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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Aarons Holdings Company Inc | NYSE:AAN | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.01 | 0.15% | 6.79 | 6.8651 | 6.75 | 6.84 | 164,301 | 21:04:08 |
☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Georgia
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58-0687630
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(State or other jurisdiction of
incorporation or organization)
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(I. R. S. Employer
Identification No.)
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400 Galleria Parkway SE
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Suite 300
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Atlanta
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Georgia
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30339-3182
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(Address of principal executive offices)
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(Zip Code)
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Title of each class
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Trading Symbol
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Name of each exchange on which registered
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Common Stock, $0.50 Par Value
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AAN
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New York Stock Exchange
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Large Accelerated Filer
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☒
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Accelerated Filer
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☐
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Non-Accelerated Filer
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☐
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(Do not check if a smaller reporting company)
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Smaller Reporting Company
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☐
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Emerging Growth Company
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☐
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act
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☐
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Title of Each Class
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|
Shares Outstanding as of
May 1, 2020
|
Common Stock, $0.50 Par Value
|
|
67,086,064
|
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|
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Item 3. Defaults Upon Senior Securities
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Item 4. Mine Safety Disclosures
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Item 5. Other Information
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ITEM 1.
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FINANCIAL STATEMENTS
|
|
(Unaudited)
|
|
|
||||
|
March 31,
2020 |
|
December 31,
2019 |
||||
|
(In Thousands, Except Share Data)
|
||||||
ASSETS:
|
|
|
|
||||
Cash and Cash Equivalents
|
$
|
551,017
|
|
|
$
|
57,755
|
|
Accounts Receivable (net of allowances of $77,430 in 2020 and $76,293 in 2019)
|
87,373
|
|
|
104,159
|
|
||
Lease Merchandise (net of accumulated depreciation and allowances of $908,058 in 2020 and $896,056 in 2019)
|
1,277,573
|
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|
1,433,417
|
|
||
Loans Receivable (net of allowances and unamortized fees of $38,306 in 2020 and $21,134 in 2019)
|
61,147
|
|
|
75,253
|
|
||
Property, Plant and Equipment at Cost (net of accumulated depreciation of $317,704 in 2020 and $311,252 in 2019)
|
236,214
|
|
|
237,666
|
|
||
Operating Lease Right-of-Use Assets
|
299,522
|
|
|
329,211
|
|
||
Goodwill
|
288,801
|
|
|
736,582
|
|
||
Other Intangibles (net of accumulated amortization of $158,008 in 2020 and $151,932 in 2019)
|
183,269
|
|
|
190,796
|
|
||
Income Tax Receivable
|
62,827
|
|
|
18,690
|
|
||
Prepaid Expenses and Other Assets
|
105,212
|
|
|
114,271
|
|
||
Total Assets
|
$
|
3,152,955
|
|
|
$
|
3,297,800
|
|
LIABILITIES & SHAREHOLDERS’ EQUITY:
|
|
|
|
||||
Accounts Payable and Accrued Expenses
|
$
|
225,762
|
|
|
$
|
272,816
|
|
Accrued Regulatory Expense
|
175,000
|
|
|
175,000
|
|
||
Deferred Income Taxes Payable
|
217,768
|
|
|
310,395
|
|
||
Customer Deposits and Advance Payments
|
84,551
|
|
|
91,914
|
|
||
Operating Lease Liabilities
|
357,191
|
|
|
369,386
|
|
||
Debt
|
646,069
|
|
|
341,030
|
|
||
Total Liabilities
|
1,706,341
|
|
|
1,560,541
|
|
||
Commitments and Contingencies (Note 4)
|
|
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SHAREHOLDERS' EQUITY:
|
|
|
|
||||
Common Stock, Par Value $0.50 Per Share: Authorized: 225,000,000 Shares at March 31, 2020 and December 31, 2019; Shares Issued: 90,752,123 at March 31, 2020 and December 31, 2019
|
45,376
|
|
|
45,376
|
|
||
Additional Paid-in Capital
|
283,467
|
|
|
290,229
|
|
||
Retained Earnings
|
1,740,193
|
|
|
2,029,613
|
|
||
Accumulated Other Comprehensive Loss
|
(1,773
|
)
|
|
(19
|
)
|
||
|
2,067,263
|
|
|
2,365,199
|
|
||
Less: Treasury Shares at Cost
|
|
|
|
||||
Common Stock: 23,666,059 Shares at March 31, 2020 and 24,034,053 at December 31, 2019
|
(620,649
|
)
|
|
(627,940
|
)
|
||
Total Shareholders’ Equity
|
1,446,614
|
|
|
1,737,259
|
|
||
Total Liabilities & Shareholders’ Equity
|
$
|
3,152,955
|
|
|
$
|
3,297,800
|
|
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
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(In Thousands, Except Per Share Data)
|
||||||
REVENUES:
|
|
|
|
||||
Lease Revenues and Fees
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$
|
1,047,913
|
|
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$
|
944,157
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Retail Sales
|
9,531
|
|
|
12,809
|
|
||
Non-Retail Sales
|
26,846
|
|
|
36,981
|
|
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Franchise Royalties and Fees
|
6,724
|
|
|
9,207
|
|
||
Interest and Fees on Loans Receivable
|
9,908
|
|
|
8,646
|
|
||
Other
|
352
|
|
|
303
|
|
||
|
1,101,274
|
|
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1,012,103
|
|
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COSTS AND EXPENSES:
|
|
|
|
||||
Depreciation of Lease Merchandise
|
597,407
|
|
|
500,820
|
|
||
Retail Cost of Sales
|
6,862
|
|
|
8,632
|
|
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Non-Retail Cost of Sales
|
23,581
|
|
|
29,196
|
|
||
Operating Expenses
|
412,970
|
|
|
387,216
|
|
||
Restructuring Expenses, Net
|
22,286
|
|
|
13,281
|
|
||
Impairment of Goodwill
|
446,893
|
|
|
—
|
|
||
Other Operating Expense (Income)
|
170
|
|
|
(897
|
)
|
||
|
1,510,169
|
|
|
938,248
|
|
||
OPERATING (LOSS) PROFIT
|
(408,895
|
)
|
|
73,855
|
|
||
Interest Income
|
192
|
|
|
101
|
|
||
Interest Expense
|
(3,799
|
)
|
|
(4,956
|
)
|
||
Other Non-Operating (Expense) Income, Net
|
(1,951
|
)
|
|
1,308
|
|
||
(LOSS) EARNINGS BEFORE INCOME TAXES
|
(414,453
|
)
|
|
70,308
|
|
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INCOME TAX (BENEFIT) EXPENSE
|
(134,448
|
)
|
|
14,230
|
|
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NET (LOSS) EARNINGS
|
$
|
(280,005
|
)
|
|
$
|
56,078
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(LOSS) EARNINGS PER SHARE
|
|
|
|
||||
Basic
|
$
|
(4.19
|
)
|
|
$
|
0.83
|
|
Assuming Dilution
|
$
|
(4.19
|
)
|
|
$
|
0.82
|
|
CASH DIVIDENDS DECLARED PER SHARE:
|
|
|
|
||||
Common Stock
|
$
|
0.040
|
|
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$
|
0.035
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING:
|
|
|
|
||||
Basic
|
66,822
|
|
|
67,294
|
|
||
Assuming Dilution
|
66,822
|
|
|
68,773
|
|
|
Three Months Ended
March 31, |
||||||
(In Thousands)
|
2020
|
|
2019
|
||||
Net (Loss) Earnings
|
$
|
(280,005
|
)
|
|
$
|
56,078
|
|
Other Comprehensive (Loss) Income:
|
|
|
|
||||
Foreign Currency Translation Adjustment
|
(1,754
|
)
|
|
424
|
|
||
Total Other Comprehensive (Loss) Income
|
(1,754
|
)
|
|
424
|
|
||
Comprehensive (Loss) Income
|
$
|
(281,759
|
)
|
|
$
|
56,502
|
|
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
|
(In Thousands)
|
||||||
OPERATING ACTIVITIES:
|
|
|
|
||||
Net (Loss) Earnings
|
$
|
(280,005
|
)
|
|
$
|
56,078
|
|
Adjustments to Reconcile Net (Loss) Earnings to Cash Provided by Operating Activities:
|
|
|
|
||||
Depreciation of Lease Merchandise
|
597,407
|
|
|
500,820
|
|
||
Other Depreciation and Amortization
|
25,267
|
|
|
26,562
|
|
||
Accounts Receivable Provision
|
85,082
|
|
|
63,235
|
|
||
Provision for Credit Losses on Loans Receivable
|
12,722
|
|
|
4,255
|
|
||
Stock-Based Compensation
|
5,619
|
|
|
7,549
|
|
||
Deferred Income Taxes
|
(90,268
|
)
|
|
10,861
|
|
||
Impairment of Goodwill and Other Assets
|
466,030
|
|
|
10,492
|
|
||
Non-Cash Lease Expense
|
26,895
|
|
|
29,555
|
|
||
Other Changes, Net
|
839
|
|
|
883
|
|
||
Changes in Operating Assets and Liabilities, Net of Effects of Acquisitions and Dispositions:
|
|
|
|
|
|
||
Additions to Lease Merchandise
|
(556,807
|
)
|
|
(580,089
|
)
|
||
Book Value of Lease Merchandise Sold or Disposed
|
114,762
|
|
|
98,257
|
|
||
Accounts Receivable
|
(68,420
|
)
|
|
(50,467
|
)
|
||
Prepaid Expenses and Other Assets
|
9,347
|
|
|
1,550
|
|
||
Income Tax Receivable
|
(44,137
|
)
|
|
15,747
|
|
||
Operating Lease Liabilities
|
(25,579
|
)
|
|
(31,643
|
)
|
||
Accounts Payable and Accrued Expenses
|
(43,584
|
)
|
|
(1,854
|
)
|
||
Customer Deposits and Advance Payments
|
(7,410
|
)
|
|
2,947
|
|
||
Cash Provided by Operating Activities
|
227,760
|
|
|
164,738
|
|
||
INVESTING ACTIVITIES:
|
|
|
|
|
|
||
Investments in Loans Receivable
|
(21,997
|
)
|
|
(14,493
|
)
|
||
Proceeds from Loans Receivable
|
14,956
|
|
|
14,482
|
|
||
Outflows on Purchases of Property, Plant and Equipment
|
(23,587
|
)
|
|
(23,807
|
)
|
||
Proceeds from Property, Plant and Equipment
|
906
|
|
|
511
|
|
||
Outflows on Acquisitions of Businesses and Customer Agreements, Net of Cash Acquired
|
(855
|
)
|
|
(3,470
|
)
|
||
Proceeds from Dispositions of Businesses and Customer Agreements, Net of Cash Disposed
|
—
|
|
|
755
|
|
||
Cash Used in Investing Activities
|
(30,577
|
)
|
|
(26,022
|
)
|
||
FINANCING ACTIVITIES:
|
|
|
|
|
|
||
Borrowings (Repayments) on Revolving Facility, Net
|
300,000
|
|
|
(16,000
|
)
|
||
Proceeds from Debt
|
5,625
|
|
|
—
|
|
||
Repayments on Debt
|
(392
|
)
|
|
(575
|
)
|
||
Dividends Paid
|
(2,668
|
)
|
|
(2,366
|
)
|
||
Issuance of Stock Under Stock Option Plans
|
528
|
|
|
1,996
|
|
||
Shares Withheld for Tax Payments
|
(5,877
|
)
|
|
(12,977
|
)
|
||
Debt Issuance Costs
|
(1,020
|
)
|
|
—
|
|
||
Cash Provided by (Used in) Financing Activities
|
296,196
|
|
|
(29,922
|
)
|
||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
|
(117
|
)
|
|
82
|
|
||
Increase in Cash and Cash Equivalents
|
493,262
|
|
|
108,876
|
|
||
Cash and Cash Equivalents at Beginning of Period
|
57,755
|
|
|
15,278
|
|
||
Cash and Cash Equivalents at End of Period
|
$
|
551,017
|
|
|
$
|
124,154
|
|
For the Three Months Ended March 31 (Unaudited and In Thousands)
|
2020
|
|
2019
|
||||
Progressive Leasing Invoice Volume1
|
$
|
447,817
|
|
|
$
|
394,727
|
|
Stores as of March 31 (Unaudited)
|
2020
|
|
2019
|
||
Company-operated Aaron's Branded Stores
|
1,129
|
|
|
1,230
|
|
Franchised Stores
|
318
|
|
|
369
|
|
Systemwide Stores
|
1,447
|
|
|
1,599
|
|
|
Three Months Ended
March 31, |
||||
(Shares In Thousands)
|
2020
|
|
2019
|
||
Weighted Average Shares Outstanding
|
66,822
|
|
|
67,294
|
|
Dilutive Effect of Share-Based Awards1
|
—
|
|
|
1,479
|
|
Weighted Average Shares Outstanding Assuming Dilution
|
66,822
|
|
|
68,773
|
|
(In Thousands)
|
March 31, 2020
|
|
December 31, 2019
|
||||
Customers
|
$
|
68,319
|
|
|
$
|
76,819
|
|
Corporate
|
9,844
|
|
|
14,109
|
|
||
Franchisee
|
9,210
|
|
|
13,231
|
|
||
Accounts Receivable
|
$
|
87,373
|
|
|
$
|
104,159
|
|
|
Three Months Ended March 31,
|
||||||
(In Thousands)
|
2020
|
|
2019
|
||||
Bad Debt Expense1
|
$
|
953
|
|
|
$
|
1,125
|
|
Provision for Returns and Uncollectible Renewal Payments
|
84,129
|
|
|
62,110
|
|
||
Accounts Receivable Provision
|
$
|
85,082
|
|
|
$
|
63,235
|
|
(In Thousands)
|
March 31, 2020
|
|
December 31, 2019
|
||||
Merchandise on Lease, net of Accumulated Depreciation and Allowances
|
$
|
1,043,959
|
|
|
$
|
1,156,798
|
|
Merchandise Not on Lease, net of Accumulated Depreciation and Allowances
|
233,614
|
|
|
276,619
|
|
||
Lease Merchandise, net of Accumulated Depreciation and Allowances
|
$
|
1,277,573
|
|
|
$
|
1,433,417
|
|
|
Three Months Ended March 31,
|
||||||
(In Thousands)
|
2020
|
|
2019
|
||||
Beginning Balance
|
$
|
61,185
|
|
|
$
|
46,694
|
|
Merchandise Written off, net of Recoveries
|
(61,926
|
)
|
|
(53,222
|
)
|
||
Provision for Write-offs
|
79,675
|
|
|
56,995
|
|
||
Ending Balance
|
$
|
78,934
|
|
|
$
|
50,467
|
|
FICO Score Category
|
March 31, 2020
|
|
December 31, 2019
|
||
600 or Less
|
7.6
|
%
|
|
6.7
|
%
|
Between 600 and 700
|
79.7
|
%
|
|
80.1
|
%
|
700 or Greater
|
12.7
|
%
|
|
13.2
|
%
|
(In Thousands)
|
March 31, 2020
|
|
December 31, 2019
|
||||
Prepaid Expenses
|
$
|
41,427
|
|
|
$
|
45,034
|
|
Prepaid Insurance
|
24,328
|
|
|
26,393
|
|
||
Assets Held for Sale
|
9,872
|
|
|
10,131
|
|
||
Deferred Tax Asset
|
826
|
|
|
826
|
|
||
Other Assets
|
28,759
|
|
|
31,887
|
|
||
Prepaid Expenses and Other Assets
|
$
|
105,212
|
|
|
$
|
114,271
|
|
(In Thousands)
|
March 31, 2020
|
|
December 31, 2019
|
||||
Accounts Payable
|
$
|
48,172
|
|
|
$
|
89,959
|
|
Accrued Insurance Costs
|
50,871
|
|
|
44,032
|
|
||
Accrued Salaries and Benefits
|
39,492
|
|
|
43,972
|
|
||
Accrued Real Estate and Sales Taxes
|
31,314
|
|
|
32,763
|
|
||
Other Accrued Expenses and Liabilities
|
55,913
|
|
|
62,090
|
|
||
Accounts Payable and Accrued Expenses
|
$
|
225,762
|
|
|
$
|
272,816
|
|
(In Thousands)
|
Progressive Leasing
|
|
Aaron’s Business
|
|
Total
|
||||||
Balance at December 31, 2019
|
$
|
288,801
|
|
|
$
|
447,781
|
|
|
$
|
736,582
|
|
Acquisition Accounting Adjustments
|
—
|
|
|
53
|
|
|
53
|
|
|||
Disposals, Currency Translation and Other Adjustments
|
—
|
|
|
(941
|
)
|
|
(941
|
)
|
|||
Impairment Loss
|
—
|
|
|
(446,893
|
)
|
|
(446,893
|
)
|
|||
Balance at March 31, 2020
|
$
|
288,801
|
|
|
$
|
—
|
|
|
$
|
288,801
|
|
|
Treasury Stock
|
|
Common Stock
|
|
Additional
Paid-in Capital
|
|
Retained Earnings
|
|
Accumulated Other Comprehensive Loss
|
Total Shareholders’ Equity
|
|||||||||||||||
(In Thousands, Except Per Share)
|
Shares
|
|
Amount
|
|
|
|
|
||||||||||||||||||
Balance, December 31, 2019
|
(24,034
|
)
|
|
$
|
(627,940
|
)
|
|
$
|
45,376
|
|
|
$
|
290,229
|
|
|
$
|
2,029,613
|
|
|
$
|
(19
|
)
|
$
|
1,737,259
|
|
Opening Balance Sheet Adjustment - ASU 2016-13, net of taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,715
|
)
|
|
—
|
|
(6,715
|
)
|
||||||
Cash Dividends, $0.04 per share
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,700
|
)
|
|
—
|
|
(2,700
|
)
|
||||||
Stock-Based Compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
5,878
|
|
|
—
|
|
|
—
|
|
5,878
|
|
||||||
Reissued Shares
|
368
|
|
|
7,291
|
|
|
—
|
|
|
(12,640
|
)
|
|
—
|
|
|
—
|
|
(5,349
|
)
|
||||||
Net Loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(280,005
|
)
|
|
—
|
|
(280,005
|
)
|
||||||
Foreign Currency Translation Adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,754
|
)
|
(1,754
|
)
|
||||||
Balance, March 31, 2020
|
(23,666
|
)
|
|
$
|
(620,649
|
)
|
|
$
|
45,376
|
|
|
$
|
283,467
|
|
|
$
|
1,740,193
|
|
|
$
|
(1,773
|
)
|
$
|
1,446,614
|
|
|
Treasury Stock
|
|
Common Stock
|
|
Additional
Paid-in Capital
|
|
Retained Earnings
|
|
Accumulated Other Comprehensive Loss
|
Total Shareholders’ Equity
|
|||||||||||||||
(In Thousands, Except Per Share)
|
Shares
|
|
Amount
|
|
|
|
|
||||||||||||||||||
Balance, December 31, 2018
|
(23,568
|
)
|
|
$
|
(567,847
|
)
|
|
$
|
45,376
|
|
|
$
|
278,922
|
|
|
$
|
2,005,344
|
|
|
$
|
(1,087
|
)
|
$
|
1,760,708
|
|
Opening Balance Sheet Adjustment - ASC 842, net of taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,592
|
|
|
—
|
|
2,592
|
|
||||||
Cash Dividends, $0.035 per share
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,363
|
)
|
|
—
|
|
(2,363
|
)
|
||||||
Stock-Based Compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
7,050
|
|
|
—
|
|
|
—
|
|
7,050
|
|
||||||
Reissued Shares
|
493
|
|
|
4,264
|
|
|
—
|
|
|
(15,245
|
)
|
|
—
|
|
|
—
|
|
(10,981
|
)
|
||||||
Net Earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
56,078
|
|
|
—
|
|
56,078
|
|
||||||
Foreign Currency Translation Adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
424
|
|
424
|
|
||||||
Balance, March 31, 2019
|
(23,075
|
)
|
|
$
|
(563,583
|
)
|
|
$
|
45,376
|
|
|
$
|
270,727
|
|
|
$
|
2,061,651
|
|
|
$
|
(663
|
)
|
$
|
1,813,508
|
|
(In Thousands)
|
March 31, 2020
|
|
December 31, 2019
|
||||||||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||||
Deferred Compensation Liability
|
$
|
—
|
|
|
$
|
(8,818
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(11,201
|
)
|
|
$
|
—
|
|
(In Thousands)
|
March 31, 2020
|
|
December 31, 2019
|
||||||||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||||
Assets Held for Sale
|
$
|
—
|
|
|
$
|
9,872
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10,131
|
|
|
$
|
—
|
|
(In Thousands)
|
March 31, 2020
|
|
December 31, 2019
|
||||||||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||||
Fixed-Rate Long Term Debt1
|
$
|
—
|
|
|
$
|
(122,118
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(123,705
|
)
|
|
$
|
—
|
|
(In Thousands)
|
March 31, 2020
|
|
December 31, 2019
|
||||
Loans Receivable, Gross
|
$
|
99,453
|
|
|
$
|
96,387
|
|
Unamortized Fees
|
(6,712
|
)
|
|
(6,223
|
)
|
||
Loans Receivable, Amortized Cost
|
92,741
|
|
|
90,164
|
|
||
Allowance for Loan Losses
|
(31,594
|
)
|
|
(14,911
|
)
|
||
Loans Receivable, Net of Allowances and Unamortized Fees
|
$
|
61,147
|
|
|
$
|
75,253
|
|
|
Three Months Ended March 31,
|
||||||
(In Thousands)
|
2020
|
|
2019
|
||||
Beginning Balance
|
$
|
14,911
|
|
|
$
|
12,970
|
|
CECL Transition Adjustment1
|
9,463
|
|
|
—
|
|
||
Provision for Loan Losses
|
12,722
|
|
|
4,255
|
|
||
Charge-offs
|
(6,201
|
)
|
|
(5,484
|
)
|
||
Recoveries
|
699
|
|
|
622
|
|
||
Ending Balance
|
$
|
31,594
|
|
|
$
|
12,363
|
|
|
Three Months Ended March 31, 2020
|
|||||||||||
(In Thousands)
|
Progressive Leasing
|
Aaron's Business
|
Vive
|
Total
|
||||||||
Lease Revenues and Fees1
|
$
|
658,534
|
|
$
|
389,379
|
|
$
|
—
|
|
$
|
1,047,913
|
|
Retail Sales2
|
—
|
|
9,531
|
|
—
|
|
9,531
|
|
||||
Non-Retail Sales2
|
—
|
|
26,846
|
|
—
|
|
26,846
|
|
||||
Franchise Royalties and Fees2
|
—
|
|
6,724
|
|
—
|
|
6,724
|
|
||||
Interest and Fees on Loans Receivable3
|
—
|
|
—
|
|
9,908
|
|
9,908
|
|
||||
Other
|
—
|
|
352
|
|
—
|
|
352
|
|
||||
Total
|
$
|
658,534
|
|
$
|
432,832
|
|
$
|
9,908
|
|
$
|
1,101,274
|
|
2
|
Substantially all retail sales, non-retail sales and franchise royalties and fees are within the scope of ASC 606, Revenue from Contracts with Customers.
|
|
Three Months Ended March 31, 2019
|
|||||||||||
(In Thousands)
|
Progressive Leasing
|
Aaron's Business
|
Vive
|
Total
|
||||||||
Lease Revenues and Fees1
|
$
|
523,401
|
|
$
|
420,756
|
|
$
|
—
|
|
$
|
944,157
|
|
Retail Sales2
|
—
|
|
12,809
|
|
—
|
|
12,809
|
|
||||
Non-Retail Sales2
|
—
|
|
36,981
|
|
—
|
|
36,981
|
|
||||
Franchise Royalties and Fees2
|
—
|
|
9,207
|
|
—
|
|
9,207
|
|
||||
Interest and Fees on Loans Receivable3
|
—
|
|
—
|
|
8,646
|
|
8,646
|
|
||||
Other
|
—
|
|
303
|
|
—
|
|
303
|
|
||||
Total
|
$
|
523,401
|
|
$
|
480,056
|
|
$
|
8,646
|
|
$
|
1,012,103
|
|
|
Three Months Ended
March 31, |
||||||
(In Thousands)
|
2020
|
|
2019
|
||||
(Loss) Earnings Before Income Taxes:
|
|
|
|
||||
Progressive Leasing
|
$
|
58,987
|
|
|
$
|
55,388
|
|
Aaron's Business1
|
(465,357
|
)
|
|
17,588
|
|
||
Vive
|
(8,083
|
)
|
|
(2,668
|
)
|
||
Total (Loss) Earnings Before Income Taxes
|
$
|
(414,453
|
)
|
|
$
|
70,308
|
|
(In Thousands)
|
March 31, 2020
|
|
December 31, 2019
|
||||
Assets:
|
|
|
|
||||
Progressive Leasing
|
$
|
1,235,893
|
|
|
$
|
1,261,786
|
|
Aaron's Business1,2
|
1,215,979
|
|
|
1,740,281
|
|
||
Vive
|
71,697
|
|
|
85,825
|
|
||
Other3
|
629,386
|
|
|
209,908
|
|
||
Total Assets
|
$
|
3,152,955
|
|
|
$
|
3,297,800
|
|
|
Three Months Ended March 31,
|
||||||
(In Thousands)
|
2020
|
|
2019
|
||||
Right-of-Use Asset Impairment
|
$
|
15,742
|
|
|
$
|
8,723
|
|
Operating Lease Charges
|
1,449
|
|
|
799
|
|
||
Fixed Asset Impairment
|
2,689
|
|
|
1,497
|
|
||
Severance
|
2,031
|
|
|
1,136
|
|
||
Other Expenses
|
375
|
|
|
1,126
|
|
||
Total Restructuring Expenses, Net
|
$
|
22,286
|
|
|
$
|
13,281
|
|
(In Thousands)
|
Severance
|
||
Balance at January 1, 2020
|
$
|
756
|
|
Restructuring Severance Charges
|
2,031
|
|
|
Payments
|
(1,462
|
)
|
|
Balance at March 31, 2020
|
$
|
1,325
|
|
•
|
Our primary concern continues to be the health and safety of our associates and customers. Beginning in mid-March, we transitioned nearly all management, Progressive Leasing and store support associates to working remotely from home.
|
•
|
Progressive continues to support its retail partners and has adapted to the needs of those who remain open for business via e-commerce and curbside lease transactions, including expanding purchasing options. Progressive is also assisting in local community volunteer efforts in Draper, Utah.
|
•
|
We understand many of our customers may be experiencing significant family, health, and/or financial challenges. We are working with our customers to provide various forms of payment deferment options and/or other alternative payment schedules to customers in need.
|
•
|
Our commitment to the health and safety of our associates and customers is further evident by our decision to temporarily close the Aaron's Business store showrooms and shift to e-commerce and curbside services only (i.e., customers are not to enter the store showrooms, but may pick up merchandise and make payments outside of the store), which was not a government-mandated action in most jurisdictions as our store operations have been classified as essential operations and are therefore permitted to remain open for business. Further, we are taking significant steps to reduce the risk of exposure, while continuing to provide our customers with the essential products they need such as refrigerators, freezers, mattresses and computers. We are adapting our operations to protect our associates and customers, while still serving our customers who need our products now more than ever. Until further notice, our store associates are not permitted to enter customers' homes for product deliveries or product returns, but rather, must deliver the products to the front door of the customers' homes.
|
•
|
As we begin a phased re-opening of our store showrooms over the next several months, we are committing to doing so in a manner that complies with local, state and federal guidelines and that ensures the safety of our associates and customers. Our store associates will wear masks, continue to practice social distancing practices and will adhere to strict cleaning guidelines. Protective sneeze guards will be installed at all store locations, and the configuration of the showrooms will be modified in order to regulate customer traffic.
|
•
|
In conjunction with the operational adjustments made at our Company-operated stores, we have accelerated the rollout of Rapid Customer Onboarding, which is a decisioning tool designed to improve our customers' experience by streamlining and standardizing the decisioning process, shortening transaction times, and establishing appropriate transaction sizes and lease payment amounts, given the customer’s profile. As of April 30, 2020, Rapid Customer Onboarding is being utilized in all Aaron's Business Company-operated stores in the United States.
|
•
|
Our franchisees are facing similar adverse impacts to their businesses; therefore, the Company has, among other things, offered relief through a royalty fee abatement until May 16, 2020 and has made various modifications to payment terms on outstanding accounts receivable from franchisees and to its franchise loan facility.
|
•
|
We recognize that during these unprecedented times, it is more important than ever to continue to give back to the communities we serve. Our Woodhaven manufacturing facility in Coolidge, Georgia quickly converted operations to produce personal protection equipment, including masks and gowns, which have been donated to medical and assisted living facilities across the United States. In addition, we have demonstrated our commitment to our communities in other ways, including manufacturing and supplying mattresses to homeless shelters and donating laptop computers to support remote learning for the children of economically challenged families.
|
•
|
We continue to monitor the Company's liquidity as the COVID-19 situation evolves. In response to anticipated adverse impacts of COVID-19, the Company temporarily borrowed $300.0 million from its revolving credit facility in March 2020 to bolster the Company's cash position, which we subsequently repaid on April 30, 2020. As of March 31, 2020, the Company had $551.0 million of cash and $186.2 million of additional availability under its revolving credit facility. In addition, the Company has taken the following actions to further preserve and protect its cash position: (i) our executive officers and members of our Board of Directors have taken significant pay cuts; (ii) our Progressive Leasing and Aaron’s Business segments furloughed approximately 2,500 associates; (iii) our Aaron’s Business significantly reduced the amount of inventory it purchased and manufactured; (iv) reduced discretionary spending across the organization; and (v) we are currently negotiating rent concessions with the landlords of Company-operated Aaron’s Business stores. As of April 30, 2020, the Company had $136.5 million of cash and $486.2 million of additional availability under its revolving credit facility.
|
•
|
Due to the uncertainties resulting from the COVID-19 pandemic, the Company withdrew its full year 2020 outlook on March 23, 2020.
|
•
|
The Company has elected to carryback its 2018 net operating losses of $242.2 million to 2013, thus generating an anticipated refund of $84.4 million and an income tax benefit of $34.2 million as of March 31, 2020. The tax benefit is the result of the federal income tax rate differential between the current statutory rate of 21% and the 35% rate applicable to 2013.
|
•
|
The Company will defer all payroll taxes permissible in the Act, which generally applies to Social Security taxes, with 50% of the tax payable on December 31, 2021 and the remaining 50% of the tax payable on December 31, 2022.
|
•
|
Certain Aaron's Business, Woodhaven and Progressive furlough wages and benefits may be eligible for an employee retention credit of up to 50% of wages paid to eligible associates.
|
•
|
Champion compliance;
|
•
|
Strengthen relationships of Progressive Leasing current retail partners and merchant partners;
|
•
|
Focus on converting existing pipeline into Progressive Leasing retail partners;
|
•
|
Enhance our virtual offering at Progressive Leasing;
|
•
|
Drive omnichannel demand generation at the Aaron's Business;
|
•
|
Evaluate potential opportunities to reposition and reinvest in our real estate at the Aaron's Business; and
|
•
|
Manage the Aaron's Business stores with operational excellence.
|
•
|
The Company reported revenues of $1.1 billion in the first quarter of 2020 compared to $1.0 billion for the first quarter of 2019. Losses before income taxes were $414.5 million compared to earnings before income taxes of $70.3 million during the first quarter of 2019. As discussed below, losses before income taxes during the first quarter of 2020 were primarily due to Aaron's Business goodwill impairment charges of $446.9 million.
|
•
|
Progressive Leasing reported revenues of $658.5 million in the first quarter of 2020, an increase of 25.8% over the first quarter of 2019. Progressive Leasing's revenue growth is due to a 13.4% increase in total invoice volume, which was driven by a 10.2% increase in the number of active doors and a 2.9% increase in invoice volume per active door. Progressive Leasing's earnings before income taxes increased to $59.0 million compared to $55.4 million during the first quarter of 2019, due mainly to its higher revenue, partially offset by $16.1 million of incremental provisions for uncollectible renewal payments and lease merchandise write-offs recognized due to potential adverse impacts in customer payment behavior driven by the direct or indirect impacts of the COVID-19 pandemic.
|
•
|
Aaron's Business revenues decreased to $432.8 million for the first quarter of 2020, compared to $480.1 million in the prior year period. The decrease is primarily due to the net reduction of 183 Company-operated stores during the 15-month period ended March 31, 2020 and a 4.6% decrease in same store revenues in the first quarter of 2020.
|
•
|
Aaron's Business losses before income taxes were $465.4 million during the first quarter of 2020 compared to earnings before income taxes of $17.6 million in the prior year period. Losses before income taxes for the Aaron's Business during the first quarter of 2020 includes a goodwill impairment charge of $446.9 million, $14.1 million related to an early termination fee for a sales and marketing agreement, and restructuring charges of $22.3 million related to the Company's closure and consolidation of stores in 2020 and changes in estimates of future sublease activity of vacant closed store properties. Aaron's Business also recognized $5.7 million of incremental allowances for lease merchandise write-offs, franchisee accounts receivable, and reserves on the franchise loan guarantees due to the potential adverse impacts of the COVID-19 pandemic.
|
•
|
The Company recorded a net income tax benefit of $134.4 million during the first quarter of 2020 as compared to income tax expense of $14.2 million in the prior year comparable period. The net income tax benefit recognized in 2020 was primarily the result of losses before income taxes of $414.5 million as well as a $34.2 million net tax benefit generated by a net operating loss carryback that the Company will be taking pursuant to the provisions of the CARES Act, as further discussed above.
|
•
|
The Company generated cash from operating activities of $227.8 million for the three months ended March 31, 2020 compared to $164.7 million for the comparable period in 2019. The increase in net cash from operating activities was primarily driven by the continued growth of Progressive Leasing as well as lower lease merchandise purchases by the Aaron's Business, partially offset by net income tax refunds of $0.4 million during the first quarter of 2020 compared to net income tax refunds of $15.3 million in the same period in 2019.
|
For the Three Months Ended March 31 (Unaudited and In Thousands)
|
2020
|
|
2019
|
||||
Progressive Leasing Invoice Volume
|
$
|
447,817
|
|
|
$
|
394,727
|
|
Active Doors at March 31 (Unaudited)
|
2020
|
|
2019
|
||
Progressive Leasing Active Doors
|
21,816
|
|
|
19,795
|
|
|
Three Months Ended March 31, 2020
|
|||||||||||
(In Thousands)
|
Progressive Leasing
|
Aaron's Business
|
Vive
|
Total
|
||||||||
Lease Revenues and Fees
|
$
|
658,534
|
|
$
|
389,379
|
|
$
|
—
|
|
$
|
1,047,913
|
|
Retail Sales
|
—
|
|
9,531
|
|
—
|
|
9,531
|
|
||||
Non-Retail Sales
|
—
|
|
26,846
|
|
—
|
|
26,846
|
|
||||
Franchise Royalties and Fees
|
—
|
|
6,724
|
|
—
|
|
6,724
|
|
||||
Interest and Fees on Loans Receivable
|
—
|
|
—
|
|
9,908
|
|
9,908
|
|
||||
Other
|
—
|
|
352
|
|
—
|
|
352
|
|
||||
Total Revenues
|
$
|
658,534
|
|
$
|
432,832
|
|
$
|
9,908
|
|
$
|
1,101,274
|
|
|
Three Months Ended March 31, 2019
|
|||||||||||
(In Thousands)
|
Progressive Leasing
|
Aaron's Business
|
Vive
|
Total
|
||||||||
Lease Revenues and Fees
|
$
|
523,401
|
|
$
|
420,756
|
|
$
|
—
|
|
$
|
944,157
|
|
Retail Sales
|
—
|
|
12,809
|
|
—
|
|
12,809
|
|
||||
Non-Retail Sales
|
—
|
|
36,981
|
|
—
|
|
36,981
|
|
||||
Franchise Royalties and Fees
|
—
|
|
9,207
|
|
—
|
|
9,207
|
|
||||
Interest and Fees on Loans Receivable
|
—
|
|
—
|
|
8,646
|
|
8,646
|
|
||||
Other
|
—
|
|
303
|
|
—
|
|
303
|
|
||||
Total Revenues
|
$
|
523,401
|
|
$
|
480,056
|
|
$
|
8,646
|
|
$
|
1,012,103
|
|
|
Three Months Ended
March 31, |
|
Change
|
|||||||||||
(In Thousands)
|
2020
|
|
2019
|
|
$
|
|
%
|
|||||||
Personnel Costs
|
$
|
168,390
|
|
|
$
|
181,750
|
|
|
$
|
(13,360
|
)
|
|
(7.4
|
)%
|
Occupancy Costs
|
57,493
|
|
|
58,128
|
|
|
(635
|
)
|
|
(1.1
|
)
|
|||
Provision for Lease Merchandise Write-Offs
|
79,675
|
|
|
56,995
|
|
|
22,680
|
|
|
39.8
|
|
|||
Bad Debt Expense and Provision for Franchise Loan Guarantees
|
3,036
|
|
|
2,767
|
|
|
269
|
|
|
9.7
|
|
|||
Shipping and Handling
|
16,525
|
|
|
19,188
|
|
|
(2,663
|
)
|
|
(13.9
|
)
|
|||
Advertising
|
12,702
|
|
|
13,583
|
|
|
(881
|
)
|
|
(6.5
|
)
|
|||
Provision for Loan Losses
|
12,722
|
|
|
4,255
|
|
|
8,467
|
|
|
199.0
|
|
|||
Intangible Amortization
|
7,407
|
|
|
9,997
|
|
|
(2,590
|
)
|
|
(25.9
|
)
|
|||
Professional Services
|
22,197
|
|
|
6,695
|
|
|
15,502
|
|
|
231.5
|
|
|||
Other Operating Expenses
|
32,823
|
|
|
33,858
|
|
|
(1,035
|
)
|
|
(3.1
|
)
|
|||
Operating Expenses
|
$
|
412,970
|
|
|
$
|
387,216
|
|
|
$
|
25,754
|
|
|
6.7
|
%
|
|
Three Months Ended
March 31, |
|
Change
|
|||||||||||
(In Thousands)
|
2020
|
|
2019
|
|
$
|
|
%
|
|||||||
(LOSS) EARNINGS BEFORE INCOME TAXES:
|
|
|
|
|
|
|
|
|||||||
Progressive Leasing
|
$
|
58,987
|
|
|
$
|
55,388
|
|
|
$
|
3,599
|
|
|
6.5
|
%
|
Aaron's Business
|
(465,357
|
)
|
|
17,588
|
|
|
(482,945
|
)
|
|
nmf
|
||||
Vive
|
(8,083
|
)
|
|
(2,668
|
)
|
|
(5,415
|
)
|
|
(203.0
|
)
|
|||
Total (Loss) Earnings Before Income Taxes
|
$
|
(414,453
|
)
|
|
$
|
70,308
|
|
|
$
|
(484,761
|
)
|
|
nmf
|
•
|
Cash and cash equivalents increased $493.3 million to $551.0 million at March 31, 2020. For additional information, refer to the "Liquidity and Capital Resources" section below.
|
•
|
Lease merchandise decreased $155.8 million due to lower inventory purchases at the Aaron's Business as a result of store closures and related initiatives in 2020 and reduction in inventory balances at Progressive Leasing due to timing of early buyouts, which are seasonally higher in the first quarter.
|
•
|
Operating lease right-of-use assets decreased $29.7 million primarily due to impairment charges recorded in connection with restructuring actions at the Aaron's Business.
|
•
|
Goodwill decreased to $288.8 million at March 31, 2020 due to an impairment charge of $446.9 million to recognize a full impairment of the goodwill within the Aaron's Business reporting unit. For additional information, refer to Note 1 to these condensed consolidated financial statements.
|
•
|
Income tax receivable increased $44.1 million due primarily to the anticipated refund of $84.4 million generated by provisions of the CARES Act as described above, partially offset by current tax expense, which results in a future tax payment obligation recognized during the three months ended March 31, 2020.
|
•
|
Debt increased $305.0 million due to a temporary $300.0 million draw on the Company's revolving credit facility in March 2020, which was subsequently repaid on April 30, 2020, and additional borrowings of $5.6 million under the term loan in January 2020.
|
•
|
cash flows from operations;
|
•
|
private debt offerings;
|
•
|
bank debt; and
|
•
|
stock offerings.
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
•
|
the ability to attract customers to store showrooms given the risks, or perceived risks, of gathering in public places;
|
•
|
the ability to retain and reinstate furloughed associates to assist in the re-openings of showrooms and fulfillment centers;
|
•
|
supply chain delays due to closed factories, reduced workforces, scarcity of raw materials and scrutiny or embargoing of goods produced in infected areas; and
|
•
|
fluctuations in regional and local economies, including the impact on regional and local retail markets and consumer confidence and spending.
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
Period
|
Total Number of Shares Purchased
|
Average Price Paid per Share
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs 1
|
|||||
January 1, 2020 through January 31, 2020
|
—
|
|
—
|
|
—
|
|
$
|
262,010,238
|
|
February 1, 2020 through February 29, 2020
|
—
|
|
—
|
|
—
|
|
262,010,238
|
|
|
March 1, 2020 through March 31, 2020
|
—
|
|
—
|
|
—
|
|
262,010,238
|
|
|
Total
|
—
|
|
|
|
—
|
|
|
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
OTHER INFORMATION
|
ITEM 6.
|
EXHIBITS
|
|
|
AARON’S, INC.
|
|
|
|
|
(Registrant)
|
|
|
|
|
Date:
|
May 7, 2020
|
By:
|
/s/ Steven A. Michaels
|
|
|
|
Steven A. Michaels
|
|
|
|
Chief Financial Officer,
|
|
|
|
President Strategic Operations
|
|
|
|
(Principal Financial Officer)
|
|
|
|
|
Date:
|
May 7, 2020
|
By:
|
/s/ Robert P. Sinclair, Jr.
|
|
|
|
Robert P. Sinclair, Jr.
|
|
|
|
Vice President,
|
|
|
|
Corporate Controller
|
|
|
|
(Principal Accounting Officer)
|
1 Year Aarons Chart |
1 Month Aarons Chart |
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