
calculated on a consolidated basis and are not identifiable by
company segments.
|
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SOURCE Aaron's, Inc.