ATLANTA, Oct 27, 2005 /PRNewswire-FirstCall via COMTEX News Network/ -- Aaron Rents, Inc.
(NYSE: RNT), the nation's leader in the sales and lease ownership, specialty
retailing and rental of residential and office furniture, consumer electronics
and home appliances and accessories, today announced revenues and earnings for
the quarter ended September 30, 2005.
Revenues for the Company increased 20% for the third quarter, including a
22% increase in the Aaron's Sales & Lease Ownership division. Same store
revenues for the Aaron's Sales & Lease Ownership division were up 8.4% for the
third quarter compared to the same period a year ago. Hurricanes Katrina and
Rita negatively impacted earnings in the quarter.
For the third quarter of 2005, revenues increased 20% to $278.7 million
compared to $231.6 million for the same period a year ago. Net earnings were
$8.8 million versus $10.6 million for the same quarter last year. Diluted
earnings per share were $.17 compared to $.21 per share in 2004.
For the first nine months of this year, revenues advanced 18% to
$829.4 million compared to $704.4 million for the first nine months of 2004.
Net earnings for the nine months were up 12% to $43.4 million versus
$38.8 million for the corresponding period last year. Diluted earnings per
share for the first nine months were $.85 for 2005 and $.77 for 2004.
"Our third quarter results were obviously negatively affected by
Hurricanes Katrina and Rita," said R. Charles Loudermilk, Sr., Chairman and
Chief Executive Officer of Aaron Rents. "Approximately 125 of our Company-
operated stores and five franchised stores in Louisiana, Mississippi, Texas,
and Alabama had operations affected to some degree, with 18 of our Company-
operated stores being severely impacted by these two disastrous storms. In
addition, although our revenue growth has been excellent, high energy prices,
increasing operating costs, and economic uncertainties have begun to create a
more difficult market environment for many of our stores."
Included in the third quarter and first nine months financial results was
$3.9 million of the estimated loss of merchandise in customers' homes and in
stores that was either destroyed or severely damaged by Hurricanes Katrina and
Rita, of which approximately $1.1 million is expected to be covered by
insurance proceeds. The net pre-tax expense recorded in the third quarter for
these estimated damages was $2.8 million, or $.04 per diluted share. The
Company also estimates that property damage to stores in the affected markets
will approximate $1.0 million, with insurance proceeds expected to fully cover
these estimated costs. In addition, included in other income for the third
quarter is $721,000 of expected proceeds from business interruption insurance
associated with the operations of the hurricane-affected stores.
Although difficult to accurately quantify, the revenues and profitability
of the stores in the four states in the hurricanes' path were adversely
affected in the third quarter beyond insurance proceeds due to the
displacement of customers, business closings and interruptions, collection
difficulties, salary continuation and assistance for employees, and other
extra costs.
"As we have stated before, our experience on past major hurricanes is that
our business picks up three to six months after the storm occurs as customers
return to their homes and need replacement furnishings," Mr. Loudermilk, Sr.
continued. "We expect these events to result in increased business over the
longer term, although the higher incidence of customer displacement caused by
Hurricane Katrina in particular compared with past storms may affect this
expectation. We will continue to assess the effects of Hurricanes Katrina and
Rita."
The Aaron's Sales & Lease Ownership division increased its third quarter
revenues 22% to $249.2 million compared to $204.3 million last year. First
nine months sales and lease ownership revenues increased 20% to $739.3 million
compared to $617.2 million a year ago.
Same store revenues (revenues earned in Company-operated stores open for
the entirety of both periods) in the Aaron's Sales & Lease Ownership division
increased 8.4% during the third quarter of 2005 compared to the third quarter
of 2004. Same store revenues also increased 4.7% for Aaron's Sales & Lease
Ownership stores open over two years at the end of September 2005.
The Company's rent-to-rent division increased revenues 6% during the third
quarter to $28.7 million compared to $27.0 million a year ago. This division
has seen a significant increase in revenues since Hurricane Katrina and
revenues for the fourth quarter are expected to be up over 12%. Due to the
substantial upfront costs of rapidly delivering merchandise to customers,
earnings for the division were down 13% for the quarter to $1.5 million.
Rentals and fees for both the third quarter and the first nine months
increased 21% over the previous year. In addition, franchise royalties and
fees increased 15% for the third quarter and 21% year-to-date. Non-retail
sales, which are primarily sales of rental merchandise to Aaron's Sales &
Lease Ownership franchisees, increased 19% to $43.7 million for the third
quarter from $36.8 million in the comparable period in 2004 and 11% to
$131.5 million for the first nine months compared to $118.6 million for the
same period last year. The increases in the Company's franchise revenues and
the shipments of non-retail sales are the result of the increase in revenues
of the Company's franchisees, who collectively had revenues of $312.3 million
for the first nine months of 2005, a 19% increase over the comparable prior
year period. Revenues of franchisees, however, are not revenues of Aaron
Rents, Inc.
During the third quarter the Aaron's Sales & Lease Ownership division
opened 13 new Company-operated stores, 22 new franchised stores and five RIMCO
stores. In addition, during the quarter the Company acquired seven franchised
stores, three stores from independent rental operators, and purchased the
accounts of two other third party stores. The Company also closed five
Company-operated stores during the quarter, four of which were in the New
Orleans market. The Company expects new store openings for Company-operated
and franchised stores combined to exceed 140 in 2005, in addition to a small
number of third party acquisitions.
Through the three months and nine months ended September 30, the Company
awarded area development agreements to open 13 and 50 additional franchised
stores, respectively. At the end of September there were a total of 292
franchised stores awarded that are expected to be opened over the next several
years.
At September 30 the Aaron's Sales and Lease Ownership division had 699
Company-operated stores and 383 franchised stores, as well as eight RIMCO
stores. In addition, the Company operated 59 rent-to-rent stores.
"Even though our customers are facing some challenges which may slightly
affect our revenue growth, and the effects of the hurricanes will still linger
into the fourth quarter and beyond, we still anticipate strong growth for the
fourth quarter and on into 2006. We expect in the fourth quarter of 2005 to
achieve revenues in excess of $285 million, an 18% plus increase over the
previous year's quarter, and diluted earnings per share in the range of $.26
to $.29," Mr. Loudermilk, Sr. continued. "For the 2005 fiscal year we expect
Company revenues in excess of $1.1 billion (excluding revenues of franchisees)
and diluted earnings per share in the range of $1.11 to $1.14. Our guidance
for 2006 is to continue to increase our store base over 15% per year and to
achieve diluted earnings per share in the range of $1.45 to $1.55."
Aaron Rents will hold a conference call to discuss its quarterly financial
results on Thursday, October 27, 2005, at 4:30 pm Eastern Time. The public is
invited to listen in to the conference call by webcast accessible through the
Company's website, www.aaronrents.com, in the "Investor Relations" section.
The webcast will be archived for playback at that same site.
Aaron Rents, Inc. based in Atlanta, currently has more than 1,150 Company-
operated and franchised stores in 46 states, Canada, and Puerto Rico for the
rental and sale of residential and office furniture, accessories, consumer
electronics and household appliances. The Company also manufactures furniture,
bedding and accessories at 10 facilities in four states.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act
of 1995: Statements in this news release regarding Aaron Rents, Inc.'s
business which 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 "Certain Factors Affecting Forward-
Looking Statements" in the Company's Annual Report on Form 10-K for fiscal
2004, which discussion is incorporated herein by this reference. Statements
in this release that are "forward-looking" include without limitation Aaron
Rents' projected revenues, earnings, and store openings for 2005 and 2006 and
its statements regarding the future effects of Hurricanes Katrina and Rita.
Aaron Rents, Inc. and Subsidiaries
Consolidated Statements of Earnings
(In thousands, except per share amounts)
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
Revenues:
Rentals and Fees $210,951 $173,721 $626,722 $516,318
Retail Sales 14,442 13,651 43,799 42,700
Non-Retail Sales 43,709 36,831 131,492 118,602
Franchise Royalties
and Fees 7,548 6,568 21,876 18,094
Other 2,017 877 5,464 8,713
Total 278,667 231,648 829,353 704,427
Costs and Expenses:
Retail Cost of Sales 9,449 9,785 29,077 30,158
Non-Retail Cost of Sales 40,639 34,253 122,361 110,268
Operating Expenses 136,003 104,864 377,236 307,615
Depreciation of Rental
Merchandise 76,727 63,845 226,231 189,377
Interest 2,343 1,350 5,680 3,824
Total 265,161 214,097 760,585 641,242
Earnings Before Taxes 13,506 17,551 68,768 63,185
Income Taxes 4,663 6,904 25,383 24,336
Net Earnings $8,843 $10,647 $43,385 $38,849
Earnings Per Share $.18 $.21 $.87 $.78
Earnings Per Share
Assuming Dilution $.17 $.21 $.85 $.77
Weighted Average
Shares Outstanding 49,861 49,711 49,807 49,557
Weighted Average
Shares Outstanding
Assuming Dilution 50,844 50,681 50,786 50,500
Selected Balance Sheet Data
(In thousands)
(Unaudited)
September 30, December 31,
2005 2004
Cash $6,753 $5,865
Accounts Receivable, Net 43,623 32,736
Rental Merchandise, Net 476,932 425,567
Property, Plant and
Equipment, Net 133,899 111,118
Other Assets, Net 125,123 125,002
Total Assets 786,330 700,288
Bank Debt 54,353 45,528
Senior Notes 100,000 50,000
Total Liabilities 366,923 325,110
Shareholders' Equity $ 419,407 $375,178
SOURCE Aaron Rents, Inc.
Gilbert L. Danielson
Executive Vice President, Chief Financial Officer of Aaron
Rents, Inc.
+1-678-402-3334