-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DHwZdEnO28KIwinhhCVjNw1nLETEFZQTPebXDvSAJ1Dpqtg278a5vrxNssjMLwR2 ePSkCRwU+ThBRvJTD1KO1g== 0000931763-97-001933.txt : 19971114 0000931763-97-001933.hdr.sgml : 19971114 ACCESSION NUMBER: 0000931763-97-001933 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AARON RENTS INC CENTRAL INDEX KEY: 0000706688 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 580687630 STATE OF INCORPORATION: GA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-12385 FILM NUMBER: 97714990 BUSINESS ADDRESS: STREET 1: 3001 N FULTON DR NE STREET 2: 1100 AARON BLDG CITY: ATLANTA STATE: GA ZIP: 30363 BUSINESS PHONE: 4042310011 MAIL ADDRESS: STREET 1: 309 E. PACES FERRY ROAD., N.E. STREET 2: 3001 N FULTON DRIVE NE CITY: ATLANTA STATE: GA ZIP: 30305-2377 10-Q 1 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Quarterly Report under Section 13 or 15 (d) of the Securities Exchange Act of l934 September 30, 1997 0-12385 - ------------------ ------- For Quarter Ended Commission File No. AARON RENTS, INC. ----------------- (Exact name of registrant as specified in its charter) Georgia 58-0687630 ------- ---------- (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) 309 E. Paces Ferry Road, N.E. Atlanta, Georgia 30305-2377 ---------------- ---------- (Address of principal executive offices) (Zip Code) (404) 231-0011 -------------- (Registrant's telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether registrant (l) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of l934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X ----- No ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Shares Outstanding as of Title of Each Class November 10, 1997 ------------------- ----------------- Common Stock, $.50 Par Value 15,112,946 Class A Common Stock, $.50 Par Value 3,836,506 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS AARON RENTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited) September 30, December 31, 1997 1996 ------------- ------------ (in thousands) ASSETS: Cash $ 98 $ 84 Accounts Receivable 11,488 10,491 Rental Merchandise 222,115 210,516 Less: Accumulated Depreciation (67,577) (60,532) -------- -------- 154,538 149,984 Property, Plant and Equipment, Net 31,076 33,267 Prepaid Expenses and Other Assets 4,154 4,277 -------- -------- Total Assets $201,354 $198,103 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY: Accounts Payable and Accrued Expenses $ 25,637 $ 24,999 Dividends Payable 382 Deferred Income Taxes Payable 4,725 2,882 Customer Deposits and Advance Payments 7,179 7,140 Bank Debt 50,840 55,125 Other Debt 828 240 -------- -------- Total Liabilities 89,209 90,768 Shareholders' Equity: Common Stock, Par Value $.50 Per Share; Authorized: 25,000,000 Shares; Shares Issued: 16,170,987 8,085 8,085 Common Stock, Class A, Par Value $.50 Per Share; Authorized: 25,000,000 Shares; Shares Issued: 5,361,761 2,681 2,681 Additional Paid in Capital 15,476 15,445 Retained Earnings 109,597 96,226 -------- -------- 135,839 122,437 Less: Treasury Shares at Cost, Common Stock, 1,062,041 Shares at September 30, 1997 and 415,941 Shares at December 31, 1996 (9,559) (2,315) Class A Common Stock, 1,525,255 Shares at September 30, 1997 and 1,418,855 Shares at December 31, 1996 (14,135) (12,787) -------- -------- Total Shareholders' Equity 112,145 107,335 -------- -------- Total Liabilities and Shareholders' Equity $201,354 $198,103 ======== ======== See Notes to Consolidated Financial Statements 2 AARON RENTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) Three Months Ended Nine Months Ended -------------------- -------------------- September 30, September 30, -------------------- -------------------- 1997 1996 1997 1996 -------------------- -------------------- (in thousands, except per share amounts) REVENUES: Rentals and Fees $ 56,940 $ 54,230 $171,961 $155,687 Retail Sales 15,068 13,857 44,491 39,608 Non-Retail Sales 2,625 1,930 9,305 5,334 Other 1,605 1,207 4,426 2,898 -------- -------- -------- -------- 76,238 71,224 230,183 203,527 -------- -------- -------- -------- COSTS AND EXPENSES: Retail Cost of Sales 10,662 10,160 32,190 28,178 Non-Retail Cost of Sales 2,491 1,856 8,732 5,069 Operating Expenses 36,796 35,377 110,932 101,259 Depreciation of Rental Merchandise 17,484 16,728 53,030 47,256 Interest 922 905 2,728 2,401 -------- -------- -------- -------- 68,355 65,026 207,612 184,163 -------- -------- -------- -------- EARNINGS BEFORE TAXES 7,883 6,198 22,571 19,364 INCOME TAXES 3,078 2,411 8,821 7,504 -------- -------- -------- -------- NET EARNINGS $ 4,805 $ 3,787 $ 13,750 $ 11,860 ======== ======== ======== ======== EARNINGS PER SHARE $ .25 $ .19 $ .70 $ .59 -------- -------- -------- -------- CASH DIVIDENDS DECLARED PER SHARE Common Stock $ $ $ .02 $ .02 -------- -------- -------- -------- Class A Common Stock $ $ $ .02 $ .02 -------- -------- -------- -------- WEIGHTED AVERAGE SHARES OUTSTANDING 19,548 20,027 19,659 19,962 ======== ======== ======== ======== See Notes to Consolidated Financial Statements 3 AARON RENTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended ------------------------- September 30, ------------------------- 1997 1996 -------- --------- (in thousands) OPERATING ACTIVITIES Net Earnings $13,750 $11,860 Depreciation and Amortization 57,709 48,088 Deferred Income Taxes 1,843 (1,381) Change in Accounts Payable and Accrued Expenses 638 2,188 Change in Accounts Receivable (997) (1,765) Other Changes, Net 204 1,349 -------- -------- Cash Provided by Operating Activities 73,147 60,339 -------- -------- INVESTING ACTIVITIES Additions to Property, Plant and Equipment (8,486) (13,319) Book Value of Property Retired or Sold 6,016 874 Additions to Rental Equipment (100,219) (98,597) Book Value of Rental Equipment Sold 42,752 37,645 Contracts and Other Assets Acquired (177) (1,744) -------- -------- Cash Used by Investing Activities (60,114) (75,141) -------- -------- FINANCING ACTIVITIES Proceeds from Revolving Credit Agreement 72,202 63,669 Repayments on Revolving Credit Agreement (76,487) (45,890) Increase in Other Debt 588 383 Dividends Paid (761) (747) Acquisition of Treasury Stock (8,918) (2,785) Issuance of Stock Under Stock Option Plan 357 173 -------- -------- Cash (used) Provided by Financing Activities (13,019) 14,803 -------- -------- Increase in Cash 14 1 Cash at Beginning of Year 84 98 -------- -------- Cash at End of Period $ 98 $ 99 ======== ======== See Notes to Consolidated Financial Statements 4 AARON RENTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Principles of Consolidation: - ---------------------------- The consolidated financial statements include the accounts of Aaron Rents, Inc. ("the Company") and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Interim Financial Statements: - ----------------------------- The Consolidated Balance Sheet as of September 30, 1997, and the Consolidated Statements of Earnings and Cash Flows for the nine months ended September 30, 1997 and 1996, have been prepared without audit. In the opinion of management, all adjustments necessary to present fairly the financial position, results of operations and cash flows at September 30, 1997 and for all periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1996. The results of operations for the period ended September 30, 1997 are not necessarily indicative of the operating results for the full year. 5 PART I - FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS: - --------------------- THE QUARTER ENDED SEPTEMBER 3O, 1997, COMPARED TO THE QUARTER ENDED SEPTEMBER 30, 1996: Total revenues for the third quarter of 1997 increased $5.0 million (7.0%) to $76.2 million compared to $71.2 million for the same period a year ago. This increase in revenues was primarily due to a $2.7 million (5.0%) increase in rentals and fees revenues. Of this increase in rental revenues, $4.4 million was attributable to Aaron's Rental Purchase stores, which increased 17.1% to $30.0 million compared to $25.7 million last year. Rental revenues from the Company's rent-to-rent operations decreased $1.7 million (5.8%) to $26.9 million compared to $28.6 million during the same period a year ago. The decrease in rent-to-rent rental revenues is due to over $2 million in Summer Olympic Games related revenues being included in the third quarter of 1996. Retail sales, increased $1.2 million (8.7%) to $15.1 million compared to $13.9 million last year. The $1.2 million increase in retail sales was due to an increase in retail sales for the rent-to-rent division of $684,000 and an increase in retail sales of $527,000 for the rental purchase division. Non-retail sales, which primarily represent wholesale sales to Aaron's Rental Purchase franchisees, increased $695,000 (36.0%) to $2.6 million compared to $1.9 million for the same period last year. The increased sales are due to the growth of the franchise operations. Other revenue increased $398,000 (33.0%) to $1.6 million compared to $1.2 million last year. Included in other revenues is an increase of $416,000 (52.1%) in franchise and royalty fee income due to a net increase of 32 franchised stores compared to a year ago, as well as older franchised stores gaining in revenues. Franchise and royalty fee income for the current quarter was $1.2 million compared with $797,000 for the same period last year. Retail cost of sales increased $502,000 (4.9%) to $10.7 million compared to $10.2 million last year and, as a percentage of retail sales, decreased to 70.8% from 73.3% due to increased margins on sales in both the rent-to-rent and rental purchase divisions. Non-retail cost of sales increased $635,000 (34.2%) to $2.5 million from $1.9 million last year, and as a percentage of non-retail sales, decreased to 94.9% from 96.2%. The decrease in non-retail cost of sales as a percentage of non- retail sales is due to a higher margins on sales from the Company's manufacturing operation to other furniture retailers during the third quarter of 1997. Operating expenses increased $1.4 million (4.0%) to $36.8 million from $35.4 million last year. As a percentage of total revenues, operating expenses decreased to 48.3% from 49.7% for the same period a year ago. The decline in operating expenses as a percentage of total revenues is due to the leveraging of such expenses over a larger revenue base. 6 Depreciation of rental merchandise increased $756,000 (4.5%) to $17.5 million compared to $16.7 million last year, and as a percentage of total rentals and fees, decreased slightly to 30.7% versus 30.8% for the same period in 1996. Interest expense increased $17,000 (1.9%) to $922,000 compared to $905,000 last year. As a percentage of total revenues, interest decreased slightly to 1.2% compared to 1.3% for the same period in 1996. The slight increase in interest expense was due to the effect of lower debt being offset by higher interest rates. Income tax expense increased $667,000 (27.7%) to $3.1 million compared to $2.4 million last year, and the Company's effective tax rate was 39.0% for the quarter versus 38.9% for the same period in 1996 due to higher state income taxes. As a result, net eamings increased $1.0 million (26.9%) to $4.8 million in the third quarter of 1997 compared to $3.8 million for the same period in 1996. As a percentage of total revenues, net earnings increased to 6.3% in the current quarter as compared to 5.3% for the same period last year. The weighted average number of shares outstanding during the third quarter of 1997 was 19,548,000 compared to 20,027,000 for the same period last year. NINE MONTHS ENDED SEPTEMBER 30, 1997, COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1996: Total revenues for the first nine months of 1997 increased $26.7 million (13.1%) to $230.2 million compared to $203.5 million for the same period a year ago. This increase in revenues was primarily due to a $16.3 million (10.5%) increase in rentals and fees revenues and $4.9 million (12.3%) increase in retail sales. Of this increase in rental revenues, $13.7 million was attributable to Aaron's Rental Purchase stores, which increased 18.2% to $88.7 million compared to $75.0 million last year. Rental revenues from the Company's rent-to-rent operations increased $2.6 million (3.2%) to $83.3 million compared to $80.7 million for the same period last year. The $4.9 million increase in retail sales was due to an increase in retail sales for the rent-to-rent division of $4.0 million (10.8%) and an increase in retail sales of $870,000 (35.5%) for the rental purchase division. Non-retail sales, which primarily represent wholesale sales to Aaron's Rental Purchase franchisees, increased $4.0 million (74.4%) to $9.3 million compared to $5.3 million for the same period last year. The increased non-retail sales are due to the growth of the franchise operations. Other revenue increased $1.5 million (52.7%) to $4.4 million compared to $2.9 million last year. Included in other revenues is an increase of $1.1 million (62.4%) in franchise and royalty fee income due to a net increase of 32 franchise stores compared to a year ago as well as older franchise stores gaining in revenue. This income for the nine month period was $2.9 million compared with $1.8 million for the same period last year. 7 Retail cost of sales increased $4.0 million (14.2%) to $32.2 million compared to $28.2 million and as a percentage of retail sales, increased to 72.4% from 71.1% primarily due to lower margin sales in the rent-to-rent division. Non-retail cost of sales increased $3.7 million (72.3%) to $8.7 million from $5.1 million last year, and as a percentage of non-retail sales, decreased to 93.8% from 95.0%. The decrease in non-retail cost of sales as a percentage of non-retail sales is due to a higher margins on sales from the Company's manufacturing operation to other furniture retailers during the first nine months of 1997. Operating expenses increased $9.7 million (9.6%) to $110.9 million from $101.3 million. As a percentage of total revenues, operating expenses decreased to 48.2% from 49.8% for the same period a year ago. The decline in operating expenses as a percentage of total revenues is due to revenues increasing faster than expenses. Depreciation of rental merchandise increased $5.8 million (12.2%) to $53.0 million compared to $47.3 million and, as a percentage of total rentals and fees, increased to 30.8% from 30.4% for the same period last year. Interest expense increased $327,000 (13.6%) to $2.7 million compared to $2.4 million last year. As a percentage of total revenues, interest expense was 1.2% for both periods. The stability in interest expense was due to higher interest rates being offset by lower debt levels. Income tax expense increased $1.3 million (17.6%) to $8.8 million compared to $7.5 million, and the Company's effective tax rate was 39.1% for the current nine month period versus 38.8% for the same period in 1996 due to higher state income tax rates. As a result, net earnings increased $1.9 million (15.9%) to $13.8 million in first nine months of 1997 compared to $11.9 million for the same period in 1996. As a percentage of total revenues, net earnings increased to 6.0% in the first nine months as compared to 5.8% for the same period last year. The weighted average number of shares outstanding during the first nine months of 1997 was 19,659,000 compared to 19,994,000 for the same period last year. LIQUIDITY AND CAPITAL RESOURCES: - -------------------------------- On May 6, 1997, the Company declared a semi-annual dividend payable on July 8, 1997 of $.02 per share on both Common Stock and Class A Common Stock. In February of 1997, the Company's Board of Directors authorized the purchase of 1,000,000 shares of the Company's Common Stock and Class A Common Stock. During the first nine months of 1997 795,000 shares at an aggregate cost of $8.9 million had been purchased. Management believes its expected cash flow from operations, proceeds from the sale of rental return merchandise, bank borrowings, and vendor credit are adequate to supply short-term capital needs, and that it has the ability to obtain additional long-term capital if needed. 8 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of l934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AARON RENTS, INC. (Registrant) Date - November 11, 1997 ------------------- /s/Gilbert L. Danielson -------------------------- Gilbert L. Danielson Vice President, Finance Chief Financial Officer Date - November 11, 1997 ------------------- /s/Robert P. Sinclair, Jr. -------------------------- Robert P. Sinclair, Jr. Corporate Controller 9 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K: (a) The following exhibits are furnished herewith: Exhibit Number Description of Exhibit ------- ---------------------- 11 Computation of Earnings Per Share 27 Financial Data Schedule (b) No reports on Form 8-K were filed by the Registrant during the three months ended September 30, 1997. 10 EX-11 2 COMPUTATION OF EARNINGS PER SHARE
EXHIBIT 11 COMPUTATION OF EARNINGS PER SHARE Three Months Ended Nine Months Ended ---------------------- --------------------- September 30 September 30 ---------------------- --------------------- 1997 1996 1997 1996 ---------- ----------- ---------- ---------- (in thousands, except per share data) Primary: Net Income $ 4,805 $ 3,787 $ 13,750 $ 11,860 ========== ========== ========== ========= Weighted average number of common shares outstanding 18,963 19,029 19,238 19,083 Add: Dilutive effect of outstanding options, as determined by the application of the treasury stock method using the average market price of the Company's common stock 585 998 421 879 ---------- ---------- ---------- ---------- Weighted average number of common and common equivalent shares 19,548 20,027 19,659 19,962 ---------- ---------- ---------- ---------- Primary earnings per share $ .25 $ .19 $ .70 $ .59 ========== ========== ========== ========== Fully diluted: Weighted average number of common and common equivalent shares 19,548 20,027 19,657 19,962 Add: Additional dilutive effect of outstanding options, as determined by the application of the treasury stock method using the quarter end market price of the Company's common stock 61 0 62 1 ---------- ---------- ---------- ---------- Weighted average number of common shares fully diluted 19,609 20,027 19,721 19,963 ---------- ---------- ---------- ---------- Fully diluted earnings per share * $ 0.25 $ 0.19 $ 0.70 $ 0.59 ========== ========== ========== ==========
*Not presented in Financial Statements since dilutive effect is less than 3%. EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 98 0 11,488 0 154,538 0 31,076 0 201,354 0 0 0 0 10,766 101,379 201,354 53,796 230,183 40,922 163,962 0 0 2,728 22,571 8,821 13,750 0 0 0 13,750 .70 .70 The allowance of doubtful accounts is netted against total accounts receivable in the Accounts Receivable balance. Rental merchandise has been classified as inventory for purposes of this schedule. Rental merchandise has been shown net of 67,577 accumulated depreciation. The financial statements are presented with an unclassified balance sheet. PP&E has been shown net of accumulated depreciation.
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