-----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, JcZkspKicJv1r0WD4rhht7rZmX3ad5yYAAqACvMeMwlYNQbvFbEyfO0BlvxF6PiA itNRXLFZCub7bh+QRYtu+g== 0000931763-97-001375.txt : 19970814 0000931763-97-001375.hdr.sgml : 19970814 ACCESSION NUMBER: 0000931763-97-001375 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 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: 1934 Act SEC FILE NUMBER: 000-12385 FILM NUMBER: 97658629 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 June 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 August 7, 1997 - ------------------- -------------- Common Stock, $.50 Par Value 15,094,946 Class A Common Stock, $.50 Par Value 3,869,506 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS AARON RENTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(unaudited) June 30, December 31, 1997 1996 ------------- ------------- (in thousands) ASSETS: Cash $ 96 $ 84 Accounts Receivable 10,823 10,491 Rental Merchandise 216,721 210,516 Less: Accumulated Depreciation (63,167) (60,532) ------------- ------------- 153,554 149,984 Property, Plant and Equipment, Net 26,734 33,267 Prepaid Expenses and Other Assets 5,470 4,277 ------------- ------------- Total Assets $ 196,677 $ 198,103 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY: Accounts Payable and Accrued Expenses $ 22,495 $ 24,999 Dividends Payable 379 382 Deferred Income Taxes Payable 3,750 2,882 Customer Deposits and Advance Payments 7,132 7,140 Bank Debt 54,000 55,125 Other Debt 1,232 240 ------------- ------------- Total Liabilities 88,988 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 15,462 15,445 Retained Earnings 104,792 96,226 ------------- ------------- 131,020 122,437 Less: Treasury Shares at Cost, Common Stock, 1,081,541 Shares at June 30, 1997 and 415,941 Shares at December 31, 1996 (9,735) (2,315) Class A Common Stock, 1,492,255 Shares at June 30, 1997 and 1,418,855 Shares at December 31, 1996 (13,596) (12,787) ------------- ------------- Total Shareholders' Equity 107,689 107,335 ------------- ------------- Total Liabilities and Shareholders' Equity $ 196,677 $ 198,103 ============= =============
See Notes to Consolidated Financial Statements AARON RENTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
Three Months Ended Six Months Ended ------------------------- ------------------------- June 30, June 30, ------------------------- ------------------------- 1997 1996 1997 1996 ------------------------- ------------------------- (in thousands, except per share amounts) REVENUES: Rentals and Fees $ 58,006 $ 51,976 $ 115,021 $ 101,457 Retail Sales 14,355 12,837 29,423 25,751 Non-Retail Sales 3,709 1,811 6,680 3,404 Other 1,395 986 2,821 1,691 ---------- ---------- ---------- ---------- 77,465 67,610 153,945 132,303 ---------- ---------- ---------- ---------- COSTS AND EXPENSES: Retail Cost of Sales 10,444 8,984 21,528 18,018 Non-Retail Cost of Sales 3,458 1,724 6,241 3,213 Operating Expenses 37,086 33,812 74,136 65,882 Depreciation of Rental Merchandise 17,932 15,936 35,546 30,528 Interest 937 779 1,806 1,496 ---------- ---------- ---------- ---------- 69,857 61,235 139,257 119,137 ---------- ---------- ---------- ---------- EARNINGS BEFORE TAXES 7,608 6,375 14,688 13,166 INCOME TAXES 2,975 2,461 5,743 5,093 ---------- ---------- ---------- ---------- NET EARNINGS $ 4,633 $ 3,914 $ 8,945 $ 8,073 ========== ========== ========== ========== EARNINGS PER SHARE $ .24 $ .20 $ .45 $ .41 ---------- ---------- ---------- ---------- CASH DIVIDENDS DECLARED PER SHARE Common Stock $ .02 $ .02 $ .02 $ .02 ---------- ---------- ---------- ---------- Class A Common Stock $ .02 $ .02 $ .02 $ .02 ---------- ---------- ---------- ---------- WEIGHTED AVERAGE SHARES OUTSTANDING 19,443 20,027 19,715 19,931 ========== ========== ========== ==========
See Notes to Consolidated Financial Statements AARON RENTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended ---------------- June 30, -------- 1997 1996 ---------- ----------- (in thousands) OPERATING ACTIVITIES Net Earnings $ 8,945 $ 8,073 Depreciation and Amortization 38,682 33,451 Deferred Taxes 732 669 Change in Accounts Payable and Accrued Expenses 1,896 6,068 Change in Accounts Receivable (332) (1,269) Other Changes, Net (5,423) 1,141 ---------- ----------- Cash Provided by Operating Activities 44,500 48,133 ---------- ----------- INVESTING ACTIVITIES Additions to Property, Plant and Equipment (3,588) (7,319) Book Value of Property Retired or Sold 6,985 506 Additions to Rental Equipment (67,655) (65,894) Book Value of Rental Equipment Sold 28,674 20,721 Contracts and Other Assets Acquired (177) (1,744) ---------- ----------- Cash Used by Investing Activities (35,761) (53,730) ---------- ----------- FINANCING ACTIVITIES Proceeds from Revolving Credit Agreement 49,880 41,429 Repayments on Revolving Credit Agreement (51,005) (33,555) Increase of Other Debt 992 735 Dividends Paid (382) (365) Acquisition of Treasury Stock (8,378) (2,785) Issuance of Stock Under Stock Option Plan 166 136 ---------- ----------- Cash (used) provided by financing activities (8,727) 5,595 ---------- ----------- Increase (decrease) in Cash 12 (2) Cash at Beginning of Year 84 98 ---------- ----------- Cash at End of Period $ 96 $ 96 ========== ===========
See Notes to Consolidated Financial Statements 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 June 30, 1997, and the Consolidated Statements of Earnings and Cash Flows for the six months ended June 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 June 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 June 30, 1997 are not necessarily indicative of the operating results for the full year. 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 JUNE 30, 1997, COMPARED TO THE QUARTER ENDED JUNE 30, 1996: Total revenues for the second quarter of 1997 increased $9.9 million (14.6%) to $77.5 million compared to $67.6 million for the same period a year ago. This increase in revenues was primarily due to a $6.0 million (11.6%) increase in rentals and fees revenues. Of this increase in rental revenues, $4.2 million was attributable to Aaron's Rental Purchase stores, which increased 16.5% to $29.9 million compared to $25.7 million last year. Rental revenues from the Company's rent-to-rent operations increased $1.8 million (6.8%) to $28.0 million compared to $26.2 million during the same period a year ago. Retail sales, increased $1.5 million (11.8%) to $14.4 million compared to $12.8 million last year. The $1.5 million increase in retail sales was due to an increase in retail sales for the rent-to-rent division of $1.3 million and an increase in retail sales of $179,000 for the rental purchase division. Non-retail sales, which primarily represent wholesale sales to Aaron's Rental Purchase franchisees, increased $1.9 million (104.8%) to $3.7 million compared to $1.8 million for the same period last year. The increased sales are due to the growth of the franchise operations. Other revenue increased $409,000 (41.5%) to $1.4 million compared to $986,000 last year. Included in other revenues is an increase of $316,000 in franchise and royalty fee income due to a net increase of 31 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 $671,000 compared with $355,000 for the same period last year. Retail cost of sales increased $1.5 million (16.3%) to $10.4 million compared to $9 million last year, and as a percentage of retail sales, increased to 72.8% from 70.0% primarily due to lower margin sales in the rent-to-rent division. Non-retail cost of sales increased $1.7 million (100.6%) to $3.5 million from $1.7 million last year, and as a percentage of sales, decreased to 93.2% from 95.2%. The decrease in cost of sales as a percentage of sales is due to a higher margins on sales from the Company's manufacturing operation to other furniture retailers during the second quarter of 1997. Operating expenses increased $3.3 million (9.7%) to $37.1 million from $33.8 million last year. As a percentage of total revenues, operating expenses decreased to 47.9% from 50.0% for the same period a year ago. The decline in operating expenses as a percenage of total revenue is due to revenues increasing faster than expenses. Depreciation of rental merchandise increased $2.0 million (12.5%) to $17.9 million compared to $15.9 million last year, and as a percentage of total rentals and fees, increased slightly to 30.9% versus 30.7% for the same period in 1996. Interest expense increased $158,000 (20.3%) to $937,000 compared to $779,000 last year. As a percentage of total revenues, interest was 1.2% for both periods due primarily to the stability of interest rates during the quarters. Income tax expense increased $514,000 (20.9%) to $3.0 million compared to $2.5 million last year, and the Company's effective tax rate was 39.1% for the quarter versus 38.6% for the same period in 1996 due to higher state income taxes. As a result, net earnings increased $719,000 (18.4%) to $4.6 million in the second quarter of 1997 compared to $3.9 million for the same period in 1996. As a percentage of total revenues, net earnings increased to 6.0% in the current quarter as compared to 5.8% for the same period last year. The weighted average number of shares outstanding during the second quarter of 1997 was 19,443,000 compared to 20,027,000 for the same period last year. Prior year weighted average shares outstanding have been restated to reflect the June, 1996 100% stock dividend. SIX MONTHS ENDED JUNE 30, 1997, COMPARED TO SIX MONTHS ENDED JUNE 30, 1996: Total revenues for the first six months of 1997 increased $21.6 million (16.4%) to $153.9 million compared to $132.3 million for the same period a year ago. This increase in revenues was primarily due to a $13.6 million (13.4%) increase in rentals and fees revenues and $3.7 million (14.3%) increase in retail sales. Of this increase in rental revenues, $9.3 million was attributable to Aaron's Rental Purchase stores, which increased 18.8% to $58.6 million compared to $49.3 million last year. Rental revenues from the Company's rent-to-rent operations increased $4.3 million (8.2%) to $56.4 million compared to $52.1 million for the same period last year. The $3.7 million increase in retail sales was due to an increase in retail sales for the rent-to-rent division of $3.3 million and an increase in retail sales of $344,000 for the rental purchase division. Non-retail sales, which primarily represent wholesale sales to Aaron's Rental Purchase franchisees, increased $3.3 million (96.2%) to $6.7 million compared to $3.4 million for the same period last year. The increased sales are due to the growth of the franchise operations. Other revenue increased $1.1 million (66.8%) to $2.8 million compared to $1.7 million last year. Included in other revenues is an increase of $562,000 in franchise and royalty fee income due to a net increase of 31 franchise stores compared to a year ago as well as older franchise stores gaining in revenue. This income for the six month period was $1.3 million compared with $697,000 for the same period last year. Retail cost of sales increased $3.5 million (19.5%) to $21.5 million compared to $18.0 million and as a percentage of retail sales, increased to 73.2% from 70% primarily due to lower margin sales in the rent-to-rent division. Non-retail cost of sales increased $3 million (94.2%) to $6.2 million from $3.2 million last year, and as a percentage of sales, decreased to 93.4% from 94.4%. The decrease in cost of sales as a percentage of sales is due to a higher margins on sales from the Company's manufacturing operation to other furniture retailers during the second quarter of 1997. Operating expenses increased $8.3 million (12.5%) to $74.1 million from $65.9 million. As a percentage of total revenues, operating expenses decreased to 48.2% from 49.8% for the same period a year ago. Depreciation of rental merchandise increased $5.0 million (16.4%) to $35.5 million compared to $30.5 million and, as a percentage of total rentals and fees, increased to 30.9% from 30.1% for the same period last year. Interest expense increased $310,000 (20.7%) to $1.8 million. As a percentage of total revenues, interest expense increased slightly to 1.2% from 1.1% due to the stability of interest rates during the two six month periods. Income tax expense increased $650,000 (12.8%) to $5.7 million compared to $5.1 million, and the Company's effective tax rate was 39.1% for the current six month period versus 38.7% for the same period in 1996 due to higher state income tax rates. As a result, net earnings increased $872,000 (10.8%) to $8.9 million in first six months of 1997 compared to $8.1 million for the same period in 1996. As a percentage of total revenues, net earnings decreased to 5.8% in the first six months as compared to 6.1% for the same period last year. The weighted average number of shares outstanding during the first six months of 1997 was 19,715,000 compared to 19,931,000 for the same period last year. Prior year weighted average shares outstanding have been restated to reflect the June, 1996 100% stock dividend. 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. 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. 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 June 30, 1997. 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 - August 12, 1997 /s/ Gilbert L. Danielson ----------------- --------------------------- Gilbert L. Danielson Vice President, Finance Chief Financial Officer Date - August 12, 1997 /s/ Robert P. Sinclair, Jr. ----------------- --------------------------- Robert P. Sinclair, Jr. Corporate Controller EX-11 2 COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11 COMPUTATION OF EARNINGS PER SHARE
Three Months Ended Six Months Ended -------------------- ---------------- June 30 June 30 -------------------- ---------------- 1997 1996 1997 1996 -------------------- ---------------- (in thousands, except per share data) Primary: Net Income $ 4,633 $ 3,914 $ 8,945 $ 8,073 ======== ======= ======= ======= Weighted average number of common shares outstanding 19,103 19,061 19,377 19,110 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 340 966 338 821 -------- ------- ------- ------- Weighted average number of common and common equivalent shares 19,443 20,027 19,715 19,931 -------- ------- ------- ------- Primary earnings per share $ .24 $ .20 $ .45 $ .41 ======== ======= ======= ======= Fully diluted: Weighted average number of common and common equivalent shares 19,443 20,027 19,715 19,931 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 126 0 65 0 -------- ------- ------- ------- Weighted average number of common shares fully diluted 19,569 20,027 19,780 19,931 -------- ------- ------- ------- Fully diluted earnings per share * $ 0.24 $ 0.20 $ 0.45 $ 0.41 ======== ======= ======= =======
*Not presented in Financial Statements since dilutive effect is less than 3%. **Prior year earnings per share and weighted average shares have been restated to reflect the June, 1996 2 for 1 stock dividend. EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 96 0 10,823 0 153,554 0 26,734 0 196,677 0 0 0 0 10,766 96,923 196,677 18,038 76,480 13,866 68,531 0 0 1,806 14,688 5,743 8,945 0 0 0 8,945 .45 .45 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 63,167 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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