Aaron's, Inc. Announces Record Fourth Quarter and Year End Results

      Aaron's, Inc. Announces Record Fourth Quarter and Year End Results

- Total Revenues Up 9% for Quarter and 10% for Year

- Same Store Revenues Increase 4.6% for Quarter

- GAAP Diluted EPS of $.48 and $2.25 for Year

- Non-GAAP Diluted EPS Up 12% for Quarter and 17% for Year

PR Newswire

ATLANTA, Feb. 7, 2013

ATLANTA, Feb. 7, 2013 /PRNewswire/ --Aaron's, Inc. (NYSE: AAN), a leader in
the sales and lease ownership and specialty retailing of residential
furniture, consumer electronics, home appliances and accessories, today
announced record revenues and earnings for the three and twelve months ended
December 31, 2012.

For the fourth quarter of 2012, revenues increased 9% to $568.5 million
compared to $522.7 million for the fourth quarter in 2011. Net earnings were
$36.6 million versus $30.5 million last year. Diluted earnings per share were
$.48 compared to $.40 per share in 2011, up 20%.

For the year ended December 31, 2012, revenues increased 10% to $2.223 billion
compared to $2.022 billion in 2011. Net earnings were $173.0 million versus
$113.8 million a year ago. Diluted earnings per share were $2.25 for 2012
compared to $1.43 in 2011, a 57% increase.

During the third quarter of 2012, the Company recorded a $10.4 million, or
$.08 per diluted share, charge to earnings for costs associated with the
retirement of the Company's founder and Chairman of the Board. Additionally,
the Company accrued $36.5 million in the second quarter of 2011 related to a
lawsuit with a former Aaron's associate. In the first quarter of 2012, the
Company settled this lawsuit and reversed into income $35.5 million of this
charge. Also, in the fourth quarter of 2011, the Company incurred separation
costs of $3.5 million, or $.03 per diluted share, related to the departure of
its former Chief Executive Officer.

On a non-GAAP basis, excluding from all periods these charges and reversals,
net earnings for the fourth quarter of 2012 would have been $36.6 million
compared to $32.7 million for the same period in 2011, and earnings per share
assuming dilution would have been $.48 compared to $.43 a year ago, a 12%
increase. Additionally, non-GAAP net earnings for the year ended December 31,
2012 would have been $157.4 million compared to $138.6 million a year ago, up
14% over the same period in 2011, and earnings per share assuming dilution
would have been $2.04 versus $1.75 last year, a 17% increase.

"We are pleased with the Company's performance for the fourth quarter and year
ended 2012, both records in revenues and earnings," said Ronald W. Allen,
Chairman, President and Chief Executive Officer of Aaron's. "The results for
the year were the best in the Company's history and at the high end of our
initial expectations, including a 6.6% increase in store count. Customer
growth during the quarter and the year was excellent, as demand remains strong
for our high-quality, affordable basic home furnishings."

"During the fourth quarter of 2012, we offered a Black Friday promotion that
was extremely successful, giving customers the option of immediate delivery of
products with no payments until January," Mr. Allen continued. "We had an
excellent response to this promotion and delivered a record number of
agreements during the time period. The results far exceeded our expectations
and did cause a deferral of more revenue than anticipated until 2013 when
customers began paying for the merchandise. Although this revenue was not
recognized in 2012, we recorded the expense in the quarter associated with
executing the promotion."

"Our HomeSmart weekly rental business, which currently consists of 78
Company-operated stores and one franchised store, grew revenues during the
quarter to $14.8 million and for the year to $55.2 million. The division lost
approximately $.01 per diluted share in the quarter and $.06 per diluted share
for the year as the stores were growing and being developed. As we have
previously stated, there are no current plans to open a significant number of
additional HomeSmart stores until after the first half of this year. Under
new leadership we are making progress with this division and believe that the
HomeSmart performance will continue to improve in 2013," Mr. Allen concluded.

Same store revenues (revenues earned in Company-operated stores open for the
entirety of both quarters) increased 4.6% during the fourth quarter of 2012
compared to the fourth quarter of 2011, and customer count on a same store
basis was up 7.8%. For Company-operated stores open over two years at the end
of December 2012, same store revenues increased 3.1% during the fourth quarter
of 2012 compared to the fourth quarter of 2011. The Company had 1,134,000
customers and its franchisees had 604,000 customers at the end of the fourth
quarter of 2012, an 11.0% increase in total customers over the number at the
end of the fourth quarter a year ago (customers of our franchisees, however,
are not customers of Aaron's, Inc.).

During fiscal year 2012, the Company generated approximately $60 million of
cash flow from operations and had $130 million of cash on hand at the end of
December. The Company reacquired 1,236,689 shares during 2012 and has
authorization to purchase an additional 4,044,655 shares.

Division Results

The Aaron's Sales & Lease Ownership division increased its revenues in the
fourth quarter of 2012 to $539.8 million, an 8% increase over the $498.7
million in revenues in the fourth quarter of 2011. Sales and lease ownership
revenues for fiscal year 2012 increased 8% to $2.089 billion compared to
$1.939 billion for the same period a year ago.

Revenues of the HomeSmart division increased in the fourth quarter to $14.8
million, compared to $8.9 million in revenues in the fourth quarter of 2011.
HomeSmart revenues for the year ended December 31, 2012 were $55.2 million
versus $15.6 million for the same period a year ago.

Components of Revenue

Consolidated lease revenues and fees for the fourth quarter and year ended
December 31, 2012 increased 9% and 11%, respectively, over the comparable
previous year periods. In addition, franchise royalties and fees increased 7%
for the fourth quarter and 5% year to date compared to the same periods in
2011. Non-retail sales, which are primarily sales of merchandise to Aaron's
Sales & Lease Ownership franchisees, increased 8% to $126.8 million for the
fourth quarter of 2012 from $117.8 million in the comparable period in 2011,
and increased 10% to $425.9 million for the year compared to $389.0 million
last year. The increases in the Company's franchise royalties and fees and
non-retail sales are the result of an increase in revenues of the Company's
franchisees, who, collectively, had revenues of $241.9 million during the
fourth quarter and $975.6 million during the year ended December 31, 2012, a
7% increase, over both the prior year periods. Same store revenues and
customer counts for franchised stores increased 6.5% and 9.6%, respectively,
for the fourth quarter compared to the same quarter last year. Revenues and
customers of franchisees, however, are not revenues and customers of Aaron's,
Inc.

Store Count

During the fourth quarter of 2012, the Company opened 37 Company-operated
Aaron's Sales & Lease Ownership stores, 26 franchised stores and two RIMCO
stores. The Company also acquired two franchised stores and the accounts of
five third-party stores, sold one Company-operated Aaron's Sales and Lease
Ownership store to a franchisee, and opened one and closed one
Company-operated HomeSmart store. One Company-operated Aaron's Sales & Lease
Ownership store was closed during the quarter.

Through the three months and year ended December 31, 2012, the Company awarded
area development agreements to open nine and 45 additional franchised stores,
respectively. At December 31, 2012, there were area development agreements
outstanding for the opening of 180 franchised stores over the next several
years.

At December 31, 2012, the Company had 1,227 Company-operated Aaron's Sales &
Lease Ownership stores, 742 franchised Aaron's Sales & Lease Ownership stores,
78 Company-operated HomeSmart stores, one franchised HomeSmart store, 19
Company-operated RIMCO stores and six franchised RIMCO stores. The total
number of stores open at December 31, 2012 was 2,073.

First Quarter and Full Year 2013 Outlook

The Company is updating its guidance for 2013 and expects to achieve the
following:

  oFirst quarter revenues (excluding revenues of franchisees) of
    approximately $630 million.
  oFirst quarter diluted earnings per share in the range of $.70 to $.74 per
    share.
  oFiscal year 2013 revenues (excluding revenues of franchisees) of
    approximately $2.4 billion.
  oGAAP fiscal year 2013 diluted earnings per share in the range of $2.25 to
    $2.41, unchanged from previous guidance.
  oEPS guidance does not assume any additional significant repurchases of the
    Company's Common Stock.
  oNew store growth of approximately 4% to 6% over the store base at the end
    of 2012, for the most part an equal mix between Company-operated and
    franchised stores, and including a small number of HomeSmart stores. This
    will be a net store growth after any opportunistic merging or disposition
    of stores.
  oThe Company will continue, as warranted, to consolidate or sell stores not
    meeting performance goals.
  oThe Company also plans to continue to acquire franchised stores or sell
    Company-operated stores as opportunities present themselves.

Conference Call

Aaron's will hold a conference call to discuss its quarterly financial results
on Thursday, February 7, 2013, at 5:00 pm Eastern Time. The public is invited
to listen to the conference call by webcast accessible through the Company's
website, www.aaronsinc.com, in the "Investor Relations" section. The webcast
will be archived for playback at that same site.

Aaron's, Inc., based in Atlanta, currently has more than 2,073
Company-operated and franchised stores in 48 states and Canada. The Company's
Woodhaven Furniture Industries division manufactured approximately $95
million, at cost, of furniture and bedding at 14 facilities in seven states in
2012. The production of Woodhaven is for shipment to Aaron's stores.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995: Statements in this news release regarding Aaron's, Inc.'s business that
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, litigation, customer privacy, information security,
customer demand and other issues, and the other risks and uncertainties
discussed under "Risk Factors" in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2011. Statements in this release that are
"forward-looking" include without limitation Aaron's projected revenues,
earnings, and store openings for future periods.



Aaron's, Inc. and Subsidiaries
Consolidated Statements of Earnings
(In thousands, except per share amounts)


                                    (Unaudited)         (Unaudited)
                                    Three Months Ended  Twelve Months Ended
                                    December 31,        December 31,
                                    2012      2011      2012        2011


Revenues:
Lease Revenues and Fees             $411,827  $376,827  $1,676,391  $1,516,508
Retail Sales                        8,336     8,066     38,455      38,557
Non-Retail Sales                    126,755   117,806   425,915     388,960
Franchise Royalties and Fees        17,027    15,847    66,655      63,255
Other                               4,518     4,159     15,172      15,051
Total                               568,463   522,705   2,222,588   2,022,331


Costs and Expenses:
Retail Cost of Sales                4,599     4,581     21,719      22,738
Non-Retail Cost of Sales            116,214   107,027   389,357     353,745
Operating Expenses                  242,488   222,597   952,262     868,716
Lawsuit (Income) Expense          -         -         (35,500)    36,500
Retirement/Separation Charges       -         3,532     10,394      3,532
Depreciation of Lease                                            

 Merchandise                       147,300   135,327   604,650     550,732
Total                               510,601   473,064   1,942,882   1,835,963
Operating Profit                    57,862    49,641    279,706     186,368
Interest Income                     833       784       3,541       1,718
Interest Expense                    (1,503)   (1,686)   (6,392)     (4,709)
Earnings Before Income Taxes        57,192    48,739    276,855     183,377
Income Taxes                        20,560    18,205    103,812     69,610
Net Earnings                        $36,632   $30,534   $173,043    $113,767
Earnings Per Share                  $.48      $.40      $2.28       $1.46
Earnings Per Share Assuming         $.48      $.40      $2.25       $1.43
Dilution
Weighted Average Shares                                          

 Outstanding                      75,556    75,557    75,820      78,101
Weighted Average Shares                                          

 Outstanding Assuming Dilution    76,402    76,765    76,826      79,339



Selected Balance Sheet Data
(In thousands)
                                    (Unaudited)   December 31,
                                    December 31,  2011
                                    2012
Cash and Cash Equivalents           $  129,534  $  176,257
Investments                         85,861        98,132
Accounts Receivable, Net            74,157        87,471
Lease Merchandise, Net              964,067       862,276
Property, Plant and Equipment, Net  230,598       226,619
Other Assets, Net                   333,415       284,394
Total Assets                        1,817,632     1,735,149
Senior Notes                        125,000       137,000
Accrued Litigation Expense          -             41,720
Total Liabilities                   681,506       758,595
Shareholders' Equity                $1,136,126    $  976,554

Use of Non-GAAP Financial Information

This press release presents the Company's net earnings and diluted earnings
per share excluding: a $36.5 million charge recorded in the second quarter of
2011 related to a lawsuit verdict against the Company, and associated legal
fees and expenses, and the subsequent reversal into income of $35.5 million of
such charge in the first quarter of 2012 related to the settlement of that
lawsuit; a $10.4 million charge to earnings in the third quarter of 2012 for
costs associated with the retirement of the Company's founder and Chairman of
the Board; and a $3.5 million separation charge in the fourth quarter of 2011
related to the departure of the Company's former Chief Executive Officer.
These measures are not presented in accordance with generally accepted
accounting principles in the United States ("GAAP").

While the lawsuit may not be considered as non-recurring in nature in a
strictly accounting sense, management regards the circumstances of this
particular lawsuit as infrequent and not arising out of the ordinary course of
business. Similarly, while separation or retirement charges do arise,
management regards the size of the retirement and separation-related charges
for the particular individuals who departed – one, the Company's founder and
Chairman of the Board at retirement, and the other, its President and Chief
Executive Officer – as uncommon. The adjustments involve matters that are not
entirely susceptible to prediction or effective management, and consequently
management believes that presentation of net earnings and diluted earnings per
share excluding these adjustments is useful because it gives investors
supplemental information to evaluate and compare the performance of the
Company's underlying core business from period to period. Non-GAAP financial
measures, however, should not be used as a substitute for, or considered
superior to, measures of financial performance prepared in accordance with
GAAP, such as the Company's GAAP basis net earnings and diluted earnings per
share, which are also presented in the press release.



Reconciliation of Net Earnings and Earnings Per Share Assuming Dilution to
Non-GAAP Net Earnings and Earnings Per Share Assuming Dilution Excluding
Accrued Lawsuit (Income) Expense, Retirement Charge and Separation Charge
(In thousands, except earnings per share)


                                      (Unaudited)          (Unaudited)
                                      Three Months Ended   Twelve Months Ended
                                      December 31,         December 31,
                                      2012        2011     2012       2011

                                      $36,632     $30,534  $173,043   $113,767
Net Earnings
Add Back Accrued Lawsuit (Income)     -           -        (22,187)   22,645
Expense, Net of Taxes (1) (2)
Add Back Retirement/Separation        -           2,191    6,496      2,191
Charges, Net of Taxes (3) (4)
Non-GAAP Net Earnings Excluding
Accrued Lawsuit (Income) Expense and  $36,632     $32,725  $157,352   $138,603
Retirement/Separation Charges
Earnings Per Share Assuming Dilution  $.48        $.40     $2.25      $1.43
Add Back Accrued Lawsuit              -           -        (.29)      .29
(Income)Expense
Add Back                              -           .03      .08        0.03
Retirement/SeparationCharges
Non-GAAP Earnings Per Share Assuming  $.48        $.43     $2.04      $1.75
Dilution Excluding All Adjustments
Weighted Average Shares
                                      76,402      76,765   76,826     79,339
 Outstanding Assuming Dilution
            Net of taxes of $13,313 for the year ended December 31, 2012
(1)         calculated using the effective tax rate for the year ended
            December 31, 2012.
            Net of taxes of $13,855 for the year ended December 31, 2011
(2)         calculated using the effective tax rate for the year ended
            December 31, 2011.
            Net of taxes of $3,898 for the year ended December 31, 2012
(3)         calculated using the effective tax rate for the year ended
            December 31, 2012.
            Net of taxes of $1,341 for the three months and year ended
(4)         December 31, 2011 calculated using the effective tax rate for the
            year ended December 31, 2011.



SOURCE Aaron's, Inc.

Website: http://www.aaronrents.com
Contact: Gilbert L. Danielson, Executive Vice President, Chief Financial
Officer, +1-404-231-0011
 
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