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| 8-K - 8-K - AARON'S INC | v211650_8k.htm |
Contact: Gilbert
L. Danielson
Executive Vice President
Chief Financial Officer
404-231-0011
Aaron’s,
Inc.
Reports Record
Fourth Quarter and Year End Results;
Same
Store Revenues Up 6.2%;
Diluted
EPS Up 23% to $.38 for Quarter;
$1.44
for Year
Increases
Guidance for 2011
ATLANTA,
February 15, 2011 – 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 record results for
the three months and year ended December 31, 2010.
For the
fourth quarter of 2010, revenues increased 9% to $484.4 million compared to
$446.3 million for the fourth quarter in 2009. Net earnings increased
23% to $30.8 million versus $25.0 million last year. Diluted earnings
per share were $.38 compared to $.31 per share a year ago, also a 23%
increase.
For the
year ended December 31, 2010, revenues increased 7% to $1.877 billion compared
to $1.753 billion for 2009. Net earnings increased 5% to $118.4
million versus $112.6 million a year ago. Diluted earnings per share
were up 5% to $1.44 for 2010 compared to $1.37 in 2009.
“Our
results for the fourth quarter exceeded our guidance, with better than expected
same store revenue growth and profitability,” said Robert C. Loudermilk, Jr.,
President and Chief Executive Officer of Aaron’s. “Although current
business challenges and conditions affect us as they do other retailers, through
the years the strength of the Aaron’s business model has been proven resilient
and has delivered consistent and superior financial results. Aaron’s
provides desired and needed basic home furnishings, and our customers’ demand
for these products continues to remain strong.”
Same
store revenues (revenues earned in Company-operated stores open for the entirety
of both periods) increased 6.2% during the fourth quarter of 2010 compared to
the fourth quarter of 2009. Same store revenues also increased 4.4%
for Company-operated stores open for over two years at the end of December
2010. The Company had 912,000 customers and its franchisees had
502,000 customers at the end of the year, a 10% increase in total customers over
the number at the end of 2009 (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 7.2% in the fourth quarter compared to the
same quarter last year.
The
Company began ceasing the operations of its Aaron’s Office Furniture division in
June of 2010. During the fourth quarter, the Company closed one
additional Aaron’s Office Furniture store and currently has one store that is
anticipated to remain open in 2011 to liquidate merchandise. The
fourth quarter 2010 financial results include pre-tax charges to operating
expenses of $893,000 and the annual results include pre-tax operating expenses
of $9.0 million, or $.07 per diluted share after tax, related to the closing of
this division.
The
Company reacquired 1,478,805 shares of Common Stock in 2010 including 1,000,000
shares during the fourth quarter, and has the Board of Director’s current
authorization to purchase an additional 4,401,815 shares of Common
Stock.
In the
fourth quarter of 2010 the Company converted its non-voting Common Stock into
voting Class A Common Stock on a one-for-one basis. The conversion
was approved by a majority of the holders of both the Company’s Common Stock and
Class A Common Stock, each voting as a separate class. As a result of
the conversion, all shares of the Company's Common Stock were converted into
shares of Class A Common Stock, and the Class A Common Stock was renamed as the
Company’s “Common Stock.”
Division
Results
Revenues
in the Aaron’s Sales & Lease Ownership division increased in the fourth
quarter to $481.7 million, a 9% increase over the $441.7 million in revenues in
the fourth quarter of 2009. For the year, sales and lease ownership
revenues were $1.861 billion, a 7% increase over the $1.734 billion recorded
last year.
The
revenues of the Aaron’s Office Furniture stores were $1.6 million and $4.1
million in the fourth quarter of 2010 and 2009, respectively. The
Aaron’s Office Furniture division recorded a pre-tax loss of $495,000 in
the fourth quarter of 2010 and a $1.3 million pre-tax loss in the fourth quarter
of 2009. For the year, revenues of the Aaron’s Office Furniture
stores were $11.6 million compared to $16.5 million for the same period of 2009,
and pre-tax losses were $11.6 million in 2010 versus $7.8 million in
2009. Included in the 2010 and 2009 fourth quarter and year-to-date
losses are the charges related to closing this division mentioned
above.
Components
of Revenue
Consolidated
lease revenues and fees increased 9% for the fourth quarter and 7% for the year
compared to the previous year. In addition, franchise royalties and
fees increased 10% in the fourth quarter and 12% for the year 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 11% for the quarter compared to the fourth quarter last year and 10%
for the year. The increases in the Company’s franchise royalties and fees and
non-retail sales are the result of an increase in revenues of the Company’s
franchisees, who collectively had revenues of $215.5 million during the fourth
quarter and $841.3 million for the year, 10% and 11% increases over the
comparable respective 2009 periods. Same store revenues and customer
counts for franchised stores were up 4.2% and 7.3%, respectively, for the fourth
quarter of 2010 compared to the fourth quarter of 2009. Revenues of
franchisees, however, are not revenues of Aaron’s, Inc.
The
Company’s other revenues in the fourth quarter of 2010 and 2009 included
$335,000 and $1.6 million of gains, respectively, from the sales of
Company-operated stores. Other revenues for the fiscal year included
gains from the sales of stores of $1.9 million in 2010 and $7.8 million in
2009.
Store
Count
During
the fourth quarter of 2010 the Aaron’s Sales & Lease Ownership division
opened 31 new Company-operated stores and 25 new franchised
stores. The Company also acquired the accounts of two independent
operators and sold three Company-operated stores to two different
franchisees. In addition, during the quarter six Company-operated
stores and one franchised sales and lease ownership store were closed, along
with one Company-operated RIMCO store and one Aaron’s Office Furniture
store.
For the
2010 year, the Company opened 91 new Company-operated stores and 72 new
franchised stores. The Aaron’s Sales & Lease Ownership total net
store count increased 8% for the year.
During
the fourth quarter and fiscal year of 2010 the Company awarded area development
agreements to open 53 and 120 additional franchised stores, respectively.
At the end of December 2010 there were area development agreements awarded to
open 282 franchised stores that the Company expects will open over the next
several years.
At
December 31, 2010, the Aaron’s Sales & Lease Ownership division consisted of
1,138 Company-operated stores, 658 franchised stores, 11 Company-operated RIMCO
stores, and six franchised RIMCO stores. The Company also had one
Aaron’s Office Furniture store. The total number of stores open at
the end of 2010 was 1,814.
First
Quarter and Full Year 2011 Outlook
The
Company has updated its guidance for 2011 and expects to achieve the following
at this time:
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First
quarter revenues (excluding revenues of franchisees) of approximately $530
million.
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First
quarter diluted earnings per share in the range of $.48 to $.52 per share,
assuming no significant store or asset
sales.
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Fiscal
year 2011 revenues (excluding revenues of franchisees) of approximately $2
billion.
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Fiscal
year 2011 diluted earnings per share in the range of $1.61 to
$1.77.
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New
store growth of approximately 5% to 9% over the store base at the end of
2010, for the most part an equal mix between Company-operated and
franchised stores. This will be a net store growth after any
opportunistic merging or disposition of
stores.
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The
Company will continue as warranted to consolidate or sell stores not
meeting performance goals.
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The
Company also plans to continue to acquire franchised stores, convert
independent operator’s stores to Aaron’s franchised stores, or sell
Company-operated stores to franchisees as opportunities present
themselves.
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Conference
Call
Aaron’s
will hold a conference call to discuss its quarterly financial results on
Tuesday, February 15, 2011, at 5:00 pm Eastern Time. The public is invited to
listen 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 1,820 Company-operated and
franchised stores in 48 states and Canada. The Company’s Woodhaven
Furniture Industries division manufactured approximately $79 million, at cost,
of furniture and bedding at 12 facilities in seven states in
2010. The entire production of Woodhaven is for shipment to Aaron’s
stores.
"Safe Harbor" Statement under the
Private Securities Litigation Reform Act of 1995: Statements in this news
release regarding Aaron's, Inc.'s business that are not historical facts are
"forward-looking statements" that involve risks and uncertainties which could
cause actual results to differ materially from those contained in the
forward-looking statements. These risks and uncertainties include factors such
as changes in general economic conditions, competition, pricing, customer demand
and other issues, and the risks and uncertainties discussed under "Risk Factors"
in the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 2009. Statements in this release that are forward-looking include without
limitation Aaron’s projected revenues, earnings and store openings for future
periods.
Aaron’s,
Inc. and Subsidiaries
Consolidated
Statements of Earnings
(In
thousands, except per share amounts)
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(Unaudited)
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(Unaudited)
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Three
Months Ended
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Twelve
Months Ended
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December
31,
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December
31,
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2010
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2009
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2010
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2009
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Revenues:
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Lease
Revenues and Fees
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$ | 349,559 | $ | 321,493 | $ | 1,402,053 | $ | 1,310,709 | ||||||||
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Retail
Sales
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7,778 | 9,183 | 40,556 | 43,394 | ||||||||||||
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Non-Retail
Sales
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108,332 | 97,697 | 362,273 | 327,999 | ||||||||||||
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Franchise
Royalties and Fees
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15,501 | 14,033 | 59,112 | 52,941 | ||||||||||||
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Other
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3,259 | 3,862 | 12,853 | 17,744 | ||||||||||||
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Total
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484,429 | 446,268 | 1,876,847 | 1,752,787 | ||||||||||||
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Costs
and Expenses:
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Retail
Cost of Sales
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3,985 | 5,228 | 23,013 | 25,730 | ||||||||||||
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Non-Retail
Cost of Sales
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99,189 | 89,416 | 330,918 | 299,727 | ||||||||||||
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Operating
Expenses
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206,239 | 196,106 | 824,929 | 771,634 | ||||||||||||
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Depreciation
of Lease
Merchandise
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124,525 | 114,815 | 504,105 | 474,958 | ||||||||||||
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Interest
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681 | 849 | 3,096 | 4,299 | ||||||||||||
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Total
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434,619 | 406,414 | 1,686,061 | 1,576,348 | ||||||||||||
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Earnings
from Continuing Operations Before Income Taxes
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49,810 | 39,854 | 190,786 | 176,439 | ||||||||||||
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Income
Taxes
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19,023 | 14,817 | 72,410 | 63,561 | ||||||||||||
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Net
Earnings from Continuing Operations
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30,787 | 25,037 | 118,376 | 112,878 | ||||||||||||
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Earnings
(Loss) from Discontinued Operations, Net of Income Taxes
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- | 27 | - | (277 | ) | |||||||||||
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Net
Earnings
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$ | 30,787 | $ | 25,064 | $ | 118,376 | $ | 112,601 | ||||||||
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Earnings
Per Share
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$ | .38 | $ | .31 | $ | 1.46 | $ | 1.39 | ||||||||
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Earnings
Per Share Assuming Dilution
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$ | .38 | $ | .31 | $ | 1.44 | $ | 1.37 | ||||||||
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Weighted
Average Shares Outstanding (1)
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80,837 | 81,354 | 81,194 | 81,138 | ||||||||||||
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Weighted
Average Shares Outstanding Assuming Dilution (1)
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81,836 | 82,064 | 82,102 | 81,951 | ||||||||||||
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(1)
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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.
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Selected
Balance Sheet Data
(In
thousands)
(Unaudited
and Preliminary)
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December
31,
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December
31,
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2010
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2009
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Cash
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$ | 72,022 | $ | 109,685 | ||||
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Accounts
Receivable, Net
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69,662 | 66,095 | ||||||
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Lease
Merchandise, Net
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814,484 | 682,402 | ||||||
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Property,
Plant and
Equipment, Net
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204,912 | 215,183 | ||||||
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Other
Assets, Net
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347,415 | 248,091 | ||||||
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Total
Assets
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1,508,495 | 1,321,456 | ||||||
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Senior
Notes
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24,000 | 36,000 | ||||||
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Total
Liabilities
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529,078 | 434,196 | ||||||
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Shareholders’
Equity
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$ | 979,417 | $ | 887,260 | ||||