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

PRNewswire 14-Feb-2019 7:00 AM

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

Aaron's Inc. Logo

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

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

Consolidated Results

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

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

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

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

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

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

Progressive Leasing Segment Results

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

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

The Aaron's Business Segment Results

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

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

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

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

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

Significant Components of Revenue

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

2019 Outlook

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



2019 Outlook

(In thousands, except per share amounts)


Low

High

Aaron's Inc. - Total Revenues


$

3,905,000


$

4,065,000


Aaron's Inc. - Adjusted EBITDA


415,000


442,000


Aaron's Inc. - Diluted EPS


3.15


3.35


Aaron's Inc. - Diluted Non-GAAP EPS


3.65


3.85


Aaron's Inc. - Capital Expenditures


100,000


120,000






Progressive Leasing - Total Revenues


2,100,000


2,175,000


Progressive Leasing- EBITDA


260,000


275,000






Aaron's Business - Total Revenues


1,775,000


1,855,000


Aaron's Business - Adjusted EBITDA


160,000


170,000


Aaron's Business - Annual Same Store Revenues


0.0%


2.0%






DAMI - Total Revenues


30,000


35,000


DAMI - Adjusted EBITDA


(5,000)


(3,000)




Conference Call and Webcast

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

About Aaron's, Inc.

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

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this news release regarding our business that are not historical facts are "forward-looking statements" that involve risks and uncertainties which could cause actual results to differ materially from those contained in the forward-looking statements.  Such forward-looking statements generally can be identified by the use of forward-looking terminology, such as "believe," "guidance," "outlook," "expect," "will," "expectations," and "trends" and similar terminology.  These risks and uncertainties include factors such as changes in general economic conditions, competition, pricing, legal and regulatory proceedings and investigations, customer privacy, information security, customer demand, the execution and results of our strategy and expense reduction and store closure and consolidation initiatives (including the risk that the costs associated with these initiatives exceeds expectations), risks related to M&A activities, including our recent franchisee acquisitions and the risk that the financial performance from those acquisitions and from M&A activities do not meet our expectations, risks related to Progressive Leasing's "virtual" lease-to-own business, the outcome of Progressive Leasing's pilot or test programs with various retailers and the results of Progressive Leasing's efforts to expand its relationships with existing retailer partners and establish new partnerships with additional retailers, increases in lease merchandise write-offs and bad debt expense associated with Progressive Leasing's growth in doors and customers and changes in product mix, and the other risks and uncertainties discussed under "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018. Statements in this release that are "forward-looking" include without limitation statements about: our expectations regarding the strength of our lease-to-own businesses; the results of our strategic investments, including the integration of franchisees we have acquired; our financial objectives; our expectations regarding revenue and earnings growth due to our investments in the Aaron's Business and Progressive Leasing; whether those investments will strengthen our long-term competitive position; our ability to invest in our operations and in opportunities to promote growth; returning capital to our shareholders; the performance of the Progressive lease portfolio and expectations regarding the retail partner pipeline for Progressive; the outcome of the transformation initiatives for the Aaron's Business; the Company's projected results and the 2019 fiscal year Outlook set forth in this press release for the Company on a consolidated basis, and for Progressive Leasing, the Aaron's Business and DAMI, individually as well as our expectations regarding the impact of ASC 842.  You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release.  Except as required by law, the Company undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances after the date of this press release.

 

Aaron's, Inc. and Subsidiaries

Consolidated Statements of Earnings

(In thousands, except per share amounts)







(Unaudited)
 Three Months Ended

(Unaudited)
 Twelve Months Ended



December 31,

December 31,



2018

2017

2018

2017

Revenues:






Lease Revenues and Fees


$

909,542


$

783,202


$

3,506,418


$

3,000,231


Retail Sales


8,543


6,307


31,271


27,465


Non-Retail Sales


56,003


74,881


207,262


270,253


Franchise Royalties and Fees


9,675


10,113


44,815


48,278


Interest and Fees on Loans Receivable


9,060


9,256


37,318


34,925


Other


361


868


1,839


2,556


Total


$

993,184


$

884,627


$

3,828,923


$

3,383,708








Costs and Expenses:






Depreciation of Lease Merchandise


437,889


375,659


1,727,904


1,448,631


Retail Cost of Sales


5,124


3,867


19,819


17,578


Non-Retail Cost of Sales


43,878


66,703


174,180


241,356


Operating Expenses


419,252


370,455


1,618,423


1,403,985


Restructuring Expenses, Net


544


3,377


1,105


17,994


Other Operating (Income) Expense, Net


(1,830)


51


(2,116)


(535)


Total


$

904,857


$

820,112


$

3,539,315


$

3,129,009








Operating Profit


88,327


64,515


289,608


254,699


Interest Income


80


139


454


1,835


Interest Expense


(4,572)


(4,464)


(16,440)


(20,538)


Impairment of Investment




(20,098)



Other Non-Operating (Expense) Income, Net


(1,778)


548


(1,320)


3,581


Earnings Before Income Tax Expense (Benefit)


$

82,057


$

60,738


$

252,204


$

239,577








Income Tax Expense (Benefit)


20,314


(116,822)


55,994


(52,959)


Net Earnings


$

61,743


$

177,560


$

196,210


$

292,536








Earnings Per Share


$

0.91


$

2.51


$

2.84


$

4.13


Earnings Per Share Assuming Dilution


$

0.89


$

2.46


$

2.78


$

4.06








Weighted Average Shares Outstanding


67,959


70,607


69,128


70,837


Weighted Average Shares Outstanding Assuming Dilution


69,408


72,314


70,597


72,121




 

 

Selected Balance Sheet Data

(In thousands)







(Unaudited)




December 31, 2018


December 31, 2017








Cash and Cash Equivalents


$

15,278



$

51,037



Investments




20,385



Accounts Receivable, Net


98,159



99,887



Lease Merchandise, Net


1,318,470



1,152,135



Loans Receivable, Net


76,153



86,112



Property, Plant and Equipment, Net


229,492



207,687



Other Assets, Net


1,089,140



1,075,021









Total Assets


$

2,826,692



$

2,692,264









Debt


424,752



368,798









Total Liabilities


1,065,984



964,260



Shareholders' Equity


1,760,708



1,728,004









Total Liabilities and Shareholders' Equity


$

2,826,692



$

2,692,264



 

 

Selected Cash Flow Data

(In thousands)






(Unaudited)
 Twelve Months Ended



December 31,



2018


2017






Cash Provided by Operating Activities


$

356,498



$

159,135


Cash Used in Investing Activities


(263,133)



(205,337)


Cash Used in Financing Activities


(128,968)



(211,397)


Effect of Exchange Rate Changes on Cash & Cash Equivalents


(156)



75


Decrease in Cash and Cash Equivalents


(35,759)



(257,524)


Cash and Cash Equivalents at Beginning of Period


51,037



308,561


Cash and Cash Equivalents at End of Period


$

15,278



$

51,037


 

 

Aaron's, Inc. and Subsidiaries

Quarterly Revenues by Segment

(In thousands)




(Unaudited)


Three Months Ended


December 31, 2018


Progressive Leasing

The Aaron's Business

DAMI

Consolidated Total

Lease Revenues and Fees

$

524,391


$

385,151


$


$

909,542


Retail Sales


8,543



8,543


Non-Retail Sales


56,003



56,003


Franchise Royalties and Fees


9,675



9,675


Interest and Fees on Loans Receivable



9,060


9,060


Other


361



361



$

524,391


$

459,733


$

9,060


$

993,184





























(Unaudited)


Three Months Ended


December 31, 2017


Progressive Leasing

The Aaron's Business

DAMI

Consolidated Total

Lease Revenues and Fees

$

428,517


$

354,685


$


$

783,202


Retail Sales


6,307



6,307


Non-Retail Sales


74,881



74,881


Franchise Royalties and Fees


10,113



10,113


Interest and Fees on Loans Receivable



9,256


9,256


Other


868



868



$

428,517


$

446,854


$

9,256


$

884,627









































Aaron's, Inc. and Subsidiaries

Twelve Months Revenues by Segment

(In thousands)




(Unaudited)


Twelve Months Ended


December 31, 2018


Progressive Leasing

The Aaron's Business

DAMI

Consolidated Total

Lease Revenues and Fees

$

1,998,981


$

1,507,437


$


$

3,506,418


Retail Sales


31,271



31,271


Non-Retail Sales


207,262



207,262


Franchise Royalties and Fees


44,815



44,815


Interest and Fees on Loans Receivable



37,318


37,318


Other


1,839



1,839



$

1,998,981


$

1,792,624


$

37,318


$

3,828,923










































(Unaudited)


Twelve Months Ended


December 31, 2017


Progressive Leasing

The Aaron's Business

DAMI

Consolidated Total

Lease Revenues and Fees

$

1,566,413


$

1,433,818


$


$

3,000,231


Retail Sales


27,465



27,465


Non-Retail Sales


270,253



270,253


Franchise Royalties and Fees


48,278



48,278


Interest and Fees on Loans Receivable



34,925


34,925


Other


2,556



2,556



$

1,566,413


$

1,782,370


$

34,925


$

3,383,708


Use of Non-GAAP Financial Information:

Non-GAAP net earnings, non-GAAP diluted earnings per share, EBITDA and Adjusted EBITDA are supplemental measures of our performance that are not calculated in accordance with generally accepted accounting principles in the United States ("GAAP").  Non-GAAP net earnings and non-GAAP diluted earnings per share for the fourth quarter of 2018 each exclude $5.4 million in Progressive Leasing-related intangible amortization expense, $3.4 million in amortization expense resulting from franchisee acquisitions, $0.8 million in acquisition transaction and transition costs related to franchisee acquisitions, $0.5 million in restructuring charges, an $0.8 million gain on the sale of a building and $1.7 million in tax expense as an indirect result of the Tax Act.  For the twelve months of 2018 Non-GAAP net earnings and non-GAAP diluted earnings per share excludes $21.7 million in Progressive Leasing-related intangible amortization expense, $8.7 million in amortization expense resulting from franchisee acquisitions, $1.5 million in acquisition transaction and transition costs related to franchisee acquisitions, $1.1 million in net restructuring charges, $0.5 million in net tax benefits related to the Tax Act adjustments, an $0.8 million gain on the sale of a building and $21.6 million of charges related to the full impairment of the Company's Perfect Home Investment and the related expenses incurred.  Non-GAAP net earnings and non-GAAP diluted earnings per share for the fourth quarter of 2017 exclude $5.4 million in Progressive Leasing-related intangible amortization expense, $1.0 million in amortization expense resulting from franchisee acquisitions, $3.4 million in restructuring charges and $137.1 million in net provisional tax benefits from the impacts of the Tax Act.  For the twelve months of 2017 Non-GAAP net earnings and non-GAAP diluted earnings per share exclude $23.0 million in Progressive Leasing-related intangible amortization expense, $2.1 million in amortization expense resulting from franchisee acquisitions, $2.0 million in acquisition transaction and transition costs related to the franchisee acquisition, $18.0 million in restructuring charges and $137.1 million in net provisional tax benefits.

The EBITDA and Adjusted EBITDA figures presented in this press release are calculated as the Company's earnings before interest expense, depreciation on property, plant and equipment, amortization of intangible assets and income taxes.  Adjusted EBITDA also excludes the other adjustments described in the calculation of non-GAAP net earnings above.

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

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

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

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

Finally, this press release presents pre-tax, pre-provision loss for DAMI, which is also a supplemental measure not calculated in accordance with GAAP.  Management believes this measure is useful because it gives management and investors an additional, supplemental metric to assess DAMI's underlying operational performance for the period.  Due to the growth of our originated credit card loan portfolio after our October 2015 acquisition of DAMI, we believe pre-provision, pre-tax loss helps investors to assess DAMI's operating performance until such time as the credit card portfolio reaches levels which management believes will be normal and recurring.  Management uses this measure as one of its bases for strategic planning and forecasting for DAMI.  Our use of pre-provision, pre-tax loss may not be comparable to similar measures disclosed by other companies, because not all companies and analysts calculate these measures in the same manner.

Non-GAAP financial measures, however, should not be used as a substitute for, or considered superior to, measures of financial performance prepared in accordance with GAAP, such as the Company's GAAP basis net earnings and diluted earnings per share and the GAAP earnings before income taxes of the Company's segments, which are also presented in the press release.  Further, we caution investors that amounts presented in accordance with our definitions of non-GAAP net earnings, non-GAAP diluted earnings per share, EBITDA, Adjusted EBITDA and pre-tax, pre-provision loss may not be comparable to similar measures disclosed by other companies, because not all companies and analysts calculate these measures in the same manner.



 

Reconciliation of Net Earnings and Earnings Per Share Assuming Dilution to Non-GAAP

Net Earnings and Earnings Per Share Assuming Dilution

(In thousands, except per share)






(Unaudited)
 Three Months Ended


(Unaudited)
 Twelve Months Ended


December 31,


December 31,


2018

2017


2018

2017

Net Earnings

$

61,743


$

177,560



$

196,210


$

292,536


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

4,194


3,611



16,824


14,935


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

2,607


678



6,778


1,336


Add Restructuring Expense, net (5)(6)

421


2,250



857


11,674


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

653


2



1,156


1,282


Impairment of Investment and Related Expenses(9)




16,779



Tax Act Adjustments

1,744


(137,098)



(529)


(137,098)


Less Gain on Sale of Building(10)

(600)




(601)



Non-GAAP Net Earnings

$

70,762


$

47,003



$

237,474


$

184,665








Earnings Per Share Assuming Dilution

$

0.89


$

2.46



$

2.78


$

4.06


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

0.06


0.05



0.24


0.21


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

0.04


0.01



0.10


0.02


Add Restructuring Expense, net(5)(6)

0.01


0.03



0.01


0.16


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

0.01




0.02


0.02


Impairment of Investment and Related Expenses(9)




0.24



Tax Act Adjustments

0.03


(1.90)



(0.01)


(1.90)


Less Gain on Sale of Building(10)

(0.01)




(0.01)



Non-GAAP Earnings Per Share Assuming Dilution(11)

$

1.02


$

0.65



$

3.36


$

2.56








Weighted Average Shares Outstanding Assuming Dilution

69,408


72,314



70,597


72,121






















(1)

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

(2)

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

(3)

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

(4)

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

(5)

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

(6)

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

(7)

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

(8)

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

(9)

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

(10)

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

(11)

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



 

 

DAMI Pre-tax, Pre-provision Loss

(In thousands)





(Unaudited)
 Three Months Ended

(Unaudited)
 Twelve Months Ended


December 31,

December 31,


2018

2017

2018

2017

Loss Before Income Taxes

$

(831)


$

(2,832)


$

(7,494)


$

(11,289)


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

(168)


992


1,516


4,830


Pre-tax, Pre-provision Loss

$

(999)


$

(1,840)


$

(5,978)


$

(6,459)




 

 

Aaron's, Inc. and Subsidiaries

Non-GAAP Financial Information

Quarterly Segment EBITDA

(In thousands)




(Unaudited)


Three Months Ended


December 31, 2018


Progressive Leasing

The Aaron's Business

DAMI

Consolidated Total

Net Earnings




$

61,743


Income Tax Expense1




20,314


Earnings (Loss) Before Income Taxes (EBT)

54,622


28,266


(831)


82,057


Interest Expense

3,745


49


778


4,572


Depreciation

1,758


14,230


192


16,180


Amortization

5,421


3,674


145


9,240


EBITDA

$

65,546


$

46,219


$

284


$

112,049


Restructuring Expenses


544



544


Acquisition Transaction and Transition Costs


844



844


Gain on Sale of Building



(775)


(775)


Adjusted EBITDA

$

65,546


$

47,607


$

(491)


$

112,662




(Unaudited)


Three Months Ended


December 31, 2017


Progressive Leasing

The Aaron's Business

DAMI

Consolidated Total

Net Earnings




$

177,560


Income Tax Benefit1




(116,822)


Earnings (Loss) Before Income Taxes (EBT)

38,492


25,078


(2,832)


60,738


Interest Expense

4,554


(885)


795


4,464


Depreciation

1,507


12,402


214


14,123


Amortization

5,421


1,609


145


7,175


EBITDA

$

49,974


$

38,204


$

(1,678)


$

86,500


Restructuring Expenses


3,170


207


3,377


Acquisition Transaction and Transition Costs


3



3


Adjusted EBITDA

$

49,974


$

41,377


$

(1,471)


$

89,880




























(1)

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



 

 

Aaron's, Inc. and Subsidiaries

Non-GAAP Financial Information

Twelve Months Segment EBITDA

(In thousands)




(Unaudited)


Twelve Months Ended


December 31, 2018


Progressive Leasing

The Aaron's Business

DAMI

Consolidated Total

Net Earnings




$

196,210


Income Tax Expense1




55,994


Earnings (Loss) Before Income Taxes (EBT)

175,015


84,683


(7,494)


252,204


Interest Expense

16,288


(2,944)


3,096


16,440


Depreciation

6,291


54,022


852


61,165


Amortization

21,683


10,722


580


32,985


EBITDA

$

219,277


$

146,483


$

(2,966)


$

362,794


Impairment of Investment and Related Expenses


21,625



21,625


Restructuring Expenses (Reversals), Net


1,115


(10)


1,105


Acquisition Transaction and Transition Costs


1,490



1,490


Gain on Sale of Building



(775)


(775)


Adjusted EBITDA

$

219,277


$

170,713


$

(3,751)


$

386,239








(Unaudited)


Twelve Months Ended


December 31, 2017


Progressive Leasing

The Aaron's Business

DAMI

Consolidated Total

Net Earnings




$

292,536


Income Tax Benefit1




(52,959)


Earnings (Loss) Before Income Taxes (EBT)

140,224


110,642


(11,289)


239,577


Interest Expense

18,577


(2,366)


4,327


20,538


Depreciation

6,029


48,121


693


54,843


Amortization

23,019


4,130


580


27,729


EBITDA

$

187,849


$

160,527


$

(5,689)


$

342,687


Restructuring Expenses


17,523


471


17,994


Acquisition Transaction and Transition Costs


1,976



1,976


Adjusted EBITDA

$

187,849


$

180,026


$

(5,218)


$

362,657




























(1)

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



 

 

Reconciliation of 2019 Outlook for Adjusted EBITDA

(In thousands)




Fiscal Year 2019 Ranges


Progressive Leasing

The Aaron's Business

DAMI

Consolidated Total

Estimated Net Earnings

$210,300 - $231,000

Taxes1

64,700 - 71,000

Projected Earnings Before Taxes

$216,500 - $231,500

$68,000 - $78,000

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

275,000 - 302,000

Interest Expense

13,500

2,500

3,500

19,500

Depreciation

8,000

66,000

1,000

75,000

Amortization

22,000

10,000

32,000

Projected EBITDA

$260,000 - $275,000

$146,500 - $156,500

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

$401,500 - $428,500

Projected Other Adjustments2

13,500

13,500

Projected Adjusted EBITDA

$260,000 - $275,000

$160,000 - $170,000

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

$415,000 - $442,000











(1)

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

(2)

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



 

 

Reconciliation of 2019 Outlook for Earnings Per Share

Assuming Dilution to Non-GAAP Earnings Per Share Assuming Dilution




Fiscal Year 2019 Range


Low

High

Projected Earnings Per Share Assuming Dilution

$

3.15


$

3.35


Add Projected Intangible Amortization Expense1

0.35


0.35


Add Sum of Other Adjustments2

0.15


0.15


Projected Non-GAAP Earnings Per Share Assuming Dilution

$

3.65


$

3.85
















(1)

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

(2)

Includes the projected non-GAAP charges related to the Aaron's Business restructuring.

 

 

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SOURCE Aaron's, Inc.

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