ATLANTA, Feb. 15, 2018
/PRNewswire/ -- Aaron's, Inc. (NYSE: AAN), a leading omnichannel
provider of lease-purchase solutions, today announced financial
results for the three and twelve months ended December 31,
2017.
"A strong fourth quarter capped a year of significant
achievement for Aaron's," said John
Robinson, Chief Executive Officer. "We delivered record
revenues, EBITDA and non-GAAP diluted EPS for the full year while
making strategic investments in each of our businesses to support
long-term growth. At the same time, we further strengthened the
balance sheet while enhancing returns for our shareholders through
share repurchases and dividends. I'm extremely proud of our team
and excited about the future."
"Progressive continues to strengthen its position as a market
leader by driving innovation. In the fourth quarter, revenue grew
32% and EBITDA increased by 20%. The team is improving speed and
ease of use for both customers and retail partner associates. At
the same time, we believe our decisioning continues to benefit from
scale and further enhancements that are allowing us to capture
additional profit dollars and drive more revenue for our retail
partners."
"In the Aaron's Business, we are beginning to reap the benefits
from our transformation program. This program encompasses a number
of initiatives balanced between revenue growth and cost
improvement. The Aaron's Business saw meaningful improvement in
average ticket and lease margin in the fourth quarter, which
contributed to a significant gain in the EBITDA margin. Many of the
leading indicators we follow for the performance of the Aaron's
Business are positive, underscoring our optimistic expectations for
the business going forward."
"As we look to 2018, we believe we can accelerate revenue and
earnings growth as we build on our momentum," continued Mr.
Robinson. "We are conservatively capitalized, which will enable us
to further invest in our existing operations and remain well
positioned to execute on opportunities that promote innovation and
growth. We also plan to continue returning capital to shareholders,
when market conditions are appropriate, as evidenced by our new
$500 million share repurchase
program, which replaces our prior authorization," Mr. Robinson
concluded.
Financial Summary
Aaron's, Inc. (the "Company") conducts its operations through
three primary businesses: 1) Progressive Leasing's virtual
lease-to-own business ("Progressive Leasing"); 2) Aaron's branded
Company-operated and franchised lease-to-own stores, Aarons.com,
our e-commerce platform and Woodhaven, the Company's furniture
manufacturing operations (collectively, the "Aaron's Business");
and 3) Dent-A-Med, Inc. ("DAMI"), our second-look financing
business.
For the fourth quarter of 2017, Company revenues were
$884.6 million compared with
$795.0 million for the fourth quarter
of 2016. Net earnings were $177.6
million compared with $21.6
million in the prior year period. Diluted earnings per share
were $2.46 compared with $0.30 a year ago, which reflects a provisional
net benefit of $137
million1 to recognize the effects of the Tax Cuts
and Jobs Act (the "Tax Act") of 2017.
On a non-GAAP basis, net earnings for the fourth quarter of 2017
were $47.0 million compared with
$36.3 million for the same period in
2016, and non-GAAP earnings per share assuming dilution were
$0.65 in the fourth quarter of 2017
compared with $0.50 for the same
quarter in 2016.
For the fourth quarter of 2017, non-GAAP net earnings and
non-GAAP diluted earnings per share exclude the effects of
amortization expense resulting from our 2014 acquisition of
Progressive Leasing, amortization expense and acquisition and
transaction costs resulting from the 2017 acquisition of our
largest franchisee, restructuring charges for the Aaron's Business
and DAMI and a provisional tax benefit resulting from the Tax Act.
For the fourth quarter of 2016, non-GAAP earnings results exclude
the effects of Progressive Leasing amortization, restructuring
charges for the Aaron's Business and a gain related to the
Company's sale of its HomeSmart business.
Adjusted EBITDA for the Company, which excludes the charges and
adjustments mentioned above, increased 21.7% to $89.9 million for the fourth quarter of 2017,
compared with $73.8 million for the
same period in 2016. See "Use of Non-GAAP Financial Information"
and the related non-GAAP reconciliation accompanying this press
release.
During fiscal year 2017, revenues increased 5.5% to $3.38 billion compared with $3.21 billion for the prior year period. Net
earnings were $292.5 million versus
$139.3 million and diluted earnings
per share were $4.06 compared with
$1.91 last year, primarily due to the
provisional tax benefit resulting from the Tax Act and the growth
in revenues and net earnings at Progressive Leasing.
On a non-GAAP basis, net earnings for fiscal year 2017 were
$184.7 million compared with
$167.7 million for the same period in
2016, and non-GAAP diluted earnings per share were $2.56 compared with $2.30 for the same period in 2016. Non-GAAP net
earnings and diluted earnings per share for 2017 exclude the
effects of amortization expense resulting from the 2014 acquisition
of Progressive Leasing, amortization expense and transaction and
transition costs resulting from the 2017 acquisition of our largest
franchisee, restructuring charges for the Aaron's Business and
DAMI, and a provisional tax benefit as a result of the Tax Act.
Non-GAAP earnings results for 2016 exclude the effects of
Progressive Leasing amortization, a gain on the sale of the
Company's headquarters building, retirement and severance charges,
and a loss resulting from the Company's disposition of HomeSmart.
See "Use of Non-GAAP Financial Information" and the related
non-GAAP reconciliation accompanying this press release.
Adjusted EBITDA for the Company, which excludes the charges and
adjustments discussed above, was $362.7
million for fiscal year 2017 compared with $342.5 million for 2016.
The Company generated $158.1
million in cash from operations during 2017 and ended the
year with $51.0 million in cash
compared with a cash balance of $308.6
million to end 2016. The reduction in cash was due primarily
to the acquisition of our largest franchisee, scheduled principal
payments of the Company's term loan and unsecured notes, the
repurchase of common stock and the repayment of the DAMI credit
facility, offset by cash from operations. The Company repurchased
approximately 1.96 million shares of its common stock during 2017
and, as stated above, has announced a new program to repurchase up
to $500 million of its shares.
1 Amount represents a preliminary estimate of the
effect of revaluing net deferred tax liabilities to a 21% federal
tax rate due to the enactment of Tax Act, which was signed into law
on December 22, 2017. The final
impact of Tax Act may change from this preliminary estimate,
possibly materially, when assumptions are refined and
interpretations of the legislation are finalized including the
Company's application of any additional guidance that may be issued
by the U.S. Department of the Treasury or the Internal Revenue
Service.
Progressive Leasing Results
Progressive Leasing's revenue in the fourth quarter of 2017
increased 32.3% to $428.5 million
from $324.0 million in the fourth
quarter of 2016. Progressive Leasing's revenue for the 2017 fiscal
year increased 26.6% to $1.57 billion
from $1.24 billion for fiscal 2016.
Active doors increased 10% in the fourth quarter of 2017 to
approximately 20,000. Invoice volume per active door increased 24%.
Progressive Leasing had 740,000 customers at December 31,
2017, a 24% increase from December 31, 2016.
Earnings before income taxes for Progressive Leasing were
$38.5 million and $140.2 million for the three and twelve months
ended December 31, 2017, respectively, compared with
$29.0 million and $104.7 million for the same periods a year ago.
EBITDA for the three and twelve months ended December 31, 2017
was $50.0 million and $187.8 million, respectively, compared with
$41.7 million and $155.5 million for the same periods of 2016. As a
percentage of revenues, EBITDA was 11.7% and 12.0%, respectively,
for the three and twelve months ended December 31, 2017
compared with 12.9% and 12.6% for the same periods in 2016. The
provision for lease merchandise write-offs was 5.4% of revenue in
the fourth quarter of 2017, compared with 5.9% in the same period
of 2016. Bad debt expense as a percentage of revenue in the fourth
quarter was 12.1% compared with 11.3% in the same period of
2016.
The Aaron's Business Results
For the fourth quarter of 2017, total revenues for the Aaron's
Business decreased 3.6% to $446.9
million from $463.5 million in
the fourth quarter of 2016. Total revenues for fiscal year 2017
decreased 8.4% to $1.78 billion
compared with $1.95 billion for
fiscal 2016.
Lease revenue and fees for the three and twelve months ended
December 31, 2017 increased 0.6% and decreased 7.1%,
respectively, compared with the same periods in 2016. Non-retail
sales, which primarily consist of merchandise sales to the
Company's franchisees, decreased 17.0% and 12.7% for the three and
twelve months ended December 31, 2017 compared with the same
periods of the prior year. The decline is attributed in part to the
reduction in non-retail sales resulting from the franchise
acquisitions completed in fiscal year 2017.
Earnings before income taxes for the Aaron's Business were
$25.1 million and $110.6 million for the three and twelve months
ended December 31, 2017, compared with $4.8 million and $123.0
million for the same periods a year ago. Adjusted EBITDA for
the three and twelve months ended December 31, 2017 was
$41.4 million and $180.0 million compared with $32.4 million and $191.2
million for the same periods in 2016. As a percentage of
revenue, Adjusted EBITDA was 9.3% and 10.1% for the three and
twelve months ended December 31, 2017, respectively, compared
with 7.0% and 9.8% for the same periods last year. Write-offs for
damaged, lost or unsaleable merchandise were 4.2% of revenues in
the fourth quarter of 2017 compared with 4.6% for the same period
last year.
Same store revenues (revenues for Company-operated stores open
for the entirety of the fourth quarter of 2017 and 2016 and fiscal
year 2017 and 2016, respectively) decreased 5.4% during the fourth
quarter of 2017, compared with the fourth quarter of 2016 and
decreased 7.0% during the 2017 fiscal year, compared to the 2016
fiscal year. Customer count on a same store basis was down 4.0%
during the fourth quarter of 2017. Company-operated Aaron's stores
had 983,000 customers at December 31,
2017, a 1.0% increase from 2016.
At December 31, 2017, the Aaron's Business had 1,175
Company-operated stores and 551 franchised stores. During the
fourth quarter of 2017, the Company acquired six franchised stores,
closed or consolidated eleven Company-operated stores and sold one
Company-operated store to a third party. Additionally, one
franchised store opened, twelve franchised stores closed and one
franchised store was sold to a third party.
Company-operated stores that were closed are primarily related
to the Company's previously disclosed program to identify, close
and consolidate underperforming stores and right size the Company's
store footprint in existing markets. During the fourth quarter of
2017, the Aaron's Business incurred a pre-tax restructuring charge
of $3.2 million related to these
closures. In the 2017 fiscal year, the aggregate pre-tax
restructuring charge related to these store closures and other
restructuring activities was $17.5
million.
DAMI Results
DAMI's revenue for the three and twelve months ended
December 31, 2017 was $9.3
million and $34.9 million
versus $7.5 million and $24.1 million for the same periods of 2016.
DAMI's loss before income taxes was $2.8
million and $11.3 million for
the three and twelve months ended December 31, 2017, compared
with a loss before income taxes of $1.6
million and $9.3 million for
the same periods in 2016. DAMI's pre-tax, pre-provision loss was
$1.8 million and $6.5 million for the three and twelve months
ended December 31, 2017 compared with $0.6 million and $3.6
million for the same periods a year ago.
Pre-tax, pre-provision loss is a non-GAAP measure that
represents loss before income taxes, adjusted so that loan
charge-offs and recoveries are recognized in earnings as they occur
by excluding the effect on earnings of changes to management's
provision for estimated future loan losses. See "Use of Non-GAAP
Financial Information" and the related non-GAAP reconciliation
accompanying this press release for more information regarding the
calculation of pre-tax, pre-provision loss.
Significant Components of Revenue
Consolidated lease revenues and fees for the three and twelve
months ended December 31, 2017 increased 15.7% and 7.9%,
respectively, over the same prior year periods. Franchise royalties
and fees decreased 24.4% in the fourth quarter of 2017 and 17.3%
for fiscal year 2017 compared with the same periods a year ago. The
decrease in franchise royalties and fees was the combined result of
decreases in revenues generated by the Company's franchisees and
the number of franchised stores. The Company's franchisee revenues
totaled $162.1 million and
$777.7 million in the three and
twelve months ended December 31, 2017, a decrease of 24.3% and
15.2% from the same periods for the prior year. Same store revenues
for franchised stores were down 5.2% and same store customer counts
were down 3.9% for the fourth quarter of 2017 compared with the
same quarter in 2016. For the 2017 fiscal year, same store revenues
for franchised stores were down 5.4%. Franchised stores had 416,000
customers at the end of 2017, a 23.5% decline from the end of 2016.
Revenues and customers of franchisees are not revenues and
customers of the Aaron's Business or the Company. Any changes in
the metrics presented above from the prior year periods are not
adjusted to net out the effects of the July
2017 purchase of our largest franchisee, which had 104 store
locations.
2018 Guidance
The Company is providing the following guidance for its 2018
fiscal year. Diluted earnings per share is presented both on a GAAP
basis and on a non-GAAP basis excluding intangible amortization
related to the 2014 Progressive acquisition and the 2017
acquisition of our largest franchisee and any future one-time or
unusual items. Adjusted EBITDA also excludes any future one-time or
unusual items. The Company currently expects to achieve the
following:
Aaron's Inc. (Consolidated)
- Revenues of $3.68 billion to
$3.89 billion.
- EBITDA of $380 million to
$413 million.
- GAAP diluted earnings per share of $2.90 to $3.20.
- Non-GAAP diluted earnings per share of $3.20 to $3.50.
- Does not include the impact of any potential share repurchase
activities.
- Capital expenditures of $70
million to $90 million.
Progressive Leasing
- Total revenues of $1.95 billion
to $2.05 billion.
- EBITDA of $215 million to
$230 million
Aaron's Business
- Total revenues of $1.70 billion
to $1.80 billion, including lease
revenues of $1.40 billion to
$1.50 billion.
- Annual same store revenues of approximately negative 4% to
negative 1%, approaching flat in the fourth quarter.
- EBITDA of $170 million to
$185 million.
- The Company will continue to evaluate its store base for
strategic growth and consolidation opportunities, which may include
both store closures and acquisitions.
DAMI
- Total revenues of approximately $30
million to $40 million.
- EBITDA of approximately negative $5
million to negative $2
million.
Conference Call and Webcast
The Company will hold a conference call to discuss its quarterly
results on Thursday, February 15, 2018, at 8:30 a.m. Eastern Time. The public is invited to
listen to the conference call by webcast accessible through the
Company's Investor Relations website, investor.aarons.com. The
webcast will be archived for playback at that same site.
About Aaron's, Inc.
Headquartered in Atlanta,
Aaron's, Inc. (NYSE: AAN), is a leading omnichannel provider of
lease-purchase solutions. The Aaron's Business engages in the sales
and lease ownership and specialty retailing of furniture, consumer
electronics, home appliances and accessories through its 1,726
Company-operated and franchised stores in 47 states and
Canada, as well as its e-commerce
platform, Aarons.com. In addition, Progressive Leasing, a
virtual lease-to-own company, provides lease-purchase solutions
through approximately 27,000 retail locations in 46 states.
Dent-A-Med, Inc., d/b/a the HELPcard®, provides a variety of
second-look credit products that are originated through federally
insured banks. For more information, visit investor.aarons.com,
Aarons.com, ProgLeasing.com, and HELPcard.com.
"Safe Harbor" Statement under the Private Securities
Litigation Reform Act of 1995: Statements in this news release
regarding our business that are not historical facts are
"forward-looking statements" that involve risks and uncertainties
which could cause actual results to differ materially from those
contained in the forward-looking statements. Such forward-looking
statements generally can be identified by the use of
forward-looking terminology, such as "believe," "guidance,"
"expect," "will," "expectations," and "trends" and similar
terminology. These risks and uncertainties include factors such as
changes in general economic conditions, competition, pricing, legal
and regulatory proceedings, customer privacy, information security,
customer demand, the execution and results of our strategy and
expense reduction and store closure and consolidation initiatives,
risks related to our recent acquisition of our largest franchisee,
including the risk that its financial performance does not meet
expectations, risks related to Progressive Leasing's "virtual"
lease-to-own business, the outcome of Progressive Leasing's pilot
or test programs with various retailers and the results of
Progressive Leasing's efforts to expand its relationships with
existing retailer partners and establish new partnerships with
additional retailers, and the other risks and uncertainties
discussed under "Risk Factors" in the Company's Annual Report on
Form 10-K for the fiscal year ended December
31, 2016 as updated in its subsequently filed Quarterly
Reports on Form 10-Q, which are available from the SEC. Statements
in this release that are "forward-looking" include without
limitation statements regarding: our expectations regarding
acceleration of revenue and earnings growth; our ability to invest
in our operations and in opportunities to promote growth; returning
capital to our shareholders; the performance of the Progressive
lease portfolio and expectations regarding innovation initiatives
at Progressive, including further enhancements to its decisioning
process; the outcome of the transformation initiatives for the
Aaron's Business; the Company's capital strategy; the Company's
projected results (including Progressive Leasing's, the Aaron's
Business's and DAMI's results) and the 2018 Guidance for the
Company on a consolidated basis, and for Progressive Leasing, the
Aaron's Business and DAMI, individually. You are cautioned not to
place undue reliance on these forward-looking statements, which
speak only as of the date of this press release. Except as required
by law, the Company undertakes no obligation to update these
forward-looking statements to reflect subsequent events or
circumstances after the date of this press release.
Aaron's, Inc. and
Subsidiaries
|
Consolidated
Statements of Earnings
|
(In thousands,
except per share amounts)
|
|
|
|
(Unaudited)
Three Months Ended
|
(Unaudited)
Twelve Months Ended
|
|
|
December
31,
|
December
31,
|
|
|
2017
|
2016
|
2017
|
2016
|
Revenues:
|
|
|
|
|
|
Lease Revenues and
Fees
|
|
$
|
783,202
|
|
$
|
676,667
|
|
$
|
3,000,231
|
|
$
|
2,780,824
|
|
Retail
Sales
|
|
6,307
|
|
5,872
|
|
27,465
|
|
29,418
|
|
Non-Retail
Sales
|
|
74,881
|
|
90,182
|
|
270,253
|
|
309,446
|
|
Franchise Royalties
and Fees
|
|
10,113
|
|
13,385
|
|
48,278
|
|
58,350
|
|
Interest and Fees on
Loans Receivable
|
|
9,256
|
|
7,535
|
|
34,925
|
|
24,080
|
|
Other
|
|
868
|
|
1,313
|
|
2,556
|
|
5,598
|
|
Total
|
|
$
|
884,627
|
|
$
|
794,954
|
|
$
|
3,383,708
|
|
$
|
3,207,716
|
|
|
|
|
|
|
|
Costs and
Expenses:
|
|
|
|
|
|
Depreciation of Lease
Merchandise
|
|
375,659
|
|
316,897
|
|
1,448,631
|
|
1,304,295
|
|
Retail Cost of
Sales
|
|
3,867
|
|
3,530
|
|
17,578
|
|
18,580
|
|
Non-Retail Cost of
Sales
|
|
66,703
|
|
80,923
|
|
241,356
|
|
276,608
|
|
Operating
Expenses
|
|
370,455
|
|
340,783
|
|
1,403,985
|
|
1,351,785
|
|
Restructuring
Expenses
|
|
3,377
|
|
15,560
|
|
17,994
|
|
20,218
|
|
Other Operating
Expense (Income), Net
|
|
51
|
|
(474)
|
|
(535)
|
|
(6,446)
|
|
Total
|
|
$
|
820,112
|
|
$
|
757,219
|
|
$
|
3,129,009
|
|
$
|
2,965,040
|
|
|
|
|
|
|
|
Operating
Profit
|
|
64,515
|
|
37,735
|
|
254,699
|
|
242,676
|
|
Interest
Income
|
|
139
|
|
903
|
|
1,835
|
|
2,699
|
|
Interest
Expense
|
|
(4,464)
|
|
(5,429)
|
|
(20,538)
|
|
(23,390)
|
|
Other Non-Operating
Income (Expense), Net
|
|
548
|
|
(921)
|
|
3,581
|
|
(3,563)
|
|
Earnings Before
Income Tax (Benefit) Expense
|
|
$
|
60,738
|
|
$
|
32,288
|
|
$
|
239,577
|
|
$
|
218,422
|
|
|
|
|
|
|
|
Income Tax (Benefit)
Expense
|
|
(116,822)
|
|
10,657
|
|
(52,959)
|
|
79,139
|
|
Net
Earnings
|
|
$
|
177,560
|
|
$
|
21,631
|
|
$
|
292,536
|
|
$
|
139,283
|
|
|
|
|
|
|
|
Earnings Per
Share
|
|
$
|
2.51
|
|
$
|
0.30
|
|
$
|
4.13
|
|
$
|
1.93
|
|
Earnings Per Share
Assuming Dilution
|
|
$
|
2.46
|
|
$
|
0.30
|
|
$
|
4.06
|
|
$
|
1.91
|
|
|
|
|
|
|
|
Weighted Average
Shares Outstanding
|
|
70,607
|
|
71,423
|
|
70,837
|
|
72,354
|
|
Weighted Average
Shares Outstanding Assuming Dilution
|
|
72,314
|
|
72,365
|
|
72,121
|
|
73,013
|
|
Selected Balance
Sheet Data
|
(In
thousands)
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
December 31,
2017
|
|
December 31,
2016
|
|
|
|
|
|
|
|
Cash and Cash
Equivalents
|
|
$
|
51,037
|
|
|
$
|
308,561
|
|
|
Investments
|
|
20,385
|
|
|
20,519
|
|
|
Accounts Receivable,
Net
|
|
99,887
|
|
|
95,777
|
|
|
Lease Merchandise,
Net
|
|
1,152,135
|
|
|
999,381
|
|
|
Loans Receivable,
Net
|
|
86,112
|
|
|
84,804
|
|
|
Property, Plant and
Equipment, Net
|
|
207,687
|
|
|
211,271
|
|
|
Other Assets,
Net
|
|
1,069,857
|
|
|
895,423
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
2,687,100
|
|
|
$
|
2,615,736
|
|
|
|
|
|
|
|
|
Debt
|
|
368,798
|
|
|
497,829
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
959,096
|
|
|
1,134,138
|
|
|
Shareholders'
Equity
|
|
1,728,004
|
|
|
1,481,598
|
|
|
|
|
|
|
|
|
Total Liabilities and
Shareholders' Equity
|
|
$
|
2,687,100
|
|
|
$
|
2,615,736
|
|
|
Selected Cash Flow
Data
|
(In
thousands)
|
|
|
|
(Unaudited)
Twelve Months Ended
|
|
|
December
31,
|
|
|
2017
|
|
2016
|
|
|
|
|
|
Cash Provided by
Operating Activities
|
|
$
|
158,082
|
|
|
$
|
467,236
|
|
Cash Used in
Investing Activities
|
|
(204,331)
|
|
|
(20,081)
|
|
Cash Used in
Financing Activities
|
|
(211,350)
|
|
|
(153,663)
|
|
Effect of Exchange
Rate Changes on Cash & Cash Equivalents
|
|
75
|
|
|
127
|
|
(Decrease) Increase
in Cash and Cash Equivalents
|
|
(257,524)
|
|
|
293,619
|
|
Cash and Cash
Equivalents at Beginning of Period
|
|
308,561
|
|
|
14,942
|
|
Cash and Cash
Equivalents at End of Period
|
|
$
|
51,037
|
|
|
$
|
308,561
|
|
Aaron's, Inc. and
Subsidiaries
|
Quarterly Revenues
by Segment
|
(In
thousands)
|
|
|
(Unaudited)
|
|
Three Months
Ended
|
|
December 31,
2017
|
|
Progressive
Leasing
|
The Aaron's
Business(1)
|
DAMI
|
Consolidated
Total
|
Lease Revenues and
Fees
|
$
|
428,517
|
|
$
|
354,685
|
|
$
|
—
|
|
$
|
783,202
|
|
Retail
Sales
|
—
|
|
6,307
|
|
—
|
|
6,307
|
|
Non-Retail
Sales
|
—
|
|
74,881
|
|
—
|
|
74,881
|
|
Franchise Royalties
and Fees
|
—
|
|
10,113
|
|
—
|
|
10,113
|
|
Interest and Fees on
Loans Receivable
|
—
|
|
—
|
|
9,256
|
|
9,256
|
|
Other
|
—
|
|
868
|
|
—
|
|
868
|
|
|
$
|
428,517
|
|
$
|
446,854
|
|
$
|
9,256
|
|
$
|
884,627
|
|
|
|
|
(Unaudited)
|
|
Three Months
Ended
|
|
December 31,
2016
|
|
Progressive
Leasing
|
The Aaron's
Business(1)
|
DAMI
|
Consolidated
Total
|
Lease Revenues and
Fees
|
$
|
323,961
|
|
$
|
352,706
|
|
$
|
—
|
|
$
|
676,667
|
|
Retail
Sales
|
—
|
|
5,872
|
|
—
|
|
5,872
|
|
Non-Retail
Sales
|
—
|
|
90,182
|
|
—
|
|
90,182
|
|
Franchise Royalties
and Fees
|
—
|
|
13,385
|
|
—
|
|
13,385
|
|
Interest and Fees on
Loans Receivable
|
—
|
|
—
|
|
7,535
|
|
7,535
|
|
Other
|
—
|
|
1,313
|
|
—
|
|
1,313
|
|
|
$
|
323,961
|
|
$
|
463,458
|
|
$
|
7,535
|
|
$
|
794,954
|
|
|
(1)
|
During the three
months ended March 31, 2017, the Company changed its composition of
reportable segments by combining Sales and Lease Ownership,
Franchise, Woodhaven, and unallocated corporate costs into one
reportable segment, the Aaron's Business, to align with the
Company's internal reporting of operating results. The 2016
period is presented to reflect this change.
|
Aaron's, Inc. and
Subsidiaries
|
Twelve Months
Revenues by Segment
|
(In
thousands)
|
|
|
(Unaudited)
|
|
Twelve Months
Ended
|
|
December 31,
2017
|
|
Progressive
Leasing
|
The Aaron's
Business(1)
|
DAMI
|
Consolidated
Total
|
Lease Revenues and
Fees
|
$
|
1,566,413
|
|
$
|
1,433,818
|
|
$
|
—
|
|
$
|
3,000,231
|
|
Retail
Sales
|
—
|
|
27,465
|
|
—
|
|
27,465
|
|
Non-Retail
Sales
|
—
|
|
270,253
|
|
—
|
|
270,253
|
|
Franchise Royalties
and Fees
|
—
|
|
48,278
|
|
—
|
|
48,278
|
|
Interest and Fees on
Loans Receivable
|
—
|
|
—
|
|
34,925
|
|
34,925
|
|
Other
|
—
|
|
2,556
|
|
—
|
|
2,556
|
|
|
$
|
1,566,413
|
|
$
|
1,782,370
|
|
$
|
34,925
|
|
$
|
3,383,708
|
|
|
|
|
(Unaudited)
|
|
Twelve Months
Ended
|
|
December 31,
2016
|
|
Progressive
Leasing
|
The Aaron's
Business(1)
|
DAMI
|
Consolidated
Total
|
Lease Revenues and
Fees
|
$
|
1,237,597
|
|
$
|
1,543,227
|
|
$
|
—
|
|
$
|
2,780,824
|
|
Retail
Sales
|
—
|
|
29,418
|
|
—
|
|
29,418
|
|
Non-Retail
Sales
|
—
|
|
309,446
|
|
—
|
|
309,446
|
|
Franchise Royalties
and Fees
|
—
|
|
58,350
|
|
—
|
|
58,350
|
|
Interest and Fees on
Loans Receivable
|
—
|
|
—
|
|
24,080
|
|
24,080
|
|
Other
|
—
|
|
5,598
|
|
—
|
|
5,598
|
|
|
$
|
1,237,597
|
|
$
|
1,946,039
|
|
$
|
24,080
|
|
$
|
3,207,716
|
|
|
|
(1)
|
During the three
months ended March 31, 2017, the Company changed its composition of
reportable segments by combining Sales and Lease Ownership,
Franchise, Woodhaven, and unallocated corporate costs into one
reportable segment, the Aaron's Business, to align with the
Company's internal reporting of operating results. The 2016
period is presented to reflect this change.
|
Use of Non-GAAP Financial Information:
Non-GAAP net earnings, non-GAAP diluted earnings per share,
EBITDA and Adjusted EBITDA are supplemental measures of our
performance that are not calculated in accordance with generally
accepted accounting principles in the
United States ("GAAP"). Non-GAAP net earnings and non-GAAP
diluted earnings per share for the fourth quarter of 2017 each
exclude $5.4 million in Progressive
Leasing-related intangible amortization expense, $1.0 million in amortization expense resulting
from our 2017 acquisition of our largest franchisee, $3,000 in acquisition transaction &
transitions costs related to the acquisition of our largest
franchisee, $3.4 million in
restructuring charges and $137.1
million in net provisional tax benefits from the impacts of
the Tax Act. For the twelve months of 2017 Non-GAAP net earnings
and non-GAAP diluted earnings per share exclude $23.0 million in Progressive Leasing-related
intangible amortization expense, $2.1
million in amortization expense resulting from our 2017
acquisition of our largest franchisee, $2.0
million in acquisition transaction & transition costs
related to the acquisition of our largest franchisee, $18.0 million in restructuring charges and
$137.1 million in net provisional tax
benefits. Non-GAAP net earnings and non-GAAP diluted earnings per
share for the fourth quarter of 2016 exclude $6.6 million in Progressive Leasing-related
intangible amortization expense, $15.6
million in restructuring charges and a $214,000 gain related to the HomeSmart asset
sale. For the twelve months of 2016 Non-GAAP net earnings and
non-GAAP diluted earnings per share exclude $26.4 million in Progressive-related intangible
amortization expense, an $11.1
million gain from the sale of the Company's headquarters
building, $3.7 million in retirement
and severance charges, $20.2 million
in restructuring charges and a $5.4
million impairment charge related to the HomeSmart asset
sale.
The EBITDA and Adjusted EBITDA figures presented in this press
release are calculated as the Company's earnings before interest
expense, depreciation on property, plant and equipment,
amortization of intangible assets and income taxes. Adjusted EBITDA
also excludes the other adjustments described in the calculation of
non-GAAP net earnings above.
Management believes that non-GAAP net earnings, non-GAAP diluted
earnings per share, EBITDA and Adjusted EBITDA provide relevant and
useful information, and are widely used by analysts, investors and
competitors in our industry as well as by our management in
assessing both consolidated and business unit performance.
Non-GAAP net earnings and non-GAAP diluted earnings provides
management and investors with an understanding of the results from
the primary operations of our business by excluding the effects of
certain items that generally arose from larger, one-time
transactions that are not reflective of the ordinary earnings
activity of our operations. This measure may be useful to an
investor in evaluating the underlying operating performance of our
business.
EBITDA and Adjusted EBITDA also provides management and
investors with an understanding of one aspect of earnings before
the impact of investing and financing charges and income taxes.
These measures may be useful to an investor in evaluating our
operating performance and liquidity because the measures:
- Are widely used by investors to measure a company's operating
performance without regard to items excluded from the calculation
of such measure, which can vary substantially from company to
company depending upon accounting methods, book value of assets,
capital structure and the method by which assets were acquired,
among other factors.
- Are a financial measurement that is used by rating agencies,
lenders and other parties to evaluate our creditworthiness.
- Are used by our management for various purposes, including as a
measure of performance of our operating entities and as a basis for
strategic planning and forecasting.
Finally, this press release presents pre-tax, pre-provision loss
for DAMI, which is also a supplemental measure not calculated in
accordance with GAAP. Management believes this measure is useful
because it gives management and investors an additional,
supplemental metric to assess DAMI's underlying operational
performance for the period. Due to the growth of our originated
credit card loan portfolio after our October
2015 acquisition of DAMI, we believe pre-provision, pre-tax
loss helps investors to assess DAMI's operating performance until
such time as the credit card portfolio reaches levels which
management believes will be normal and recurring. Management
uses this measure as one of its bases for strategic planning and
forecasting for DAMI. Our use of pre-provision, pre-tax loss may
not be comparable to similar measures disclosed by other companies,
because not all companies and analysts calculate these measures in
the same manner.
Non-GAAP financial measures, however, should not be used as a
substitute for, or considered superior to, measures of financial
performance prepared in accordance with GAAP, such as the Company's
GAAP basis net earnings and diluted earnings per share and the GAAP
earnings before income taxes of the Company's segments, which are
also presented in the press release. Further, we caution investors
that amounts presented in accordance with our definitions of
non-GAAP net earnings, non-GAAP diluted earnings per share, EBITDA,
Adjusted EBITDA and pre-tax, pre-provision loss may not be
comparable to similar measures disclosed by other companies,
because not all companies and analysts calculate these measures in
the same manner.
Reconciliation of
Net Earnings and Earnings Per Share Assuming Dilution to
Non-GAAP
|
Net Earnings and
Earnings Per Share Assuming Dilution
|
(In thousands,
except per share)
|
|
|
(Unaudited)
Three Months Ended
|
|
(Unaudited)
Twelve Months Ended
|
|
December
31,
|
|
December
31,
|
|
2017
|
2016
|
|
2017
|
2016
|
Net
Earnings
|
$
|
177,560
|
|
$
|
21,631
|
|
|
$
|
292,536
|
|
$
|
139,283
|
|
Add Progressive
Leasing-Related Intangible Amortization Expense
(1)(2)
|
3,611
|
|
4,413
|
|
|
14,935
|
|
16,803
|
|
Add Franchisee
Related Intangible Amortization Expense(3)
|
678
|
|
—
|
|
|
1,336
|
|
—
|
|
Less Gain on Sale of
Building (4)
|
—
|
|
—
|
|
|
—
|
|
(7,060)
|
|
Add Retirement and
Severance Charges (5)
|
—
|
|
—
|
|
|
—
|
|
2,349
|
|
Add Loss on Sale of
HomeSmart (6)
|
—
|
|
(143)
|
|
|
—
|
|
3,463
|
|
Add Restructuring
(7)(8)
|
2,250
|
|
10,424
|
|
|
11,674
|
|
12,893
|
|
Add Acquisition
Transaction and Transition Costs (9)
|
2
|
|
—
|
|
|
1,282
|
|
—
|
|
Less Tax Act
Benefit
|
(137,098)
|
|
—
|
|
|
(137,098)
|
|
—
|
|
Non-GAAP Net
Earnings
|
$
|
47,003
|
|
$
|
36,325
|
|
|
$
|
184,665
|
|
$
|
167,731
|
|
|
|
|
|
|
|
Earnings Per Share
Assuming Dilution
|
$
|
2.46
|
|
$
|
0.30
|
|
|
$
|
4.06
|
|
$
|
1.91
|
|
Add Progressive
Leasing-Related Intangible Amortization Expense
(1)(2)
|
0.05
|
|
0.06
|
|
|
0.21
|
|
0.23
|
|
Add Franchisee
Related Intangible Amortization Expense(3)
|
0.01
|
|
—
|
|
|
0.02
|
|
—
|
|
Less Gain on Sale of
Building (4)
|
—
|
|
—
|
|
|
—
|
|
(0.10)
|
|
Add Retirement and
Severance Charges (5)
|
—
|
|
—
|
|
|
—
|
|
0.03
|
|
Add Loss on Sale of
HomeSmart (6)
|
—
|
|
—
|
|
|
—
|
|
0.05
|
|
Add Restructuring
(7)(8)
|
0.03
|
|
0.14
|
|
|
0.16
|
|
0.18
|
|
Add Acquisition
Transaction and Transition Costs (9)
|
—
|
|
—
|
|
|
0.02
|
|
—
|
|
Less Tax Act
Benefit
|
(1.90)
|
|
—
|
|
|
(1.90)
|
|
—
|
|
|
|
|
|
|
|
Non-GAAP Earnings Per
Share Assuming Dilution (10)
|
$
|
0.65
|
|
$
|
0.50
|
|
|
$
|
2.56
|
|
$
|
2.30
|
|
|
|
|
|
|
|
Weighted Average
Shares Outstanding Assuming Dilution
|
72,314
|
|
72,365
|
|
|
72,121
|
|
73,013
|
|
|
|
(1)
|
Net of taxes of
$1,810 and $8,084 for the three and twelve months ended
December 31, 2017 calculated using the estimated tax rates of
33.4% and 35.1% for the three and twelve months ended
December 31, 2017.
|
|
|
(2)
|
Net of taxes of
$2,175 and $9,547 for the three and twelve months ended
December 31, 2016 calculated using the effective tax rate for
the respective periods.
|
|
|
(3)
|
Net of taxes of $340
and $724 for the three and twelve months ended December 31,
2017 calculated using the estimated tax rates of 33.4% and 35.1%
for the three and twelve months ended December 31,
2017.
|
|
|
(4)
|
Net of taxes of
$4,011 for the twelve months ended December 31, 2016
calculated using the effective tax rate for the period.
|
|
|
(5)
|
Net of taxes of
$1,334 for the twelve months ended December 31, 2016
calculated using the effective tax rate for the period.
|
|
|
(6)
|
Net of taxes of $71
and $1,968 for the three and twelve months ended December 31,
2016 calculated using the effective tax rate for the respective
periods.
|
|
|
(7)
|
Net of taxes of
$1,127 and $6,320 for the three and twelve months ended
December 31, 2017 calculated using the estimated tax rates of
33.4% and 35.1% for the three and twelve months ended
December 31, 2017.
|
|
|
(8)
|
Net of taxes of
$5,136 and $7,325 for the three and twelve months ended
December 31, 2016 calculated using the effective tax rate for
the respective periods.
|
|
|
(9)
|
Net of taxes of $1
and $694 for the three and twelve months ended December 31,
2017 calculated using the estimated tax rates of 33.4% and 35.1%
for the three and twelve months ended December 31,
2017.
|
|
|
(10)
|
In some cases, the
sum of individual EPS amounts may not equal total EPS calculations
due to rounding.
|
DAMI Pre-tax,
Pre-provision Loss
|
(In
thousands)
|
|
|
(Unaudited)
Three Months Ended
|
(Unaudited)
Twelve Months Ended
|
|
December
31,
|
December
31,
|
|
2017
|
2016
|
2017
|
2016
|
Loss Before Income
Taxes
|
$
|
(2,832)
|
|
$
|
(1,587)
|
|
$
|
(11,289)
|
|
$
|
(9,273)
|
|
Add: Adjustment to
Increase Allowance for Loan Losses During
Period
|
992
|
|
1,035
|
|
4,830
|
|
5,687
|
|
Pre-tax,
Pre-provision Loss
|
$
|
(1,840)
|
|
$
|
(552)
|
|
$
|
(6,459)
|
|
$
|
(3,586)
|
|
Due to the growth of our originated credit card loan
portfolio subsequent to the October
2015 acquisition of DAMI, we believe pre-provision, pre-tax
loss helps investors to assess DAMI's operating performance until
such time as the credit card portfolio reaches levels which
management believes will be normal and recurring. Our use of
pre-provision, pre-tax loss may not be comparable to similar
measures disclosed by other companies, because not all companies
and analysts calculate these measures in the same manner.
Aaron's, Inc. and
Subsidiaries
|
Non-GAAP Financial
Information
|
Quarterly Segment
EBITDA
|
(In
thousands)
|
|
|
(Unaudited)
|
|
Three Months
Ended
|
|
December 31,
2017
|
|
Progressive
Leasing
|
The Aaron's
Business(1)
|
DAMI
|
Consolidated
Total
|
Net
Earnings
|
—
|
|
—
|
|
—
|
|
$
|
177,560
|
|
Income
Taxes2
|
—
|
|
—
|
|
—
|
|
(116,822)
|
|
Earnings (Loss)
Before Income Taxes
|
38,492
|
|
25,078
|
|
(2,832)
|
|
60,738
|
|
Interest
Expense
|
4,554
|
|
(885)
|
|
795
|
|
4,464
|
|
Depreciation
|
1,507
|
|
12,402
|
|
214
|
|
14,123
|
|
Amortization
|
5,421
|
|
1,609
|
|
145
|
|
7,175
|
|
EBITDA
|
$
|
49,974
|
|
$
|
38,204
|
|
$
|
(1,678)
|
|
$
|
86,500
|
|
Restructuring
Expenses
|
—
|
|
3,170
|
|
207
|
|
3,377
|
|
Acquisition
Transaction and Transition Costs
|
—
|
|
3
|
|
—
|
|
3
|
|
Adjusted
EBITDA
|
$
|
49,974
|
|
$
|
41,377
|
|
$
|
(1,471)
|
|
$
|
89,880
|
|
|
|
(Unaudited)
|
|
Three Months
Ended
|
|
December 31,
2016
|
|
Progressive
Leasing
|
The Aaron's
Business(1)
|
DAMI
|
Consolidated
Total
|
Net
Earnings
|
—
|
|
—
|
|
—
|
|
$
|
21,631
|
|
Income
Taxes2
|
—
|
|
—
|
|
—
|
|
10,657
|
|
Earnings (Loss)
Before Income Taxes
|
29,034
|
|
4,841
|
|
(1,587)
|
|
32,288
|
|
Interest
Expense
|
4,817
|
|
(463)
|
|
1,075
|
|
5,429
|
|
Depreciation
|
1,282
|
|
12,124
|
|
121
|
|
13,527
|
|
Amortization
|
6,588
|
|
526
|
|
145
|
|
7,259
|
|
EBITDA
|
$
|
41,721
|
|
$
|
17,028
|
|
$
|
(246)
|
|
$
|
58,503
|
|
Gain on Sale of
HomeSmart
|
—
|
|
(214)
|
|
—
|
|
(214)
|
|
Restructuring
Expenses
|
—
|
|
15,560
|
|
—
|
|
15,560
|
|
Adjusted
EBITDA
|
$
|
41,721
|
|
$
|
32,374
|
|
$
|
(246)
|
|
$
|
73,849
|
|
|
|
(1)
|
During the three
months ended March 31, 2017, the Company changed its composition of
reportable segments by combining Sales and Lease Ownership,
Franchise, Woodhaven, and unallocated corporate costs into one
reportable segment, the Aaron's Business, to align with the
Company's internal reporting of operating results. The 2016
period is presented to reflect this change.
|
(2)
|
Taxes are calculated
on a consolidated basis and are not identifiable by company
divisions.
|
Aaron's, Inc. and
Subsidiaries
|
Non-GAAP Financial
Information
|
Twelve Months
Segment EBITDA
|
(In
thousands)
|
|
|
(Unaudited)
|
|
Twelve Months
Ended
|
|
December 31,
2017
|
|
Progressive
Leasing
|
The Aaron's
Business(1)
|
DAMI
|
Consolidated
Total
|
Net
Earnings
|
—
|
|
—
|
|
—
|
|
$
|
292,536
|
|
Income
Taxes2
|
—
|
|
—
|
|
—
|
|
(52,959)
|
|
Earnings (Loss)
Before Income Taxes
|
140,224
|
|
110,642
|
|
(11,289)
|
|
239,577
|
|
Interest
Expense
|
18,577
|
|
(2,366)
|
|
4,327
|
|
20,538
|
|
Depreciation
|
6,029
|
|
48,121
|
|
693
|
|
54,843
|
|
Amortization
|
23,019
|
|
4,130
|
|
580
|
|
27,729
|
|
EBITDA
|
$
|
187,849
|
|
$
|
160,527
|
|
$
|
(5,689)
|
|
$
|
342,687
|
|
Restructuring
Expenses
|
—
|
|
17,523
|
|
471
|
|
17,994
|
|
Acquisition
Transaction and Transition Costs
|
—
|
|
1,976
|
|
—
|
|
1,976
|
|
Adjusted
EBITDA
|
$
|
187,849
|
|
$
|
180,026
|
|
$
|
(5,218)
|
|
$
|
362,657
|
|
|
|
|
|
|
|
(Unaudited)
|
|
Twelve Months
Ended
|
|
December 31,
2016
|
|
Progressive
Leasing
|
The Aaron's
Business(1)
|
DAMI
|
Consolidated
Total
|
Net
Earnings
|
—
|
|
—
|
|
—
|
|
$
|
139,283
|
|
Income
Taxes2
|
—
|
|
—
|
|
—
|
|
79,139
|
|
Earnings (Loss)
Before Income Taxes
|
104,686
|
|
123,009
|
|
(9,273)
|
|
218,422
|
|
Interest
Expense
|
20,042
|
|
(768)
|
|
4,116
|
|
23,390
|
|
Depreciation
|
4,377
|
|
48,764
|
|
423
|
|
53,564
|
|
Amortization
|
26,350
|
|
1,894
|
|
570
|
|
28,814
|
|
EBITDA
|
$
|
155,455
|
|
$
|
172,899
|
|
$
|
(4,164)
|
|
$
|
324,190
|
|
Gain on Sale of
Building
|
—
|
|
(11,071)
|
|
—
|
|
(11,071)
|
|
Retirement
Charges
|
—
|
|
3,683
|
|
—
|
|
3,683
|
|
Loss on Sale of
HomeSmart
|
—
|
|
5,431
|
|
—
|
|
5,431
|
|
Restructuring
Expenses
|
—
|
|
20,218
|
|
—
|
|
20,218
|
|
Adjusted
EBITDA
|
$
|
155,455
|
|
$
|
191,160
|
|
$
|
(4,164)
|
|
$
|
342,451
|
|
|
|
(1)
|
During the three
months ended March 31, 2017, the Company changed its composition of
reportable segments by combining Sales and Lease Ownership,
Franchise, Woodhaven, and unallocated corporate costs into one
reportable segment, the Aaron's Business, to align with the
Company's internal reporting of operating results. The 2016
period is presented to reflect this change.
|
(2)
|
Taxes are calculated
on a consolidated basis and are not identifiable by company
divisions.
|
Reconciliation of
2018 Projected Guidance for EBITDA
|
(In
thousands)
|
|
|
Fiscal Year 2018
Ranges
|
|
Progressive
Leasing
|
The Aaron's
Business(1)
|
DAMI
|
Consolidated
Total
|
Estimated Net
Earnings
|
—
|
—
|
—
|
$209,000 -
$234,000
|
Taxes2
|
—
|
—
|
—
|
68,000 -
76,000
|
Projected Earnings
Before Taxes
|
$175,000 -
$190,000
|
$112,000 -
$127,000
|
$(10,000) -
$(7,000)
|
277,000 -
310,000
|
Interest
Expense
|
10,000
|
—
|
3,500
|
13,500
|
Depreciation
|
8,000
|
51,000
|
1,500
|
60,500
|
Amortization
|
22,000
|
7,000
|
—
|
29,000
|
Projected
EBITDA
|
$215,000 -
$230,000
|
$170,000 -
$185,000
|
$(5,000) -
$(2,000)
|
$380,000 -
$413,000
|
|
|
|
|
|
(1)
|
During the three
months ended March 31, 2017, the Company changed its composition of
reportable segments by combining Sales and Lease Ownership,
Franchise, Woodhaven, and unallocated corporate costs into one
reportable segment, the Aaron's Business, to align with the
Company's internal reporting of operating results.
|
(2)
|
Taxes are calculated
on a consolidated basis and are not identifiable by company
divisions.
|
Reconciliation of
2018 Projected Guidance for Earnings Per Share
|
Assuming Dilution
to Non-GAAP Earnings Per Share Assuming Dilution
|
|
|
Fiscal Year 2018
Range
|
|
Low
|
High
|
Projected Earnings
Per Share Assuming Dilution
|
$
|
2.90
|
|
$
|
3.20
|
|
Add Projected
Intangible Amortization Expenses1
|
0.30
|
|
0.30
|
|
Projected Non-GAAP
Earnings Per Share Assuming Dilution
|
$
|
3.20
|
|
$
|
3.50
|
|
|
|
(1)
|
Includes projected
intangible amortization related to the acquisition of Progressive
Leasing and the franchisee acquisition.
|
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SOURCE Aaron's, Inc.