Aaron's, Inc. Reports Fourth Quarter Revenue And Earnings
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Aaron's, Inc. Reports Fourth Quarter Revenue And Earnings

  • Revenues of $1.0 Billion; Non-GAAP Revenues Up 8.4%
  • Diluted EPS ($1.60); Non-GAAP Diluted EPS $1.15, Up 12.7%
  • Progressive Reports Record Revenues; Invoice Growth Accelerates to 34.4%
  • Aaron's Business Same Store Revenues up 0.4%
  • Progressive Reaches Agreement In Principle with FTC Staff, Records $179 million charge

ATLANTA, Feb. 20, 2020 // 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, 2019.

"Aaron's finished the year on a positive note with record annual revenues, adjusted EBITDA and non-GAAP EPS. Progressive's invoice growth accelerated significantly in the fourth quarter, up 34.4% compared to the prior year. In addition, collections performance at the Aaron's Business improved significantly during the quarter, contributing to positive same-store revenues and strong adjusted EBITDA," said John Robinson, Chief Executive Officer.

"Finally, I'm pleased to report that Progressive has reached an agreement in principle with the staff of the FTC regarding the Civil Investigative Demand Progressive received in July 2018. Under the proposed agreement, which requires final approval by FTC Commissioners and the U.S. District Court for the Northern District of Georgia, Progressive will make a payment of $175 million and enhance certain compliance-related activities, including monitoring, disclosure and reporting requirements. We have agreed to settle this matter to avoid the distraction and uncertainty caused by protracted litigation and allow Progressive to remain focused on providing competitive, flexible and affordable purchase options to credit-challenged consumers," Mr. Robinson concluded.

Consolidated Results

For the fourth quarter of 2019, consolidated revenues were $1.0 billion compared with $993.2 million for the fourth quarter of 2018. Calculated on a basis consistent with the 2019 adoption of ASC 842 related to lease accounting, revenues increased $77.5 million, or 8.4%, compared to the prior year period. The increase in consolidated revenues was primarily due to increases in revenues at Progressive and the revenue contribution from franchised locations acquired by the Aaron's Business in 2018, partially offset by the closure of Aaron's stores during 2019.

The Company reported a net loss for the fourth quarter of 2019 of $107.1 million compared to net earnings of $61.7 million in the prior year period. The net loss in the fourth quarter of 2019 included $179 million of charges related to the Progressive FTC settlement and $2.5 million in pre-tax restructuring charges. Adjusted EBITDA for the Company was $125.2 million for the fourth quarter of 2019, compared with $112.7 million for the same period in 2018, an increase of $12.5 million, or 11.1%. As a percentage of revenues, adjusted EBITDA was 12.5% in the fourth quarter of 2019 compared with 12.2% for the same period in 2018 when calculated on a basis consistent with the 2019 adoption of ASC 842. Adjusted EBITDA in the fourth quarter of 2019 includes $5.6 million of gains in the Aaron's Business related to real estate sales.

Diluted losses per share for the fourth quarter of 2019 were $1.60 compared with diluted earnings per share of $0.89 in the year ago period. On a non-GAAP basis, diluted earnings per share were $1.15 in the fourth quarter of 2019 compared with $1.02 for the same quarter in 2018, an increase of $0.13 or 12.7%.

The Company generated $317.2 million in cash from operations during the twelve months ended December 31, 2019 and ended the fourth quarter with $57.8 million in cash, compared with a cash balance of $15.3 million at the end of 2018. During the fourth quarter, the Company repurchased 513,900 shares of its common stock for $29.8 million at an average purchase price of $58.05 per share.

Progressive Leasing Segment Results

Progressive Leasing reported record revenues in the fourth quarter of 2019 of $559.5 million compared to reported revenues of $524.4 million in the fourth quarter of 2018. Calculated on a basis consistent with the 2019 adoption of ASC 842, revenues increased $102.2 million or 22.3%. Fourth quarter invoice volume increased 34.4% compared to the prior year quarter, driven by a 23.3% increase in invoice volume per active door and a 9.0% increase in active doors to approximately 22,000. The increase in active door count was primarily due to the addition of new national retail partner locations in the fourth quarter, partially offset by a reduction in locations in our mattress and mobile phone verticals in previous quarters. Progressive Leasing had 1,072,000 customers at December 31, 2019, a 22.4% increase from December 31, 2018.

Losses before income taxes for the fourth quarter of 2019 were $111.6 million, as a result of a $179 million pre-tax charge related to the tentative settlement of the FTC matter. Adjusted EBITDA for the fourth quarter of 2019 was $77.1 million compared with EBITDA of $65.5 million for the same period of 2018, an increase of 17.6%. This increase was due primarily to strong revenue growth, partially offset by slightly higher than expected onboarding costs for national retailers and a year over year increase in write-offs.

As a percentage of revenues, adjusted EBITDA was 13.8% for the fourth quarter of 2019, a decrease of 50 basis points compared to the fourth quarter of 2018, calculated on a basis consistent with the 2019 adoption of ASC 842.

The provision for lease merchandise write-offs was 6.6% of revenues in the fourth quarter of 2019 compared with 5.8% in the same period of 2018, calculated on a basis consistent with the 2019 adoption of ASC 842, and well within our annual target range of 6% to 8% of revenues. The increase in write-offs was a result of accelerating invoice growth in the quarter which drove an increase in the impairment reserve on leased assets.

The Aaron's Business Segment Results

For the fourth quarter of 2019, total revenues for the Aaron's Business decreased 5.4% to $435.0 million from $459.7 million in the fourth quarter of 2018. The decrease was primarily due to the net reduction of 145 stores during 2019, the expected attrition of revenue from prior year store mergers and lower collections, partially offset by the positive contributions from 152 franchised locations acquired throughout 2018. Same-store revenues were up 0.4% in the fourth quarter of 2019, an improvement of 95 basis points from the fourth quarter of 2018. Contributing to the fourth quarter increase in same store revenues was the favorable impact of improved sequential collections as well at the continuing increase in e-commerce recurring revenues written, which was up 35.3% in the fourth quarter. For the full year, same store revenues were flat, an improvement of 143 basis points from 2018. Customer count on a same-store basis was down 4.8% during the fourth quarter of 2019 compared to the same period in 2018. Company-operated Aaron's stores had 946,000 customers at December 31, 2019, an 8.9% decrease from December 31, 2018.

Lease revenue and fees for the three months ended December 31, 2019 decreased 1.2% compared with the same period in 2018. Non-retail sales, which primarily consist of merchandise sales to the Company's franchisees, decreased 30.8% for the fourth quarter of 2019 compared with the same period of the prior year. The decline is attributable primarily to the franchisee acquisitions completed in 2018.

Earnings before income taxes for the fourth quarter of 2019 were $28.1 million, and adjusted EBITDA was $49.3 million, an increase of $1.7 million or 3.6% compared to the same period in 2018. The increase in adjusted EBITDA was due primarily to a recovery in collections performance, expense management, and gains from real estate sales.

The provision for lease merchandise write-offs was 7.3% of revenues in the fourth quarter of 2019, compared with 5.1% for the same period last year. Contributing to the increase in write-offs was the reduction in collection performance in the third quarter that resulted from the implementation of our new sales program, store closure activity during the first half of 2019, and an increasing mix of e-commerce as a percent of revenue.

At December 31, 2019, the Aaron's Business had 1,167 Company-operated stores and 335 franchised stores.

Significant Components of Revenue and Franchise Performance

Consolidated lease revenues and fees for the three months ended December 31, 2019 increased 11.6% over the same period of the prior year, calculated on a basis consistent with the 2019 adoption of ASC 842. Franchise royalties and fees decreased 22.1% in the fourth quarter of 2019 compared with the same period a year ago, primarily as a result of the lower number of franchised stores. Franchise revenues totaled $101.2 million for the three months ended December 31, 2019, a decrease of 13.5% from the same period for the prior year. For franchised stores, same-store revenues decreased 1.2% and same-store customer counts declined 4.9% for the fourth quarter of 2019 compared with the same quarter in 2018. Franchised stores had 239,000 customers at the end of the fourth quarter of 2019. Revenues and customers of franchisees are not revenues and customers of the Aaron's Business or the Company.

2020 Outlook

   

2020 Outlook

(In thousands, except per share amounts)

 

Low

High

Aaron's Inc. - Total Revenues

 

$

4,150,000

 

$

4,300,000

 

Aaron's Inc. - EBITDA

 

430,000

 

458,000

 

Aaron's Inc. - Diluted EPS

 

3.50

 

3.70

 

Aaron's Inc. - Diluted Non-GAAP EPS

 

3.80

 

4.00

 

Aaron's Inc. - Capital Expenditures

 

90,000

 

100,000

 
       

Progressive - Total Revenues

 

2,540,000

 

2,635,000

 

Progressive - EBITDA

 

310,000

 

325,000

 
       

Aaron's Business - Total Revenues

 

1,575,000

 

1,625,000

 

Aaron's Business - EBITDA

 

125,000

 

135,000

 

Aaron's Business - Annual Same-Store Revenues

 

-4.0%

 

-2.0%

 
       

Vive - Total Revenues

 

35,000

 

40,000

 

Vive - EBITDA

 

(5,000)

 

(2,000)

 

Conference Call and Webcast

The Company will hold a conference call to discuss its quarterly results on Thursday, February 20, 2020, 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, 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 approximately 22,000 retail and e-commerce partner locations in 46 states and the District of Columbia. The Aaron's Business engages in the sales and lease ownership and specialty retailing of furniture, home appliances, consumer electronics and accessories through its approximately 1,500 Company-operated and franchised stores in 47 states, Puerto Rico and Canada, as well as its e-commerce platform, Aarons.com. Vive Financial ("Vive", formerly Dent-A-Med, Inc.), provides a variety of second-look credit products that are originated through federally-insured banks. For more information, visit investor.aarons.com, Aarons.com, ProgLeasing.com, and ViveCard.com.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this news release regarding our business that are not historical facts are "forward-looking statements" that involve risks and uncertainties which could cause actual results to differ materially from those contained in the forward-looking statements. Such forward-looking statements generally can be identified by the use of forward-looking terminology, such as "will," "outlook," "believe," "expect," "continue," "guidance," "expectations," and "trends" and similar terminology. These risks and uncertainties include factors such as the effects on our business and reputation resulting from our announcement of Progressive's proposed agreement in principle with the Staff of the FTC, including the risk of losing existing retail partners or being unable to establish new partnerships with additional retailers, and of any follow-on regulatory and/or civil litigation arising therefrom; other types of legal and regulatory proceedings and investigations, including those related to customer privacy, third party and employee fraud; information security, customer demand, the risks associated with our business transformation strategy for our Aaron's Business not being successful, including our e-commerce and real estate repositioning and optimization initiatives (including the risk that the costs associated with these initiatives exceeds our expectations); risks associated with the challenges faced by our Aaron's Business, including the commoditization of consumer electronics and the high fixed-cost operating model of the Aaron's Business; risks related to M&A activities, including the risk that the financial performance from such activities, such as our acquisitions of Aaron's Business franchisees, may not meet our expectations; increases in lease merchandise write-offs for our Aaron's Business; increases in lease merchandise write-offs and the provision for returns and uncollectible renewal payments associated with Progressive Leasing's growth; and the other risks and uncertainties discussed under "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019. Statements in this press release that are "forward-looking" include without limitation statements about the proposed agreement and principle we have reached with the staff of the FTC and our 2020 Outlook. 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,

   

2019

2018

2019

2018

Revenues:

         

Lease Revenues and Fees

 

$

939,993

 

$

909,542

 

$

3,698,491

 

$

3,506,418

 

Retail Sales

 

7,913

 

8,543

 

38,474

 

31,271

 

Non-Retail Sales

 

38,760

 

56,003

 

140,950

 

207,262

 

Franchise Royalties and Fees

 

7,533

 

9,675

 

33,432

 

44,815

 

Interest and Fees on Loans Receivable

 

9,103

 

9,060

 

35,046

 

37,318

 

Other

 

302

 

361

 

1,263

 

1,839

 

Total

 

1,003,604

 

993,184

 

3,947,656

 

3,828,923

 
           

Costs and Expenses:

         

Depreciation of Lease Merchandise

 

507,471

 

437,889

 

1,972,358

 

1,727,904

 

Retail Cost of Sales

 

3,999

 

5,124

 

24,024

 

19,819

 

Non-Retail Cost of Sales

 

30,172

 

43,878

 

113,229

 

174,180

 

Operating Expenses

 

370,793

 

419,252

 

1,524,849

 

1,618,423

 

Restructuring Expenses, Net

 

2,455

 

544

 

39,990

 

1,105

 

Legal and Regulatory Expense

 

179,261

 

 

179,261

 

 

Other Operating Income, Net

 

(7,217)

 

(1,830)

 

(11,929)

 

(2,116)

 

Total

 

1,086,934

 

904,857

 

3,841,782

 

3,539,315

 
           

Operating (Loss) Profit

 

(83,330)

 

88,327

 

105,874

 

289,608

 

Interest Income

 

385

 

80

 

1,790

 

454

 

Interest Expense

 

(3,720)

 

(4,572)

 

(16,967)

 

(16,440)

 

Impairment of Investment

 

 

 

 

(20,098)

 

Other Non-Operating Income (Expense), Net

 

661

 

(1,778)

 

2,091

 

(1,320)

 

(Losses) Earnings Before Income Tax Expense

 

(86,004)

 

82,057

 

92,788

 

252,204

 
           

Income Tax Expense

 

21,053

 

20,314

 

61,316

 

55,994

 

Net (Losses) Earnings

 

$

(107,057)

 

$

61,743

 

$

31,472

 

$

196,210

 
           

(Losses) Earnings Per Share

 

$

(1.60)

 

$

0.91

 

$

0.47

 

$

2.84

 

(Losses) Earnings Per Share Assuming Dilution

 

$

(1.60)

 

$

0.89

 

$

0.46

 

$

2.78

 
           

Weighted Average Shares Outstanding

 

66,908

 

67,959

 

67,322

 

69,128

 

Weighted Average Shares Outstanding Assuming Dilution

 

66,908

 

69,408

 

68,631

 

70,597

 

 

Aaron's, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands)

 
   

(Unaudited)

 
   

December 31, 2019

 

December 31, 2018

 

ASSETS:

         

Cash and Cash Equivalents

 

$

57,755

   

$

15,278

   

Accounts Receivable (net of allowances of $76,293 in 2019
and $62,704 in 2018)

 

104,159

   

98,159

   

Lease Merchandise (net of accumulated depreciation and
allowances of $896,056 in 2019 and $816,928 in 2018)

 

1,433,417

   

1,318,470

   

Loans Receivable (net of allowances and unamortized fees of
$21,134 in 2019 and $19,941 in 2018)

 

75,253

   

76,153

   

Property, Plant and Equipment, Net

 

237,666

   

229,492

   

Operating Lease Right-of-Use Assets

 

329,211

   

   

Goodwill

 

736,582

   

733,170

   

Other Intangibles, Net

 

190,796

   

228,600

   

Income Tax Receivable

 

18,690

   

29,148

   

Prepaid Expenses and Other Assets

 

114,271

   

98,222

   

Total Assets

 

$

3,297,800

   

$

2,826,692

   

LIABILITIES & SHAREHOLDERS' EQUITY:

         

Accounts Payable and Accrued Expenses

 

$

272,816

   

$

293,153

   

Accrued Regulatory Expense

 

175,000

   

   

Deferred Income Taxes Payable

 

310,395

   

267,500

   

Customer Deposits and Advance Payments

 

91,914

   

80,579

   

Operating Lease Liabilities

 

369,386

   

   

Debt

 

341,030

   

424,752

   

Total Liabilities

 

1,560,541

   

1,065,984

   

SHAREHOLDERS' EQUITY:

         

Common Stock, Par Value $0.50 Per Share: Authorized:
225,000,000 Shares at December 31, 2019 and 2018; Shares
Issued: 90,752,123 at December 31, 2019 and 2018

 

45,376

   

45,376

   

Additional Paid-in Capital

 

290,229

   

278,922

   

Retained Earnings

 

2,029,613

   

2,005,344

   

Accumulated Other Comprehensive Loss

 

(19)

   

(1,087)

   

Less: Treasury Shares at Cost

         

Common Stock: 24,034,053 Shares at December 31, 2019 and
23,567,979 at December 31, 2018

 

(627,940)

   

(567,847)

   

Total Shareholders' Equity

 

1,737,259

   

1,760,708

   

Total Liabilities and Shareholders' Equity

 

$

3,297,800

   

$

2,826,692

   

 

Aaron's, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

 

(Unaudited)

Twelve Months Ended
 December 31,

(In Thousands)

2019

 

2018

OPERATING ACTIVITIES:

     

Net Earnings

$

31,472

   

$

196,210

 

Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating
Activities:

     

Depreciation of Lease Merchandise

1,972,358

   

1,727,904

 

Other Depreciation and Amortization

105,061

   

94,150

 

Accounts Receivable Provision

322,963

   

268,088

 

Provision for Credit Losses on Loans Receivable

21,667

   

21,063

 

Stock-Based Compensation

26,548

   

28,182

 

Deferred Income Taxes

49,967

   

48,359

 

Impairment of Assets

30,344

   

20,098

 

Non-Cash Lease Expense

114,934

   

 

Other Changes, Net

(9,886)

   

(2,198)

 

Changes in Operating Assets and Liabilities, Net of Effects of Acquisitions and
Dispositions:

     

Additions to Lease Merchandise

(2,484,755)

   

(2,234,646)

 

Book Value of Lease Merchandise Sold or Disposed

401,960

   

398,748

 

Accounts Receivable

(331,636)

   

(270,888)

 

Prepaid Expenses and Other Assets

(25,860)

   

5,903

 

Income Tax Receivable

10,458

   

70,875

 

Operating Lease Right-of-Use Assets and Liabilities

(124,384)

   

 

Accounts Payable and Accrued Expenses

20,183

   

(20,367)

 

Accrued Regulatory Expense

175,000

   

 

Customer Deposits and Advance Payments

10,791

   

5,017

 

Cash Provided by Operating Activities

317,185

   

356,498

 

INVESTING ACTIVITIES:

     

Investments in Loans Receivable

(70,313)

   

(64,914)

 

Proceeds from Loans Receivable

53,170

   

57,328

 

Proceeds from Investments

1,212

   

3,066

 

Outflows on Purchases of Property, Plant & Equipment

(92,963)

   

(78,845)

 

Proceeds from Property, Plant, and Equipment

14,090

   

9,191

 

Outflows on Acquisitions of Businesses and Customer Agreements, Net of Cash
Acquired

(14,285)

   

(189,901)

 

Proceeds from Dispositions of Businesses and Customer Agreements, Net of Cash
Disposed

2,813

   

942

 

Cash Used in Investing Activities

(106,276)

   

(263,133)

 

FINANCING ACTIVITIES:

     

(Repayments) Borrowings on Revolving Facility, Net

(16,000)

   

16,000

 

Proceeds from Debt

   

137,500

 

Repayments on Debt

(68,531)

   

(97,583)

 

Acquisition of Treasury Stock

(69,255)

   

(168,735)

 

Dividends Paid

(9,437)

   

(6,243)

 

Issuance of Stock Under Stock Option Plans

7,749

   

7,975

 

Shares Withheld for Tax Payments

(13,038)

   

(17,347)

 

Debt Issuance Costs

(40)

   

(535)

 

Cash Used in Financing Activities

(168,552)

   

(128,968)

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS

120

   

(156)

 

Increase (Decrease) in Cash and Cash Equivalents

42,477

   

(35,759)

 

Cash and Cash Equivalents at Beginning of Year

15,278

   

51,037

 

Cash and Cash Equivalents at End of Year

$

57,755

   

$

15,278

 

 

 

Aaron's, Inc. and Subsidiaries

Quarterly Revenues by Segment

(In thousands)

 
 

(Unaudited)

 

Three Months Ended

 

December 31, 2019

 

Progressive Leasing1

Aaron's Business

Vive

Consolidated Total

Lease Revenues and Fees

$

559,549

 

$

380,444

 

$

 

$

939,993

 

Retail Sales

 

7,913

 

 

7,913

 

Non-Retail Sales

 

38,760

 

 

38,760

 

Franchise Royalties and Fees

 

7,533

 

 

7,533

 

Interest and Fees on Loans Receivable

 

 

9,103

 

9,103

 

Other

 

302

 

 

302

 

Total Revenues

$

559,549

 

$

434,952

 

$

9,103

 

$

1,003,604

 
 

1

For the three months ended December 31, 2019, Progressive Leasing incurred bad debt expense of $81,037 which was recorded as a reduction to Lease Revenues and Fees as a result of the Company's adoption of ASC 842, Leases.

 

 

(Unaudited)

 

Three Months Ended

 

December 31, 2018

 

Progressive Leasing

Aaron's Business

Vive

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

 

Total Revenues

$

524,391

 

$

459,733

 

$

9,060

 

$

993,184

 

Progressive Bad Debt Expense

67,040

 

 

 

67,040

 

Total Revenues, net of Progressive
Bad Debt Expense1

$

457,351

 

$

459,733

 

$

9,060

 

$

926,144

 
 

1

 See the "Use of Non-GAAP Financial Information" section accompanying this press release.

 

Aaron's, Inc. and Subsidiaries

Twelve Months Revenues by Segment

(In thousands)

 
 

(Unaudited)

 

Twelve Months Ended

 

December 31, 2019

 

Progressive Leasing1

Aaron's Business

Vive

Consolidated Total

Lease Revenues and Fees

$

2,128,133

 

$

1,570,358

 

$

 

$

3,698,491

 

Retail Sales

 

38,474

 

 

38,474

 

Non-Retail Sales

 

140,950

 

 

140,950

 

Franchise Royalties and Fees

 

33,432

 

 

33,432

 

Interest and Fees on Loans Receivable

 

 

35,046

 

35,046

 

Other

 

1,263

 

 

1,263

 

Total Revenues

$

2,128,133

 

$

1,784,477

 

$

35,046

 

$

3,947,656

 
 

1

For the twelve months ended December 31, 2019, Progressive Leasing incurred bad debt expense of $274,905 which was recorded as a reduction to Lease Revenues and Fees as a result of the Company's adoption of ASC 842, Leases.

 

 

(Unaudited)

 

Twelve Months Ended

 

December 31, 2018

 

Progressive Leasing

Aaron's Business

Vive

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

 

Total Revenues

$

1,998,981

 

$

1,792,624

 

$

37,318

 

$

3,828,923

 

Progressive Bad Debt Expense

227,813

 

 

 

227,813

 

Total Revenues, net of Progressive
Bad Debt Expense1

$

1,771,168

 

$

1,792,624

 

$

37,318

 

$

3,601,110

 
 

1

See the "Use of Non-GAAP Financial Information" section accompanying this press release.

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 2019 exclude Progressive Leasing-related intangible amortization expense, amortization expense resulting from franchisee acquisitions, restructuring charges, the regulatory charge related to Progressive Leasing's tentative settlement of the FTC matter, legal expenses incurred related to the FTC matter and acquisition transaction and transition costs. Non-GAAP net earnings and non-GAAP diluted earnings per share for 2018 exclude Progressive Leasing-related intangible amortization expense, amortization expense resulting from franchisee acquisitions, acquisition transaction and transition costs related to franchisee acquisitions, restructuring charges, gain on the sale of a building, tax expense as an indirect result of the Tax Act and charges related to the full impairment of the Company's PerfectHome Investment and the related expenses incurred. The amounts for these after-tax non-GAAP adjustments can be found in the Reconciliation of Net Earnings and Earnings Per Share Assuming Dilution to Non-GAAP Net Earnings and Earnings Per Share Assuming Dilution table in this press release.

The EBITDA and Adjusted EBITDA figures presented in this press release are calculated as the Company's earnings before interest expense, depreciation on property, plant and equipment, amortization of intangible assets and income taxes.  Adjusted EBITDA also excludes the other adjustments described in the calculation of non-GAAP net earnings above. The amounts for these pre-tax non-GAAP adjustments can be found in the Quarterly and Twelve Months Segment EBITDA tables in this press release.

Management believes that non-GAAP net earnings, non-GAAP diluted earnings per share, EBITDA and Adjusted EBITDA provide relevant and useful information, and are widely used by analysts, investors and competitors in our industry as well as by our management in assessing both consolidated and business unit performance.

Non-GAAP net earnings and non-GAAP diluted earnings provide management and investors with an understanding of the results from the primary operations of our business by excluding the effects of certain items that generally arose from larger, one-time transactions that are not reflective of the ordinary earnings activity of our operations or transactions that have variability and volatility of the amount.  This measure may be useful to an investor in evaluating the underlying operating performance of our business.

EBITDA and Adjusted EBITDA also provide management and investors with an understanding of one aspect of earnings before the impact of investing and financing charges and income taxes.  These measures may be useful to an investor in evaluating our operating performance and liquidity because the measures:

  • Are widely used by investors to measure a company's operating performance without regard to items excluded from the calculation of such measure, which can vary substantially from company to company depending upon accounting methods, book value of assets, capital structure and the method by which assets were acquired, among other factors.
  • Are a financial measurement that is used by rating agencies, lenders and other parties to evaluate our creditworthiness.
  • Are used by our management for various purposes, including as a measure of performance of our operating entities and as a basis for strategic planning and forecasting.

This press release also discloses non-GAAP revenues for periods prior to January 1, 2019 as if the lessor accounting impacts of ASC 842 were in effect during the twelve months ended months ended December 31, 2018. "Total Revenues, net of Progressive Bad Debt Expense" and the related percentages for the comparable prior year periods are a supplemental measure of our performance that are not calculated in accordance with GAAP in place during 2018. These non-GAAP measures assume that Progressive bad debt expense is recorded as a reduction to lease revenues and fees instead of within operating expenses in 2018. Please see Note 1 to the consolidated financial statements and the "Results of Operations" section of our Form 10-K for the year ended December 31, 2019 for a more comprehensive disclosure of bad debt expense and the impact of the adoption of ASC 842 related to accounting for leases for the prospective periods beginning with the first quarter of 2019.

Management believes these non-GAAP measures for 2018 provide relevant and useful information for users of our financial statements, as they provide comparability with the financial results we are reporting beginning in 2019 when ASC 842 became effective and we began reporting Progressive's bad debt expense as a reduction to lease revenues and fees. We believe these non-GAAP measures provide management and investors the ability to better understand the results from the primary operations of our business in 2019 compared with 2018 by classifying Progressive's bad debt expense consistently between the periods.

The Company also discusses a non-GAAP measure for the Aaron's Business Recurring Revenue Written into the portfolio. Recurring Revenue Written is the expected recurring monthly lease payments from lease agreements originated in a given period. Recurring Revenue Written is not lease revenue as it does not adjust for certain items such as uncollectible payments, charge offs, and/or lease non-renewals.

Finally, this press release presents pre-tax, pre-provision loss for Vive, which is also a supplemental measure not calculated in accordance with GAAP.  Management believes this measure is useful because it gives management and investors an additional, supplemental metric to assess Vive's underlying operational performance for the period. Management uses this measure as one of its bases for strategic planning and forecasting for Vive.  Our use of pre-provision, pre-tax loss may not be comparable to similar measures disclosed by other companies, because not all companies and analysts calculate these measures in the same manner.

Non-GAAP financial measures, however, should not be used as a substitute for, or considered superior to, measures of financial performance prepared in accordance with GAAP, such as the Company's GAAP basis net earnings and diluted earnings per share and the GAAP revenues and earnings before income taxes of the Company's segments, which are also presented in the press release.  Further, we caution investors that amounts presented in accordance with our definitions of non-GAAP net earnings, non-GAAP diluted earnings per share, EBITDA, Adjusted EBITDA, Total revenues net of Progressive's bad debt expense and the related percentages for the comparable prior year period, 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,

 

2019

2018

 

2019

2018

Net (Losses) Earnings

$

(107,057)

 

$

61,743

   

$

31,472

 

$

196,210

 

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

4,139

 

4,194

   

16,718

 

16,824

 

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

1,459

 

2,607

   

9,239

 

6,778

 

Add Restructuring Expense, net (5)(6)

1,874

 

421

   

30,833

 

857

 

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

76

 

653

   

567

 

1,156

 

Add FTC Legal Expenses(9)

3,253

 

   

3,285

 

 

Add FTC Tentative Settlement

175,000

 

   

175,000

 

 

Less Impairment of Investment and Related Expenses(10)

 

   

 

16,779

 

Less Tax Act Adjustments

 

1,744

   

 

(529)

 

Less Gain on Sale of Building(11)

 

(600)

   

 

(601)

 

Non-GAAP Net Earnings

$

78,744

 

$

70,762

   

$

267,114

 

$

237,474

 
           

(Losses) Earnings Per Share Assuming Dilution

$

(1.60)

 

$

0.89

   

$

0.46

 

$

2.78

 

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

0.06

 

0.06

   

0.24

 

0.24

 

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

0.02

 

0.04

   

0.13

 

0.10

 

Add Restructuring Expense, net(5)(6)

0.03

 

0.01

   

0.45

 

0.01

 

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

 

0.01

   

0.01

 

0.02

 

Add FTC Legal Expenses(9)

0.05

 

   

0.05

 

 

Add FTC Tentative Settlement

2.56

 

   

2.55

 

 

Less Impairment of Investment and Related Expenses(10)

 

   

 

0.24

 

Less Tax Act Adjustments

 

0.03

   

 

(0.01)

 

Less Gain on Sale of Building(11)

 

(0.01)

   

 

(0.01)

 

Non-GAAP Earnings Per Share Assuming Dilution(12)

$

1.15

 

$

1.02

   

$

3.89

 

$

3.36

 
           

Weighted Average Shares Outstanding Assuming Dilution

68,308

 

69,408

   

68,631

 

70,597

 
 

(1)

Net of taxes of $1,282 and $4,965 for the three and twelve months ended December 31, 2019 calculated using the estimated tax rates of 23.66% and 22.90% for the respective periods.

(2)

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

(3)

Net of taxes of $452 and $2,744 for the three and twelve months ended December 31, 2019 calculated using the estimated tax rates of 23.66% and 22.90% for the respective periods.

(4)

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

(5)

Net of taxes of $581 and $9,157 for the three and twelve months ended December 31, 2019 calculated using the estimated tax rates of 23.66% and 22.90% for the respective periods.

(6)

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

(7)

Net of taxes of $24 and $168 for the three and twelve months ended December 31, 2019 calculated using the estimated tax rates of 23.66% and 22.90% for the respective periods.

(8)

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

(9)

Net of taxes of $1,008 and $976 for the three and twelve months ended December 31, 2019 calculated using the estimated tax rates of 23.66% and 22.90% for the respective periods.

(10)

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

(11)

Net of taxes of $175 and $174 for the three and twelve months ended December 31, 2018 calculated using the estimated tax rates of 22.63% and 22.41% for the respective periods.

(12)

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

 

Vive Pre-tax, Pre-provision Loss

(In thousands)

 
 

(Unaudited)
Three Months Ended

(Unaudited)
 Twelve Months Ended

 

December 31,

December 31,

 

2019

2018

2019

2018

Loss Before Income Taxes

$

(2,521)

 

$

(831)

 

$

(9,654)

 

$

(7,494)

 

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

857

 

(168)

 

1,941

 

1,516

 

Pre-tax, Pre-provision Loss

$

(1,664)

 

$

(999)

 

$

(7,713)

 

$

(5,978)

 

 

Aaron's, Inc. and Subsidiaries

Non-GAAP Financial Information

Quarterly Segment EBITDA

(In thousands)

 
 

(Unaudited)

 

Three Months Ended

 

December 31, 2019

 

Progressive
Leasing

Aaron's
Business

Vive

Consolidated
Total

Net Loss

     

$

(107,057)

 

Income Taxes1

     

21,053

 

(Loss) Earnings Before Income Taxes

$

(111,556)

 

$

28,073

 

$

(2,521)

 

(86,004)

 

Interest Expense

1,698

 

1,095

 

927

 

3,720

 

Depreciation

2,288

 

15,385

 

209

 

17,882

 

Amortization

5,421

 

2,194

 

145

 

7,760

 

EBITDA

$

(102,149)

 

$

46,747

 

$

(1,240)

 

$

(56,642)

 

Restructuring Expenses

 

2,455

 

 

2,455

 

Acquisition Transaction and Transition Costs

 

100

 

 

100

 

Legal and Regulatory Expenses

179,261

 

 

 

179,261

 

Adjusted EBITDA

$

77,112

 

$

49,302

 

$

(1,240)

 

$

125,174

 
 
 

(Unaudited)

 

Three Months Ended

 

December 31, 2018

 

Progressive
Leasing

Aaron's
Business

Vive

Consolidated
Total

Net Earnings

     

$

61,743

 

Income Taxes1

     

20,314

 

Earnings (Loss) Before Income Taxes

$

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

 
 

(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, 2019

 

Progressive
Leasing

Aaron's
Business

Vive

Consolidated
Total

Net Earnings

     

$

31,472

 

Income Taxes1

     

61,316

 

Earnings (Loss) Before Income Taxes

$

55,711

 

$

46,731

 

$

(9,654)

 

92,788

 

Interest Expense

8,572

 

4,868

 

3,527

 

16,967

 

Depreciation

8,284

 

60,415

 

805

 

69,504

 

Amortization

21,683

 

13,294

 

580

 

35,557

 

EBITDA

$

94,250

 

$

125,308

 

$

(4,742)

 

$

214,816

 

Restructuring Expenses

 

39,990

 

 

39,990

 

Acquisition Transaction and Transition Costs

 

735

 

 

735

 

Legal and Regulatory Expenses

179,261

 

 

 

179,261

 

Adjusted EBITDA

$

273,511

 

$

166,033

 

$

(4,742)

 

$

434,802

 
         
 

(Unaudited)

 

Twelve Months Ended

 

December 31, 2018

 

Progressive
Leasing

Aaron's
Business

Vive

Consolidated
Total

Net Earnings

     

$

196,210

 

Income Taxes1

     

55,994

 

Earnings (Loss) Before Income Taxes

$

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

 

Restructuring Expenses (Reversals), Net

 

1,115

 

(10)

 

1,105

 

Impairment of Investment and Related Expenses

 

21,625

 

 

21,625

 

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

 
 

(1)

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

 

Reconciliation of 2020 Outlook for EBITDA

(In thousands)

 
 

Fiscal Year 2020 Ranges

 

Progressive Leasing

Aaron's Business

Vive

Consolidated Total

Estimated Net Earnings

     

$233,500 - $255,000

Taxes1

     

74,000 - 80,500

Projected Earnings Before Taxes

$260,500 - $275,500

$58,000 - $68,000

$(11,000) - $(8,000)

307,500 - 335,500

Interest Expense

17,000

(6,000)

4,000

15,000

Depreciation

10,500

68,000

1,000

79,500

Amortization

22,000

5,000

1,000

28,000

Projected EBITDA

310,000 - 325,000

125,000 - 135,000

(5,000) - (2,000)

430,000- 458,000

 

(1)

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

 

Reconciliation of 2020 Outlook for Earnings Per Share

Assuming Dilution to Non-GAAP Earnings Per Share Assuming Dilution

 
 

Fiscal Year 2020 Range

 

Low

High

Projected Earnings Per Share Assuming Dilution

$

3.50

 

$

3.70

 

Add Projected Intangible Amortization Expense1

0.30

 

0.30

 

Projected Non-GAAP Earnings Per Share Assuming Dilution

$

3.80

 

$

4.00

 
 

(1)

Includes projected amortization expense related to the acquisition of Progressive Leasing and the franchisee acquisitions.

Contact:

Michael P. Dickerson
Aaron's, Inc.
Vice President
Corporate Communications & Investor Relations
678.402.3590
Mike.Dickerson@Aarons.com

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/aarons-inc-reports-fourth-quarter-revenue-and-earnings-301007967.html

SOURCE Aaron's, Inc.

###

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