Aaron's, Inc. Reports Fourth Quarter Results And Provides 2019 Annual Outlook
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Aaron's, Inc. Reports Fourth Quarter Results And Provides 2019 Annual Outlook

  • Consolidated Revenues of $993.2 Million, Up 12%;
  • Diluted EPS $0.89; Non-GAAP Diluted EPS $1.02, Up 57%
  • Progressive Leasing Revenues Up 22%; EBT Up 42%; EBITDA Up 31%
  • Aaron's Business Revenues Up 3%; EBT Up 13%; Adjusted EBITDA Up 15%

ATLANTA, - Feb. 14, 2019 // PRNewswire // - Aaron's, Inc. (NYSE: AAN), a leading omnichannel provider of lease-purchase solutions, today announced financial results for the three months ended December 31, 2018.

"Our revenue and earnings growth in the fourth quarter capped off a strong 2018 for the Company," said John Robinson, Chief Executive Officer. "Progressive achieved 31% EBITDA growth on a 22% increase in revenue, while continuing to invest in infrastructure and technology to support and grow a robust pipeline of potential retail partners," continued Mr. Robinson.

"The Aaron's Business achieved significant improvement in same store revenue trends from the fourth quarter of 2017. Recurring revenue written into the portfolio was positive for the fourth consecutive quarter, and lease margin increased over year ago levels. I am proud of the team as they delivered these improvements while making continued investments in the business and integrating the franchised locations acquired in 2018. We are pleased with our progress during the year and expect to continue transforming the business in 2019," Mr. Robinson said.

Consolidated Results

For the fourth quarter of 2018, consolidated revenues were $993.2 million compared with $884.6 million for the fourth quarter of 2017, an increase of $108.6 million or 12.3%. The increase in consolidated revenues was primarily due to the 22.4% increase in revenues at Progressive and the addition of 152 franchised locations acquired by the Aaron's Business in 2018.

Net earnings for the fourth quarter of 2018 were $61.7 million compared to $177.6 million in the prior year period, a decrease of $115.8 million or 65.2%. This decrease is due to a fourth quarter 2017 net benefit of $137.1 million to recognize the effects of the Tax Cuts and Jobs Act of 2017 (the "Tax Act").

Adjusted EBITDA for the Company was $112.7 million for the fourth quarter of 2018, compared with $89.9 million for the same period in 2017, an increase of $22.8 million, or 25.3%, due primarily to the strong growth in our Progressive segment. As a percentage of revenues, adjusted EBITDA improved 110 basis points to 11.3% in the fourth quarter of 2018 compared to 10.2% in the fourth quarter of 2017, as a result of expanding gross margins and leveraging of operating expenses. See "Use of Non-GAAP Financial Information" and the related non-GAAP reconciliation accompanying this press release.

Diluted earnings per share for the fourth quarter of 2018 were $0.89 compared with $2.46 a year ago, a decrease of $1.57 or 63.8%. This decrease is due to the fourth quarter 2017 net benefit of $137.1 million to recognize the effects of the Tax Act.

On a non-GAAP basis, earnings per share assuming dilution were $1.02 in the fourth quarter of 2018 compared with $0.65 for the same quarter in 2017, an increase of $0.37 or 56.9%.

During the fourth quarter of 2018, the Company used $48.8 million for the acquisition of 49 franchised locations. Also during the quarter, the Company returned $70.8 million to shareholders through the payment of dividends as well as the repurchase of common stock totaling 1,448,946 shares for $68.7 million, or an average price per share of $47.42. The Company has authorization to purchase an additional $331.3 million of its common stock.

Progressive Leasing Segment Results

Progressive Leasing's revenues in the fourth quarter of 2018 increased 22.4% to a record $524.4 million from $428.5 million in the fourth quarter of 2017. Invoice volume increased 14.1% in the quarter, driven by an 11.6% increase in invoice volume per active door and a 2.2% increase in active doors to approximately 20,000. Progressive Leasing had 876,000 customers at December 31, 2018, an 18.4% increase from December 31, 2017.

Earnings before income taxes for the fourth quarter of 2018 were $54.6 million. EBITDA for the fourth quarter of 2018 was $65.5 million compared with $50.0 million for the same period of 2017, an increase of 31.2%. As a percentage of revenues, EBITDA improved 80 basis points to 12.5% for the fourth quarter of 2018 compared with 11.7% for the same period in 2017. Leased merchandise write-offs were 5.1% of revenues in the fourth quarter of 2018, compared with 5.4% in the same period of 2017. Bad debt expense as a percentage of revenues was 12.8% in the fourth quarter of 2018 compared with 12.1% in the same period of 2017, resulting in a full year bad debt percentage of 11.4%, within the 10% to 12% target range we have previously disclosed.

The Aaron's Business Segment Results

For the fourth quarter of 2018, total revenues for the Aaron's Business increased 2.9% to $459.7 million from $446.9 million in the fourth quarter of 2017. The increase was primarily due to the acquisition of 152 franchised locations in 2018. Same store revenues were down 0.5% in the fourth quarter of 2018. The decline in same store revenue is partially due to the lower up-front payments resulting from increased holiday promotional activity, which increased recurring revenue written into the portfolio and should benefit same store revenue growth in 2019. Customer count on a same store basis was down 5.0% during the fourth quarter of 2018. Company-operated Aaron's stores had 1,038,000 customers at December 31, 2018, a 5.6% increase from December 31, 2017.

Lease revenue and fees for the three months ended December 31, 2018 increased 8.6% compared with the same period in 2017. Non-retail sales, which primarily consist of merchandise sales to the Company's franchisees, decreased 25.2% for the fourth quarter compared with the same period of the prior year. The decline is attributed primarily to the franchise acquisitions completed in 2018.

Earnings before income taxes for the fourth quarter of 2018 were $28.3 million. Adjusted EBITDA for the three months ended December 31, 2018 was $47.6 million compared with $41.4 million for the same period in 2017, an increase of $6.2 million or 15.1%. As a percentage of revenues, Adjusted EBITDA improved 110 basis points to 10.4% for the three months ended December 31, 2018 compared with 9.3% for the same period last year.

Write-offs for damaged, lost or unsaleable merchandise were 5.1% of revenues in the fourth quarter of 2018 compared with 4.2% for the same period last year. Higher promotional activity drove improvements in traffic trends, ticket size and growth of the portfolio in the fourth quarter, but also resulted in an expected increase in write-offs.

At December 31, 2018, the Aaron's Business had 1,312 Company-operated stores and 377 franchised stores. During the fourth quarter of 2018, the Company acquired 49 franchised stores and consolidated four Company-operated stores. Additionally, during the quarter, four franchised stores closed and two franchised stores were sold to a third party.

Significant Components of Revenue

Consolidated lease revenues and fees for the three months ended December 31, 2018 increased 16.1% over the same period of the prior year. Franchise royalties and fees decreased 4.3% in the fourth quarter of 2018 compared with the same period a year ago. The decrease in franchise royalties and fees was the result of the lower number of franchised stores. Franchise revenues totaled $117.0 million for the three months ended December 31, 2018, a decrease of 27.8% from the same period for the prior year. Same store revenues for franchised stores were up 3.1% and same store customer counts were down 2.2% for the fourth quarter of 2018 compared with the same quarter in 2017. Franchised stores had 277,000 customers at the end of the fourth quarter of 2018. Revenues and customers of franchisees are not revenues and customers of the Aaron's Business or the Company.

2019 Outlook

2019 Outlook revenues for the Progressive business segment have been adjusted for the impact of ASU 2016-02 Leases ("ASC 842"), which will be adopted in the first quarter of 2019.

   

2019 Outlook

(In thousands, except per share amounts)

 

Low

High

Aaron's Inc. - Total Revenues

 

$

3,905,000

 

$

4,065,000

 

Aaron's Inc. - Adjusted EBITDA

 

415,000

 

442,000

 

Aaron's Inc. - Diluted EPS

 

3.15

 

3.35

 

Aaron's Inc. - Diluted Non-GAAP EPS

 

3.65

 

3.85

 

Aaron's Inc. - Capital Expenditures

 

100,000

 

120,000

 
       

Progressive Leasing - Total Revenues

 

2,100,000

 

2,175,000

 

Progressive Leasing- EBITDA

 

260,000

 

275,000

 
       

Aaron's Business - Total Revenues

 

1,775,000

 

1,855,000

 

Aaron's Business - Adjusted EBITDA

 

160,000

 

170,000

 

Aaron's Business - Annual Same Store Revenues

 

0.0%

 

2.0%

 
       

DAMI - Total Revenues

 

30,000

 

35,000

 

DAMI - Adjusted EBITDA

 

(5,000)

 

(3,000)

 

Conference Call and Webcast

The Company will hold a conference call to discuss its quarterly results on Thursday, February 14, 2019, at 8:30 a.m. Eastern Time. The public is invited to listen to the conference call by webcast accessible through the Investor Relations section of the Company's website at aarons.com. The webcast will be archived for playback at that same site.

About Aaron's, Inc.

Headquartered in Atlanta, Aaron's, Inc. (NYSE: AAN), is a leading omnichannel provider of lease-purchase solutions. Progressive Leasing provides lease-purchase solutions through more than 20,000 retail partner locations in 46 states. The Aaron's Business engages in the sales and lease ownership and specialty retailing of furniture, consumer electronics, home appliances and accessories through its approximately 1,700 Company-operated and franchised stores in 47 states, Puerto Rico and Canada, as well as its e-commerce platform, Aarons.com. Dent-A-Med, Inc., d/b/a the HELPcard®, provides a variety of second-look credit products that are originated through federally-insured banks. For more information, visit investor.aarons.com, Aarons.com, ProgLeasing.com, and HELPcard.com.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this news release regarding our business that are not historical facts are "forward-looking statements" that involve risks and uncertainties which could cause actual results to differ materially from those contained in the forward-looking statements. Such forward-looking statements generally can be identified by the use of forward-looking terminology, such as "believe," "guidance," "outlook," "expect," "will," "expectations," and "trends" and similar terminology. These risks and uncertainties include factors such as changes in general economic conditions, competition, pricing, legal and regulatory proceedings and investigations, customer privacy, information security, customer demand, the execution and results of our strategy and expense reduction and store closure and consolidation initiatives (including the risk that the costs associated with these initiatives exceeds expectations), risks related to M&A activities, including our recent franchisee acquisitions and the risk that the financial performance from those acquisitions and from M&A activities do not meet our expectations, risks related to Progressive Leasing's "virtual" lease-to-own business, the outcome of Progressive Leasing's pilot or test programs with various retailers and the results of Progressive Leasing's efforts to expand its relationships with existing retailer partners and establish new partnerships with additional retailers, increases in lease merchandise write-offs and bad debt expense associated with Progressive Leasing's growth in doors and customers and changes in product mix, and the other risks and uncertainties discussed under "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018. Statements in this release that are "forward-looking" include without limitation statements about: our expectations regarding the strength of our lease-to-own businesses; the results of our strategic investments, including the integration of franchisees we have acquired; our financial objectives; our expectations regarding revenue and earnings growth due to our investments in the Aaron's Business and Progressive Leasing; whether those investments will strengthen our long-term competitive position; 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 the retail partner pipeline for Progressive; the outcome of the transformation initiatives for the Aaron's Business; the Company's projected results and the 2019 fiscal year Outlook set forth in this press release for the Company on a consolidated basis, and for Progressive Leasing, the Aaron's Business and DAMI, individually as well as our expectations regarding the impact of ASC 842. 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,

   

2018

2017

2018

2017

Revenues:

         

Lease Revenues and Fees

 

$

909,542

 

$

783,202

 

$

3,506,418

 

$

3,000,231

 

Retail Sales

 

8,543

 

6,307

 

31,271

 

27,465

 

Non-Retail Sales

 

56,003

 

74,881

 

207,262

 

270,253

 

Franchise Royalties and Fees

 

9,675

 

10,113

 

44,815

 

48,278

 

Interest and Fees on Loans Receivable

 

9,060

 

9,256

 

37,318

 

34,925

 

Other

 

361

 

868

 

1,839

 

2,556

 

Total

 

$

993,184

 

$

884,627

 

$

3,828,923

 

$

3,383,708

 
           

Costs and Expenses:

         

Depreciation of Lease Merchandise

 

437,889

 

375,659

 

1,727,904

 

1,448,631

 

Retail Cost of Sales

 

5,124

 

3,867

 

19,819

 

17,578

 

Non-Retail Cost of Sales

 

43,878

 

66,703

 

174,180

 

241,356

 

Operating Expenses

 

419,252

 

370,455

 

1,618,423

 

1,403,985

 

Restructuring Expenses, Net

 

544

 

3,377

 

1,105

 

17,994

 

Other Operating (Income) Expense, Net

 

(1,830)

 

51

 

(2,116)

 

(535)

 

Total

 

$

904,857

 

$

820,112

 

$

3,539,315

 

$

3,129,009

 
           

Operating Profit

 

88,327

 

64,515

 

289,608

 

254,699

 

Interest Income

 

80

 

139

 

454

 

1,835

 

Interest Expense

 

(4,572)

 

(4,464)

 

(16,440)

 

(20,538)

 

Impairment of Investment

 

 

 

(20,098)

 

 

Other Non-Operating (Expense) Income, Net

 

(1,778)

 

548

 

(1,320)

 

3,581

 

Earnings Before Income Tax Expense (Benefit)

 

$

82,057

 

$

60,738

 

$

252,204

 

$

239,577

 
           

Income Tax Expense (Benefit)

 

20,314

 

(116,822)

 

55,994

 

(52,959)

 

Net Earnings

 

$

61,743

 

$

177,560

 

$

196,210

 

$

292,536

 
           

Earnings Per Share

 

$

0.91

 

$

2.51

 

$

2.84

 

$

4.13

 

Earnings Per Share Assuming Dilution

 

$

0.89

 

$

2.46

 

$

2.78

 

$

4.06

 
           

Weighted Average Shares Outstanding

 

67,959

 

70,607

 

69,128

 

70,837

 

Weighted Average Shares Outstanding Assuming Dilution

 

69,408

 

72,314

 

70,597

 

72,121

 

 

Selected Balance Sheet Data

(In thousands)

       
   

(Unaudited)

 
   

December 31, 2018

 

December 31, 2017

 
           

Cash and Cash Equivalents

 

$

15,278

   

$

51,037

   

Investments

 

   

20,385

   

Accounts Receivable, Net

 

98,159

   

99,887

   

Lease Merchandise, Net

 

1,318,470

   

1,152,135

   

Loans Receivable, Net

 

76,153

   

86,112

   

Property, Plant and Equipment, Net

 

229,492

   

207,687

   

Other Assets, Net

 

1,089,140

   

1,075,021

   
           

Total Assets

 

$

2,826,692

   

$

2,692,264

   
           

Debt

 

424,752

   

368,798

   
           

Total Liabilities

 

1,065,984

   

964,260

   

Shareholders' Equity

 

1,760,708

   

1,728,004

   
           

Total Liabilities and Shareholders' Equity

 

$

2,826,692

   

$

2,692,264

   

 

Selected Cash Flow Data

(In thousands)

     
   

(Unaudited)
 Twelve Months Ended

   

December 31,

   

2018

 

2017

         

Cash Provided by Operating Activities

 

$

356,498

   

$

159,135

 

Cash Used in Investing Activities

 

(263,133)

   

(205,337)

 

Cash Used in Financing Activities

 

(128,968)

   

(211,397)

 

Effect of Exchange Rate Changes on Cash & Cash Equivalents

 

(156)

   

75

 

Decrease in Cash and Cash Equivalents

 

(35,759)

   

(257,524)

 

Cash and Cash Equivalents at Beginning of Period

 

51,037

   

308,561

 

Cash and Cash Equivalents at End of Period

 

$

15,278

   

$

51,037

 

 

Aaron's, Inc. and Subsidiaries

Quarterly Revenues by Segment

(In thousands)

   
 

(Unaudited)

 

Three Months Ended

 

December 31, 2018

 

Progressive Leasing

The Aaron's Business

DAMI

Consolidated Total

Lease Revenues and Fees

$

524,391

 

$

385,151

 

$

 

$

909,542

 

Retail Sales

 

8,543

 

 

8,543

 

Non-Retail Sales

 

56,003

 

 

56,003

 

Franchise Royalties and Fees

 

9,675

 

 

9,675

 

Interest and Fees on Loans Receivable

 

 

9,060

 

9,060

 

Other

 

361

 

 

361

 
 

$

524,391

 

$

459,733

 

$

9,060

 

$

993,184

 
                         
                         
 

(Unaudited)

 

Three Months Ended

 

December 31, 2017

 

Progressive Leasing

The Aaron's Business

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

 
                         
                         
                         

Aaron's, Inc. and Subsidiaries

Twelve Months Revenues by Segment

(In thousands)

   
 

(Unaudited)

 

Twelve Months Ended

 

December 31, 2018

 

Progressive Leasing

The Aaron's Business

DAMI

Consolidated Total

Lease Revenues and Fees

$

1,998,981

 

$

1,507,437

 

$

 

$

3,506,418

 

Retail Sales

 

31,271

 

 

31,271

 

Non-Retail Sales

 

207,262

 

 

207,262

 

Franchise Royalties and Fees

 

44,815

 

 

44,815

 

Interest and Fees on Loans Receivable

 

 

37,318

 

37,318

 

Other

 

1,839

 

 

1,839

 
 

$

1,998,981

 

$

1,792,624

 

$

37,318

 

$

3,828,923

 
                         
                         
                         
 

(Unaudited)

 

Twelve Months Ended

 

December 31, 2017

 

Progressive Leasing

The Aaron's Business

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

 

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 2018 each exclude $5.4 million in Progressive Leasing-related intangible amortization expense, $3.4 million in amortization expense resulting from franchisee acquisitions, $0.8 million in acquisition transaction and transition costs related to franchisee acquisitions, $0.5 million in restructuring charges, an $0.8 million gain on the sale of a building and $1.7 million in tax expense as an indirect result of the Tax Act. For the twelve months of 2018 Non-GAAP net earnings and non-GAAP diluted earnings per share excludes $21.7 million in Progressive Leasing-related intangible amortization expense, $8.7 million in amortization expense resulting from franchisee acquisitions, $1.5 million in acquisition transaction and transition costs related to franchisee acquisitions, $1.1 million in net restructuring charges, $0.5 million in net tax benefits related to the Tax Act adjustments, an $0.8 million gain on the sale of a building and $21.6 million of charges related to the full impairment of the Company's Perfect Home Investment and the related expenses incurred. Non-GAAP net earnings and non-GAAP diluted earnings per share for the fourth quarter of 2017 exclude $5.4 million in Progressive Leasing-related intangible amortization expense, $1.0 million in amortization expense resulting from franchisee acquisitions, $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 franchisee acquisitions, $2.0 million in acquisition transaction and transition costs related to the franchisee acquisition, $18.0 million in restructuring charges and $137.1 million in net provisional tax benefits.

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,

 

2018

2017

 

2018

2017

Net Earnings

$

61,743

 

$

177,560

   

$

196,210

 

$

292,536

 

Add Progressive Leasing-Related Intangible Amortization Expense (1)(2)

4,194

 

3,611

   

16,824

 

14,935

 

Add Franchisee-Related Intangible Amortization Expense(3)(4)

2,607

 

678

   

6,778

 

1,336

 

Add Restructuring Expense, net (5)(6)

421

 

2,250

   

857

 

11,674

 

Add Acquisition Transaction and Transition Costs(7)(8)

653

 

2

   

1,156

 

1,282

 

Impairment of Investment and Related Expenses(9)

 

   

16,779

 

 

Tax Act Adjustments

1,744

 

(137,098)

   

(529)

 

(137,098)

 

Less Gain on Sale of Building(10)

(600)

 

   

(601)

 

 

Non-GAAP Net Earnings

$

70,762

 

$

47,003

   

$

237,474

 

$

184,665

 
           

Earnings Per Share Assuming Dilution

$

0.89

 

$

2.46

   

$

2.78

 

$

4.06

 

Add Progressive Leasing-Related Intangible Amortization Expense (1)(2)

0.06

 

0.05

   

0.24

 

0.21

 

Add Franchisee-Related Intangible Amortization Expense(3)(4)

0.04

 

0.01

   

0.10

 

0.02

 

Add Restructuring Expense, net(5)(6)

0.01

 

0.03

   

0.01

 

0.16

 

Add Acquisition Transaction and Transition Costs(7)(8)

0.01

 

   

0.02

 

0.02

 

Impairment of Investment and Related Expenses(9)

 

   

0.24

 

 

Tax Act Adjustments

0.03

 

(1.90)

   

(0.01)

 

(1.90)

 

Less Gain on Sale of Building(10)

(0.01)

 

   

(0.01)

 

 

Non-GAAP Earnings Per Share Assuming Dilution(11)

$

1.02

 

$

0.65

   

$

3.36

 

$

2.56

 
           

Weighted Average Shares Outstanding Assuming Dilution

69,408

 

72,314

   

70,597

 

72,121

 
                   
                   

(1)Net of taxes of $1,227 and $4,859 for the three and twelve months ended months ended December 31, 2018 calculated using the estimated tax rates of 22.63% and 22.41% for the respective periods.

(2) Net of taxes of $1,810 and $8,084 for the three and twelve months ended months ended December 31, 2017 calculated using the estimated tax rates for the respective periods.

(3) Net of taxes of $763 and $1,958 for the three and twelve months ended months ended December 31, 2018 calculated using the estimated tax rates of 22.63% and 22.41% for the respective periods.

(4) Net of taxes of $340 and $724 for the three and twelve months ended months ended December 31, 2017 calculated using the estimated tax rates for the respective periods.

(5) Net of taxes of $123 and $248 for the three and twelve months ended months ended December 31, 2018 calculated using the estimated tax rates of 22.63% and 22.41% for the respective periods.

(6) Net of taxes of $1,127 and $6,320 for the three and twelve months ended months ended December 31, 2017 calculated using the estimated tax rates for the respective periods.

(7) Net of taxes of $191 and $334 for the three and twelve months ended months ended December 31, 2018 calculated using the estimated tax rates of 22.63% and 22.41% for the respective periods.

(8) Net of taxes of $1 and $694 for the three and twelve months ended months ended December 31, 2017 calculated using the estimated tax rates for the respective periods.

(9) Net of taxes of $4,846 for the twelve months ended December 31, 2018 calculated using the estimated tax rate of 22.41%.

(10) Net of taxes of $175 and $174 for the three and twelve months ended months ended December 31, 2017 calculated using the estimated tax rates of 22.63% and 22.41% for the respective periods.

(11) In some cases, the sum of individual EPS amounts may not equal total non-GAAP EPS calculations due to rounding.

 

DAMI Pre-tax, Pre-provision Loss

(In thousands)

     
 

(Unaudited)
 Three Months Ended

(Unaudited)
 Twelve Months Ended

 

December 31,

December 31,

 

2018

2017

2018

2017

Loss Before Income Taxes

$

(831)

 

$

(2,832)

 

$

(7,494)

 

$

(11,289)

 

Adjustment to (Decrease) Increase Allowance for Loan Losses During Period

(168)

 

992

 

1,516

 

4,830

 

Pre-tax, Pre-provision Loss

$

(999)

 

$

(1,840)

 

$

(5,978)

 

$

(6,459)

 

 

Aaron's, Inc. and Subsidiaries

Non-GAAP Financial Information

Quarterly Segment EBITDA

(In thousands)

   
 

(Unaudited)

 

Three Months Ended

 

December 31, 2018

 

Progressive Leasing

The Aaron's Business

DAMI

Consolidated Total

Net Earnings

     

$

61,743

 

Income Tax Expense1

     

20,314

 

Earnings (Loss) Before Income Taxes (EBT)

54,622

 

28,266

 

(831)

 

82,057

 

Interest Expense

3,745

 

49

 

778

 

4,572

 

Depreciation

1,758

 

14,230

 

192

 

16,180

 

Amortization

5,421

 

3,674

 

145

 

9,240

 

EBITDA

$

65,546

 

$

46,219

 

$

284

 

$

112,049

 

Restructuring Expenses

 

544

 

 

544

 

Acquisition Transaction and Transition Costs

 

844

 

 

844

 

Gain on Sale of Building

 

 

(775)

 

(775)

 

Adjusted EBITDA

$

65,546

 

$

47,607

 

$

(491)

 

$

112,662

 
 
 

(Unaudited)

 

Three Months Ended

 

December 31, 2017

 

Progressive Leasing

The Aaron's Business

DAMI

Consolidated Total

Net Earnings

     

$

177,560

 

Income Tax Benefit1

     

(116,822)

 

Earnings (Loss) Before Income Taxes (EBT)

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

 
                         
                         

(1)

Taxes are calculated on a consolidated basis and are not identifiable by company segments.

 

Aaron's, Inc. and Subsidiaries

Non-GAAP Financial Information

Twelve Months Segment EBITDA

(In thousands)

   
 

(Unaudited)

 

Twelve Months Ended

 

December 31, 2018

 

Progressive Leasing

The Aaron's Business

DAMI

Consolidated Total

Net Earnings

     

$

196,210

 

Income Tax Expense1

     

55,994

 

Earnings (Loss) Before Income Taxes (EBT)

175,015

 

84,683

 

(7,494)

 

252,204

 

Interest Expense

16,288

 

(2,944)

 

3,096

 

16,440

 

Depreciation

6,291

 

54,022

 

852

 

61,165

 

Amortization

21,683

 

10,722

 

580

 

32,985

 

EBITDA

$

219,277

 

$

146,483

 

$

(2,966)

 

$

362,794

 

Impairment of Investment and Related Expenses

 

21,625

 

 

21,625

 

Restructuring Expenses (Reversals), Net

 

1,115

 

(10)

 

1,105

 

Acquisition Transaction and Transition Costs

 

1,490

 

 

1,490

 

Gain on Sale of Building

 

 

(775)

 

(775)

 

Adjusted EBITDA

$

219,277

 

$

170,713

 

$

(3,751)

 

$

386,239

 
         
 

(Unaudited)

 

Twelve Months Ended

 

December 31, 2017

 

Progressive Leasing

The Aaron's Business

DAMI

Consolidated Total

Net Earnings

     

$

292,536

 

Income Tax Benefit1

     

(52,959)

 

Earnings (Loss) Before Income Taxes (EBT)

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

 
                         
                         

(1)

Taxes are calculated on a consolidated basis and are not identifiable by company segments.

 

Reconciliation of 2019 Outlook for Adjusted EBITDA

(In thousands)

   
 

Fiscal Year 2019 Ranges

 

Progressive Leasing

The Aaron's Business

DAMI

Consolidated Total

Estimated Net Earnings

$210,300 - $231,000

Taxes1

64,700 - 71,000

Projected Earnings Before Taxes

$216,500 - $231,500

$68,000 - $78,000

$(9,500) - $(7,500)

275,000 - 302,000

Interest Expense

13,500

2,500

3,500

19,500

Depreciation

8,000

66,000

1,000

75,000

Amortization

22,000

10,000

32,000

Projected EBITDA

$260,000 - $275,000

$146,500 - $156,500

$(5,000) - $(3,000)

$401,500 - $428,500

Projected Other Adjustments2

13,500

13,500

Projected Adjusted EBITDA

$260,000 - $275,000

$160,000 - $170,000

$(5,000) - $(3,000)

$415,000 - $442,000

         
         

(1)

Taxes are calculated on a consolidated basis and are not identifiable by company divisions.

(2)

Projected Other Adjustments include the non-GAAP charges related to the Aaron's Business restructuring.

 

Reconciliation of 2019 Outlook for Earnings Per Share

Assuming Dilution to Non-GAAP Earnings Per Share Assuming Dilution

   
 

Fiscal Year 2019 Range

 

Low

High

Projected Earnings Per Share Assuming Dilution

$

3.15

 

$

3.35

 

Add Projected Intangible Amortization Expense1

0.35

 

0.35

 

Add Sum of Other Adjustments2

0.15

 

0.15

 

Projected Non-GAAP Earnings Per Share Assuming Dilution

$

3.65

 

$

3.85

 
             
             

Contact:

Michael P. Dickerson
Aaron's, Inc.
Vice President
Investor Relations
678.402.3950
Mike.Dickerson@Aarons.com

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/aarons-inc-reports-fourth-quarter-results-and-provides-2019-annual-outlook-300795478.html

SOURCE Aaron's, Inc.

###

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