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Aaron Rents, Inc. Reports Fourth Quarter and Fiscal Year Results; Revenues up 14% for Quarter and 13% for Year

02/19/2008

For the fourth quarter of 2007, revenues increased 14% to $388.6 million compared to $339.9 million for the fourth quarter in 2006. Net earnings were $15.5 million versus $19.0 million last year. Diluted earnings per share were $.28 compared to $.35 per share a year ago.

For the year, revenues increased 13% to $1.495 billion compared to $1.327 billion for the 2006 year. Net earnings were $80.3 million versus $78.6 million a year ago. Diluted earnings per share were $1.46 for 2007 and $1.47 in 2006.

"We are pleased that 2007 revenues and earnings reached new records," said R. Charles Loudermilk, Sr., Chairman and Chief Executive Officer of Aaron Rents. "As we said in our January 22 release previewing 2007 results, the year was marked by rapid expansion in our store base as we added a net 215 new stores, a 16% increase over the previous year. The expenses of such substantial store growth reduced earnings, and we had to deal with collection issues at our Company-operated stores which resulted in many of the stores not performing at the same high level as our franchised stores."

"Although new store start-up expenses will continue into 2008, we expect to see improved profit trends later in the year as we grow at a more measured rate, focusing on increasing revenues in existing stores and improving overall profitability," Mr. Loudermilk, Sr. added.

The Aaron's Sales & Lease Ownership division increased its revenues in the fourth quarter to $358.6 million, a 16% increase over the $309.8 million in the fourth quarter of 2006. For the year, revenues were $1.366 billion, a 14% increase over the $1.201 billion recorded last year.

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 3.9% during the fourth quarter of 2007 compared to the fourth quarter of 2006. Same store revenues also increased 2.1% for Aaron's Sales & Lease Ownership stores open over two years at the end of December 2007.

Consolidated rentals and fees increased 14% for the fourth quarter and 13% for the year. In addition, franchise royalties and fees increased 18% in the fourth quarter and 15% for the year. Non-retail sales, which are primarily sales of rental merchandise to Aaron's Sales & Lease Ownership franchisees, increased 18% for the quarter compared to the fourth quarter last year and 17% for the year. The increases in the Company's franchise revenues and the shipments of non-retail sales are the result of an increase in revenues of the Company's franchisees, who collectively had revenues of $143.8 million during the fourth quarter, an 18% increase over the same quarter a year ago, and $558.9 million for the 2007 year, a 15% increase over last year. Same store revenues for franchised stores were up 15% for the quarter compared to the fourth quarter last year. Revenues of franchisees, however, are not revenues of Aaron Rents, Inc.

During the fourth quarter the Aaron's Sales & Lease Ownership division opened 56 new Company-operated stores and 29 new franchised stores. It also acquired 23 stores and the accounts of nine other stores from two different third party rental operators and one Aaron's franchisee, which resulted in an additional 14 Company-operated stores and two franchised stores, with the remainder of the accounts of acquired stores being merged into existing Company-operated and franchised stores. During the quarter the Company also sold nine Company-operated stores to two different franchisees, and closed one franchised store. In addition, during the quarter two new Aaron's Office Furniture stores were opened.

During the fourth quarter and fiscal year the Company awarded, in total, area development agreements to open 30 and 182 additional franchised stores, respectively. At the end of December 2007 there were 284 franchised stores awarded that are planned to be opened over the next several years.

At December 31, 2007 the Aaron's Sales and Lease Ownership division accounted for 987 Company-operated stores, 480 franchised stores, 27 Company- operated RIMCO stores, and four franchised RIMCO stores. The Company also had 62 corporate furnishings stores. The total number of stores open at the end of 2007 was 1,560.

The Company generated $111 million in cash flow from operations in 2007 and expects to continue to generate positive cash flow from operations in 2008. The Company may use some of this cash flow to continue repurchasing its shares as deemed warranted. There are currently 4,307,958 shares remaining under the Company's recent Board repurchase authorization.

In 2008 the Company expects to achieve the following:

  • First quarter revenues (excluding revenues of franchisees) in excess of $425 million.
  • First quarter diluted earnings per share in the range of $.38 to $.43 per share.
  • Fiscal year revenues (excluding revenues of franchisees) of approximately $1.7 billion.
  • Fiscal year diluted earnings per share in the range of $1.40 to $1.55.
  • Opening between 55 and 75 new Company-operated stores and 70 and 90 new franchised stores.
  • The Company-operated store openings will be offset somewhat by the merging or selling of stores not meeting profit goals.
  • The Company also plans to continue to acquire franchised stores or sell Company-operated stores to franchisees as opportunities present themselves.

    The Company expects to increase store count, a combination of Company- operated and franchised stores, between 10% and 13% on average over the next several years. The net store growth in 2008 is expected to be somewhat less than 10%, as the Company plans to consolidate or sell some stores during the year that do not meet revenue or profit criteria.

    Aaron Rents will hold a conference call to discuss its quarterly financial results on Wednesday, February 20, 2008, at 10:30 am Eastern Time. The public is invited to listen to the conference call via webcast accessible through the Company's website, http://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 over 1,565 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 12 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)
    
                                    Three Months Ended     Twelve Months Ended
                                       December 31,            December 31,
                                      2007        2006       2007         2006
                                   (Unaudited)            (Unaudited)
    
        Revenues:
         Rentals and Fees        $284,984    $249,102  $1,126,812     $992,791
         Retail Sales              13,570      12,887      54,518       62,319
         Non-Retail Sales          76,537      64,676     261,584      224,489
         Franchise Royalties
          and Fees                 10,406       8,856      38,803       33,626
         Other                      3,114       4,348      13,194       13,367
           Total                  388,611     339,869   1,494,911    1,326,592
    
        Costs and Expenses:
         Retail Cost of Sales       8,919       8,436      36,099       41,262
         Non-Retail Cost of Sales  70,400      58,909     239,755      207,217
         Operating Expenses       179,893     149,190     674,412      579,565
         Depreciation of Rental
          Merchandise             101,908      90,701     407,321      364,109
         Interest                   2,514       1,869       8,479        9,729
           Total                  363,634     309,105   1,366,066    1,201,882
    
        Earnings Before Taxes      24,977      30,764     128,845      124,710
    
        Income Taxes                9,485      11,723      48,570       46,075
    
        Net Earnings              $15,492     $19,041     $80,275      $78,635
    
        Earnings Per Share           $.29        $.35       $1.48        $1.50
    
        Earnings Per Share
         Assuming Dilution           $.28        $.35       $1.46        $1.47
    
        Weighted Average
         Shares Outstanding        54,084      54,062      54,163       52,545
    
        Weighted Average
         Shares Outstanding
         Assuming Dilution         54,791      54,866      55,082       53,377
    
    
    
    
                             Selected Balance Sheet Data
                                  (In Thousands)
    
                                                December 31,      December 31,
                                                   2007              2006
                                                (Unaudited)
    
        Cash                                       $5,249           $8,807
        Accounts Receivable                        52,025           43,495
        Rental Merchandise, Net                   623,452          612,149
        Property, Plant and Equipment, Net        247,038          170,294
        Other Assets, Net                         185,412          144,861
        Total Assets                            1,113,176          979,606
    
        Bank Debt                                  82,884           15,612
        Senior Notes                               80,000           90,000
        Total Liabilities                         439,796          372,591
        Shareholders' Equity                     $673,380         $607,015
    
    

    SOURCE Aaron Rents, Inc.

    http://www.aaronrents.com

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