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Aaron Rents, Inc. Reports Third Quarter Results; Expects to Grow Store Base 15% in 2007; 10% to 13% in 2008


ATLANTA, Oct. 24 /PRNewswire-FirstCall/ -- 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 three and nine months ended September 30, 2007.

For the third quarter of 2007, revenues increased 13% to $359.4 million compared to $317.7 million for the same period a year ago. Net earnings were $15.9 million versus $17.4 million for the third quarter last year. Diluted earnings per share were $.29 compared to $.32 per share in 2006.

For the first nine months of this year, revenues advanced 12% to $1.106 billion compared to $986.7 million for the same period of 2006. Net earnings for the nine months were up 9% to $64.8 million versus $59.6 million for the corresponding period a year ago. Diluted earnings per share for the first nine months were $1.18 for 2007 and $1.13 for 2006.

"We anticipate record revenues and earnings for the Company this year," said R. Charles Loudermilk, Sr. Chairman and Chief Executive Officer of Aaron Rents. "Our third quarter results were affected primarily, as expected per our news release a month ago, by construction delays in our aggressive program of new store openings as well as slower revenue growth and higher operating costs. Consequently, we are now focused on improving revenue growth and earnings of all our stores and, in the near term, opening new Company-operated stores at a less accelerated rate."

"Our franchise system continues its strong performance with solid same store revenue growth for the quarter. We have a growing franchise expansion program with more than 300 franchised stores now in the pipeline for future opening. We anticipate that area development agreements will be awarded for a record number of stores this year," continued Mr. Loudermilk.

The Aaron's Sales & Lease Ownership division increased its third quarter revenues 15% to $328.1 million compared to $286.2 million last year. First nine months sales and lease ownership revenues increased 13% to $1.007 billion compared to $890.7 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 4.0% during the third quarter of 2007 compared to the third quarter of 2006.

The Aaron's Corporate Furnishings division revenues declined 2% during the third quarter to $29.7 million compared to $30.4 million a year ago. Corporate furnishings revenues were $91.5 million for the nine months compared to $93.8 million in 2006.

Consolidated rentals and fees increased 14% for the third quarter and 13% for the first nine months compared to the previous year periods. In addition, franchise royalties and fees increased 7% for the third quarter and 15% year- to-date compared to the same periods a year ago. Non-retail sales, which are primarily sales of rental merchandise to Aaron's Sales & Lease Ownership franchisees, increased 18% to $58.1 million for the third quarter from $49.4 million from the comparable period in 2006, and 16% to $185.0 million for the first nine months compared to $159.8 million for the same period last year. The increases in the Company's franchise revenues and non-retail sales are the result of the increase in revenues of the Company's franchisees, who collectively had revenues of $131.3 million for the third quarter and $415.1 million for the first nine months of 2007, an 11% and 14% increase, respectively, over the comparable prior year periods. Same store revenues for franchised stores increased 8.8% for the third quarter of 2007 compared to the third quarter of 2006. Revenues of franchisees, however, are not revenues of Aaron Rents, Inc.

During the third quarter the Aaron's Sales & Lease Ownership division opened 40 new Company-operated stores, nine new franchised stores, five Company-operated RIMCO stores, and two franchised RIMCO stores. The Company also opened one new corporate furnishings store and closed two Company- operated sales and lease ownership stores. In addition, during the quarter the Company acquired 21 franchised stores and purchased the accounts of four third party stores.

Through the three months and nine months ended September 30, the Company awarded area development agreements to open 46 and 152 additional franchised stores, respectively. At the end of September there were a total of 302 franchised stores awarded that we expect will open over the next several years.

At September 30 the Aaron's Sales and Lease Ownership division had 927 Company-operated stores and 442 franchised stores, 27 Company-operated RIMCO stores, and four franchised RIMCO stores. In addition, the Company operated 61 corporate furnishings stores. The total number of stores open at the end of September was 1,461.

"We expect in the fourth quarter of 2007 to have revenues in excess of $375 million and diluted earnings per share in the range of $.30 to $.34," Mr. Loudermilk continued. "For the 2007 fiscal year we anticipate Company revenues slightly below $1.5 billion (excluding revenues of franchisees) and diluted earnings per share in the range of $1.48 to $1.52, or $1.43 to $1.47 excluding the gain on the first quarter parking deck sale. As previously announced, our new store openings in 2007 will be less than originally planned. We now expect total store growth for 2007, a combination of Company- operated and franchise stores, to be up approximately 15% for the year. We expect to increase the store base 10% to 13% in 2008, roughly an equal mix between Company-operated and franchised stores. Our initial earnings guidance for 2008 is to achieve diluted earnings per share in the range of $1.60 to $1.75.

Aaron Rents will hold a conference call to discuss its quarterly financial results on Thursday, October 25, 2007, at 10:30 am Eastern Time. The public is invited to listen in to the conference call by webcast accessible through the Company's website,, 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 1,490 Company-operated and franchised stores in 48 states and Canada 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 13 facilities in five 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 "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2006. Statements in this release that are "forward-looking" include without limitation Aaron Rents' projected revenues, earnings, and store openings for future periods.

                      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,
                            2007          2006         2007          2006

      Rentals and Fees    $278,104     $243,649     $841,828     $743,689
      Retail Sales          12,808       14,330       40,948       49,432
      Non-Retail Sales      58,140       49,429      185,047      159,813
      Franchise Royalties
       and Fees              8,881        8,322       28,397       24,770
      Other                  1,448        1,979       10,080        9,019
        Total              359,381      317,709    1,106,300      986,723
    Costs and Expenses:
      Retail Cost of Sales   8,389        9,553       27,180       32,826
      Non-Retail Cost of
       Sales                53,095       45,210      169,355      148,308
      Operating Expenses   169,105      143,601      494,519      430,375
      Depreciation of
       Rental Merchandise  101,299       89,806      305,413      273,408
      Interest               2,180        1,914        5,965        7,860
        Total              334,068      290,084    1,002,432      892,777

    Earnings Before Taxes   25,313       27,625      103,868       93,946

    Income Taxes             9,394       10,242       39,085       34,352

    Net Earnings           $15,919      $17,383      $64,783      $59,594

    Earnings Per Share        $.29         $.32        $1.20        $1.15

    Earnings Per Share
     Assuming Dilution        $.29         $.32        $1.18        $1.13

    Weighted Average
     Shares Outstanding     54,217       53,989       54,190       52,034

    Weighted Average
     Shares Outstanding
     Assuming Dilution      55,049       54,767       55,046       52,874

                         Selected Balance Sheet Data
                                (In thousands)

                                                  September 30,   December 31,
                                                       2007           2006

    Cash                                              $9,723         $8,807
    Accounts Receivable, Net                          46,065         43,495
    Rental Merchandise, Net                          614,232        612,149
    Property, Plant and
     Equipment, Net                                  226,981        170,294
    Other Assets, Net                                180,506        144,861
    Total Assets                                   1,077,507        979,606

    Bank Debt                                         47,640         15,612
    Senior Notes                                      80,000         90,000
    Total Liabilities                                406,856        372,591
    Shareholders' Equity                            $670,651       $607,015

SOURCE Aaron Rents, Inc.

Gilbert L. Danielson,
Executive Vice President, Chief Financial Officer of Aaron Rents, Inc.,
Web site:

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