Basis and Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2019

Schedule Of Company Operated Store Activity

The following table presents invoice volume for Progressive Leasing:



For the Three Months Ended March 31 (Unaudited and In Thousands)	2019		2018
Progressive Leasing Invoice Volume¹	$	394,727	$	345,562

¹ Invoice volume is defined as the retail price of lease merchandise acquired and then leased to customers during the period, net of returns.

The Aaron's Business segment offers furniture, consumer electronics, home appliances and accessories to consumers primarily with a month-to-month, lease-to-own agreement with no credit needed through the Company's Aaron's-branded stores in the United States and Canada and its e-commerce platform. This operating segment also supports franchisees of its Aaron's-branded stores. In addition, the Aaron's Business segment includes the operations of Woodhaven Furniture Industries ("Woodhaven"), which manufactures and supplies the majority of the upholstered furniture and bedding leased and sold in Company-operated and franchised stores.

The Company acquired the store operations of two franchisees during the three months ended March 31, 2019. Refer to Note 2 to these condensed consolidated financial statements.

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



Stores as of March 31 (Unaudited)	2019	2018
Company-operated Aaron's Branded Stores	1,230	1,182
Franchised Stores	369	537
Systemwide Stores	1,599	1,719

Calculation of Dilutive Stock Awards

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



	Three Months Ended March 31,
(Shares In Thousands)	2019	2018
Weighted Average Shares Outstanding	67,294	70,105
Dilutive Effect of Share-Based Awards	1,479	1,913
Weighted Average Shares Outstanding Assuming Dilution	68,773	72,018

Accounts Receivable Net of Allowances

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



(In Thousands)	March 31, 2019		December 31, 2018
Customers	$	54,517	$	60,879
Corporate	13,405		18,171
Franchisee	16,115		19,109
Accounts Receivable	$	84,037	$	98,159

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



(In Thousands)	March 31, 2019			December 31, 2018
Credit Card Loans¹	$	87,768		$	90,406
Acquired Loans²	3,721			5,688
Loans Receivable, Gross	91,489			96,094

Allowance for Loan Losses	(12,363		)	(12,970		)
Unamortized Fees	(6,562		)	(6,971		)
Loans Receivable, Net of Allowances and Unamortized Fees	$	72,564		$	76,153

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:



	Three Months Ended March 31,
(In Thousands)	2019		2018
Bad Debt Expense¹	$	1,125	$	46,542
Provision for Returns and Uncollectible Renewal Payments²	62,110		4,916
Accounts Receivable Provision	$	63,235	$	51,458

¹ Bad debt expense is recorded within operating expenses in the condensed consolidated financial statements.

² In accordance with the adoption of ASC 842, Progressive Leasing provision for returns and uncollectible renewal payments are recorded as a reduction to lease revenues and fees within the condensed consolidated financial statements beginning January 1, 2019. Prior to January 1, 2019, Progressive Leasing provision for returns and uncollectible renewal payments were recorded as bad debt expense within operating expenses in the condensed consolidated financial statements.

Schedule of Lease Merchandise

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



(In Thousands)	March 31, 2019		December 31, 2018
Merchandise on Lease	$	1,022,902	$	1,053,684
Merchandise Not on Lease	278,164		264,786
Lease Merchandise, net of Accumulated Depreciation and Allowances	$	1,301,066	$	1,318,470

Allowance for Lease Merchandise

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



	Three Months Ended March 31,
(In Thousands)	2019			2018
Beginning Balance	$	46,694		$	35,629
Merchandise Written off, net of Recoveries	(53,222		)	(40,511		)
Provision for Write-offs	56,995			44,470
Ending Balance	$	50,467		$	39,588

Loan Portfolio Credit Quality Indicators

Below is a summary of the credit quality of the Company's loan portfolio as of March 31, 2019 and December 31, 2018 by Fair Isaac and Company (FICO) score as determined at the time of loan origination:



FICO Score Category	March 31, 2019		December 31, 2018
600 or Less	4.1	%	3.7	%
Between 600 and 700	79.0	%	77.9	%
700 or Greater	16.9	%	18.4	%

Schedule of Prepaid Expenses and Other Assets

Prepaid expenses and other assets consist of the following:



(In Thousands)	March 31, 2019		December 31, 2018
Prepaid Expenses	$	27,467	$	30,763
Prepaid Insurance	24,072		27,948
Assets Held for Sale	8,974		6,589
Deferred Tax Asset	8,761		8,761
Other Assets	23,207		24,161
Prepaid Expenses and Other Assets	$	92,481	$	98,222

Schedule of Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following:



(In Thousands)	March 31, 2019		December 31, 2018
Accounts Payable	$	71,751	$	88,369
Accrued Insurance Costs	39,181		40,423
Accrued Salaries and Benefits	45,832		40,790
Accrued Real Estate and Sales Taxes	30,749		30,332
Deferred Rent¹	—		27,270
Other Accrued Expenses and Liabilities¹	59,266		65,969
Accounts Payable and Accrued Expenses	$	246,779	$	293,153


¹	Amounts as of March 31, 2019 were impacted by the January 1, 2019 adoption of ASC 842. Upon transition to ASC 842, the remaining balances of the Company's deferred rent, lease incentives, and closed store reserve were reclassified as a reduction to the operating lease right-of-use asset in the accompanying condensed consolidated balance sheet.

Schedule of Stockholders Equity

Changes in stockholders' equity for the three months ended March 31, 2019 and 2018 are as follows:



	Treasury Stock					Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
(In Thousands, Except Per Share)	Shares		Amount			Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
Balance, December 31, 2018	(23,568	)	$	(567,847	)	$	45,376	$	278,922		$	2,005,344		$	(1,087	)	$	1,760,708
Opening Balance Sheet Adjustment - ASC 842, net of taxes	—		—			—		—			2,592			—			2,592
Cash Dividends, $0.035 per share	—		—			—		—			(2,363		)	—			(2,363		)
Stock-Based Compensation	—		—			—		7,050			—			—			7,050
Reissued Shares	493		4,264			—		(15,245		)	—			—			(10,981		)
Net Earnings	—		—			—		—			56,078			—			56,078
Foreign Currency Translation Adjustment	—		—			—		—			—			424			424
Balance, March 31, 2019	(23,075	)	$	(563,583	)	$	45,376	$	270,727		$	2,061,651		$	(663	)	$	1,813,508



	Treasury Stock					Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
(In Thousands, Except Per Share)	Shares		Amount			Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
Balance, December 31, 2017	(20,733	)	$	(407,713	)	$	45,376	$	270,043		$	1,819,524		$	774		$	1,728,004
Opening Balance Sheet Adjustment - ASC 606, net of taxes	—		—			—		—			(1,729		)	—			(1,729		)
Cash Dividends, $0.03 per share	—		—			—		—			(2,146		)	—			(2,146		)
Stock-Based Compensation	—		—			—		7,862			—			—			7,862
Reissued Shares	545		3,441			—		(12,602		)	—			—			(9,161		)
Repurchased Shares	(391	)	(18,407		)	—		—			—			—			(18,407		)
Net Earnings	—		—			—		—			52,246			—			52,246
Foreign Currency Translation Adjustment	—		—			—		—			—			(477		)	(477		)
Balance, March 31, 2018	(20,579	)	$	(422,679	)	$	45,376	$	265,303		$	1,867,895		$	297		$	1,756,192