ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Georgia
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58-0687630
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(State or other jurisdiction of
incorporation or organization)
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(I. R. S. Employer
Identification No.)
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309 E. Paces Ferry Road, N.E.
Atlanta, Georgia
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30305-2377
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(Address of principal executive offices)
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(Zip Code)
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Large Accelerated Filer
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ý
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Accelerated Filer
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o
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Non-Accelerated Filer
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o
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(Do not check if a smaller reporting company)
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Smaller Reporting Company
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o
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Title of Each Class
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Shares Outstanding as of
July 31, 2015
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Common Stock, $.50 Par Value
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72,578,301
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Item 3. Defaults Upon Senior Securities
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Item 4. Mine Safety Disclosures
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Item 5. Other Information
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(Unaudited)
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(In Thousands, Except Share Data)
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June 30,
2015 |
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December 31,
2014 |
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ASSETS:
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Cash and Cash Equivalents
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$
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91,144
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$
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3,549
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Investments
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22,758
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21,311
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Accounts Receivable (net of allowances of $29,957 in 2015 and $27,401 in 2014)
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94,081
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107,383
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Lease Merchandise (net of accumulated depreciation of $722,988 in 2015 and $701,822 in 2014)
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1,038,133
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1,087,032
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Property, Plant and Equipment at Cost (net of accumulated depreciation of $220,387 in 2015 and $216,065 in 2014)
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211,886
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219,417
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Goodwill
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533,020
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530,670
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Other Intangibles (net of accumulated amortization of $45,862 in 2015 and $33,250 in 2014)
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285,120
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297,471
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Income Tax Receivable
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11,690
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124,095
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Prepaid Expenses and Other Assets
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59,951
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59,560
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Assets Held For Sale
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6,924
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6,356
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Total Assets
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$
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2,354,707
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$
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2,456,844
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LIABILITIES & SHAREHOLDERS’ EQUITY:
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Accounts Payable and Accrued Expenses
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$
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271,260
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$
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270,421
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Accrued Regulatory Expense
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17,500
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27,200
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Deferred Income Taxes Payable
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198,138
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268,551
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Customer Deposits and Advance Payments
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55,862
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61,069
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Debt
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494,858
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606,082
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Total Liabilities
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1,037,618
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1,233,323
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Commitments and Contingencies (Note 5)
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Shareholders’ Equity:
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Common Stock, Par Value $.50 Per Share: Authorized: 225,000,000 Shares at June 30, 2015 and December 31, 2014; Shares Issued: 90,752,123 at June 30, 2015 and December 31, 2014
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45,376
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45,376
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Additional Paid-in Capital
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232,964
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227,290
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Retained Earnings
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1,360,685
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1,274,233
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Accumulated Other Comprehensive Loss
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(66
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)
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(90
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)
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1,638,959
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1,546,809
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Less: Treasury Shares at Cost
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Common Stock: 18,174,923 Shares at June 30, 2015 and 18,263,589 at December 31, 2014
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(321,870
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)
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(323,288
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)
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Total Shareholders’ Equity
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1,317,089
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1,223,521
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Total Liabilities & Shareholders’ Equity
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$
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2,354,707
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$
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2,456,844
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Three Months Ended
June 30, |
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Six Months Ended
June 30, |
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(In Thousands, Except Per Share Data)
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2015
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2014
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2015
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2014
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||||||||
REVENUES:
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Lease Revenues and Fees
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$
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660,472
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$
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552,494
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$
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1,355,754
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$
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1,012,310
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Retail Sales
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7,073
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8,419
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19,067
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22,929
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Non-Retail Sales
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84,449
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83,893
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180,486
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175,518
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Franchise Royalties and Fees
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15,491
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16,225
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32,495
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34,309
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Other
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1,564
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1,459
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3,061
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2,847
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769,049
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662,490
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1,590,863
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1,247,913
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COSTS AND EXPENSES:
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Depreciation of Lease Merchandise
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294,362
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232,715
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610,348
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400,627
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Retail Cost of Sales
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4,849
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5,478
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12,553
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14,491
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Non-Retail Cost of Sales
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76,463
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76,227
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163,315
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159,134
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Operating Expenses
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325,555
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311,116
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653,475
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573,815
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Financial Advisory and Legal Costs
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—
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12,404
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—
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13,276
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Progressive-Related Transaction Costs
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—
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5,464
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—
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6,267
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Restructuring Expenses
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—
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2,264
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—
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2,264
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Other Operating Expense (Income), Net
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277
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5
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(1,183
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)
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(672
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)
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701,506
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645,673
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1,438,508
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1,169,202
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OPERATING PROFIT
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67,543
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16,817
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152,355
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78,711
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Interest Income
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792
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1,074
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1,231
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1,827
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Interest Expense
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(5,622
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)
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(5,479
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(11,591
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)
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(7,012
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)
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Other Non-Operating Income, Net
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1,641
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1,150
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189
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746
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EARNINGS BEFORE INCOME TAXES
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64,354
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13,562
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142,184
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74,272
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INCOME TAXES
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23,808
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5,057
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52,395
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27,428
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NET EARNINGS
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$
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40,546
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$
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8,505
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$
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89,789
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$
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46,844
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EARNINGS PER SHARE
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Basic
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$
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.56
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$
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.12
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$
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1.24
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$
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.65
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Assuming Dilution
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$
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.56
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$
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.12
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$
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1.23
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$
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.64
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CASH DIVIDENDS DECLARED PER SHARE:
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||||||||
Common Stock
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$
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.023
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$
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.021
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$
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.046
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$
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.042
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WEIGHTED AVERAGE SHARES OUTSTANDING:
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||||||||
Basic
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72,572
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72,246
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72,544
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72,356
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Assuming Dilution
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72,965
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72,598
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72,910
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72,733
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Three Months Ended
June 30, |
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Six Months Ended
June 30, |
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(In Thousands)
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2015
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|
2014
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2015
|
|
2014
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||||||||
Net Earnings
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$
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40,546
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$
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8,505
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$
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89,789
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$
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46,844
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Other Comprehensive Income:
|
|
|
|
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||||||||
Foreign Currency Translation Adjustment
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21
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11
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24
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7
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|
||||
Total Other Comprehensive Income
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21
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11
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24
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7
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||||
Comprehensive Income
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$
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40,567
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$
|
8,516
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$
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89,813
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$
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46,851
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Six Months Ended
June 30, |
||||||
(In Thousands)
|
2015
|
|
2014
|
||||
OPERATING ACTIVITIES:
|
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||||
Net Earnings
|
$
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89,789
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$
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46,844
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Adjustments to Reconcile Net Earnings to Cash Provided by Operating Activities:
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||||
Depreciation of Lease Merchandise
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610,348
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400,627
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||
Other Depreciation and Amortization
|
39,756
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|
|
38,020
|
|
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Bad Debt Expense
|
67,794
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|
|
28,757
|
|
||
Stock-Based Compensation
|
6,725
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|
|
2,312
|
|
||
Deferred Income Taxes
|
(70,748
|
)
|
|
(63,436
|
)
|
||
Other Changes, Net
|
(2,825
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)
|
|
1,034
|
|
||
Changes in Operating Assets and Liabilities, Net of Effects of Acquisitions and Dispositions:
|
|
|
|
||||
Additions to Lease Merchandise
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(801,620
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)
|
|
(640,866
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)
|
||
Book Value of Lease Merchandise Sold or Disposed
|
236,750
|
|
|
208,123
|
|
||
Accounts Receivable
|
(56,856
|
)
|
|
(11,882
|
)
|
||
Prepaid Expenses and Other Assets
|
(898
|
)
|
|
(4,750
|
)
|
||
Income Tax Receivable
|
112,405
|
|
|
(3,186
|
)
|
||
Accounts Payable and Accrued Expenses
|
3,788
|
|
|
(22,038
|
)
|
||
Accrued Regulatory Expense
|
(9,700
|
)
|
|
—
|
|
||
Customer Deposits and Advance Payments
|
(5,361
|
)
|
|
(4,117
|
)
|
||
Cash Provided by (Used in) Operating Activities
|
219,347
|
|
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(24,558
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)
|
||
INVESTING ACTIVITIES:
|
|
|
|
||||
Proceeds from Maturities and Calls of Investments
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—
|
|
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19,814
|
|
||
Additions to Property, Plant and Equipment
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(21,821
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)
|
|
(24,659
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)
|
||
Acquisitions of Businesses and Contracts
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(9,274
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)
|
|
(672,454
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)
|
||
Proceeds from Dispositions of Businesses and Contracts
|
8,330
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|
|
15,773
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|
||
Proceeds from Sale of Property, Plant and Equipment
|
2,719
|
|
|
2,896
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|
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Cash Used in Investing Activities
|
(20,046
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)
|
|
(658,630
|
)
|
||
FINANCING ACTIVITIES:
|
|
|
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||||
Proceeds from Debt
|
30,150
|
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|
584,041
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|
||
Repayments on Debt
|
(141,374
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)
|
|
(114,104
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)
|
||
Dividends Paid
|
(1,668
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)
|
|
(3,121
|
)
|
||
Excess Tax Benefits from Stock-Based Compensation
|
274
|
|
|
1,458
|
|
||
Issuance of Stock Under Stock Option Plans
|
912
|
|
|
3,632
|
|
||
Other
|
—
|
|
|
(2,238
|
)
|
||
Cash (Used in) Provided by Financing Activities
|
(111,706
|
)
|
|
469,668
|
|
||
Increase (Decrease)in Cash and Cash Equivalents
|
87,595
|
|
|
(213,520
|
)
|
||
Cash and Cash Equivalents at Beginning of Period
|
3,549
|
|
|
231,091
|
|
||
Cash and Cash Equivalents at End of Period
|
$
|
91,144
|
|
|
$
|
17,571
|
|
NOTE 1:
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BASIS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Stores (Unaudited)
|
June 30, 2015
|
|
December 31, 2014
|
||
Company-operated stores
|
|
|
|
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Sales and Lease Ownership
|
1,211
|
|
|
1,243
|
|
HomeSmart
|
83
|
|
|
83
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|
Total Company-operated stores
|
1,294
|
|
|
1,326
|
|
Franchised stores
|
786
|
|
|
782
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|
Systemwide stores
|
2,080
|
|
|
2,108
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||
(Shares In Thousands)
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||
Weighted average shares outstanding
|
72,572
|
|
|
72,246
|
|
|
72,544
|
|
|
72,356
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
||||
Dilutive effect of share-based awards
|
393
|
|
|
352
|
|
|
366
|
|
|
377
|
|
Weighted average shares outstanding assuming dilution
|
72,965
|
|
|
72,598
|
|
|
72,910
|
|
|
72,733
|
|
(In Thousands)
|
June 30, 2015
|
|
December 31, 2014
|
||||
Customers
|
$
|
34,585
|
|
|
$
|
30,438
|
|
Corporate
|
26,077
|
|
|
32,572
|
|
||
Franchisee
|
33,419
|
|
|
44,373
|
|
||
|
$
|
94,081
|
|
|
$
|
107,383
|
|
(In Thousands)
|
Foreign Currency
|
|
Total
|
||||
Balance at January 1, 2015
|
$
|
(90
|
)
|
|
$
|
(90
|
)
|
Other comprehensive income
|
24
|
|
|
24
|
|
||
Balance at June 30, 2015
|
$
|
(66
|
)
|
|
$
|
(66
|
)
|
NOTE 2.
|
ACQUISITIONS
|
NOTE 3.
|
FAIR VALUE MEASUREMENT
|
(In Thousands)
|
June 30, 2015
|
|
December 31, 2014
|
||||||||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||||
Deferred Compensation Liability
|
$
|
—
|
|
|
$
|
(12,491
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(12,677
|
)
|
|
$
|
—
|
|
(In Thousands)
|
June 30, 2015
|
|
December 31, 2014
|
||||||||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||||
Assets Held for Sale
|
$
|
—
|
|
|
$
|
6,924
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,356
|
|
|
$
|
—
|
|
(In Thousands)
|
June 30, 2015
|
|
December 31, 2014
|
||||||||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||||
Perfect Home Notes
1
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
22,758
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21,311
|
|
Fixed-Rate Long-Term Debt
2
|
—
|
|
|
(399,660
|
)
|
|
—
|
|
|
—
|
|
|
(429,049
|
)
|
|
—
|
|
1
|
The Perfect Home notes were initially valued at cost. The Company periodically reviews the valuation utilizing company-specific transactions or changes in Perfect Home’s financial performance to determine if fair value adjustments are necessary.
|
2
|
The fair value of fixed-rate long-term debt is estimated using the present value of underlying cash flows discounted at a current market yield for similar instruments. The carrying value of fixed-rate long-term debt was
$375.0 million
and
$400.0 million
at
June 30, 2015
and
December 31, 2014
, respectively.
|
|
|
|
Gross Unrealized
|
|
|
||||||||||
(In Thousands)
|
Amortized Cost
|
|
Gains
|
|
Losses
|
|
Fair Value
|
||||||||
June 30, 2015
|
|
|
|
|
|
|
|
||||||||
Perfect Home Notes
|
$
|
22,758
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
22,758
|
|
December 31, 2014
|
|
|
|
|
|
|
|
||||||||
Perfect Home Notes
|
$
|
21,311
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21,311
|
|
NOTE 4.
|
INDEBTEDNESS
|
NOTE 5.
|
COMMITMENTS AND CONTINGENCIES
|
NOTE 6.
|
RESTRUCTURING
|
(In Thousands)
|
Contractual Obligations Under Canceled Leases
|
||
Balance at January 1, 2015
|
$
|
3,227
|
|
Payments
|
(1,266
|
)
|
|
Balance at June 30, 2015
|
$
|
1,961
|
|
NOTE 7.
|
SEGMENTS
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In Thousands)
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Revenues From External Customers:
|
|
|
|
|
|
|
|
||||||||
Sales and Lease Ownership
|
$
|
474,346
|
|
|
$
|
495,049
|
|
|
$
|
1,010,506
|
|
|
$
|
1,043,760
|
|
Progressive
|
255,946
|
|
|
128,859
|
|
|
507,565
|
|
|
128,859
|
|
||||
HomeSmart
|
15,275
|
|
|
15,749
|
|
|
32,247
|
|
|
33,153
|
|
||||
Franchise
|
15,491
|
|
|
16,225
|
|
|
32,495
|
|
|
34,309
|
|
||||
Manufacturing
|
25,228
|
|
|
23,743
|
|
|
54,034
|
|
|
54,898
|
|
||||
Other
|
326
|
|
|
367
|
|
|
694
|
|
|
2,265
|
|
||||
Revenues of Reportable Segments
|
786,612
|
|
|
679,992
|
|
|
1,637,541
|
|
|
1,297,244
|
|
||||
Elimination of Intersegment Revenues
|
(24,691
|
)
|
|
(23,404
|
)
|
|
(52,980
|
)
|
|
(53,662
|
)
|
||||
Cash to Accrual Adjustments
|
7,128
|
|
|
5,902
|
|
|
6,302
|
|
|
4,331
|
|
||||
Total Revenues from External Customers
|
$
|
769,049
|
|
|
$
|
662,490
|
|
|
$
|
1,590,863
|
|
|
$
|
1,247,913
|
|
Earnings (Loss) Before Income Taxes:
|
|
|
|
|
|
|
|
||||||||
Sales and Lease Ownership
|
$
|
30,859
|
|
|
$
|
32,132
|
|
|
$
|
83,434
|
|
|
$
|
87,751
|
|
Progressive
|
23,314
|
|
|
(323
|
)
|
|
39,144
|
|
|
(323
|
)
|
||||
HomeSmart
|
(126
|
)
|
|
(662
|
)
|
|
411
|
|
|
(731
|
)
|
||||
Franchise
|
11,993
|
|
|
11,073
|
|
|
25,891
|
|
|
25,631
|
|
||||
Manufacturing
|
376
|
|
|
(89
|
)
|
|
1,658
|
|
|
458
|
|
||||
Other
|
(11,668
|
)
|
|
(28,547
|
)
|
|
(23,147
|
)
|
|
(38,474
|
)
|
||||
Earnings Before Income Taxes for Reportable Segments
|
54,748
|
|
|
13,584
|
|
|
127,391
|
|
|
74,312
|
|
||||
Elimination of Intersegment (Profit) Loss
|
(398
|
)
|
|
82
|
|
|
(1,666
|
)
|
|
(427
|
)
|
||||
Cash to Accrual and Other Adjustments
|
10,004
|
|
|
(104
|
)
|
|
16,459
|
|
|
387
|
|
||||
Total Earnings Before Income Taxes
|
$
|
64,354
|
|
|
$
|
13,562
|
|
|
$
|
142,184
|
|
|
$
|
74,272
|
|
•
|
Sales and Lease Ownership earnings before income taxes included
$2.3 million
of restructuring charges related to the Company's strategic decision to close
44
Company-operated stores and restructure its home office and field support.
|
•
|
The results of the Other category loss before income taxes included
$13.3 million
in financial and advisory costs related to addressing strategic matters, including proxy contests, of which
$12.4 million
was incurred during the three months ended
June 30, 2014
. In addition, the Other category loss included
$6.3 million
in transaction costs related to the Progressive acquisition, of which
$5.5 million
was incurred during the three months ended
June 30, 2014
.
|
(In Thousands)
|
June 30,
2015 |
|
December 31,
2014 |
||||
Assets:
|
|
|
|
||||
Sales and Lease Ownership
|
$
|
1,175,071
|
|
|
$
|
1,246,325
|
|
Progressive
|
909,440
|
|
|
858,159
|
|
||
HomeSmart
|
43,950
|
|
|
47,585
|
|
||
Franchise
|
34,949
|
|
|
46,755
|
|
||
Manufacturing
1
|
24,222
|
|
|
23,050
|
|
||
Other
|
167,075
|
|
|
234,970
|
|
||
Total Assets
|
$
|
2,354,707
|
|
|
$
|
2,456,844
|
|
1
|
Includes inventory (principally raw materials and work-in-process) that has been classified within lease merchandise in the condensed consolidated balance sheets of
$14.9 million
and
$13.2 million
as of
June 30, 2015
and
December 31, 2014
, respectively.
|
•
|
Revenues in the Sales and Lease Ownership and HomeSmart segments are reported on a cash basis for management reporting purposes.
|
•
|
A predetermined amount of each reportable segment’s revenues is charged to the reportable segment as an allocation of corporate overhead. This allocation was generally
5%
in
2015
and
2014
.
|
•
|
Accruals related to store closures are not recorded on the reportable segments’ financial statements, but are maintained and controlled by corporate headquarters.
|
•
|
The capitalization and amortization of manufacturing variances are recorded on the consolidated financial statements as part of Cash to Accrual and Other Adjustments and are not allocated to the segment that holds the related lease merchandise.
|
•
|
Advertising expense in the Sales and Lease Ownership and HomeSmart segments is estimated at the beginning of each year and then allocated to the division ratably over time for management reporting purposes. For financial reporting purposes, advertising expense is recognized when the related advertising activities occur. The difference between these two methods is reflected as part of Cash to Accrual and Other Adjustments.
|
•
|
Sales and lease ownership lease merchandise write-offs are recorded using the direct write-off method for management reporting purposes and using the allowance method for financial reporting purposes. The difference between these two methods is reflected as part of Cash to Accrual and Other Adjustments.
|
•
|
Interest on borrowings is estimated at the beginning of each year. Interest is then allocated to the Sales and Lease Ownership and HomeSmart segments based on relative total assets.
|
NOTE 8.
|
RELATED PARTY TRANSACTIONS
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Renewing our focus on same store revenue growth for our core portfolio, through improved execution, optimization of merchandising and pricing and an enhanced go-to-market strategy;
|
•
|
Enhancing and growing our online platform;
|
•
|
Driving cost efficiency to recapture margin, including through selling, general and administrative cost savings and rationalizing underperforming stores;
|
•
|
Moderating new Company-operated store growth to result in no net store growth after store closings; and
|
•
|
Strengthening and growing the franchise store base.
|
|
Three Months Ended
June 30, |
|
Change
|
|||||||||||
(In Thousands)
|
2015
|
|
2014
|
|
$
|
|
%
|
|||||||
REVENUES:
|
|
|
|
|
|
|
|
|||||||
Sales and Lease Ownership
1
|
$
|
474,346
|
|
|
$
|
495,049
|
|
|
$
|
(20,703
|
)
|
|
(4.2
|
)%
|
Progressive
2
|
255,946
|
|
|
128,859
|
|
|
127,087
|
|
|
98.6
|
|
|||
HomeSmart
1
|
15,275
|
|
|
15,749
|
|
|
(474
|
)
|
|
(3.0
|
)
|
|||
Franchise
3
|
15,491
|
|
|
16,225
|
|
|
(734
|
)
|
|
(4.5
|
)
|
|||
Manufacturing
|
25,228
|
|
|
23,743
|
|
|
1,485
|
|
|
6.3
|
|
|||
Other
|
326
|
|
|
367
|
|
|
(41
|
)
|
|
(11.2
|
)
|
|||
Revenues of Reportable Segments
|
786,612
|
|
|
679,992
|
|
|
106,620
|
|
|
15.7
|
|
|||
Elimination of Intersegment Revenues
|
(24,691
|
)
|
|
(23,404
|
)
|
|
(1,287
|
)
|
|
(5.5
|
)
|
|||
Cash to Accrual Adjustments
|
7,128
|
|
|
5,902
|
|
|
1,226
|
|
|
20.8
|
|
|||
Total Revenues from External Customers
|
$
|
769,049
|
|
|
$
|
662,490
|
|
|
$
|
106,559
|
|
|
16.1
|
%
|
1
Segment revenue principally consists of lease revenues and fees, retail sales and non-retail sales, and is presented on a cash basis.
|
||||||||||||||
2
Segment revenue consists of lease revenues and fees.
|
||||||||||||||
3
Segment revenue consists of franchise royalties and fees.
|
|
Three Months Ended
June 30, |
||||||
(In Thousands)
|
2015
|
|
2014
|
||||
Losses (gains) on sales of stores and delivery vehicles
|
$
|
103
|
|
|
$
|
(245
|
)
|
Losses on asset dispositions and assets held for sale
|
174
|
|
|
250
|
|
||
Other operating expense, net
|
$
|
277
|
|
|
$
|
5
|
|
|
Three Months Ended June 30,
|
|
Change
|
|||||||||||
|
|
|
|
|
2015 vs. 2014
|
|||||||||
(In Thousands)
|
2015
|
|
2014
|
|
$
|
|
%
|
|||||||
EARNINGS (LOSS) BEFORE INCOME TAXES:
|
|
|
|
|
|
|
|
|||||||
Sales and Lease Ownership
|
$
|
30,859
|
|
|
$
|
32,132
|
|
|
$
|
(1,273
|
)
|
|
(4.0
|
)%
|
Progressive
|
23,314
|
|
|
(323
|
)
|
|
23,637
|
|
|
nmf
|
|
|||
HomeSmart
|
(126
|
)
|
|
(662
|
)
|
|
536
|
|
|
81.0
|
|
|||
Franchise
|
11,993
|
|
|
11,073
|
|
|
920
|
|
|
8.3
|
|
|||
Manufacturing
|
376
|
|
|
(89
|
)
|
|
465
|
|
|
522.5
|
|
|||
Other
|
(11,668
|
)
|
|
(28,547
|
)
|
|
16,879
|
|
|
59.1
|
|
|||
Earnings Before Income Taxes for Reportable Segments
|
54,748
|
|
|
13,584
|
|
|
41,164
|
|
|
303.0
|
|
|||
Elimination of Intersegment (Profit) Loss
|
(398
|
)
|
|
82
|
|
|
(480
|
)
|
|
(585.4
|
)
|
|||
Cash to Accrual and Other Adjustments
|
10,004
|
|
|
(104
|
)
|
|
10,108
|
|
|
nmf
|
|
|||
Total
|
$
|
64,354
|
|
|
$
|
13,562
|
|
|
$
|
50,792
|
|
|
374.5
|
%
|
|
|
|
|
|
|
|
|
|||||||
nmf - Calculation is not meaningful
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, |
|
Change
|
|
|
|||||||||
(In Thousands)
|
2015
|
|
2014
|
|
$
|
|
%
|
|||||||
REVENUES:
|
|
|
|
|
|
|
|
|||||||
Sales and Lease Ownership
1
|
$
|
1,010,506
|
|
|
$
|
1,043,760
|
|
|
$
|
(33,254
|
)
|
|
(3.2
|
)%
|
Progressive
2
|
507,565
|
|
|
128,859
|
|
|
378,706
|
|
|
293.9
|
|
|||
HomeSmart
1
|
32,247
|
|
|
33,153
|
|
|
(906
|
)
|
|
(2.7
|
)
|
|||
Franchise
3
|
32,495
|
|
|
34,309
|
|
|
(1,814
|
)
|
|
(5.3
|
)
|
|||
Manufacturing
|
54,034
|
|
|
54,898
|
|
|
(864
|
)
|
|
(1.6
|
)
|
|||
Other
|
694
|
|
|
2,265
|
|
|
(1,571
|
)
|
|
(69.4
|
)
|
|||
Revenues of Reportable Segments
|
1,637,541
|
|
|
1,297,244
|
|
|
340,297
|
|
|
26.2
|
|
|||
Elimination of Intersegment Revenues
|
(52,980
|
)
|
|
(53,662
|
)
|
|
682
|
|
|
1.3
|
|
|||
Cash to Accrual Adjustments
|
6,302
|
|
|
4,331
|
|
|
1,971
|
|
|
45.5
|
|
|||
Total Revenues from External Customers
|
$
|
1,590,863
|
|
|
$
|
1,247,913
|
|
|
$
|
342,950
|
|
|
27.5
|
%
|
1
Segment revenue principally consists of lease revenues and fees, retail sales and non-retail sales, and is presented on a cash basis.
|
||||||||||||||
2
Segment revenue consists of lease revenues and fees.
|
|
|
|
|
|
|
|
|||||||
3
Segment revenue consists of franchise royalties and fees.
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, |
||||||
(In Thousands)
|
2015
|
|
2014
|
||||
Gains on sales of stores and delivery vehicles
|
$
|
(2,290
|
)
|
|
$
|
(2,050
|
)
|
Impairment charges and losses on asset dispositions
|
1,107
|
|
|
1,378
|
|
||
Other operating income, net
|
$
|
(1,183
|
)
|
|
$
|
(672
|
)
|
•
|
Cash and cash equivalents
increased
$87.6 million
to
$91.1 million
at
June 30, 2015
from
$3.5 million
at
December 31, 2014
. For additional information, refer to the “Liquidity and Capital Resources” section below.
|
•
|
Income tax receivable
decreased
$112.4 million
due to the enactment of the Tax Increase Prevention Act of 2014 in December 2014, which extended bonus depreciation on eligible inventory held during 2014. Throughout 2014, the Company made payments based on the previously enacted law, resulting in an overpayment when the current act was signed. During the
six months
ended
June 30, 2015
, the Company applied for and received a
$100.0 million
refund from the Internal Revenue Service (“IRS”).
|
•
|
Deferred income taxes
decreased
$70.4 million
due primarily to the reversal of accelerated bonus depreciation deductions on lease merchandise that were taken in prior periods.
|
•
|
Debt
decreased
$111.2 million
due primarily to the net repayment of
$81.6 million
in revolving credit borrowings and term loans outstanding as of
December 31, 2014
. Refer to “Liquidity and Capital Resources” below for further details regarding the Company's financing arrangements.
|
•
|
cash flows from operations;
|
•
|
trade credit with vendors;
|
•
|
private debt offerings;
|
•
|
bank debt;
|
•
|
proceeds from the sale of lease return merchandise; and
|
•
|
stock offerings.
|
(In Thousands)
|
Total
|
Period Less
Than 1 Year
|
Period 1-3
Years
|
Period 3-5
Years
|
Period Over
5 Years
|
||||||||||
Debt, Excluding Capital Leases
|
$
|
484,375
|
|
$
|
31,250
|
|
$
|
195,000
|
|
$
|
198,125
|
|
$
|
60,000
|
|
Capital Leases
|
10,483
|
|
2,792
|
|
4,608
|
|
2,360
|
|
723
|
|
|||||
Interest Obligations
|
74,015
|
|
20,457
|
|
33,597
|
|
17,202
|
|
2,759
|
|
|||||
Operating Leases
|
491,612
|
|
111,413
|
|
164,608
|
|
104,774
|
|
110,817
|
|
|||||
Purchase Obligations
|
12,076
|
|
9,932
|
|
2,144
|
|
—
|
|
—
|
|
|||||
Retirement Obligations
|
6,255
|
|
4,050
|
|
2,150
|
|
26
|
|
29
|
|
|||||
Regulatory Obligations
|
17,500
|
|
17,500
|
|
—
|
|
—
|
|
—
|
|
|||||
Total Contractual Cash Obligations
|
$
|
1,096,316
|
|
$
|
197,394
|
|
$
|
402,107
|
|
$
|
322,487
|
|
$
|
174,328
|
|
(In Thousands)
|
Total
Amounts
Committed
|
Period Less Than 1 Year
|
Period 1-3
Years
|
Period 3-5
Years
|
Period Over
5 Years
|
||||||||||
Guaranteed Borrowings of Franchisees
|
$
|
87,620
|
|
$
|
87,620
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
Period
|
Total Number of Shares Purchased
1
|
Average Price Paid per Share
2
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
3
|
||||
April 1, 2015 through April 30, 2015
|
—
|
|
—
|
|
—
|
|
10,496,421
|
|
May 1, 2015 through May 31, 2015
|
—
|
|
—
|
|
—
|
|
10,496,421
|
|
June 1, 2015 through June 30, 2015
|
—
|
|
—
|
|
—
|
|
10,496,421
|
|
Total
|
—
|
|
|
—
|
|
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
OTHER INFORMATION
|
ITEM 6.
|
EXHIBITS
|
|
|
AARON’S, INC.
|
|
|
|
|
(Registrant)
|
|
|
|
|
Date:
|
August 6, 2015
|
By:
|
/s/ Gilbert L. Danielson
|
|
|
|
Gilbert L. Danielson
|
|
|
|
Executive Vice President,
|
|
|
|
Chief Financial Officer
|
|
|
|
|
Date:
|
August 6, 2015
|
By:
|
/s/ Robert P. Sinclair, Jr.
|
|
|
|
Robert P. Sinclair, Jr.
|
|
|
|
Vice President,
|
|
|
|
Corporate Controller
|
|
|
|
AARON’S, INC.
|
|
|
|
|
|
|
By:
|
/s/ D. Chad Strickland
|
|
|
|
D. Chad Strickland
|
|
|
|
Senior Vice President,
|
|
|
|
Associate Resources
|
|
|
|
AARON’S, INC.
|
|
|
|
|
|
|
By:
|
/s/ D. Chad Strickland
|
|
|
|
D. Chad Strickland
|
|
|
|
Senior Vice President,
|
|
|
|
Associate Resources
|
|
I, John W. Robinson III, certify that:
|
||||
|
|
|
|
||
1.
|
I have reviewed this quarterly report on Form 10-Q of Aaron's, Inc.;
|
||||
|
|
|
|
||
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
||||
|
|
||||
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
||||
|
|
||||
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
||||
|
|
||||
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
|
|||
|
|
|
|||
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|||
|
|
|
|||
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|||
|
|
|
|||
|
d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
|||
|
|
||||
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
|
||||
|
|
||||
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
|||
|
|
|
|||
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date:
|
August 6, 2015
|
/s/ John W. Robinson III
|
|
|
John W. Robinson III
|
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
I, Gilbert L. Danielson, certify that:
|
||||
|
|
|
|
||
1.
|
I have reviewed this quarterly report on Form 10-Q of Aaron's, Inc.;
|
||||
|
|
|
|
||
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
||||
|
|
||||
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
||||
|
|
||||
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
||||
|
|
||||
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|||
|
|
|
|||
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|||
|
|
|
|||
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|||
|
|
|
|||
|
d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
|||
|
|
||||
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
|
||||
|
|
||||
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
|||
|
|
|
|||
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date:
|
August 6, 2015
|
/s/ Gilbert L. Danielson
|
|
|
Gilbert L. Danielson
|
|
|
Executive Vice President,
|
|
|
Chief Financial Officer
|
Date:
|
August 6, 2015
|
|
/s/ John W. Robinson III
|
|
|
|
John W. Robinson III
|
|
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
Date:
|
August 6, 2015
|
|
/s/ Gilbert L. Danielson
|
|
|
|
Gilbert L. Danielson
|
|
|
|
Executive Vice President,
|
|
|
|
Chief Financial Officer
|