☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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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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400 Galleria Parkway SE
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Suite 300
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Atlanta
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Georgia
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30339-3182
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(Address of principal executive offices)
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(Zip Code)
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Title of each class
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Trading Symbol
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Name of each exchange on which registered
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Common Stock, $0.50 Par Value
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AAN
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New York Stock Exchange
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Large Accelerated Filer
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☒
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Accelerated Filer
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☐
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Non-Accelerated Filer
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☐
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(Do not check if a smaller reporting company)
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Smaller Reporting Company
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☐
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Emerging Growth Company
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☐
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act
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☐
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Title of Each Class
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Shares Outstanding as of
October 28, 2019
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Common Stock, $0.50 Par Value
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67,151,778
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Item 3. Defaults Upon Senior Securities
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Item 4. Mine Safety Disclosures
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Item 5. Other Information
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ITEM 1.
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FINANCIAL STATEMENTS
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(Unaudited)
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September 30,
2019 |
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December 31,
2018 |
||||
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(In Thousands, Except Share Data)
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||||||
ASSETS:
|
|
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||||
Cash and Cash Equivalents
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$
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150,261
|
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$
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15,278
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Accounts Receivable (net of allowances of $74,752 in 2019 and $62,704 in 2018)
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93,090
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98,159
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Lease Merchandise (net of accumulated depreciation and allowances of $890,932 in 2019 and $816,928 in 2018)
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1,281,872
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1,318,470
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Loans Receivable (net of allowances and unamortized fees of $19,970 in 2019 and $19,941 in 2018)
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72,130
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76,153
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Property, Plant and Equipment at Cost (net of accumulated depreciation of $311,155 in 2019 and $284,287 in 2018)
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230,347
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229,492
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Operating Lease Right-of-Use Assets
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330,508
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—
|
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Goodwill
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735,782
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733,170
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Other Intangibles (net of accumulated amortization of $147,389 in 2019 and $130,116 in 2018)
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198,216
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228,600
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Income Tax Receivable
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15,931
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29,148
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Prepaid Expenses and Other Assets
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111,483
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98,222
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Total Assets
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$
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3,219,620
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$
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2,826,692
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LIABILITIES & SHAREHOLDERS’ EQUITY:
|
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||||
Accounts Payable and Accrued Expenses
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$
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254,234
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$
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293,153
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Deferred Income Taxes Payable
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297,110
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267,500
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Customer Deposits and Advance Payments
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79,071
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80,579
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Operating Lease Liabilities
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374,443
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—
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Debt
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347,107
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424,752
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Total Liabilities
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1,351,965
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1,065,984
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Commitments and Contingencies (Note 6)
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SHAREHOLDERS' EQUITY:
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Common Stock, Par Value $0.50 Per Share: Authorized: 225,000,000 Shares at September 30, 2019 and December 31, 2018; Shares Issued: 90,752,123 at September 30, 2019 and December 31, 2018
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45,376
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45,376
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Additional Paid-in Capital
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283,454
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278,922
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Retained Earnings
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2,139,353
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2,005,344
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Accumulated Other Comprehensive Loss
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(348
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)
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(1,087
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)
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2,467,835
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2,328,555
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Less: Treasury Shares at Cost
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Common Stock: 23,602,055 Shares at September 30, 2019 and 23,567,979 at December 31, 2018
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(600,180
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)
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(567,847
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)
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Total Shareholders’ Equity
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1,867,655
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1,760,708
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Total Liabilities & Shareholders’ Equity
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$
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3,219,620
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$
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2,826,692
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Three Months Ended
September 30, |
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Nine Months Ended
September 30, |
||||||||||||
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2019
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2018
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2019
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2018
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||||||||
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(In Thousands, Except Per Share Data)
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||||||||||||||
REVENUES:
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Lease Revenues and Fees
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$
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906,776
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$
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880,871
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$
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2,758,498
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$
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2,596,876
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Retail Sales
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8,854
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7,620
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30,561
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22,728
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Non-Retail Sales
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31,085
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44,368
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102,190
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151,259
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Franchise Royalties and Fees
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8,087
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10,153
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25,899
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35,140
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Interest and Fees on Loans Receivable
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8,687
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9,508
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25,943
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28,258
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Other
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319
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551
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961
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1,478
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||||
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963,808
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953,071
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2,944,052
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2,835,739
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||||
COSTS AND EXPENSES:
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||||||||
Depreciation of Lease Merchandise
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489,199
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434,593
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1,464,887
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1,290,015
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Retail Cost of Sales
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5,742
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4,877
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20,025
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14,695
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Non-Retail Cost of Sales
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24,913
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35,214
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83,057
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130,302
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Operating Expenses
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383,264
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420,602
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1,154,056
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1,199,171
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Restructuring Expenses, Net
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5,516
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537
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37,535
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561
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|
||||
Other Operating Income, Net
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(329
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)
|
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(38
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)
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(4,712
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)
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(286
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)
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||||
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908,305
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895,785
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2,754,848
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2,634,458
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||||
OPERATING PROFIT
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55,503
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57,286
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189,204
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201,281
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||||
Interest Income
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360
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18
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1,405
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374
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|
||||
Interest Expense
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(3,991
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)
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(3,735
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)
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(13,247
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)
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(11,868
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)
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||||
Impairment of Investment
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—
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|
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—
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—
|
|
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(20,098
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)
|
||||
Other Non-Operating (Expense) Income, Net
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(207
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)
|
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(154
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)
|
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1,430
|
|
|
458
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EARNINGS BEFORE INCOME TAXES
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51,665
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53,415
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178,792
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170,147
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INCOME TAXES
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11,864
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9,695
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40,263
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|
|
35,680
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|
||||
NET EARNINGS
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$
|
39,801
|
|
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$
|
43,720
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$
|
138,529
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$
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134,467
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EARNINGS PER SHARE
|
|
|
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||||||||
Basic
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$
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0.59
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$
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0.64
|
|
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$
|
2.05
|
|
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$
|
1.93
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Assuming Dilution
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$
|
0.58
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$
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0.62
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$
|
2.02
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$
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1.89
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CASH DIVIDENDS DECLARED PER SHARE:
|
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|
||||||||
Common Stock
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$
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0.0350
|
|
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$
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0.0300
|
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$
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0.1050
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$
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0.0900
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WEIGHTED AVERAGE SHARES OUTSTANDING:
|
|
|
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|
|
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||||||||
Basic
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67,400
|
|
|
68,819
|
|
|
67,461
|
|
|
69,521
|
|
||||
Assuming Dilution
|
68,652
|
|
|
70,139
|
|
|
68,739
|
|
|
70,996
|
|
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Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
(In Thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Net Earnings
|
$
|
39,801
|
|
|
$
|
43,720
|
|
|
$
|
138,529
|
|
|
$
|
134,467
|
|
Other Comprehensive (Loss) Income:
|
|
|
|
|
|
|
|
||||||||
Foreign Currency Translation Adjustment
|
(303
|
)
|
|
297
|
|
|
739
|
|
|
(715
|
)
|
||||
Total Other Comprehensive (Loss) Income
|
(303
|
)
|
|
297
|
|
|
739
|
|
|
(715
|
)
|
||||
Comprehensive Income
|
$
|
39,498
|
|
|
$
|
44,017
|
|
|
$
|
139,268
|
|
|
$
|
133,752
|
|
|
Nine Months Ended
September 30, |
||||||
|
2019
|
|
2018
|
||||
|
(In Thousands)
|
||||||
OPERATING ACTIVITIES:
|
|
|
|
||||
Net Earnings
|
$
|
138,529
|
|
|
$
|
134,467
|
|
Adjustments to Reconcile Net Earnings to Cash Provided by Operating Activities:
|
|
|
|
||||
Depreciation of Lease Merchandise
|
1,464,887
|
|
|
1,290,015
|
|
||
Other Depreciation and Amortization
|
79,419
|
|
|
68,730
|
|
||
Accounts Receivable Provision
|
228,608
|
|
|
188,763
|
|
||
Provision for Credit Losses on Loans Receivable
|
15,291
|
|
|
16,011
|
|
||
Stock-Based Compensation
|
20,261
|
|
|
21,793
|
|
||
Deferred Income Taxes
|
28,747
|
|
|
30,166
|
|
||
Impairment of Assets
|
29,031
|
|
|
20,098
|
|
||
Non-Cash Lease Expense
|
86,367
|
|
|
—
|
|
||
Other Changes, Net
|
3,423
|
|
|
(1,625
|
)
|
||
Changes in Operating Assets and Liabilities, Net of Effects of Acquisitions and Dispositions:
|
|
|
|
|
|
||
Additions to Lease Merchandise
|
(1,723,385
|
)
|
|
(1,583,184
|
)
|
||
Book Value of Lease Merchandise Sold or Disposed
|
298,904
|
|
|
289,859
|
|
||
Accounts Receivable
|
(225,372
|
)
|
|
(181,512
|
)
|
||
Prepaid Expenses and Other Assets
|
(19,642
|
)
|
|
(6,685
|
)
|
||
Income Tax Receivable
|
13,217
|
|
|
70,299
|
|
||
Operating Lease Liabilities
|
(91,333
|
)
|
|
—
|
|
||
Accounts Payable and Accrued Expenses
|
5,762
|
|
|
7,998
|
|
||
Customer Deposits and Advance Payments
|
(1,954
|
)
|
|
(2,198
|
)
|
||
Cash Provided by Operating Activities
|
350,760
|
|
|
362,995
|
|
||
INVESTING ACTIVITIES:
|
|
|
|
|
|
||
Investments in Loans Receivable
|
(49,311
|
)
|
|
(49,311
|
)
|
||
Proceeds from Loans Receivable
|
40,423
|
|
|
44,016
|
|
||
Proceeds from Investments
|
—
|
|
|
666
|
|
||
Outflows on Purchases of Property, Plant and Equipment
|
(67,049
|
)
|
|
(52,927
|
)
|
||
Proceeds from Property, Plant and Equipment
|
2,805
|
|
|
5,488
|
|
||
Outflows on Acquisitions of Businesses and Customer Agreements, Net of Cash Acquired
|
(12,873
|
)
|
|
(141,079
|
)
|
||
Proceeds from Dispositions of Businesses and Customer Agreements, Net of Cash Disposed
|
2,813
|
|
|
802
|
|
||
Cash Used in Investing Activities
|
(83,192
|
)
|
|
(192,345
|
)
|
||
FINANCING ACTIVITIES:
|
|
|
|
|
|
||
(Repayments) Borrowings on Revolving Facility, Net
|
(16,000
|
)
|
|
25,000
|
|
||
Repayments on Debt
|
(62,317
|
)
|
|
(96,857
|
)
|
||
Dividends Paid
|
(7,086
|
)
|
|
(4,186
|
)
|
||
Acquisition of Treasury Stock
|
(39,422
|
)
|
|
(100,004
|
)
|
||
Issuance of Stock Under Stock Option Plans
|
5,115
|
|
|
6,684
|
|
||
Shares Withheld for Tax Payments
|
(12,977
|
)
|
|
(17,282
|
)
|
||
Debt Issuance Costs
|
—
|
|
|
(55
|
)
|
||
Cash Used in Financing Activities
|
(132,687
|
)
|
|
(186,700
|
)
|
||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
|
102
|
|
|
(1
|
)
|
||
Increase (Decrease) in Cash and Cash Equivalents
|
134,983
|
|
|
(16,051
|
)
|
||
Cash and Cash Equivalents at Beginning of Period
|
15,278
|
|
|
51,037
|
|
||
Cash and Cash Equivalents at End of Period
|
$
|
150,261
|
|
|
$
|
34,986
|
|
NOTE 1.
|
BASIS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
For the Three Months Ended September 30 (Unaudited and In Thousands)
|
2019
|
|
2018
|
||||
Progressive Leasing Invoice Volume1
|
$
|
420,902
|
|
|
$
|
355,005
|
|
Stores as of September 30 (Unaudited)
|
2019
|
|
2018
|
||
Company-operated Aaron's Branded Stores
|
1,163
|
|
|
1,267
|
|
Franchised Stores
|
341
|
|
|
432
|
|
Systemwide Stores
|
1,504
|
|
|
1,699
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||
(Shares In Thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||
Weighted Average Shares Outstanding
|
67,400
|
|
|
68,819
|
|
|
67,461
|
|
|
69,521
|
|
Dilutive Effect of Share-Based Awards
|
1,252
|
|
|
1,320
|
|
|
1,278
|
|
|
1,475
|
|
Weighted Average Shares Outstanding Assuming Dilution
|
68,652
|
|
|
70,139
|
|
|
68,739
|
|
|
70,996
|
|
(In Thousands)
|
September 30, 2019
|
|
December 31, 2018
|
||||
Customers
|
$
|
67,359
|
|
|
$
|
60,879
|
|
Corporate
|
12,600
|
|
|
18,171
|
|
||
Franchisee
|
13,131
|
|
|
19,109
|
|
||
Accounts Receivable
|
$
|
93,090
|
|
|
$
|
98,159
|
|
|
Nine Months Ended September 30,
|
||||||
(In Thousands)
|
2019
|
|
2018
|
||||
Bad Debt Expense1
|
$
|
1,272
|
|
|
$
|
160,886
|
|
Provision for Returns and Uncollectible Renewal Payments2
|
227,336
|
|
|
27,877
|
|
||
Accounts Receivable Provision
|
$
|
228,608
|
|
|
$
|
188,763
|
|
(In Thousands)
|
September 30, 2019
|
|
December 31, 2018
|
||||
Merchandise on Lease
|
$
|
1,034,855
|
|
|
$
|
1,053,684
|
|
Merchandise Not on Lease
|
247,017
|
|
|
264,786
|
|
||
Lease Merchandise, net of Accumulated Depreciation and Allowances
|
$
|
1,281,872
|
|
|
$
|
1,318,470
|
|
|
Nine Months Ended September 30,
|
||||||
(In Thousands)
|
2019
|
|
2018
|
||||
Beginning Balance
|
$
|
46,694
|
|
|
$
|
35,629
|
|
Merchandise Written off, net of Recoveries
|
(168,770
|
)
|
|
(130,946
|
)
|
||
Provision for Write-offs
|
186,922
|
|
|
146,091
|
|
||
Ending Balance
|
$
|
64,846
|
|
|
$
|
50,774
|
|
FICO Score Category
|
September 30, 2019
|
|
December 31, 2018
|
||
600 or Less
|
5.6
|
%
|
|
3.7
|
%
|
Between 600 and 700
|
79.9
|
%
|
|
77.9
|
%
|
700 or Greater
|
14.5
|
%
|
|
18.4
|
%
|
(In Thousands)
|
September 30, 2019
|
|
December 31, 2018
|
||||
Prepaid Expenses
|
$
|
37,658
|
|
|
$
|
30,763
|
|
Prepaid Insurance
|
26,535
|
|
|
27,948
|
|
||
Assets Held for Sale
|
10,017
|
|
|
6,589
|
|
||
Deferred Tax Asset
|
8,761
|
|
|
8,761
|
|
||
Other Assets
|
28,512
|
|
|
24,161
|
|
||
Prepaid Expenses and Other Assets
|
$
|
111,483
|
|
|
$
|
98,222
|
|
(In Thousands)
|
September 30, 2019
|
|
December 31, 2018
|
||||
Accounts Payable
|
$
|
72,190
|
|
|
$
|
88,369
|
|
Accrued Insurance Costs
|
41,872
|
|
|
40,423
|
|
||
Accrued Salaries and Benefits
|
49,052
|
|
|
40,790
|
|
||
Accrued Real Estate and Sales Taxes
|
32,337
|
|
|
30,332
|
|
||
Deferred Rent1
|
—
|
|
|
27,270
|
|
||
Other Accrued Expenses and Liabilities1
|
58,783
|
|
|
65,969
|
|
||
Accounts Payable and Accrued Expenses
|
$
|
254,234
|
|
|
$
|
293,153
|
|
1
|
Amounts as of September 30, 2019 were impacted by the January 1, 2019 adoption of ASC 842. Upon transition to ASC 842, the remaining balances of the Company's deferred rent, lease incentives, and closed store reserve were reclassified as a reduction to the operating lease right-of-use asset in the accompanying condensed consolidated balance sheet.
|
|
Treasury Stock
|
|
Common Stock
|
|
Additional
Paid-in Capital
|
|
Retained Earnings
|
|
Accumulated Other Comprehensive Loss
|
Total Shareholders’ Equity
|
|||||||||||||||
(In Thousands, Except Per Share)
|
Shares
|
|
Amount
|
|
|
|
|
||||||||||||||||||
Balance, December 31, 2018
|
(23,568
|
)
|
|
$
|
(567,847
|
)
|
|
$
|
45,376
|
|
|
$
|
278,922
|
|
|
$
|
2,005,344
|
|
|
$
|
(1,087
|
)
|
$
|
1,760,708
|
|
Opening Balance Sheet Adjustment - ASC 842, net of taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,592
|
|
|
—
|
|
2,592
|
|
||||||
Cash Dividends, $0.035 per share
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,363
|
)
|
|
—
|
|
(2,363
|
)
|
||||||
Stock-Based Compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
7,050
|
|
|
—
|
|
|
—
|
|
7,050
|
|
||||||
Reissued Shares
|
493
|
|
|
4,264
|
|
|
—
|
|
|
(15,245
|
)
|
|
—
|
|
|
—
|
|
(10,981
|
)
|
||||||
Net Earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
56,078
|
|
|
—
|
|
56,078
|
|
||||||
Foreign Currency Translation Adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
424
|
|
424
|
|
||||||
Balance, March 31, 2019
|
(23,075
|
)
|
|
(563,583
|
)
|
|
45,376
|
|
|
270,727
|
|
|
2,061,651
|
|
|
(663
|
)
|
1,813,508
|
|
||||||
Cash Dividends, $0.035 per share
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,386
|
)
|
|
—
|
|
(2,386
|
)
|
||||||
Stock-Based Compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
6,522
|
|
|
—
|
|
|
—
|
|
6,522
|
|
||||||
Reissued Shares
|
113
|
|
|
2,776
|
|
|
—
|
|
|
284
|
|
|
—
|
|
|
—
|
|
3,060
|
|
||||||
Repurchased Shares
|
(243
|
)
|
|
(14,414
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
(14,414
|
)
|
||||||
Net Earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
42,650
|
|
|
—
|
|
42,650
|
|
||||||
Foreign Currency Translation Adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
618
|
|
618
|
|
||||||
Balance, June 30, 2019
|
(23,205
|
)
|
|
(575,221
|
)
|
|
45,376
|
|
|
277,533
|
|
|
2,101,915
|
|
|
(45
|
)
|
1,849,558
|
|
||||||
Cash Dividends, $0.035 per share
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,363
|
)
|
|
—
|
|
(2,363
|
)
|
||||||
Stock-Based Compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
5,911
|
|
|
—
|
|
|
—
|
|
5,911
|
|
||||||
Reissued Shares
|
2
|
|
|
49
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
—
|
|
59
|
|
||||||
Repurchased Shares
|
(399
|
)
|
|
(25,008
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
(25,008
|
)
|
||||||
Net Earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39,801
|
|
|
—
|
|
39,801
|
|
||||||
Foreign Currency Translation Adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(303
|
)
|
(303
|
)
|
||||||
Balance, September 30, 2019
|
(23,602
|
)
|
|
$
|
(600,180
|
)
|
|
$
|
45,376
|
|
|
$
|
283,454
|
|
|
$
|
2,139,353
|
|
|
$
|
(348
|
)
|
$
|
1,867,655
|
|
|
Treasury Stock
|
|
Common Stock
|
|
Additional
Paid-in Capital
|
|
Retained Earnings
|
|
Accumulated Other Comprehensive Income (Loss)
|
Total Shareholders’ Equity
|
|||||||||||||||
(In Thousands, Except Per Share)
|
Shares
|
|
Amount
|
|
|
|
|
||||||||||||||||||
Balance, December 31, 2017
|
(20,733
|
)
|
|
$
|
(407,713
|
)
|
|
$
|
45,376
|
|
|
$
|
270,043
|
|
|
$
|
1,819,524
|
|
|
$
|
774
|
|
$
|
1,728,004
|
|
Opening Balance Sheet Adjustment - ASC 606, net of taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,729
|
)
|
|
—
|
|
(1,729
|
)
|
||||||
Cash Dividends, $0.03 per share
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,146
|
)
|
|
—
|
|
(2,146
|
)
|
||||||
Stock-Based Compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
7,862
|
|
|
—
|
|
|
—
|
|
7,862
|
|
||||||
Reissued Shares
|
545
|
|
|
3,441
|
|
|
—
|
|
|
(12,602
|
)
|
|
—
|
|
|
—
|
|
(9,161
|
)
|
||||||
Repurchased Shares
|
(391
|
)
|
|
(18,407
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
(18,407
|
)
|
||||||
Net Earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
52,246
|
|
|
—
|
|
52,246
|
|
||||||
Foreign Currency Translation Adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(477
|
)
|
(477
|
)
|
||||||
Balance, March 31, 2018
|
(20,579
|
)
|
|
(422,679
|
)
|
|
45,376
|
|
|
265,303
|
|
|
1,867,895
|
|
|
297
|
|
1,756,192
|
|
||||||
Cash Dividends, $0.03 per share
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,087
|
)
|
|
—
|
|
(2,087
|
)
|
||||||
Stock-Based Compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
6,380
|
|
|
—
|
|
|
—
|
|
6,380
|
|
||||||
Reissued Shares
|
220
|
|
|
1,795
|
|
|
—
|
|
|
(5,408
|
)
|
|
—
|
|
|
—
|
|
(3,613
|
)
|
||||||
Repurchased Shares
|
(1,234
|
)
|
|
(50,025
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
(50,025
|
)
|
||||||
Net Earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
38,501
|
|
|
—
|
|
38,501
|
|
||||||
Foreign Currency Translation Adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(535
|
)
|
(535
|
)
|
||||||
Balance, June 30, 2018
|
(21,593
|
)
|
|
(470,909
|
)
|
|
45,376
|
|
|
266,275
|
|
|
1,904,309
|
|
|
(238
|
)
|
1,744,813
|
|
||||||
Cash Dividends, $0.03 per share
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,068
|
)
|
|
—
|
|
(2,068
|
)
|
||||||
Stock-Based Compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
6,140
|
|
|
—
|
|
|
—
|
|
6,140
|
|
||||||
Reissued Shares
|
104
|
|
|
2,322
|
|
|
—
|
|
|
(146
|
)
|
|
—
|
|
|
—
|
|
2,176
|
|
||||||
Repurchased Shares
|
(676
|
)
|
|
(31,572
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
(31,572
|
)
|
||||||
Net Earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
43,720
|
|
|
—
|
|
43,720
|
|
||||||
Foreign Currency Translation Adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
297
|
|
297
|
|
||||||
Balance, September 30, 2018
|
(22,165
|
)
|
|
$
|
(500,159
|
)
|
|
$
|
45,376
|
|
|
$
|
272,269
|
|
|
$
|
1,945,961
|
|
|
$
|
59
|
|
$
|
1,763,506
|
|
(In Thousands)
|
Amounts Recognized as of Acquisition Dates (as of June 30, 2019)1
|
Acquisition Accounting Adjustments2
|
Final Amounts Recognized as of Acquisition Dates
|
||||||
Purchase Price
|
$
|
190,167
|
|
$
|
—
|
|
$
|
190,167
|
|
Add: Settlement of Pre-existing Relationship
|
5,405
|
|
—
|
|
5,405
|
|
|||
Less: Working Capital Adjustments
|
155
|
|
—
|
|
155
|
|
|||
Aggregate Consideration Transferred
|
195,727
|
|
—
|
|
195,727
|
|
|||
Estimated Fair Value of Identifiable Assets Acquired and Liabilities Assumed
|
|
|
|
||||||
Cash and Cash Equivalents
|
50
|
|
—
|
|
50
|
|
|||
Lease Merchandise
|
59,616
|
|
—
|
|
59,616
|
|
|||
Property, Plant and Equipment
|
5,568
|
|
—
|
|
5,568
|
|
|||
Operating Lease Right-of-Use Assets3
|
—
|
|
4,338
|
|
4,338
|
|
|||
Other Intangibles4
|
24,498
|
|
(1,176
|
)
|
23,322
|
|
|||
Prepaid Expenses and Other Assets
|
1,206
|
|
35
|
|
1,241
|
|
|||
Total Identifiable Assets Acquired
|
90,938
|
|
3,197
|
|
94,135
|
|
|||
Accounts Payable and Accrued Expenses
|
(977
|
)
|
—
|
|
(977
|
)
|
|||
Customer Deposits and Advance Payments
|
(5,156
|
)
|
—
|
|
(5,156
|
)
|
|||
Total Liabilities Assumed
|
(6,133
|
)
|
—
|
|
(6,133
|
)
|
|||
Goodwill5
|
110,922
|
|
(3,197
|
)
|
107,725
|
|
|||
Net Assets Acquired
|
$
|
84,805
|
|
$
|
3,197
|
|
$
|
88,002
|
|
|
Fair Value
(In Thousands)
|
|
Weighted Average Life
(In Years)
|
||
Non-compete Agreements
|
$
|
1,872
|
|
|
3.0
|
Customer Lease Contracts
|
7,457
|
|
|
1.0
|
|
Customer Relationships
|
9,330
|
|
|
3.0
|
|
Reacquired Franchise Rights
|
4,663
|
|
|
3.9
|
|
Total Acquired Intangible Assets1
|
$
|
23,322
|
|
|
|
(In Thousands)
|
September 30, 2019
|
|
December 31, 2018
|
||||||||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||||
Deferred Compensation Liability
|
$
|
—
|
|
|
$
|
(10,708
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(10,389
|
)
|
|
$
|
—
|
|
(In Thousands)
|
September 30, 2019
|
|
December 31, 2018
|
||||||||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||||
Assets Held for Sale
|
$
|
—
|
|
|
$
|
10,017
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,589
|
|
|
$
|
—
|
|
(In Thousands)
|
September 30, 2019
|
|
December 31, 2018
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||
Fixed-Rate Long-Term Debt1
|
—
|
|
|
(124,239
|
)
|
|
—
|
|
|
—
|
|
|
(183,765
|
)
|
|
—
|
|
(In Thousands)
|
September 30, 2019
|
|
December 31, 2018
|
||||
Credit Card Loans1
|
$
|
91,279
|
|
|
$
|
90,406
|
|
Acquired Loans2
|
821
|
|
|
5,688
|
|
||
Loans Receivable, Gross
|
92,100
|
|
|
96,094
|
|
||
|
|
|
|
||||
Allowance for Loan Losses
|
(14,054
|
)
|
|
(12,970
|
)
|
||
Unamortized Fees
|
(5,916
|
)
|
|
(6,971
|
)
|
||
Loans Receivable, Net of Allowances and Unamortized Fees
|
$
|
72,130
|
|
|
$
|
76,153
|
|
|
Three Months Ended September 30,
|
||||||
(In Thousands)
|
2019
|
|
2018
|
||||
Beginning Balance
|
$
|
12,783
|
|
|
$
|
11,586
|
|
Provision for Loan Losses
|
6,068
|
|
|
6,471
|
|
||
Charge-offs
|
(5,423
|
)
|
|
(5,294
|
)
|
||
Recoveries
|
626
|
|
|
375
|
|
||
Ending Balance
|
$
|
14,054
|
|
|
$
|
13,138
|
|
|
Nine Months Ended September 30,
|
||||||
(In Thousands)
|
2019
|
|
2018
|
||||
Beginning Balance
|
$
|
12,970
|
|
|
$
|
11,454
|
|
Provision for Loan Losses
|
15,291
|
|
|
16,011
|
|
||
Charge-offs
|
(16,065
|
)
|
|
(15,504
|
)
|
||
Recoveries
|
1,858
|
|
|
1,177
|
|
||
Ending Balance
|
$
|
14,054
|
|
|
$
|
13,138
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||
(In Thousands)
|
September 30, 2019
|
|
September 30, 2019
|
||||
Finance Lease Cost:
|
|
|
|
||||
Amortization of Right-of-Use Assets
|
$
|
396
|
|
|
$
|
1,302
|
|
Interest on Lease Liabilities
|
83
|
|
|
296
|
|
||
Total Finance Lease Cost:
|
479
|
|
|
1,598
|
|
||
|
|
|
|
||||
Operating Lease Cost:
|
|
|
|
||||
Operating Lease Cost Classified within Operating Expenses1
|
27,647
|
|
|
84,789
|
|
||
Operating Lease Cost Classified within Restructuring Expenses, Net
|
881
|
|
|
2,521
|
|
||
Sublease Receipts
|
(628
|
)
|
|
(2,399
|
)
|
||
Total Operating Lease Cost:
|
27,900
|
|
|
84,911
|
|
||
|
|
|
|
||||
Total Lease Cost
|
$
|
28,379
|
|
|
$
|
86,509
|
|
|
Nine Months Ended
|
||
(In Thousands)
|
September 30, 2019
|
||
Cash Paid for Amounts Included in Measurement of Lease Liabilities:
|
|
||
Operating Cash Flows for Finance Leases
|
$
|
345
|
|
Operating Cash Flows for Operating Leases
|
91,333
|
|
|
Financing Cash Flows for Finance Leases
|
1,971
|
|
|
Total Cash Paid for Amounts Included in Measurement of Lease Liabilities
|
93,649
|
|
|
Right-of-Use Assets Obtained in Exchange for New Finance Lease Liabilities
|
—
|
|
|
Right-of-Use Assets Obtained in Exchange for New Operating Lease Liabilities, Net of Exercised Early Lease Termination Options
|
$
|
27,185
|
|
(In Thousands)
|
|
Balance Sheet Classification
|
|
September 30, 2019
|
||
Assets
|
|
|
|
|
||
Operating Lease Assets
|
|
Operating Lease Right-of-Use Assets
|
|
$
|
330,508
|
|
Finance Lease Assets
|
|
Property, Plant and Equipment, Net
|
|
1,018
|
|
|
Total Lease Assets
|
|
|
|
$
|
331,526
|
|
|
|
|
|
|
||
Liabilities
|
|
|
|
|
||
Operating Lease Liabilities
|
|
Operating Lease Liabilities
|
|
$
|
374,443
|
|
Finance Lease Liabilities
|
|
Debt
|
|
3,192
|
|
|
Total Lease Liabilities
|
|
|
|
$
|
377,635
|
|
|
Weighted Average Discount Rate1
|
|
Weighted Average Remaining Lease Term (in years)
|
|
Finance Leases
|
5.8
|
%
|
|
1.3
|
Operating Leases
|
3.6
|
%
|
|
5.0
|
(In Thousands)
|
Operating Leases
|
|
Finance Leases
|
|
Total
|
||||||
2019
|
$
|
27,105
|
|
|
$
|
561
|
|
|
$
|
27,666
|
|
2020
|
108,113
|
|
|
2,001
|
|
|
110,114
|
|
|||
2021
|
85,651
|
|
|
841
|
|
|
86,492
|
|
|||
2022
|
65,160
|
|
|
83
|
|
|
65,243
|
|
|||
2023
|
44,363
|
|
|
—
|
|
|
44,363
|
|
|||
Thereafter
|
78,980
|
|
|
—
|
|
|
78,980
|
|
|||
Total Undiscounted Cash Flows
|
409,372
|
|
|
3,486
|
|
|
412,858
|
|
|||
Less: Interest
|
34,929
|
|
|
294
|
|
|
35,223
|
|
|||
Present Value of Lease Liabilities
|
$
|
374,443
|
|
|
$
|
3,192
|
|
|
$
|
377,635
|
|
|
Three Months Ended September 30, 2019
|
|||||||||||
(In Thousands)
|
Progressive Leasing
|
Aaron's Business
|
DAMI
|
Total
|
||||||||
Lease Revenues and Fees1
|
$
|
528,850
|
|
$
|
377,926
|
|
$
|
—
|
|
$
|
906,776
|
|
Retail Sales2
|
—
|
|
8,854
|
|
—
|
|
8,854
|
|
||||
Non-Retail Sales2
|
—
|
|
31,085
|
|
—
|
|
31,085
|
|
||||
Franchise Royalties and Fees2
|
—
|
|
8,087
|
|
—
|
|
8,087
|
|
||||
Interest and Fees on Loans Receivable3
|
—
|
|
—
|
|
8,687
|
|
8,687
|
|
||||
Other
|
—
|
|
319
|
|
—
|
|
319
|
|
||||
Total
|
$
|
528,850
|
|
$
|
426,271
|
|
$
|
8,687
|
|
$
|
963,808
|
|
2
|
Revenue within the scope of ASC 606, Revenue from Contracts with Customers. Of the Franchise Royalties and Fees, $6.3 million is related to franchise royalty income that is recognized as the franchisee collects cash revenue from its customers. The remaining revenue is primarily related to fees collected for pre-opening services, which are being deferred and recognized as revenue over the agreement term, and advertising fees charged to franchisees. Retail sales are recognized as revenue at the point of sale. Non-retail sales are recognized as revenue upon delivery of the merchandise.
|
|
Three Months Ended September 30, 2018
|
|||||||||||
(In Thousands)
|
Progressive Leasing
|
Aaron's Business
|
DAMI
|
Total
|
||||||||
Lease Revenues and Fees1
|
$
|
504,407
|
|
$
|
376,464
|
|
$
|
—
|
|
$
|
880,871
|
|
Retail Sales2
|
—
|
|
7,620
|
|
—
|
|
7,620
|
|
||||
Non-Retail Sales2
|
—
|
|
44,368
|
|
—
|
|
44,368
|
|
||||
Franchise Royalties and Fees2
|
—
|
|
10,153
|
|
—
|
|
10,153
|
|
||||
Interest and Fees on Loans Receivable3
|
—
|
|
—
|
|
9,508
|
|
9,508
|
|
||||
Other
|
—
|
|
551
|
|
—
|
|
551
|
|
||||
Total
|
$
|
504,407
|
|
$
|
439,156
|
|
$
|
9,508
|
|
$
|
953,071
|
|
|
Nine Months Ended September 30, 2019
|
|||||||||||
(In Thousands)
|
Progressive Leasing
|
Aaron's Business
|
DAMI
|
Total
|
||||||||
Lease Revenues and Fees1
|
$
|
1,568,584
|
|
$
|
1,189,914
|
|
$
|
—
|
|
$
|
2,758,498
|
|
Retail Sales2
|
—
|
|
30,561
|
|
—
|
|
30,561
|
|
||||
Non-Retail Sales2
|
—
|
|
102,190
|
|
—
|
|
102,190
|
|
||||
Franchise Royalties and Fees2
|
—
|
|
25,899
|
|
—
|
|
25,899
|
|
||||
Interest and Fees on Loans Receivable3
|
—
|
|
—
|
|
25,943
|
|
25,943
|
|
||||
Other
|
—
|
|
961
|
|
—
|
|
961
|
|
||||
Total
|
$
|
1,568,584
|
|
$
|
1,349,525
|
|
$
|
25,943
|
|
$
|
2,944,052
|
|
2
|
Revenue within the scope of ASC 606, Revenue from Contracts with Customers. Of the Franchise Royalties and Fees, $19.6 million is related to franchise royalty income that is recognized as the franchisee collects cash revenue from its customers. The remaining revenue is primarily related to fees collected for pre-opening services, which are being deferred and recognized as revenue over the agreement term, and advertising fees charged to franchisees. Retail sales are recognized as revenue at the point of sale. Non-retail sales are recognized as revenue upon delivery of the merchandise.
|
|
Nine Months Ended September 30, 2018
|
|||||||||||
(In Thousands)
|
Progressive Leasing
|
Aaron's Business
|
DAMI
|
Total
|
||||||||
Lease Revenues and Fees1
|
$
|
1,474,590
|
|
$
|
1,122,286
|
|
$
|
—
|
|
$
|
2,596,876
|
|
Retail Sales2
|
—
|
|
22,728
|
|
—
|
|
22,728
|
|
||||
Non-Retail Sales2
|
—
|
|
151,259
|
|
—
|
|
151,259
|
|
||||
Franchise Royalties and Fees2
|
—
|
|
35,140
|
|
—
|
|
35,140
|
|
||||
Interest and Fees on Loans Receivable3
|
—
|
|
—
|
|
28,258
|
|
28,258
|
|
||||
Other
|
—
|
|
1,478
|
|
—
|
|
1,478
|
|
||||
Total
|
$
|
1,474,590
|
|
$
|
1,332,891
|
|
$
|
28,258
|
|
$
|
2,835,739
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
(In Thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Earnings (Loss) Before Income Taxes:
|
|
|
|
|
|
|
|
||||||||
Progressive Leasing
|
$
|
53,473
|
|
|
$
|
40,839
|
|
|
$
|
167,267
|
|
|
$
|
120,393
|
|
Aaron's Business1
|
932
|
|
|
15,641
|
|
|
18,658
|
|
|
56,417
|
|
||||
DAMI
|
(2,740
|
)
|
|
(3,065
|
)
|
|
(7,133
|
)
|
|
(6,663
|
)
|
||||
Total Earnings Before Income Taxes
|
$
|
51,665
|
|
|
$
|
53,415
|
|
|
$
|
178,792
|
|
|
$
|
170,147
|
|
(In Thousands)
|
September 30, 2019
|
|
December 31, 2018
|
||||
Assets:
|
|
|
|
||||
Progressive Leasing
|
$
|
1,128,831
|
|
|
$
|
1,088,227
|
|
Aaron's Business1
|
1,693,574
|
|
|
1,483,102
|
|
||
DAMI
|
89,951
|
|
|
95,341
|
|
||
Other2
|
307,264
|
|
|
160,022
|
|
||
Total Assets
|
$
|
3,219,620
|
|
|
$
|
2,826,692
|
|
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
||||||||||||
(In Thousands)
|
2019
|
|
2018
|
2019
|
|
2018
|
||||||||
Right-of-Use Asset Impairment and Operating Lease Charges
|
$
|
1,828
|
|
|
$
|
586
|
|
$
|
26,616
|
|
|
$
|
1,512
|
|
Fixed Asset Impairment
|
2,174
|
|
|
—
|
|
4,743
|
|
|
—
|
|
||||
Severance
|
376
|
|
|
—
|
|
3,368
|
|
|
601
|
|
||||
Other Expenses (Reversals)
|
73
|
|
|
—
|
|
1,743
|
|
|
(1,176
|
)
|
||||
Loss (Gain) on Sale of Store Properties
|
1,065
|
|
|
(49
|
)
|
1,065
|
|
|
(376
|
)
|
||||
Total Restructuring Expenses, Net
|
$
|
5,516
|
|
|
$
|
537
|
|
$
|
37,535
|
|
|
$
|
561
|
|
(In Thousands)
|
Contractual Lease Obligations
|
|
Severance
|
||||
Balance at January 1, 2019
|
$
|
8,472
|
|
|
$
|
651
|
|
ASC 842 Transition Adjustment1
|
(8,472
|
)
|
|
—
|
|
||
Adjusted Balance at January 1, 2019
|
—
|
|
|
651
|
|
||
Restructuring Charges
|
—
|
|
|
3,368
|
|
||
Payments
|
—
|
|
|
(2,902
|
)
|
||
Balance at September 30, 2019
|
$
|
—
|
|
|
$
|
1,117
|
|
•
|
Strengthen relationships of Progressive Leasing current retail partners;
|
•
|
Focus on converting existing pipeline into Progressive Leasing retail partners;
|
•
|
Drive operational excellence in our Aaron's Business stores;
|
•
|
Grow revenue and new customers through our omnichannel platform;
|
•
|
Invest and innovate to provide a superior customer experience while lowering our costs to serve; and
|
•
|
Accelerate our vision of business transformation in the Aaron's Business at a larger scale.
|
•
|
The Company reported revenues of $963.8 million in the third quarter of 2019 compared to $953.1 million for the third quarter of 2018. Earnings before income taxes decreased to $51.7 million compared to $53.4 million during the third quarter of 2018.
|
•
|
Progressive Leasing reported revenues of $528.9 million in the third quarter of 2019, an increase of 4.8% over the third quarter of 2018. Calculated on a basis consistent with the January 2019 adoption of ASC 842, Leases (see the "Use of Non-GAAP Financial Information" section below), Progressive Leasing revenues increased 20.1% over the third quarter of 2018. Progressive Leasing's revenue growth is due to an 18.6% increase in total invoice volume, which was driven by a 20.5% increase in invoice volume per active door.
|
•
|
Progressive Leasing's earnings before income taxes increased to $53.5 million compared to $40.8 million during the third quarter of 2018, due mainly to its higher revenue.
|
•
|
Aaron's Business revenues decreased to $426.3 million for the third quarter of 2019, compared to $439.2 million in the prior year period. The decrease is primarily due to the net reduction of 149 Company-operated stores during 2019 and a 2.9% decrease in same store revenues in the third quarter of 2019, partially offset by the acquisitions of various franchisees in 2018. The Company launched new sales and marketing initiatives during the third quarter, which led to an increase in new customer agreements but also resulted in insufficient labor capacity to handle the elevated workload on our stores. This capacity imbalance created a shortfall in collections performance which had an unfavorable impact on lease revenues, same store revenues, and write-offs in the quarter.
|
•
|
Aaron's Business earnings before income taxes decreased to $0.9 million during the third quarter of 2019 compared to $15.6 million in the prior year period. Earnings before income taxes for the Aaron's Business during the third quarter of 2019 includes restructuring charges of $5.5 million related to the Company's closure and consolidation of underperforming stores.
|
•
|
The Company generated cash from operating activities of $350.8 million for the nine months ended September 30, 2019 compared to $363.0 million for the comparable period in 2018. The decrease in net cash from operating activities was impacted by net income tax refunds of $5.5 million during the nine months ended September 30, 2019, compared to net income tax refunds of $64.8 million in the same period in 2018.
|
For the Three Months Ended September 30 (Unaudited and In Thousands)
|
2019
|
|
2018
|
||||
Progressive Leasing Invoice Volume
|
$
|
420,902
|
|
|
$
|
355,005
|
|
Active Doors at September 30 (Unaudited)
|
2019
|
|
2018
|
||
Progressive Leasing Active Doors
|
19,926
|
|
|
20,258
|
|
|
Three Months Ended September 30, 2019
|
|||||||||||
(In Thousands)
|
Progressive Leasing1
|
Aaron's Business
|
DAMI
|
Total
|
||||||||
Lease Revenues and Fees
|
$
|
528,850
|
|
$
|
377,926
|
|
$
|
—
|
|
$
|
906,776
|
|
Retail Sales
|
—
|
|
8,854
|
|
—
|
|
8,854
|
|
||||
Non-Retail Sales
|
—
|
|
31,085
|
|
—
|
|
31,085
|
|
||||
Franchise Royalties and Fees
|
—
|
|
8,087
|
|
—
|
|
8,087
|
|
||||
Interest and Fees on Loans Receivable
|
—
|
|
—
|
|
8,687
|
|
8,687
|
|
||||
Other
|
—
|
|
319
|
|
—
|
|
319
|
|
||||
Total Revenues
|
$
|
528,850
|
|
$
|
426,271
|
|
$
|
8,687
|
|
$
|
963,808
|
|
|
Three Months Ended September 30, 2018
|
|||||||||||
(In Thousands)
|
Progressive Leasing
|
Aaron's Business
|
DAMI
|
Total
|
||||||||
Lease Revenues and Fees
|
$
|
504,407
|
|
$
|
376,464
|
|
$
|
—
|
|
$
|
880,871
|
|
Retail Sales
|
—
|
|
7,620
|
|
—
|
|
7,620
|
|
||||
Non-Retail Sales
|
—
|
|
44,368
|
|
—
|
|
44,368
|
|
||||
Franchise Royalties and Fees
|
—
|
|
10,153
|
|
—
|
|
10,153
|
|
||||
Interest and Fees on Loans Receivable
|
—
|
|
—
|
|
9,508
|
|
9,508
|
|
||||
Other
|
—
|
|
551
|
|
—
|
|
551
|
|
||||
Total Revenues
|
$
|
504,407
|
|
$
|
439,156
|
|
$
|
9,508
|
|
$
|
953,071
|
|
Progressive Bad Debt Expense
|
64,213
|
|
—
|
|
—
|
|
64,213
|
|
||||
Total Revenues, net of Progressive Bad Debt Expense1
|
$
|
440,194
|
|
$
|
439,156
|
|
$
|
9,508
|
|
$
|
888,858
|
|
|
Three Months Ended
September 30, |
|
Change
|
|||||||||||
(In Thousands)
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
Personnel Costs
|
$
|
173,762
|
|
|
$
|
164,587
|
|
|
$
|
9,175
|
|
|
5.6
|
%
|
Occupancy Costs
|
59,264
|
|
|
56,860
|
|
|
2,404
|
|
|
4.2
|
|
|||
Provision for Lease Merchandise Write-Offs
|
68,928
|
|
|
54,671
|
|
|
14,257
|
|
|
26.1
|
|
|||
Bad Debt Expense
|
106
|
|
|
64,235
|
|
|
(64,129
|
)
|
|
(99.8
|
)
|
|||
Shipping and Handling
|
17,592
|
|
|
18,392
|
|
|
(800
|
)
|
|
(4.3
|
)
|
|||
Advertising
|
9,189
|
|
|
9,814
|
|
|
(625
|
)
|
|
(6.4
|
)
|
|||
Provision for Loan Losses
|
6,068
|
|
|
6,471
|
|
|
(403
|
)
|
|
(6.2
|
)
|
|||
Intangible Amortization
|
7,938
|
|
|
8,807
|
|
|
(869
|
)
|
|
(9.9
|
)
|
|||
Other Operating Expenses
|
40,417
|
|
|
36,765
|
|
|
3,652
|
|
|
9.9
|
|
|||
Operating Expenses
|
$
|
383,264
|
|
|
$
|
420,602
|
|
|
$
|
(37,338
|
)
|
|
(8.9
|
)%
|
|
Three Months Ended
September 30, |
|
Change
|
||||||||||
(In Thousands)
|
2019
|
|
2018
|
|
$
|
|
%
|
||||||
Net gains on sales of delivery vehicles
|
$
|
(539
|
)
|
|
$
|
(184
|
)
|
|
$
|
(355
|
)
|
|
nmf
|
Impairment charges and net losses on asset dispositions, assets held for sale and other
|
210
|
|
|
146
|
|
|
64
|
|
|
43.8
|
|||
Other operating income, net
|
$
|
(329
|
)
|
|
$
|
(38
|
)
|
|
$
|
(291
|
)
|
|
nmf
|
|
Nine Months Ended
September 30, |
|
Change
|
|||||||||||
(In Thousands)
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
REVENUES:
|
|
|
|
|
|
|
|
|||||||
Progressive Leasing
|
$
|
1,568,584
|
|
|
$
|
1,474,590
|
|
|
$
|
93,994
|
|
|
6.4
|
%
|
Aaron's Business
|
1,349,525
|
|
|
1,332,891
|
|
|
16,634
|
|
|
1.2
|
|
|||
DAMI
|
25,943
|
|
|
28,258
|
|
|
(2,315
|
)
|
|
(8.2
|
)
|
|||
Total Revenues from External Customers
|
$
|
2,944,052
|
|
|
$
|
2,835,739
|
|
|
$
|
108,313
|
|
|
3.8
|
%
|
|
Nine Months Ended September 30, 2019
|
|||||||||||
(In Thousands)
|
Progressive Leasing1
|
Aaron's Business
|
DAMI
|
Total
|
||||||||
Lease Revenues and Fees
|
$
|
1,568,584
|
|
$
|
1,189,914
|
|
$
|
—
|
|
$
|
2,758,498
|
|
Retail Sales
|
—
|
|
30,561
|
|
—
|
|
30,561
|
|
||||
Non-Retail Sales
|
—
|
|
102,190
|
|
—
|
|
102,190
|
|
||||
Franchise Royalties and Fees
|
—
|
|
25,899
|
|
—
|
|
25,899
|
|
||||
Interest and Fees on Loans Receivable
|
—
|
|
—
|
|
25,943
|
|
25,943
|
|
||||
Other
|
—
|
|
961
|
|
—
|
|
961
|
|
||||
Total Revenues
|
$
|
1,568,584
|
|
$
|
1,349,525
|
|
$
|
25,943
|
|
$
|
2,944,052
|
|
|
Nine Months Ended September 30, 2018
|
|||||||||||
(In Thousands)
|
Progressive Leasing
|
Aaron's Business
|
DAMI
|
Total
|
||||||||
Lease Revenues and Fees
|
$
|
1,474,590
|
|
$
|
1,122,286
|
|
$
|
—
|
|
$
|
2,596,876
|
|
Retail Sales
|
—
|
|
22,728
|
|
—
|
|
22,728
|
|
||||
Non-Retail Sales
|
—
|
|
151,259
|
|
—
|
|
151,259
|
|
||||
Franchise Royalties and Fees
|
—
|
|
35,140
|
|
—
|
|
35,140
|
|
||||
Interest and Fees on Loans Receivable
|
—
|
|
—
|
|
28,258
|
|
28,258
|
|
||||
Other
|
—
|
|
1,478
|
|
—
|
|
1,478
|
|
||||
Total Revenues
|
$
|
1,474,590
|
|
$
|
1,332,891
|
|
$
|
28,258
|
|
$
|
2,835,739
|
|
Progressive Bad Debt Expense
|
160,773
|
|
—
|
|
—
|
|
160,773
|
|
||||
Total Revenues, net of Progressive Bad Debt Expense1
|
$
|
1,313,817
|
|
$
|
1,332,891
|
|
$
|
28,258
|
|
$
|
2,674,966
|
|
|
Nine Months Ended
September 30, |
|
Change
|
|||||||||||
(In Thousands)
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
Losses (gains) on sales of stores and customer agreements
|
$
|
4
|
|
|
$
|
(46
|
)
|
|
$
|
50
|
|
|
nmf
|
|
Net gains on sales of delivery vehicles
|
(869
|
)
|
|
(629
|
)
|
|
(240
|
)
|
|
(38.2
|
)
|
|||
Gain on insurance recoveries
|
(4,527
|
)
|
|
—
|
|
|
(4,527
|
)
|
|
nmf
|
|
|||
Impairment charges and net losses on asset dispositions, assets held for sale and other
|
680
|
|
|
389
|
|
|
291
|
|
|
74.8
|
|
|||
Other operating income, net
|
$
|
(4,712
|
)
|
|
$
|
(286
|
)
|
|
$
|
(4,426
|
)
|
|
nmf
|
|
•
|
Cash and cash equivalents increased $135.0 million to $150.3 million at September 30, 2019. For additional information, refer to the "Liquidity and Capital Resources" section below.
|
•
|
As a result of the adoption of ASC 842 as of January 1, 2019, the Company has operating lease right-of-use assets and operating lease liabilities of $330.5 million and $374.4 million, respectively, as of September 30, 2019.
|
•
|
Income tax receivable decreased $13.2 million due primarily to net income tax refunds of $5.5 million received during the nine months ended September 30, 2019.
|
•
|
Accounts payable and accrued expenses decreased $38.9 million primarily due to the seasonality of the Company's lease merchandise purchases and timing of related payments. Additionally, upon transition to ASC 842, the remaining balances of the Company's deferred rent, lease incentives, and closed store reserve, which were previously recorded within accounts payable and accrued expenses, were reclassified as a reduction to the operating lease right-of-use asset in the accompanying condensed consolidated balance sheet.
|
•
|
Debt decreased $77.6 million due primarily to scheduled repayments on the Company's senior unsecured notes.
|
•
|
cash flows from operations;
|
•
|
private debt offerings;
|
•
|
bank debt; and
|
•
|
stock offerings.
|
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
|
Average Price Paid per Share
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs 1
|
|||||
July 1, 2019 through July 31, 2019
|
10,100
|
|
63.85
|
|
10,100
|
|
$
|
316,206,310
|
|
August 1, 2019 through August 31, 2019
|
204,477
|
|
63.29
|
|
204,477
|
|
303,265,450
|
|
|
September 1, 2019 through September 30, 2019
|
184,847
|
|
61.79
|
|
184,847
|
|
291,843,242
|
|
|
Total
|
399,424
|
|
|
|
399,424
|
|
|
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
OTHER INFORMATION
|
ITEM 6.
|
EXHIBITS
|
|
|
AARON’S, INC.
|
|
|
|
|
(Registrant)
|
|
|
|
|
Date:
|
November 4, 2019
|
By:
|
/s/ Steven A. Michaels
|
|
|
|
Steven A. Michaels
|
|
|
|
Chief Financial Officer,
|
|
|
|
President Strategic Operations
|
|
|
|
(Principal Financial Officer)
|
|
|
|
|
Date:
|
November 4, 2019
|
By:
|
/s/ Robert P. Sinclair, Jr.
|
|
|
|
Robert P. Sinclair, Jr.
|
|
|
|
Vice President,
|
|
|
|
Corporate Controller
|
|
|
|
(Principal Accounting Officer)
|
1.
|
Section 9.2(c) of the Plan is amended to read as follows:
|
2.
|
Except as provided herein, the Plan will remain in full force and effect.
|
|
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:
|
November 4, 2019
|
/s/ John W. Robinson III
|
|
|
John W. Robinson III
|
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
I, Steven A. Michaels, 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:
|
November 4, 2019
|
/s/ Steven A. Michaels
|
|
|
Steven A. Michaels
|
|
|
Chief Financial Officer,
|
|
|
President Strategic Operations
|
Date:
|
November 4, 2019
|
|
/s/ John W. Robinson III
|
|
|
|
John W. Robinson III
|
|
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
Date:
|
November 4, 2019
|
|
/s/ Steven A. Michaels
|
|
|
|
Steven A. Michaels
|
|
|
|
Chief Financial Officer,
|
|
|
|
President Strategic Operations
|