ATLANTA, July 29, 2020 /PRNewswire/ -- Aaron's, Inc.
(NYSE: AAN), a leading omnichannel provider of lease-purchase
solutions, today announced financial results for the three months
ended June 30, 2020.
"The Company's second quarter results significantly exceeded our
expectations as we managed the business through the uncertainty
caused by the COVID-19 pandemic. Progressive's results were
favorably impacted by improving invoice growth throughout the
quarter, operating expense management and strong customer payment
activity. Similarly, the Aaron's Business second quarter
financial strength is the result of strong customer payment
activity, lower write-offs, and operating expense management. We
continue to maintain a conservatively capitalized balance sheet and
have experienced strong year-to-date operating cash flow.
Overall, I am very pleased with our second quarter results and
would like to express my deepest gratitude to our team members
across all of our businesses for their dedication during these
challenging times," said John
Robinson, Chief Executive Officer of Aaron's, Inc.
Consolidated Results
For the second quarter of
2020, consolidated revenues were $1.03
billion compared with $968.1
million for the second quarter of 2019, an increase of 6.4%.
The increase in consolidated revenues was due to an increase in
revenues at Progressive partially offset by lower revenues in the
Aaron's Business.
Net earnings for the second quarter of 2020 were $68.4 million compared to net earnings of
$42.7 million in the prior year
period. Net earnings in the second quarter of 2020 and 2019
included $7.0 million and
$18.7 million, respectively, in
pre-tax restructuring charges.
Adjusted EBITDA for the Company was $129.8 million for the second quarter of 2020,
compared with $107.4 million for the
same period in 2019, an increase of $22.4
million, or 20.9%. As a percentage of revenues, Adjusted
EBITDA was 12.6% in the second quarter of 2020 compared with 11.1%
for the same period in 2019.
Diluted earnings per share for the second quarter of 2020 were
$1.01 compared with diluted earnings
per share of $0.62 in the year ago
period. On a non-GAAP basis, diluted earnings per share were
$1.18 in the second quarter of 2020.
This compares with non-GAAP earnings per share of $0.93 for the same quarter in 2019, an increase
of $0.25 or 26.9%.
The Company generated $360.8 million in cash from operations
during the six months ended June 30, 2020 and ended the second
quarter with $313.1 million in cash,
compared with a cash balance of $57.8
million at the end of 2019. Total available liquidity was
approximately $800 million at
June 30, 2020.
Progressive Leasing Segment Results
Progressive
Leasing's revenues in the second quarter of 2020 increased 14.2% to
a record $589.7 million compared to
$516.3 million in the second quarter
of 2019. Second quarter invoice volume decreased 2.2% due primarily
to the COVID-related closure of many retail partner locations,
which have recently begun to reopen. Invoice volume per active door
was up 1.7% while active doors were down 3.9% to approximately
19,000. Progressive Leasing had 902,000 customers at June 30,
2020, a 0.8% decrease from June 30, 2019.
Earnings before income taxes for the second quarter of 2020 were
$59.8 million compared to
$58.4 million in the prior year
period. EBITDA for the second quarter of 2020 was $70.7 million compared with $68.2 million for the same period of 2019, an
increase of 3.6%. As a percentage of revenues, EBITDA was
12.0% for the second quarter of 2020, a decrease of 120 basis
points compared to the second quarter of 2019. Lower SG&A
expenses and merchandise write-offs were more than offset by lower
year-over-year gross margins resulting from higher 90-day buyout
activity in the second quarter.
The provision for lease merchandise write-offs was 6.1% of
revenues in the second quarter of 2020 compared with 7.6% in the
same period of 2019. The decrease in the provision for lease
merchandise write-offs was due primarily to strong customer payment
activity and more conservative decisioning.
The Aaron's Business Segment Results
For the
second quarter of 2020, total revenues for the Aaron's Business
decreased 2.8% to $431.0 million from
$443.2 million in the second quarter
of 2019. The decrease was primarily due to the net reduction of 185
stores during the 15-month period ended June
30, 2020, a lower lease portfolio balance entering the
quarter, and the temporary impact of COVID-related showroom
closures during the second quarter of 2020, partially offset by
strong customer payment activity. Same-store revenues were up
1.4% due primarily to strong customer payment activity
including early buyout revenue and retail sales and continued
growth in e-commerce revenue. Customer count on a same-store basis
was down 6.5% during the second quarter of 2020 compared to
the same period in 2019. Company-operated Aaron's stores had
898,000 customers at June 30, 2020,
an 8.7% decrease from June 30,
2019.
Lease revenue and fees for the three months ended June 30,
2020 decreased 2.8% compared with the same period in 2019.
Non-retail sales, which primarily consist of merchandise sales to
the Company's franchisees, decreased 3.2% for the second quarter of
2020 compared with the same period of the prior year.
Earnings before income taxes for the second quarter of 2020 were
$32.0 million which includes the
impact of $7.0 million in
restructuring charges. Adjusted EBITDA for the three months ended
June 30, 2020 was $57.1 million,
compared to $39.7 million for the
same period in 2019, an increase of $17.4
million or 44.0%. The increase in adjusted EBITDA was due
primarily to strong customer payment activity, improved merchandise
write-offs and lower SG&A expenses, partially offset by the
impact of a lower portfolio balance entering the second quarter and
the temporary impact of COVID related showroom closures during the
second quarter of 2020.
The provision for lease merchandise write-offs was 3.7% of
revenues in the second quarter of 2020, compared with 5.6% for the
same period last year. Contributing to the year-over-year
improvement in write-offs was strong customer payment activity,
both in-store and on Aarons.com.
At June 30, 2020, the Aaron's Business had 1,098
Company-operated stores and 316 franchised stores.
Significant Components of Revenue and Franchise
Performance
Consolidated lease revenues and fees for the
three months ended June 30, 2020 increased 6.9% over the same
period of the prior year. Franchise royalties and fees decreased
60.9% in the second quarter of 2020 compared with the same period a
year ago. That decrease resulted from the temporary suspension of
franchise royalty fees from early March until late May, as part of
the COVID-19 relief the Aaron's Business offered franchisees, and a
lower number of franchised stores. Franchisee revenues
totaled $104.2 million for the three
months ended June 30, 2020, a decrease of 3.5% from the same
period for the prior year. Same-store revenues for franchised
stores increased 6.6% and same-store customer counts declined 7.6%
for the second quarter of 2020 compared with the same quarter in
2019. Franchised stores had 216,000 customers at the end of
the second quarter of 2020. Revenues and customers of
franchisees are not revenues and customers of the Aaron's Business
or the Company.
2020 Outlook
For the third quarter, we expect
consolidated revenues between $950
million and $975 million and
Non-GAAP Diluted Earnings Per Share of between $0.80 and $0.90.
This outlook assumes no significant deterioration in the current
retail environment, some level of continuing government stimulus,
and a gradual improvement in global supply chain conditions.
Reconciliation of Non-GAAP Items
|
Q3 2020
Range
|
|
Low
|
High
|
Projected Earnings
Per Share Assuming Dilution
|
$
|
0.74
|
|
$
|
0.84
|
|
Add: Projected
Intangible Amortization Expense
|
0.06
|
|
0.06
|
|
Projected Non-GAAP
Earnings Per Share Assuming Dilution
|
$
|
0.80
|
|
$
|
0.90
|
|
Conference Call and Webcast
The Company will
hold a conference call to discuss its quarterly results on
Wednesday, July 29, 2020, 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 leading omnichannel provider of lease-purchase
solutions. Progressive Leasing provides lease-purchase
solutions through more than 19,000 retail and e-commerce partner
locations in 46 states and the District
of Columbia. The Aaron's Business engages in the sales and
lease ownership and specialty retailing of furniture, home
appliances, consumer electronics and accessories through its
approximately 1,400 Company-operated and franchised stores in 47
states, Puerto Rico and
Canada, as well as its e-commerce
platform, Aarons.com. Vive Financial ("Vive", formerly Dent-A-Med,
Inc.), 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 ViveCard.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 "continue", "expect",
"outlook" and similar terminology. These risks and
uncertainties include factors such as (i) the impact of the
COVID-19 pandemic and related measures taken by governmental or
regulatory authorities to combat the pandemic, and whether
additional government stimulus payments or supplemental
unemployment benefits will be approved, and the nature, amount and
timing of any such payments or benefits, including the impact of
the pandemic and such measures on: (a) demand for the lease-to-own
products offered by our Progressive Leasing and Aaron's Business
segments, (b) Progressive Leasing's retail partners, (c) our
customers, including their ability and willingness to satisfy their
obligations under their lease agreements, (d) our suppliers'
ability to provide us with the merchandise we need to obtain from
them, (e) our employees and labor needs, including our ability to
adequately staff our operations, (f) our financial and operational
performance, and (g) our liquidity; (ii) changes in the enforcement
of existing laws and regulations and the adoption of new laws and
regulations that may unfavorably impact our businesses; (iii) the
effects on our business and reputation resulting from Progressive's
announced settlement and related consent order with the FTC,
including the risk of losing existing retail partners or being
unable to establish new partnerships with additional retailers, and
of any follow-on regulatory and/or civil litigation arising
therefrom; (iv) other types of legal and regulatory proceedings and
investigations, including those related to customer privacy, third
party and employee fraud and information security; (v) the risks
associated with our business transformation strategy for our
Aaron's Business not being successful, including our e-commerce and
real estate repositioning and optimization initiatives (including
the risk that the costs associated with these initiatives exceeds
our expectations); (vi) risks associated with the challenges faced
by our Aaron's Business, including the commoditization of consumer
electronics and the high fixed-cost operating model of the Aaron's
Business; (vii) increased competition from traditional and virtual
lease-to-own competitors, as well as from traditional and on-line
retailers and other competitors; (viii) financial challenges faced
by our franchisees, which we believe may be exacerbated by the
COVID-19 pandemic and related governmental or regulatory measures
to combat the pandemic; (ix) increases in lease merchandise
write-offs for our Aaron's Business and increases in lease
merchandise write-offs and the provision for returns and
uncollectible renewal payments for Progressive Leasing, especially
in light of the COVID-19 pandemic; 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,
2019 and in the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2020. Statements in this press release that
are "forward-looking" include without limitation statements about
(i) the strength of our balance sheet and our liquidity; and (ii)
our outlook for our consolidated financial performance for the
third quarter of 2020. 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,
|
|
|
2020
|
2019
|
2020
|
2019
|
Revenues:
|
|
|
|
|
|
Lease Revenues and
Fees
|
|
$
|
969,987
|
|
$
|
907,565
|
|
$
|
2,017,900
|
|
$
|
1,851,722
|
|
Retail
Sales
|
|
14,020
|
|
8,898
|
|
23,551
|
|
21,707
|
|
Non-Retail
Sales
|
|
33,044
|
|
34,124
|
|
59,890
|
|
71,105
|
|
Franchise Royalties
and Fees
|
|
3,365
|
|
8,605
|
|
10,089
|
|
17,812
|
|
Interest and Fees on
Loans Receivable
|
|
9,414
|
|
8,610
|
|
19,322
|
|
17,256
|
|
Other
|
|
289
|
|
339
|
|
641
|
|
642
|
|
Total
|
|
1,030,119
|
|
968,141
|
|
2,131,393
|
|
1,980,244
|
|
|
|
|
|
|
|
Costs and
Expenses:
|
|
|
|
|
|
Depreciation of Lease
Merchandise
|
|
547,551
|
|
474,868
|
|
1,144,958
|
|
975,688
|
|
Retail Cost of
Sales
|
|
9,065
|
|
5,651
|
|
15,927
|
|
14,283
|
|
Non-Retail Cost of
Sales
|
|
29,316
|
|
28,948
|
|
52,897
|
|
58,144
|
|
Operating
Expenses
|
|
343,850
|
|
383,576
|
|
756,820
|
|
770,792
|
|
Restructuring
Expenses, Net
|
|
6,991
|
|
18,738
|
|
29,277
|
|
32,019
|
|
Impairment of
Goodwill
|
|
—
|
|
—
|
|
446,893
|
|
—
|
|
Other Operating
(Income) Expense, Net
|
|
(96)
|
|
(3,486)
|
|
74
|
|
(4,383)
|
|
Total
|
|
936,677
|
|
908,295
|
|
2,446,846
|
|
1,846,543
|
|
|
|
|
|
|
|
Operating Profit
(Loss)
|
|
93,442
|
|
59,846
|
|
(315,453)
|
|
133,701
|
|
Interest
Income
|
|
227
|
|
944
|
|
419
|
|
1,045
|
|
Interest
Expense
|
|
(2,853)
|
|
(4,300)
|
|
(6,652)
|
|
(9,256)
|
|
Other Non-Operating
Income (Expense), Net
|
|
1,721
|
|
329
|
|
(230)
|
|
1,637
|
|
Earnings (Loss)
Before Income Tax Expense
|
|
92,537
|
|
56,819
|
|
(321,916)
|
|
127,127
|
|
|
|
|
|
|
|
Income Tax Expense
(Benefit)
|
|
24,160
|
|
14,169
|
|
(110,288)
|
|
28,399
|
|
Net Earnings
(Loss)
|
|
$
|
68,377
|
|
$
|
42,650
|
|
$
|
(211,628)
|
|
$
|
98,728
|
|
|
|
|
|
|
|
Earnings (Loss) Per
Share
|
|
$
|
1.02
|
|
$
|
0.63
|
|
$
|
(3.16)
|
|
$
|
1.46
|
|
Earnings (Loss) Per
Share Assuming Dilution
|
|
$
|
1.01
|
|
$
|
0.62
|
|
$
|
(3.16)
|
|
$
|
1.44
|
|
|
|
|
|
|
|
Weighted Average
Shares Outstanding
|
|
67,097
|
|
67,687
|
|
66,959
|
|
67,492
|
|
Weighted Average
Shares Outstanding Assuming Dilution
|
|
67,523
|
|
68,793
|
|
66,959
|
|
68,784
|
|
Aaron's, Inc. and
Subsidiaries
|
Consolidated
Balance Sheets
|
(In
thousands)
|
|
|
|
(Unaudited)
|
|
|
|
|
|
June 30,
2020
|
|
December 31,
2019
|
|
ASSETS:
|
|
|
|
|
|
Cash and Cash
Equivalents
|
|
$
|
313,057
|
|
|
$
|
57,755
|
|
|
Accounts Receivable
(net of allowances of $73,294 in 2020 and $76,293 in
2019)
|
|
79,933
|
|
|
104,159
|
|
|
Lease Merchandise
(net of accumulated depreciation and allowances of $878,259 in 2020
and $896,056 in 2019)
|
|
1,119,640
|
|
|
1,433,417
|
|
|
Loans Receivable (net
of allowances and unamortized fees of $37,649 in 2020 and $21,134
in 2019)
|
|
58,870
|
|
|
75,253
|
|
|
Property, Plant and
Equipment at Cost (net of accumulated depreciation of $326,340 in
2020 and $311,252 in 2019)
|
|
228,088
|
|
|
237,666
|
|
|
Operating Lease
Right-of-Use Assets
|
|
279,802
|
|
|
329,211
|
|
|
Goodwill
|
|
288,801
|
|
|
736,582
|
|
|
Other Intangibles
(net of accumulated amortization of $164,324 in 2020 and $151,932
in 2019)
|
|
176,104
|
|
|
190,796
|
|
|
Income Tax
Receivable
|
|
57,487
|
|
|
18,690
|
|
|
Prepaid Expenses and
Other Assets
|
|
113,920
|
|
|
114,271
|
|
|
Total
Assets
|
|
$
|
2,715,702
|
|
|
$
|
3,297,800
|
|
|
LIABILITIES & SHAREHOLDERS'
EQUITY:
|
|
|
|
|
|
Accounts Payable and
Accrued Expenses
|
|
$
|
249,182
|
|
|
$
|
272,816
|
|
|
Accrued Regulatory
Expense
|
|
—
|
|
|
175,000
|
|
|
Deferred Income Taxes
Payable
|
|
234,380
|
|
|
310,395
|
|
|
Customer Deposits and
Advance Payments
|
|
89,435
|
|
|
91,914
|
|
|
Operating Lease
Liabilities
|
|
335,705
|
|
|
369,386
|
|
|
Debt
|
|
285,801
|
|
|
341,030
|
|
|
Total
Liabilities
|
|
1,194,503
|
|
|
1,560,541
|
|
|
SHAREHOLDERS'
EQUITY:
|
|
|
|
|
|
Common Stock, Par
Value $0.50 Per Share: Authorized: 225,000,000 Shares at June 30,
2020 and December 31, 2019; Shares Issued: 90,752,123 at June 30,
2020 and December 31, 2019
|
|
45,376
|
|
|
45,376
|
|
|
Additional Paid-in
Capital
|
|
290,653
|
|
|
290,229
|
|
|
Retained
Earnings
|
|
1,805,869
|
|
|
2,029,613
|
|
|
Accumulated Other
Comprehensive Loss
|
|
(1,442)
|
|
|
(19)
|
|
|
|
|
|
|
|
|
Less: Treasury Shares
at Cost
|
|
|
|
|
|
Common Stock:
23,613,045 Shares at June 30, 2020 and 24,034,053 at December 31,
2019
|
|
(619,257)
|
|
|
(627,940)
|
|
|
Total Shareholders'
Equity
|
|
1,521,199
|
|
|
1,737,259
|
|
|
Total Liabilities and
Shareholders' Equity
|
|
$
|
2,715,702
|
|
|
$
|
3,297,800
|
|
|
Aaron's, Inc. and
Subsidiaries
|
Consolidated
Statements of Cash Flows
|
|
(Unaudited)
|
Six Months
Ended June 30,
|
(In
Thousands)
|
2020
|
|
2019
|
OPERATING
ACTIVITIES:
|
|
|
|
Net (Loss)
Earnings
|
$
|
(211,628)
|
|
|
$
|
98,728
|
|
Adjustments to
Reconcile Net (Loss) Earnings to Cash Provided by Operating
Activities:
|
|
|
|
Depreciation of Lease
Merchandise
|
1,144,958
|
|
|
975,688
|
|
Other Depreciation and
Amortization
|
50,154
|
|
|
53,862
|
|
Accounts Receivable
Provision
|
158,587
|
|
|
137,611
|
|
Provision for Credit
Losses on Loans Receivable
|
16,150
|
|
|
9,223
|
|
Stock-Based
Compensation
|
12,487
|
|
|
14,231
|
|
Deferred Income
Taxes
|
(73,656)
|
|
|
19,928
|
|
Impairment of Goodwill
and Other Assets
|
468,634
|
|
|
26,267
|
|
Non-Cash Lease
Expense
|
50,638
|
|
|
58,073
|
|
Other Changes,
Net
|
5,109
|
|
|
(3,390)
|
|
Changes in Operating
Assets and Liabilities, Net of Effects of Acquisitions and
Dispositions:
|
|
|
|
Additions to Lease
Merchandise
|
(1,032,977)
|
|
|
(1,141,863)
|
|
Book Value of Lease
Merchandise Sold or Disposed
|
201,058
|
|
|
196,219
|
|
Accounts
Receivable
|
(134,467)
|
|
|
(126,112)
|
|
Prepaid Expenses and
Other Assets
|
(4,711)
|
|
|
(6,847)
|
|
Income Tax
Receivable
|
(38,797)
|
|
|
17,227
|
|
Operating Lease
Liabilities
|
(53,544)
|
|
|
(62,541)
|
|
Accounts Payable and
Accrued Expenses
|
(19,713)
|
|
|
(21,465)
|
|
Accrued Regulatory
Expense
|
(175,000)
|
|
|
—
|
|
Customer Deposits and
Advance Payments
|
(2,527)
|
|
|
(200)
|
|
Cash Provided by
Operating Activities
|
360,755
|
|
|
244,639
|
|
INVESTING
ACTIVITIES:
|
|
|
|
Investments in Loans
Receivable
|
(39,986)
|
|
|
(29,506)
|
|
Proceeds from Loans
Receivable
|
32,248
|
|
|
27,720
|
|
Outflows on Purchases
of Property, Plant and Equipment
|
(33,885)
|
|
|
(48,059)
|
|
Proceeds from
Property, Plant and Equipment
|
2,220
|
|
|
1,425
|
|
Outflows on
Acquisitions of Businesses and Customer Agreements, Net of Cash
Acquired
|
(1,209)
|
|
|
(7,612)
|
|
Proceeds from
Dispositions of Businesses and Customer Agreements, Net of Cash
Disposed
|
359
|
|
|
755
|
|
Cash Used in
Investing Activities
|
(40,253)
|
|
|
(55,277)
|
|
FINANCING
ACTIVITIES:
|
|
|
|
Repayments on
Revolving Facility, Net
|
—
|
|
|
(16,000)
|
|
Proceeds from
Debt
|
5,625
|
|
|
—
|
|
Repayments on
Debt
|
(60,748)
|
|
|
(61,465)
|
|
Dividends
Paid
|
(5,351)
|
|
|
(4,717)
|
|
Acquisition of
Treasury Stock
|
—
|
|
|
(14,414)
|
|
Issuance of Stock
Under Stock Option Plans
|
2,250
|
|
|
5,056
|
|
Shares Withheld for
Tax Payments
|
(5,877)
|
|
|
(12,977)
|
|
Debt Issuance
Costs
|
(1,020)
|
|
|
—
|
|
Cash Used in
Financing Activities
|
(65,121)
|
|
|
(104,517)
|
|
EFFECT OF EXCHANGE
RATE CHANGES ON CASH AND CASH EQUIVALENTS
|
(79)
|
|
|
119
|
|
Increase in Cash and
Cash Equivalents
|
255,302
|
|
|
84,964
|
|
Cash and Cash
Equivalents at Beginning of Period
|
57,755
|
|
|
15,278
|
|
Cash and Cash
Equivalents at End of Period
|
$
|
313,057
|
|
|
$
|
100,242
|
|
Aaron's, Inc. and
Subsidiaries
|
Quarterly Revenues
by Segment
|
(In
thousands)
|
|
|
(Unaudited)
|
|
Three Months
Ended
|
|
June 30,
2020
|
|
Progressive
Leasing
|
Aaron's
Business
|
Vive
|
Consolidated
Total
|
Lease Revenues and
Fees
|
$
|
589,749
|
|
$
|
380,238
|
|
$
|
—
|
|
$
|
969,987
|
|
Retail
Sales
|
—
|
|
14,020
|
|
—
|
|
14,020
|
|
Non-Retail
Sales
|
—
|
|
33,044
|
|
—
|
|
33,044
|
|
Franchise Royalties
and Fees
|
—
|
|
3,365
|
|
—
|
|
3,365
|
|
Interest and Fees on
Loans Receivable
|
—
|
|
—
|
|
9,414
|
|
9,414
|
|
Other
|
—
|
|
289
|
|
—
|
|
289
|
|
Total
Revenues
|
$
|
589,749
|
|
$
|
430,956
|
|
$
|
9,414
|
|
$
|
1,030,119
|
|
|
|
|
(Unaudited)
|
|
Three Months
Ended
|
|
June 30,
2019
|
|
Progressive
Leasing
|
Aaron's
Business
|
Vive
|
Consolidated
Total
|
Lease Revenues and
Fees
|
$
|
516,333
|
|
$
|
391,232
|
|
$
|
—
|
|
$
|
907,565
|
|
Retail
Sales
|
—
|
|
8,898
|
|
—
|
|
8,898
|
|
Non-Retail
Sales
|
—
|
|
34,124
|
|
—
|
|
34,124
|
|
Franchise Royalties
and Fees
|
—
|
|
8,605
|
|
—
|
|
8,605
|
|
Interest and Fees on
Loans Receivable
|
—
|
|
—
|
|
8,610
|
|
8,610
|
|
Other
|
—
|
|
339
|
|
—
|
|
339
|
|
Total
Revenues
|
$
|
516,333
|
|
$
|
443,198
|
|
$
|
8,610
|
|
$
|
968,141
|
|
Aaron's, Inc. and
Subsidiaries
|
Six Months
Revenues by Segment
|
(In
thousands)
|
|
|
(Unaudited)
|
|
Six Months
Ended
|
|
June 30,
2020
|
|
Progressive
Leasing
|
Aaron's
Business
|
Vive
|
Consolidated
Total
|
Lease Revenues and
Fees
|
$
|
1,248,283
|
|
$
|
769,617
|
|
$
|
—
|
|
$
|
2,017,900
|
|
Retail
Sales
|
—
|
|
23,551
|
|
—
|
|
23,551
|
|
Non-Retail
Sales
|
—
|
|
59,890
|
|
—
|
|
59,890
|
|
Franchise Royalties
and Fees
|
—
|
|
10,089
|
|
—
|
|
10,089
|
|
Interest and Fees on
Loans Receivable
|
—
|
|
—
|
|
19,322
|
|
19,322
|
|
Other
|
—
|
|
641
|
|
—
|
|
641
|
|
Total
Revenues
|
$
|
1,248,283
|
|
$
|
863,788
|
|
$
|
19,322
|
|
$
|
2,131,393
|
|
|
|
|
(Unaudited)
|
|
Six Months
Ended
|
|
June 30,
2019
|
|
Progressive
Leasing
|
Aaron's
Business
|
Vive
|
Consolidated
Total
|
Lease Revenues and
Fees
|
$
|
1,039,734
|
|
$
|
811,988
|
|
$
|
—
|
|
$
|
1,851,722
|
|
Retail
Sales
|
—
|
|
21,707
|
|
—
|
|
21,707
|
|
Non-Retail
Sales
|
—
|
|
71,105
|
|
—
|
|
71,105
|
|
Franchise Royalties
and Fees
|
—
|
|
17,812
|
|
—
|
|
17,812
|
|
Interest and Fees on
Loans Receivable
|
—
|
|
—
|
|
17,256
|
|
17,256
|
|
Other
|
—
|
|
642
|
|
—
|
|
642
|
|
Total
Revenues
|
$
|
1,039,734
|
|
$
|
923,254
|
|
$
|
17,256
|
|
$
|
1,980,244
|
|
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 2020 exclude Progressive
Leasing-related intangible amortization expense, and certain
Aaron's Business charges including amortization expense resulting
from franchisee acquisitions, restructuring charges, early
termination charges incurred to terminate a sales and marketing
agreement, goodwill impairment charges, legal and accounting fees
incurred in conjunction with the Company's implementation of a
Holding Company structure and an income tax benefit resulting from
the revaluation of a net operating loss carryback. Non-GAAP net
earnings and non-GAAP diluted earnings per share for 2019 exclude
Progressive Leasing-related intangible amortization expense,
certain Aaron's Business charges including amortization expense
resulting from franchisee acquisitions, acquisition transaction and
transition costs related to franchisee acquisitions and
restructuring charges. The amounts for these after-tax non-GAAP
adjustments, which are calculated using estimated tax rates which
are commensurate with non-GAAP pre-tax earnings, can be found in
the Reconciliation of Net Earnings and Earnings Per Share Assuming
Dilution to Non-GAAP Net Earnings and Earnings Per Share Assuming
Dilution table in this press release.
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. The amounts for these
pre-tax non-GAAP adjustments can be found in the Quarterly Segment
EBITDA tables in this press release.
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 provide
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 or transactions that have variability
and volatility of the amount. This measure may be useful to
an investor in evaluating the underlying operating performance of
our business.
EBITDA and Adjusted EBITDA also provide 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 Vive, 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 Vive's underlying operational
performance for the period. Management uses this measure as one of
its bases for strategic planning and forecasting for Vive.
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
revenues and 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 (Loss) and Earnings (Loss) Per Share Assuming Dilution
to
|
Non-GAAP Net
Earnings and Earnings Per Share Assuming Dilution
|
(In thousands,
except per share)
|
|
|
(Unaudited) Three
Months Ended
|
|
(Unaudited) Six
Months Ended
|
|
June 30,
|
|
June 30,
|
|
2020
|
2019
|
|
2020
|
2019
|
Net Earnings
(Loss)
|
$
|
68,377
|
|
$
|
42,650
|
|
|
$
|
(211,628)
|
|
$
|
98,728
|
|
Add: Progressive
Leasing-Related Intangible Amortization Expense
(1)(2)
|
4,260
|
|
4,069
|
|
|
8,229
|
|
8,420
|
|
Add:
Franchisee-Related Intangible Amortization
Expense(3)(4)
|
1,130
|
|
2,971
|
|
|
2,291
|
|
6,216
|
|
Add: Restructuring
Expenses, net (5)(6)
|
5,494
|
|
14,065
|
|
|
22,221
|
|
24,866
|
|
Add: Acquisition
Transaction and Transition Costs(7)
|
—
|
|
150
|
|
|
—
|
|
243
|
|
Add: Sales and
Marketing Early Contract Termination Fees(8)
|
—
|
|
—
|
|
|
11,129
|
|
—
|
|
Add: Holding Company
Legal and Accounting Fees(9)
|
1,982
|
|
—
|
|
|
1,914
|
|
—
|
|
Add: Impairment of
Goodwill(10)
|
—
|
|
—
|
|
|
339,191
|
|
—
|
|
Less: NOL Carryback
Revaluation
|
(1,350)
|
|
—
|
|
|
(35,540)
|
|
—
|
|
Non-GAAP Net
Earnings
|
$
|
79,893
|
|
$
|
63,905
|
|
|
$
|
137,807
|
|
$
|
138,473
|
|
|
|
|
|
|
|
Earnings (Loss) Per
Share Assuming Dilution(10)
|
$
|
1.01
|
|
$
|
0.62
|
|
|
$
|
(3.16)
|
|
$
|
1.44
|
|
Add: Progressive
Leasing-Related Intangible Amortization Expense
(1)(2)
|
0.06
|
|
0.06
|
|
|
0.12
|
|
0.12
|
|
Add:
Franchisee-Related Intangible Amortization
Expense(3)(4)
|
0.02
|
|
0.04
|
|
|
0.03
|
|
0.09
|
|
Add: Restructuring
Expenses, net(5)(6)
|
0.08
|
|
0.20
|
|
|
0.33
|
|
0.36
|
|
Add: Acquisition
Transaction and Transition Costs(7)
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Add: Sales and
Marketing Early Contract Termination Fees(8)
|
—
|
|
—
|
|
|
0.16
|
|
—
|
|
Add: Holding Company
Legal and Accounting Fees(9)
|
0.03
|
|
—
|
|
|
0.03
|
|
—
|
|
Add: Impairment of
Goodwill(10)
|
—
|
|
—
|
|
|
5.01
|
|
—
|
|
Less: NOL Carryback
Revaluation
|
(0.02)
|
|
—
|
|
|
(0.53)
|
|
—
|
|
|
|
|
|
|
|
Non-GAAP Earnings Per
Share Assuming Dilution(11)(12)
|
$
|
1.18
|
|
$
|
0.93
|
|
|
$
|
2.04
|
|
$
|
2.01
|
|
|
|
|
|
|
|
Weighted Average
Shares Outstanding Assuming Dilution
|
67,523
|
|
68,793
|
|
|
67,694
|
|
68,784
|
|
|
|
(1)
|
Net of taxes of
$1,161 and $2,613 for the three and six months ended June 30,
2020 calculated using the estimated tax rates of 21.4% and 24.1%
for the respective periods.
|
(2)
|
Net of taxes of
$1,352 and $2,422 for the three and six months ended June 30,
2019 calculated using the effective tax rate for the respective
periods.
|
(3)
|
Net of taxes of $308
and $727 for the three and six months ended June 30, 2020
calculated using the estimated tax rates of 21.4% and 24.1% for the
respective periods.
|
(4)
|
Net of taxes of $987
and $1,788 for the three and six months ended June 30, 2019
calculated using the effective tax rate for the respective
periods.
|
(5)
|
Net of taxes of
$1,497 and $7,056 for the three and six months ended June 30,
2020 calculated using the estimated tax rates of 21.4% and 24.1%
for the respective periods.
|
(6)
|
Net of taxes of
$4,673 and $7,153 for the three and six months ended June 30,
2019 calculated using the effective tax rate for the respective
periods.
|
(7)
|
Net of taxes of $50
and $70 for the three and six months ended June 30, 2019
calculated using the effective tax rate for the respective
periods.
|
(8)
|
Net of taxes of
$3,534 for the six months ended June 30, 2020 calculated using
the estimated tax rate of 24.1% for the respective
periods.
|
(9)
|
Net of taxes of $540
and $608 for the three and six months ended June 30, 2020
calculated using the estimated tax rates of 21.4% and 24.1% for the
respective periods.
|
(10)
|
Net of taxes of
$107,702 for the six months ended June 30, 2020 calculated
using the estimated tax rate of 24.1% for the period.
|
(11)
|
For the six months
ended June 30, 2020, the GAAP Weighted Average Shares
Outstanding Assuming Dilution was 66,959 and the Non-GAAP Weighted
Average Shares Outstanding Assuming Dilution was 67,694.
|
(12)
|
In some cases, the
sum of individual EPS amounts may not equal total non-GAAP EPS
calculations due to rounding.
|
Vive Pre-tax,
Pre-provision Loss
|
(In
thousands)
|
|
|
(Unaudited) Three
Months Ended
|
(Unaudited) Six
Months Ended
|
|
June 30,
|
June 30,
|
|
2020
|
2019
|
2020
|
2019
|
Earnings (Loss)
Before Income Taxes
|
$
|
714
|
|
$
|
(1,725)
|
|
$
|
(7,369)
|
|
$
|
(4,393)
|
|
Adjustment to
(Decrease) Increase Allowance for Loan Losses During
Period
|
(901)
|
|
420
|
|
6,319
|
|
(187)
|
|
Pre-tax,
Pre-provision Loss
|
$
|
(187)
|
|
$
|
(1,305)
|
|
$
|
(1,050)
|
|
$
|
(4,580)
|
|
Aaron's, Inc. and
Subsidiaries
|
Non-GAAP Financial
Information
|
Quarterly Segment
EBITDA
|
(In
thousands)
|
|
|
(Unaudited)
|
|
Three Months
Ended
|
|
June 30,
2020
|
|
Progressive
Leasing
|
Aaron's
Business
|
Vive
|
Consolidated
Total
|
Net Income
|
|
|
|
$
|
68,377
|
|
Income
Taxes1
|
|
|
|
24,160
|
|
Earnings Before
Income Taxes
|
$
|
59,814
|
|
$
|
32,009
|
|
$
|
714
|
|
92,537
|
|
Interest
Expense
|
3,299
|
|
(1,358)
|
|
912
|
|
2,853
|
|
Depreciation
|
2,179
|
|
15,300
|
|
210
|
|
17,689
|
|
Amortization
|
5,421
|
|
1,632
|
|
145
|
|
7,198
|
|
EBITDA
|
$
|
70,713
|
|
$
|
47,583
|
|
$
|
1,981
|
|
$
|
120,277
|
|
Holding Company Legal
and Accounting Fees
|
—
|
|
2,522
|
|
—
|
|
2,522
|
|
Restructuring
Expenses
|
—
|
|
6,991
|
|
—
|
|
6,991
|
|
Adjusted
EBITDA
|
$
|
70,713
|
|
$
|
57,096
|
|
$
|
1,981
|
|
$
|
129,790
|
|
|
|
(Unaudited)
|
|
Three Months
Ended
|
|
June 30,
2019
|
|
Progressive
Leasing
|
Aaron's
Business
|
Vive
|
Consolidated
Total
|
Net
Earnings
|
|
|
|
$
|
42,650
|
|
Income
Taxes1
|
|
|
|
14,169
|
|
Earnings (Loss)
Before Income Taxes
|
$
|
58,406
|
|
$
|
138
|
|
$
|
(1,725)
|
|
56,819
|
|
Interest
Expense
|
2,242
|
|
1,209
|
|
849
|
|
4,300
|
|
Depreciation
|
2,160
|
|
15,077
|
|
201
|
|
17,438
|
|
Amortization
|
5,421
|
|
4,296
|
|
145
|
|
9,862
|
|
EBITDA
|
$
|
68,229
|
|
$
|
20,720
|
|
$
|
(530)
|
|
$
|
88,419
|
|
Restructuring
Expenses
|
—
|
|
18,738
|
|
—
|
|
18,738
|
|
Acquisition
Transaction and Transition Costs
|
—
|
|
200
|
|
—
|
|
200
|
|
Adjusted
EBITDA
|
$
|
68,229
|
|
$
|
39,658
|
|
$
|
(530)
|
|
$
|
107,357
|
|
|
|
(1)
|
Taxes are calculated
on a consolidated basis and are not identifiable by Company
segments.
|
Aaron's, Inc. and
Subsidiaries
|
Non-GAAP Financial
Information
|
Six Months Segment
EBITDA
|
(In
thousands)
|
|
|
(Unaudited)
|
|
Six Months
Ended
|
|
June 30,
2020
|
|
Progressive
Leasing
|
Aaron's
Business
|
Vive
|
Consolidated
Total
|
Net Loss
|
|
|
|
$
|
(211,628)
|
|
Income Tax
Benefit1
|
|
|
|
(110,288)
|
|
Earnings (Loss)
Before Income Taxes
|
$
|
118,801
|
|
$
|
(433,348)
|
|
$
|
(7,369)
|
|
(321,916)
|
|
Interest
Expense
|
7,019
|
|
(2,210)
|
|
1,843
|
|
6,652
|
|
Depreciation
|
4,300
|
|
30,821
|
|
427
|
|
35,548
|
|
Amortization
|
10,842
|
|
3,474
|
|
290
|
|
14,606
|
|
EBITDA
|
$
|
140,962
|
|
$
|
(401,263)
|
|
$
|
(4,809)
|
|
$
|
(265,110)
|
|
Restructuring
Expenses
|
—
|
|
29,277
|
|
—
|
|
29,277
|
|
Sales and Marketing
Early Termination Fees
|
—
|
|
14,663
|
|
—
|
|
14,663
|
|
Holding Company Legal
and Accounting Fees
|
—
|
|
2,522
|
|
—
|
|
2,522
|
|
Impairment of
Goodwill
|
—
|
|
446,893
|
|
—
|
|
446,893
|
|
Adjusted
EBITDA
|
$
|
140,962
|
|
$
|
92,092
|
|
$
|
(4,809)
|
|
$
|
228,245
|
|
|
|
|
|
|
|
(Unaudited)
|
|
Six Months
Ended
|
|
June 30,
2019
|
|
Progressive
Leasing
|
Aaron's
Business
|
Vive
|
Consolidated
Total
|
Net
Earnings
|
|
|
|
$
|
98,728
|
|
Income
Taxes1
|
|
|
|
28,399
|
|
Earnings (Loss)
Before Income Taxes
|
$
|
113,794
|
|
$
|
17,726
|
|
$
|
(4,393)
|
|
127,127
|
|
Interest
Expense
|
4,964
|
|
2,563
|
|
1,729
|
|
9,256
|
|
Depreciation
|
3,947
|
|
29,665
|
|
391
|
|
34,003
|
|
Amortization
|
10,842
|
|
8,727
|
|
290
|
|
19,859
|
|
EBITDA
|
$
|
133,547
|
|
$
|
58,681
|
|
$
|
(1,983)
|
|
$
|
190,245
|
|
Restructuring
Expenses, Net
|
—
|
|
32,019
|
|
—
|
|
32,019
|
|
Acquisition
Transaction and Transition Costs
|
—
|
|
313
|
|
—
|
|
313
|
|
Adjusted
EBITDA
|
$
|
133,547
|
|
$
|
91,013
|
|
$
|
(1,983)
|
|
$
|
222,577
|
|
|
|
(1)
|
Taxes are calculated
on a consolidated basis and are not identifiable by Company
segments.
|
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SOURCE Aaron's, Inc.