ATLANTA, Oct 28, 2008 /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
three and nine months ended September 30, 2008.
As previously announced, the Company has entered into an agreement to sell
substantially all of the assets of its Aaron's Corporate Furnishings division.
Beginning with the results reported in this release, the Company no longer
includes the revenues and expenses of the Aaron's Corporate Furnishings
division on the Company's statement of earnings, and reports net earnings of
the division as discontinued operations. Prior periods are restated to
reflect this change in accounting treatment and the assets of the division
will be reflected as assets held for sale on the Company's balance sheet until
the transaction closes.
For the third quarter of 2008, revenues increased 16% to $388.0 million
compared to $333.7 million for the same period a year ago. Net earnings rose
32% to $21.1 million versus the $15.9 million recorded in the third quarter
last year. Diluted earnings per share were $.39 compared to $.29 per share in
2007, a 34% increase.
For the first nine months of this year, revenues advanced 15% to $1.188
billion compared to $1.030 billion for the same period of 2007. Net earnings
for the nine months were up 7% to $69.1 million versus $64.8 million for the
corresponding period a year ago. Diluted earnings per share for the first
nine months increased 8% to $1.28 for 2008 versus $1.18 for 2007.
For the third quarter diluted earnings per share from continuing
operations increased 42% over the same period in 2007 and 12% for the
comparable nine month period.
"We are very pleased with the third quarter results from both our Company-
operated and franchised stores," said Robert C. Loudermilk, Jr., President and
Chief Executive Officer of Aaron Rents. "Even though economic times are tough
and our stores in the southern and central United States were affected in
September by business disruption and property damage as a result of Hurricanes
Gustav and Ike, we still managed to have an outstanding quarter as customers
continue to come into our stores seeking basic home furnishings."
"Our same store revenue growth accelerated in the quarter and margins
improved, even though over 100 of our stores were adversely impacted by the
hurricanes," continued Mr. Loudermilk. "Although difficult to estimate, we
feel that the hurricanes negatively affected earnings in the quarter by at
least $.01 to $.02 per diluted share, including the value of our merchandise
that was destroyed in the homes of our customers. In addition, start up
expenses associated with new stores also reduced third quarter earnings by
approximately $.05 per share. We feel we are in an outstanding position to
continue the growth of our business during the remainder of 2008 and on into
2009."
The Company's other revenues in the third quarter of 2008 included a $2.6
million gain from the sale of 11 Company-operated stores to three different
franchisees. Excluding this gain, net earnings on a non-GAAP basis for the
third quarter of 2008 would have been $19.5 million, or $.36 per diluted
share. The Company has realized a total of $8.4 million in gains in other
revenues during the first nine months of 2008 relating to similar store sales.
The Company's other revenues in the first nine months of 2007 included a $4.9
million gain from the sale of a parking deck at the Company's corporate
headquarters in last year's first quarter. See the attached table for a
reconciliation of revenues, net earnings, and diluted earnings per share to
non-GAAP revenues, earnings, and diluted earnings per share excluding the
aforementioned asset sales.
Revenues in the Aaron's Sales & Lease Ownership division in the third
quarter increased 17% to $382.6 million compared to $328.1 million last year.
The first nine months sales and lease ownership revenues went up 16% to $1.170
billion compared to $1.007 billion 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 5.7% during the third quarter of 2008 compared to the third quarter
of last year.
On September 15, 2008, the Company announced that it had entered into an
agreement to sell substantially all of the assets of its Aaron's Corporate
Furnishings division to CORT Business Services Corporation and to transfer
certain liabilities of the division to CORT. As consideration for the sale,
the Company anticipates receiving approximately $72 million in cash plus
payments for certain accounts receivable, subject to certain adjustments.
Subject to customary closing conditions, it is anticipated that the
transaction will close in November. It is not expected that the Company will
record a material gain or loss on the sale.
The Aaron's Corporate Furnishings division revenues, which are not
included in the Company's revenues, declined 4% during the third quarter to
$24.6 million compared to $25.7 million a year ago. Corporate furnishings
revenues were $73.5 million for the nine months compared to $76.0 million in
2007, a 3% decrease. After the sale of the Aaron's Corporate Furnishings
division, the Company will continue with the operations of the Aaron's Office
Furniture division.
Consolidated rentals and fees increased 13% for both the third quarter and
first nine months compared to the previous year periods. In addition,
franchise royalties and fees increased 25% for the third quarter and 16% 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 22% to $70.7 million for the third quarter from $58.1
million in the comparable period in 2007, and 20% to $222.2 million for the
first nine months compared to $185.0 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 $166.0 million for the third quarter and $493.7
million for the first nine months of 2008, a 26% and 19% increase,
respectively, over the comparable prior year periods. Same store revenues for
franchised stores were up 18.4% for the third quarter of 2008 compared to the
third quarter of 2007. Revenues of franchisees, however, are not revenues of
Aaron Rents, Inc.
During the third quarter the Aaron's Sales & Lease Ownership division
opened four new Company-operated stores, 12 new franchised stores, and one
franchised RIMCO store. The Company sold 11 Company-operated sales and lease
ownership stores to franchisees, and closed four Company-operated sales and
lease ownership stores. In addition, during the quarter the Company acquired
one franchised store and purchased the accounts of three third party stores.
For the three months and nine months ended September 30, the Company
awarded area development agreements to open 46 and 125 additional franchised
stores, respectively. At the end of September there were a total of 303
franchised stores awarded that we expect will open over the next several
years.
At September 30 the Aaron's Sales & Lease Ownership division had open 983
Company-operated stores and 502 franchised stores, 30 Company-operated RIMCO
stores, and eight franchised RIMCO stores. In addition, the Company operated
47 Aaron's Corporate Furnishings stores and 13 Aaron's Office Furniture
stores. The total number of stores open at the end of September was 1,583.
"We anticipate in the fourth quarter of 2008 to have revenues in excess of
$410 million and diluted earnings per share between $0.32 to $0.37," Mr.
Loudermilk added. "For the 2008 fiscal year we anticipate Company revenues to
be approximately $1.6 billion (excluding revenues of franchisees) and diluted
earnings per share in the range of $1.60 to $1.65, excluding any gain or loss
recorded on the sale of the Aaron's Corporate Furnishings division. By the
end of 2008 we expect to have approximately 1,600 Company-operated and
franchised stores open. We continue to expect to increase the store base 10%
to 13% over the next several years, for the most part an equal mix between
Company-operated and franchised stores. Our initial earnings guidance for 2009
is to achieve diluted earnings per share in the range of $1.65 to $1.80."
Aaron Rents will hold a conference call to discuss its quarterly financial
results on Wednesday, October 29, 2008, at 10:30 am Eastern Time. The public
is invited to listen 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 1,585
Company- operated and franchised stores in 48 states and Canada. The
Company's MacTavish Furniture Industries division manufactured approximately
$73 million at cost of furniture, bedding and accessories at 12 facilities in
five states in 2007. The entire production of MacTavish is for shipment to
Aaron Rents stores.
"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, 2007. 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,
2008 2007 2008 2007
Revenues:
Rentals and Fees $291,102 $257,294 $885,554 $780,254
Retail Sales 10,230 7,713 32,363 25,783
Non-Retail Sales 70,691 58,140 222,180 185,047
Franchise Royalties and
Fees 11,127 8,881 33,060 28,397
Other 4,869 1,688 14,557 10,796
Total 388,019 333,716 1,187,714 1,030,277
Costs and Expenses:
Retail Cost of Sales 6,266 4,546 19,839 15,838
Non-Retail Cost of Sales 64,752 53,095 203,222 169,355
Operating Expenses 175,409 154,531 529,213 451,734
Depreciation of Rental
Merchandise 106,962 97,218 323,600 293,610
Interest 2,243 1,945 6,593 5,328
Total 355,632 311,335 1,082,467 935,865
Earnings from Continuing
Operations Before Taxes 32,387 22,381 105,247 94,412
Income Taxes 12,597 8,273 40,617 35,477
Net Earnings from Continuing
Operations 19,790 14,108 64,630 58,935
Earnings from Discontinued
Operations, Net of Tax 1,288 1,811 4,480 5,848
Net Earnings $21,078 $15,919 $69,110 $64,783
Earnings Per Share:
From Continuing Operations $.37 $.26 $1.21 $1.09
From Discontinued Operations .03 .03 .08 .11
Total $.40 $.29 $1.29 $1.20
Earnings Per Share Assuming
Dilution:
From Continuing Operations $.37 $.26 $1.20 $1.07
From Discontinued Operations .02 .03 .08 .11
Total $.39 $.29 $1.28 $1.18
Weighted Average Shares
Outstanding 53,356 54,217 53,370 54,190
Weighted Average Shares
Outstanding Assuming Dilution 54,219 55,049 54,178 55,046
Selected Balance Sheet Data
(In thousands)
(Unaudited)
September 30, December 31,
2008 2007
Cash $6,579 $5,249
Accounts Receivable, Net 48,470 47,712
Rental Merchandise, Net 630,444 571,833
Property, Plant and Equipment, Net 212,318 245,876
Other Assets, Net 213,334 184,981
Assets of Discontinued Operations 58,438 57,525
Total Assets 1,169,583 1,113,176
Bank Debt 72,321 82,884
Senior Notes 58,000 80,000
Total Liabilities 429,752 439,796
Shareholders' Equity $739,831 $673,380
Reconciliation of Revenues, Net Earnings and Earnings per Share
Excluding Asset Sales of Stores and Parking Deck
(In thousands, except per share amounts)
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
Total Revenues $388,019 $333,716 $1,187,714 $1,030,277
Less Revenues from Store
Asset Sales 2,646 - 8,397 780
Less Revenues from Parking
Deck Sale - - - 4,878
Revenues Excluding Sales 385,373 333,716 1,179,317 1,024,619
Net Earnings 21,078 15,919 69,110 64,783
Less Gain from Store Asset
Sales 1,619 - 5,158 479
Less Gain from Parking Deck
Sale - - - 3,034
Net Earnings Excluding Gain
from Sales $19,459 $15,919 $63,952 $61,270
Earnings Per Share Excluding
Gain from Sales $.36 $.29 $1.20 $1.13
Earnings Per Share Assuming
Dilution Excluding Gain
from Sales $.36 $.29 $1.18 $1.11
Weighted Average Shares
Outstanding 53,356 54,217 53,370 54,190
Weighted Average Shares
Outstanding Assuming Dilution 54,219 55,049 54,178 55,046
SOURCE Aaron Rents, Inc.
http://www.aaronrents.com