Basis and Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2018

Schedule Of Company Operated Store Activity

The following table presents active doors for Progressive Leasing:



Active Doors at June 30 (Unaudited)	2018	2017
Progressive Leasing Active Doors¹	20,309	19,148

¹ Active doors are comprised of both (i) each retail store location where at least one virtual lease-to-own transaction has been completed during the trailing three month period; and (ii) with respect to an e-commerce merchant, each state where at least one virtual lease-to-own transaction has been completed through that e-commerce merchant during the trailing three month period.

The following table presents store count by ownership type for the Aaron's Business operations:



Stores as of June 30 (Unaudited)	2018	2017
Company-operated Aaron's Branded Stores	1,179	1,093
Franchised Stores	530	680
Systemwide Stores	1,709	1,773

Calculation of Dilutive Stock Awards

The following table shows the calculation of dilutive share-based awards:



	Three Months Ended June 30,		Six Months Ended June 30,
(Shares In Thousands)	2018	2017	2018	2017
Weighted Average Shares Outstanding	69,645	70,686	69,875	71,001
Dilutive Effect of Share-Based Awards	1,192	1,011	1,553	1,039
Weighted Average Shares Outstanding Assuming Dilution	70,837	71,697	71,428	72,040

Accounts Receivable Net of Allowances

Accounts receivable, net of allowances, consist of the following:



(In Thousands)	June 30, 2018		December 31, 2017
Customers	$	48,978	$	48,661
Corporate	12,860		23,431
Franchisee	22,471		27,795
Accounts Receivable	$	84,309	$	99,887

The following is a summary of the Company’s loans receivable, net:



(In Thousands)	June 30, 2018			December 31, 2017
Credit Card Loans¹	$	88,947		$	89,728
Acquired Loans²	10,019			16,213
Loans Receivable, Gross	98,966			105,941

Allowance for Loan Losses	(11,586		)	(11,454		)
Unamortized Fees	(7,692		)	(8,375		)
Loans Receivable, Net of Allowances and Unamortized Fees	$	79,688		$	86,112

¹ "Credit Card Loans" are loans originated after the 2015 acquisition of DAMI.

² "Acquired Loans" are credit card loans the Company purchased in the 2015 acquisition of DAMI.

Components of the Accounts Receivable Provision

The following table shows the amounts recognized for bad debt expense and provision for returns and uncollected payments:



	Six Months Ended June 30,
(In Thousands)	2018		2017
Bad Debt Expense	$	96,651	$	68,044
Provision for Returns and Uncollected Renewal Payments	16,426		14,062
Accounts Receivable Provision	$	113,077	$	82,106

Schedule of Lease Merchandise

The following is a summary of lease merchandise, net of accumulated depreciation and allowances:



(In Thousands)	June 30, 2018		December 31, 2017
Merchandise on Lease	$	909,700	$	908,268
Merchandise not on Lease	227,728		243,867
Lease Merchandise, net of Accumulated Depreciation and Allowances	$	1,137,428	$	1,152,135

Allowance for Lease Merchandise

The following table shows the components of the allowance for lease merchandise write-offs:



	Six Months Ended June 30,
(In Thousands)	2018			2017
Beginning Balance	$	35,629		$	33,399
Merchandise Written off, net of Recoveries	(80,856		)	(61,034		)
Provision for Write-offs	91,420			63,938
Ending Balance	$	46,193		$	36,303

Loan Portfolio Credit Quality Indicators

Below is a summary of the credit quality of the Company's loan portfolio as of June 30, 2018 and December 31, 2017 by Fair Isaac and Company (FICO) score as determined at the time of loan origination:



FICO Score Category	June 30, 2018		December 31, 2017
600 or Less	2.5	%	1.7	%
Between 600 and 700	77.4	%	76.5	%
700 or Greater	20.1	%	21.8	%

Schedule of Prepaid Expenses and Other Assets

Prepaid expenses and other assets consist of the following:



(In Thousands)	June 30, 2018		December 31, 2017
Prepaid Expenses	$	39,023	$	31,509
Prepaid Insurance	33,444		36,735
Assets Held for Sale	9,698		10,118
Deferred Tax Asset	7,556		11,589
Other Assets	29,511		26,548
Prepaid Expenses and Other Assets	$	119,232	$	116,499

Schedule of Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following:



(In Thousands)	June 30, 2018		December 31, 2017
Accounts Payable	$	62,314	$	80,821
Accrued Insurance Costs	39,859		41,680
Accrued Salaries and Benefits	41,903		46,511
Accrued Real Estate and Sales Taxes	31,599		31,054
Deferred Rent	27,816		29,912
Other Accrued Expenses and Liabilities	67,472		74,832
Accounts Payable and Accrued Expenses	$	270,963	$	304,810

Changes in Accumulated Other Comprehensive Income

Changes in accumulated other comprehensive (loss) income for the six months ended June 30, 2018 are as follows:



(In Thousands)	Foreign Currency
Balance at January 1, 2018	$	774
Other Comprehensive Loss	(1,012		)
Balance at June 30, 2018	$	(238	)

Schedule of Impact of Adoption of New Revenue Standard

The impact of adoption on the condensed consolidated statements of earnings and balance sheets was as follows:

Condensed Consolidated Statements of Earnings



Three Months Ended June 30, 2018
(In Thousands)	As Reported		Balance Without ASC 606 Adoption		Effect of Change Higher/(Lower)
Franchise Royalties and Fees	$	12,125	$	10,078	$	2,047
Operating Expenses	388,337		386,495		1,842
OPERATING PROFIT	73,931		73,726		205
EARNINGS BEFORE INCOME TAXES	49,980		49,775		205
INCOME TAXES	11,479		11,429		50
NET EARNINGS	$	38,501	$	38,347	$	154



Six Months Ended June 30, 2018
(In Thousands)	As Reported		Balance Without ASC 606 Adoption		Effect of Change Higher/(Lower)
Franchise Royalties and Fees	$	24,987	$	20,844	$	4,143
Operating Expenses	778,569		774,891		3,678
OPERATING PROFIT	143,995		143,531		464
EARNINGS BEFORE INCOME TAXES	116,732		116,268		464
INCOME TAXES	25,985		25,871		114
NET EARNINGS	$	90,747	$	90,396	$	351

Condensed Consolidated Balance Sheets



Balance at June 30, 2018
(In Thousands)	As Reported		Balance Without ASC 606 Adoption		Effect of Change Higher/(Lower)
Deferred Income Taxes Payable	$	257,620	$	258,129	$	(509	)
Customer Deposits and Advance Payments	72,613		70,725		1,888
Total Liabilities	874,137		872,758		1,379
Retained Earnings	1,904,309		1,905,688		(1,379		)
Total Shareholders’ Equity	1,744,813		1,746,192		(1,379		)
Total Liabilities & Shareholders’ Equity	$	2,618,950	$	2,618,950	$	—

Condensed Comprehensive Statements of Income



Three Months Ended June 30, 2018
(In Thousands)	As Reported		Balance Without ASC 606 Adoption		Effect of Change Higher/(Lower)
Comprehensive Income	$	37,966	$	37,812	$	154



Six Months Ended June 30, 2018
(In Thousands)	As Reported		Balance Without ASC 606 Adoption		Effect of Change Higher/(Lower)
Comprehensive Income	$	89,735	$	89,384	$	351