Attached files
| file | filename |
|---|---|
| 8-K - AARON'S INC | v199878_8-k.htm |
|
Contact: Gilbert
L. Danielson
Executive
Vice President
Chief
Financial Officer
404-231-0011
|
|
Aaron’s,
Inc. Announces
Third
Quarter Results;
Same
Store Revenues Up 3.2%;
EPS
$.32
ATLANTA,
October 25, 2010 – Aaron’s, Inc. (NYSE: AAN), the nation’s leader in the sales
and lease ownership and specialty retailing of residential furniture, consumer
electronics, home appliances and accessories, today announced revenues and
earnings for the three and nine months ended September 30, 2010.
For
the third quarter of 2010, revenues increased 9% to $452.2 million compared to
$415.3 million for the same period last year. Net earnings rose 6% to
$26.2 million versus $24.6 million recorded in the third quarter a year
ago. Diluted earnings per share were $.32 compared to $.30 for
the third quarter of last year, a 7% increase.
For the
first nine months of this year, revenues were up 7% to $1.392 billion compared
to $1.307 billion for the same period of 2009. Net earnings for the
nine months were $87.6 million versus $87.5 million for the corresponding period
a year ago. Diluted earnings per share were $1.07 for both the nine
months ended September 30, 2010 and 2009.
“We are
pleased that our third quarter results were in line with our expectations,” said
Robert C. Loudermilk, Jr., President and Chief Executive Officer of
Aaron’s. “Same store revenue and customer growth continue to be
strong, and we are on track with our 2010 new store opening plans. In
this tough economic environment, we have performed very well, providing basic
home furnishings that are desired and needed by our customers. We
feel that our positive business trends will continue during the remainder of
2010 and look forward for another excellent year in 2011.”
As
previously announced, the Company began ceasing the operations of its Aaron’s
Office Furniture division in June of 2010. During the third quarter,
the Company closed two additional Aaron’s Office Furniture stores and has two
remaining stores that are anticipated to remain open in 2011 to liquidate
merchandise. The third quarter 2010 financial results include pre-tax
charges to operating expenses of $949,000 and the nine month results include
pre-tax operating expenses of $8.1 million, or $.06 per diluted share, related
to the closing of this division.
In the
third quarter of 2009 the Company recorded a $2.2 million pre-tax charge to
operating expenses relating to the write-down of certain lease merchandise and
the impairment of long-lived assets associated with its Aaron’s Office Furniture
stores. Additionally, in the third quarter of 2009 the Company’s tax
provision was favorably impacted by a $2.3 million reversal of previously
recorded liabilities for uncertain income tax positions due to the expiration of
tax statutes.
Same
store revenues (revenues earned in Company-operated stores open for the entirety
of both periods) increased 3.2% during the third quarter of 2010 compared to the
third quarter of 2009. Same store revenues also increased 1.6% for
Company-operated stores open over two years at the end of September 2010. The
Company had 872,000 customers and our franchisees had 477,000 customers at the
end of the third quarter of 2010, a 12% increase in total customers over the
number at the end of September a year ago (customers of our franchisees,
however, are not customers of Aaron’s, Inc.). The customer count on a
same store basis for Company-operated stores was up 6.7% in the third quarter
compared to the same quarter last year.
Division
Results
The
Aaron’s Sales & Lease Ownership division increased its revenues in the third
quarter of 2010 to $448.4 million, a 9% increase over the $411.0 million in
revenues in the third quarter of 2009. Sales and lease ownership
revenues for the first nine months of 2010 increased 7% to $1.380 billion
compared to $1.292 billion for the same period a year ago.
The
revenues of the Aaron’s Office Furniture stores were $2.5 million and $3.5
million in the third quarter of 2010 and 2009, respectively. The
Aaron’s Office Furniture division recorded a pre-tax loss of $993,000 in the
third quarter of 2010 and a $3.7 million pre-tax loss in the third quarter of
2009. For the first nine months of 2010, revenues of the Aaron’s
Office Furniture stores were $10.0 million compared to $12.3 million for the
same period of 2009, and pre-tax losses were $11.1 million in 2010 versus $6.5
million in 2009. Included in the 2010 and 2009 third quarter and
year-to-date losses are the above mentioned charges that were
recorded.
Components
of Revenue
Consolidated
lease revenues and fees increased 6% for both the third quarter and the first
nine months of 2010 compared to the same periods in the previous
year. In addition, franchise royalties and fees increased 13% for the
third quarter and 12% year-to-date 2010 compared to the same periods last
year. Non-retail sales, which are primarily sales of lease
merchandise to Aaron’s Sales & Lease Ownership franchisees, increased 21% to
$84.3 million for the third quarter of 2010 from $69.5 million in the comparable
period in 2009, and increased 10% to $253.9 million for the first nine months of
2010 compared to $230.3 million for the same period last year. The increases
during the year in the Company’s franchise royalties and fees and non-retail
sales are the result of the increases in revenues of the Company’s franchisees,
who collectively had revenues of $204.4 million for the third quarter and $625.8
million for the first nine months of 2010, a respective 10% and 11% increase
over the comparable prior year periods. Same store revenues and
customer counts for franchised stores were up 4.5% and 8.7%, respectively, for
the third quarter of 2010 compared to the third quarter of
2009. Revenues of franchisees, however, are not revenues of Aaron’s,
Inc.
The
Company’s other revenues in the third quarter of 2010 and 2009 included $1.2
million and $193,000 of gains, respectively, from the sales of Company-operated
stores. Other revenues for the first nine months included gains from
the sales of stores of $1.6 million in 2010 and $6.3 million in
2009.
Store Count
During
the third quarter of 2010, the Aaron’s Sales & Lease Ownership division
opened 29 new Company-operated stores and 18 new franchised
stores. The Company also acquired four franchised stores and the
accounts of three independent operators. Aaron’s sold six
Company-operated stores to Aaron’s franchisees and one Company-operated store to
an unaffiliated operator, and one RIMCO store left the franchise
system. Eight Company-operated stores and two Aaron’s Office
Furniture stores were closed in the third quarter.
Through
the three months and nine months ended September 30, 2010, the Company awarded
area development agreements to open 25 and 67 additional franchised stores,
respectively. At the end of September 2010, there were 266 franchised
stores awarded that are expected to be opened over the next several
years.
At
September 30, 2010, the Aaron’s Sales & Lease Ownership division consisted
of 1,116 Company-operated stores, 631 franchised stores, 12 Company-operated
RIMCO stores, and six franchised RIMCO stores. The Company also had
two Aaron’s Office Furniture stores. The total number of stores open
at September 30, 2010 was 1,767.
Fourth
Quarter and Full Year 2010 and 2011 Outlook
The
Company is updating its guidance for the remainder of 2010 as well as providing
diluted earnings per share guidance for 2011. The following is
expected to be achieved at this time:
|
-
|
Fourth
quarter revenues (excluding revenues of franchisees) of approximately $470
million.
|
|
-
|
Fourth
quarter diluted earnings per share in the range of $.32 to $.36 per share,
assuming no significant store or other asset
sales.
|
|
-
|
Fiscal
year 2010 revenues (excluding revenues of franchisees) of approximately
$1.86 billion.
|
|
-
|
Fiscal
year 2010 diluted earnings per share in the range of $1.39 to $1.43, which
includes charges of an estimated $.06 per diluted share associated with
closing the office furniture
division.
|
|
-
|
Our
initial earnings guidance for 2011 is to achieve diluted earnings per
share in the range of $1.54 to
$1.70.
|
|
-
|
New
store growth for both the Company-operated and franchised stores of
approximately 7% to 9% over the Company-operated and franchised store base
at the end of 2009. We expect new store growth in 2011 in the
range of 5% to 9% over the store count at the end of 2010. This
is expected to be a net store growth after any opportunistic merging or
disposition of stores.
|
|
-
|
The
consolidation or sale of stores not meeting performance
goals.
|
|
-
|
The
acquisition of franchised stores, conversion of independent operators’
stores to Aaron’s franchised stores or sale of Company-operated stores to
franchisees as opportunities present
themselves.
|
Conference
Call
Aaron’s will hold a conference
call to discuss its quarterly financial results on Monday, October 25, 2010, at
5:00 pm Eastern Time. The public is invited to listen in to the conference call
by webcast accessible through the Company’s website, www.aaronsinc.com, in
the “Investor Relations” section. The webcast will be archived for
playback at that same site.
Aaron’s,
Inc., based in Atlanta, currently has more than 1,770 Company-operated and
franchised stores in 48 states and Canada. The Company’s Woodhaven
Furniture Industries division manufactured approximately $72 million at cost of
furniture and bedding at 11 facilities in five states in 2009. The
entire production of Woodhaven is for shipment to Aaron’s stores.
“Safe
Harbor” Statement under the Private Securities Litigation Reform Act of 1995:
Statements in this news release regarding Aaron’s, Inc.’s 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. These risks and
uncertainties include factors such as changes in general economic conditions,
competition, pricing, customer demand and other issues, and the risks and
uncertainties discussed under “Risk Factors” in the Company’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2009. Statements in
this release that are “forward-looking” include without limitation Aaron’s
projected revenues, earnings and store openings for future periods.
Aaron’s,
Inc. and Subsidiaries
Consolidated
Statements of Earnings
(In
thousands, except per share amounts)
|
September
30, (Unaudited)Three
Months Ended
|
September
30,
(Unaudited)
Nine
Months Ended
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Revenues:
|
||||||||||||||||
|
Lease
Revenues and Fees
|
$ | 340,848 | $ | 320,603 | $ | 1,052,494 | $ | 989,216 | ||||||||
|
Retail
Sales
|
8,362 | 8,846 | 32,778 | 34,211 | ||||||||||||
|
Non-Retail
Sales
|
84,301 | 69,501 | 253,941 | 230,302 | ||||||||||||
|
Franchise
Royalties and Fees
|
14,537 | 12,881 | 43,611 | 38,908 | ||||||||||||
|
Other
|
4,102 | 3,428 | 9,594 | 13,882 | ||||||||||||
|
Total
|
452,150 | 415,259 | 1,392,418 | 1,306,519 | ||||||||||||
|
Costs
and Expenses:
|
||||||||||||||||
|
Retail
Cost of Sales
|
4,415 | 5,283 | 19,028 | 20,502 | ||||||||||||
|
Non-Retail
Cost of Sales
|
76,209 | 63,503 | 231,729 | 210,311 | ||||||||||||
|
Operating
Expenses
|
206,021 | 193,440 | 618,690 | 575,528 | ||||||||||||
|
Depreciation
of Lease Merchandise
|
122,692 | 117,024 | 379,580 | 360,143 | ||||||||||||
|
Interest
|
728 | 1,010 | 2,415 | 3,450 | ||||||||||||
|
Total
|
410,065 | 380,260 | 1,251,442 | 1,169,934 | ||||||||||||
|
Earnings
from Continuing Operations Before Income Taxes
|
42,085 | 34,999 | 140,976 | 136,585 | ||||||||||||
|
Income
Taxes
|
15,906 | 10,344 | 53,387 | 48,744 | ||||||||||||
|
Net
Earnings from Continuing Operations
|
26,179 | 24,655 | 87,589 | 87,841 | ||||||||||||
|
Loss
from Discontinued Operations,
Net of Income Taxes
|
- | (19 | ) | - | (304 | ) | ||||||||||
|
Net
Earnings
|
$ | 26,179 | $ | 24,636 | $ | 87,589 | $ | 87,537 | ||||||||
|
Earnings
Per Share
|
$ | .32 | $ | .30 | $ | 1.08 | $ | 1.08 | ||||||||
|
Earnings
Per Share Assuming Dilution
|
$ | .32 | $ | .30 | $ | 1.07 | $ | 1.07 | ||||||||
|
Weighted
Average Shares Outstanding
(1)
|
81,070 | 81,366 | 81,315 | 81,066 | ||||||||||||
|
Weighted
Average Shares Outstanding
Assuming Dilution (1)
|
81,695 | 82,050 | 82,053 | 81,885 | ||||||||||||
|
|
(1)
Shares have been adjusted for the effect of the 3-for-2 partial stock
split distributed on April 15, 2010 and effective April 16,
2010.
|
Aaron’s,
Inc. and Subsidiaries
Selected
Balance Sheet Data
(In
thousands)
|
(Unaudited
and
Preliminary)
|
||||||||
|
September
30,
2010
|
December
31,
2009
|
|||||||
|
Cash
and Cash Equivalents
|
$ | 100,067 | $ | 109,685 | ||||
|
Accounts
Receivable, Net
|
61,556 | 66,095 | ||||||
|
Lease
Merchandise, Net
|
716,696 | 682,402 | ||||||
|
Property,
Plant and Equipment,
Net
|
206,862 | 215,183 | ||||||
|
Other
Assets, Net
|
317,964 | 248,091 | ||||||
|
Total
Assets
|
1,403,145 | 1,321,456 | ||||||
|
Bank
Debt
|
- | - | ||||||
|
Senior
Notes
|
24,000 | 36,000 | ||||||
|
Total
Liabilities
|
435,206 | 434,196 | ||||||
|
Shareholders’
Equity
|
$ | 967,939 | $ | 887,260 | ||||