Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Nov. 02, 2015 | |
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2015 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q3 | |
Trading Symbol | AAN | |
Entity Registrant Name | AARON'S INC | |
Entity Central Index Key | 706,688 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 72,592,731 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
ASSETS: | ||
Cash and Cash Equivalents | $ 66,912 | $ 3,549 |
Investments | 22,334 | 21,311 |
Accounts Receivable (net of allowances of $36,253 in 2015 and $27,401 in 2014) | 85,224 | 107,383 |
Lease Merchandise (net of accumulated depreciation of $734,934 in 2015 and $701,822 in 2014) | 1,052,615 | 1,087,032 |
Property, Plant and Equipment at Cost (net of accumulated depreciation of $219,862 in 2015 and $216,065 in 2014) | 212,217 | 219,417 |
Goodwill | 536,121 | 530,670 |
Other Intangibles (net of accumulated amortization of $52,218 in 2015 and $33,250 in 2014) | 279,187 | 297,471 |
Income Tax Receivable | 12,997 | 124,095 |
Prepaid Expenses and Other Assets | 60,525 | 59,560 |
Assets Held For Sale | 7,542 | 6,356 |
Total Assets | 2,335,674 | 2,456,844 |
LIABILITIES & SHAREHOLDERS’ EQUITY: | ||
Accounts Payable and Accrued Expenses | 268,521 | 270,421 |
Accrued Regulatory Expense | 11,280 | 27,200 |
Deferred Income Taxes Payable | 162,764 | 268,551 |
Customer Deposits and Advance Payments | 55,586 | 61,069 |
Debt | 494,161 | 606,082 |
Total Liabilities | $ 992,312 | $ 1,233,323 |
Commitments and Contingencies | ||
Shareholders’ Equity: | ||
Common Stock, Par Value $.50 Per Share: Authorized: 225,000,000 Shares at September 30, 2015 and December 31, 2014; Shares Issued: 90,752,123 at September 30, 2015 and December 31, 2014 | $ 45,376 | $ 45,376 |
Additional Paid-in Capital | 236,620 | 227,290 |
Retained Earnings | 1,383,208 | 1,274,233 |
Accumulated Other Comprehensive Loss | (222) | (90) |
Stockholders' Equity before Treasury Stock, Total | 1,664,982 | 1,546,809 |
Less: Treasury Shares at Cost, Common Stock: 18,174,923 Shares at June 30, 2015 and 18,263,589 at December 31, 2014 | (321,620) | (323,288) |
Total Shareholders’ Equity | 1,343,362 | 1,223,521 |
Total Liabilities & Shareholders’ Equity | $ 2,335,674 | $ 2,456,844 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowances | $ 36,253 | $ 27,401 |
Lease Merchandise, Accumulated depreciation | 734,934 | 701,822 |
Property, Plant and Equipment at Cost, accumulated depreciation and amortization | 219,862 | 216,065 |
Other Intangibles, accumulated amortization | $ 52,218 | $ 33,250 |
Common Stock, Par Value (in dollars per share) | $ 0.50 | $ 0.50 |
Common Stock, Shares Authorized | 225,000,000 | 225,000,000 |
Common Stock, Shares Issued | 90,752,123 | 90,752,123 |
Treasury Shares | 18,160,832 | 18,263,589 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Earnings - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
REVENUES: | ||||
Lease Revenues and Fees | $ 661,856 | $ 594,455 | $ 2,017,610 | $ 1,606,765 |
Retail Sales | 6,988 | 8,094 | 26,055 | 31,023 |
Non-Retail Sales | 81,708 | 78,503 | 262,194 | 254,021 |
Franchise Royalties and Fees | 15,574 | 15,838 | 48,069 | 50,147 |
Other | 1,568 | 1,528 | 4,629 | 4,375 |
Revenues, Total | 767,694 | 698,418 | 2,358,557 | 1,946,331 |
COSTS AND EXPENSES: | ||||
Depreciation of Lease Merchandise | 302,029 | 260,819 | 912,377 | 661,446 |
Retail Cost of Sales | 4,537 | 5,409 | 17,090 | 19,900 |
Non-Retail Cost of Sales | 73,567 | 71,403 | 236,882 | 230,537 |
Operating Expenses | 345,514 | 325,148 | 998,989 | 898,963 |
Financial Advisory and Legal Costs | 0 | 385 | 0 | 13,661 |
Restructuring Expenses | 0 | 6,876 | 0 | 9,140 |
Retirement and Vacation Charges | 0 | 9,094 | 0 | 9,094 |
Progressive-Related Transaction Costs | 0 | 371 | 0 | 6,638 |
Regulatory Income | 0 | (1,200) | 0 | (1,200) |
Other Operating Income, Net | (962) | (197) | (2,145) | (869) |
Costs and Expenses, Total | 724,685 | 678,108 | 2,163,193 | 1,847,310 |
OPERATING PROFIT | 43,009 | 20,310 | 195,364 | 99,021 |
Interest Income | 483 | 634 | 1,714 | 2,461 |
Interest Expense | (5,524) | (6,162) | (17,115) | (13,174) |
Other Non-Operating Expense, Net | (1,412) | (1,583) | (1,223) | (837) |
EARNINGS BEFORE INCOME TAXES | 36,556 | 13,199 | 178,740 | 87,471 |
INCOME TAXES | 12,362 | 3,904 | 64,757 | 31,332 |
NET EARNINGS | $ 24,194 | $ 9,295 | $ 113,983 | $ 56,139 |
EARNINGS PER SHARE | ||||
Basic (in dollars per share) | $ 0.33 | $ 0.13 | $ 1.57 | $ 0.78 |
Assuming Dilution (in dollars per share) | 0.33 | 0.13 | 1.56 | 0.77 |
CASH DIVIDENDS DECLARED PER SHARE: | ||||
Common Stock (in dollars per share) | $ 0.023 | $ 0.021 | $ 0.069 | $ 0.063 |
WEIGHTED AVERAGE SHARES OUTSTANDING: | ||||
Basic (in shares) | 72,586 | 72,340 | 72,558 | 72,350 |
Assuming Dilution (in shares) | 73,076 | 72,660 | 72,966 | 72,713 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Statement of Comprehensive Income [Abstract] | ||||
Net Earnings | $ 24,194 | $ 9,295 | $ 113,983 | $ 56,139 |
Other Comprehensive Income: | ||||
Foreign Currency Translation Adjustment | (156) | (26) | (132) | (19) |
Total Other Comprehensive Income | (156) | (26) | (132) | (19) |
Comprehensive Income | $ 24,038 | $ 9,269 | $ 113,851 | $ 56,120 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
OPERATING ACTIVITIES: | ||
Net Earnings | $ 113,983 | $ 56,139 |
Adjustments to Reconcile Net Earnings to Cash Provided by Operating Activities: | ||
Depreciation of Lease Merchandise | 912,377 | 661,446 |
Other Depreciation and Amortization | 59,659 | 63,087 |
Bad Debt Expense | 117,898 | 62,169 |
Stock-Based Compensation | 10,692 | 8,756 |
Deferred Income Taxes | (106,122) | (91,376) |
Other Changes, Net | (3,835) | 2,011 |
Changes in Operating Assets and Liabilities, Net of Effects of Acquisitions and Dispositions: | ||
Additions to Lease Merchandise | (1,234,441) | (1,006,652) |
Book Value of Lease Merchandise Sold or Disposed | 354,240 | 317,793 |
Accounts Receivable | (99,849) | (55,627) |
Prepaid Expenses and Other Assets | (861) | (3,654) |
Income Tax Receivable | 111,098 | (7,001) |
Accounts Payable and Accrued Expenses | 382 | (10,703) |
Accrued Regulatory Expense | (15,920) | (1,200) |
Customer Deposits and Advance Payments | (5,991) | (3,849) |
Cash Provided by (Used in) Operating Activities | 213,310 | (8,661) |
INVESTING ACTIVITIES: | ||
Proceeds from Maturities and Calls of Investments | 0 | 89,993 |
Additions to Property, Plant and Equipment | (37,418) | (37,221) |
Acquisitions of Businesses and Contracts | (16,841) | (695,765) |
Proceeds from Dispositions of Businesses and Contracts | 13,976 | 15,773 |
Proceeds from Sale of Property, Plant and Equipment | 5,941 | 3,357 |
Cash Used in Investing Activities | (34,342) | (623,863) |
FINANCING ACTIVITIES: | ||
Proceeds from Debt | 30,151 | 715,554 |
Repayments on Debt | (142,072) | (301,043) |
Dividends Paid | (5,008) | (6,155) |
Excess Tax Benefits from Stock-Based Compensation | 340 | 1,392 |
Issuance of Stock Under Stock Option Plans | 984 | 4,324 |
Other | 0 | (2,238) |
Cash (Used in) Provided by Financing Activities | (115,605) | 411,834 |
Increase (Decrease) in Cash and Cash Equivalents | 63,363 | (220,690) |
Cash and Cash Equivalents at Beginning of Period | 3,549 | 231,091 |
Cash and Cash Equivalents at End of Period | $ 66,912 | $ 10,401 |
Basis and Summary of Significan
Basis and Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Basis and Summary of Significant Accounting Policies | BASIS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Business Aaron’s, Inc. (the “Company” or “Aaron’s”) is a leading specialty retailer primarily engaged in the business of leasing and selling furniture, consumer electronics, computers, appliances and household accessories throughout the United States and Canada. On April 14, 2014, the Company acquired a 100% ownership interest in Progressive Finance Holdings, LLC (“Progressive”), a leading virtual lease-to-own company, for merger consideration of $700.0 million , net of cash acquired. Progressive provides lease-purchase solutions in 46 states. It does so by purchasing merchandise from third-party retailers desired by those retailers' customers and, in turn, leasing that merchandise to the customers on a lease-to-own basis. Progressive consequently has no stores of its own, but rather offers lease-purchase solutions to the customers of traditional retailers. Our major operating divisions are the Aaron’s Sales & Lease Ownership division (established as a monthly payment concept), Progressive, HomeSmart (established as a weekly payment concept) and Woodhaven Furniture Industries, which manufactures and supplies the majority of the upholstered furniture and bedding leased and sold in our stores. The following table presents store count by ownership type for the Company's store-based operations: Stores (Unaudited) September 30, 2015 September 30, 2014 Company-operated stores Sales and Lease Ownership 1,218 1,234 HomeSmart 82 82 Total Company-operated stores 1,300 1,316 Franchised stores 764 785 Systemwide stores 2,064 2,101 The following table presents active doors for the Progressive segment: (Unaudited) September 30, 2015 September 30, 2014 Progressive Active Doors 1 12,132 11,955 1 An active door is a retail store location at which at least one virtual lease-to-own transaction has been completed during the trailing three month period. Basis of Presentation The preparation of the Company’s condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information requires management to make estimates and assumptions that affect amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates. Generally, actual experience has been consistent with management’s prior estimates and assumptions. Management does not believe these estimates or assumptions will change significantly in the future absent unsurfaced and unforeseen events. The accompanying unaudited condensed consolidated financial statements do not include all information required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included in the accompanying unaudited condensed consolidated financial statements. These financial statements should 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 U.S. Securities and Exchange Commission for the year ended December 31, 2014 (the “ 2014 Annual Report”). The results of operations for the nine months ended September 30, 2015 are not necessarily indicative of operating results for the full year. Reclassifications Certain reclassifications have been made to the prior periods to conform to the current period presentation. The Company presents sales net of related taxes for its traditional lease-to-own (“core”) business. Prior to 2015, Progressive presented lease revenues on a gross basis with sales taxes included. Effective January 1, 2015, Progressive conformed its presentation of sales tax to that of the core business. For the three and nine months ended September 30, 2014 , reclassification adjustments of $9.1 million and $19.2 million , respectively, have been made to present sales net of related taxes on a consolidated basis. These adjustments reduce lease revenues and fees and operating expenses. Principles of Consolidation and Variable Interest Entities The condensed consolidated financial statements include the accounts of Aaron’s, Inc. and its subsidiaries, each of which is wholly owned. Intercompany balances and transactions between consolidated entities have been eliminated. The Company holds notes issued by Perfect Home Holdings Limited (“Perfect Home”), a privately-held lease-to-own company that is primarily financed by share capital and subordinated debt. Perfect Home is based in the U.K. and operates 70 retail stores as of September 30, 2015 . Perfect Home is a variable interest entity (“VIE”) because it does not have sufficient equity at risk. However, the Company is not the primary beneficiary and does not consolidate Perfect Home because the Company lacks the power through voting or similar rights to direct the activities that most significantly affect Perfect Home's economic performance. The Company’s maximum exposure to any potential losses associated with this VIE is equal to its total recorded investment, which is $22.3 million at September 30, 2015 . Accounting Policies and Estimates See Note 1 to the consolidated financial statements in the 2014 Annual Report. Income Taxes The Company files a federal consolidated income tax return in the United States, and the Company and its subsidiaries file in various state and foreign jurisdictions. With few exceptions, the Company is no longer subject to federal, state and local tax examinations by tax authorities for years before 2012 . As of September 30, 2015 and December 31, 2014 , the amount of uncertain tax benefits that, if recognized, would affect the effective tax rate is $2.9 million and $2.1 million , respectively, including interest and penalties. The Company recognizes potential interest and penalties related to uncertain tax benefits as a component of income tax expense. Earnings Per Share Earnings per share is computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the period. The computation of earnings per share assuming dilution includes the dilutive effect of stock options, restricted stock units, restricted stock awards and performance share units (collectively, “share-based awards”) as determined under the treasury stock method. The following table shows the calculation of dilutive share-based awards for the three and nine months ended September 30, 2015 and 2014 : Three Months Ended Nine Months Ended (Shares In Thousands) 2015 2014 2015 2014 Weighted average shares outstanding 72,586 72,340 72,558 72,350 Effect of dilutive securities: Dilutive effect of share-based awards 490 320 408 363 Weighted average shares outstanding assuming dilution 73,076 72,660 72,966 72,713 During the three and nine months ended September 30, 2015 , there were approximately 281,000 and 431,000 weighted-average share-based awards, respectively, excluded from the computation for earnings per share assuming dilution because the awards would have been anti-dilutive for the period. During the three and nine months ended September 30, 2014 , there were approximately 166,000 and 143,000 weighted-average share-based awards, respectively, excluded from the computation for earnings per share assuming dilution because the awards would have been anti-dilutive for the period. Lease Merchandise All lease merchandise is available for lease or sale. On a monthly basis, all damaged, lost or unsalable merchandise identified is written off. The Company records lease merchandise adjustments on the allowance method, which estimates the merchandise losses incurred but not yet identified by management as of the end of the accounting period based on historical write-off experience. As of September 30, 2015 and December 31, 2014 , the allowance for lease merchandise write-offs was $32.2 million and $27.6 million , respectively. Lease merchandise adjustments totaled $38.8 million and $29.9 million for the three months ended September 30, 2015 and 2014 , respectively, and $98.3 million and $64.6 million for the nine months ended September 30, 2015 and 2014 , respectively. Lease merchandise adjustments are included in operating expenses in the accompanying condensed consolidated statements of earnings. Cash and Cash Equivalents The Company classifies highly liquid investments with maturity dates of three months or less when purchased as cash equivalents. The Company maintains its cash and cash equivalents in a limited number of banks. Bank balances typically exceed coverage provided by the Federal Deposit Insurance Corporation. However, due to the size and strength of the banks in which the balances are held, such exposure to loss is believed to be minimal. Investments The Company holds British pound-denominated notes issued by Perfect Home. The Perfect Home notes, which totaled £14.8 million ( $22.3 million ) and £13.7 million ( $21.3 million ) at September 30, 2015 and December 31, 2014 , respectively, are classified as held-to-maturity securities because the Company has the positive intent and ability to hold the investments to maturity. The Perfect Home notes are carried at amortized cost in investments in the condensed consolidated balance sheets and mature on June 30, 2016. The increase in the carrying amount of the notes during the nine months ended September 30, 2015 relates to accretion of the original discount on the notes, which had a face value of £10.0 million . The Company evaluates held-to-maturity securities for other-than-temporary impairment on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. The Company does not intend to sell its remaining securities and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases. Historically, the Company maintained investments in various corporate debt securities, or bonds, that were classified as held-to-maturity securities. During the three months ended September 30, 2014, the Company sold all of its investments in corporate bonds due to the Progressive acquisition. The amortized cost of the investments sold was $68.7 million , and a net realized gain of approximately $95,000 was recorded during the three months ended September 30, 2014. Accounts Receivable Accounts receivable consist primarily of receivables due from customers of Company-operated stores and Progressive, corporate receivables incurred during the normal course of business (primarily for vendor consideration and in-transit credit card transactions) and franchisee obligations. Accounts receivable, net of allowances, consist of the following: (In Thousands) September 30, 2015 December 31, 2014 Customers $ 32,826 $ 30,438 Corporate 15,986 32,572 Franchisee 36,412 44,373 $ 85,224 $ 107,383 Assets Held for Sale Certain properties, consisting of parcels of land and commercial buildings, met the held for sale classification criteria as of September 30, 2015 and December 31, 2014 . After adjustment to fair value, the $7.5 million and $6.4 million carrying amount of these properties has been classified as assets held for sale in the condensed consolidated balance sheets as of September 30, 2015 and December 31, 2014 , respectively. The Company estimated the fair values of real estate properties using the market values for similar properties. These properties are considered Level 2 assets as described in Note 3. Deferred Compensation The Company maintains the Aaron’s, Inc. Deferred Compensation Plan, an unfunded, nonqualified deferred compensation plan for a select group of management, highly compensated employees and non-employee directors. On a pre-tax basis, eligible employees can defer receipt of up to 75% of their base compensation and up to 100% of their incentive pay compensation, and eligible non-employee directors can defer receipt of up to 100% of both their cash and stock director fees. Compensation deferred under the plan is credited to each participant’s deferral account and a deferred compensation liability is recorded in accounts payable and accrued expenses in the condensed consolidated balance sheets. The deferred compensation liability was $11.6 million and $12.7 million as of September 30, 2015 and December 31, 2014 , respectively. Liabilities under the plan are recorded at amounts due to participants, based on the fair value of participants’ selected investments. The Company has established a rabbi trust to fund obligations under the plan with Company-owned life insurance. The obligations are unsecured general obligations of the Company and the participants have no right, interest or claim in the assets of the Company, except as unsecured general creditors. The cash surrender value of the insurance contracts totaled $15.1 million as of September 30, 2015 and $14.5 million as of December 31, 2014 and is included in prepaid expenses and other assets in the condensed consolidated balance sheets. Deferred compensation expense charged to operations for the Company’s matching contributions was not significant during any of the three or nine months periods presented. Benefits of $1.0 million and $1.4 million were paid during the first nine months of 2015 and 2014 , respectively. Accumulated Other Comprehensive Loss Changes in accumulated other comprehensive loss by component for the nine months ended September 30, 2015 are as follows: (In Thousands) Foreign Currency Total Balance at January 1, 2015 $ (90 ) $ (90 ) Other comprehensive income (132 ) (132 ) Balance at September 30, 2015 $ (222 ) $ (222 ) There were no reclassifications out of accumulated other comprehensive loss for the nine months ended September 30, 2015 . Fair Value Measurement Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value: Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets. Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. Level 3—Valuations based on unobservable inputs reflecting the Company's own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment. The Company measures assets held for sale at fair value on a nonrecurring basis and records impairment charges when they are deemed to be impaired. The Company maintains certain financial assets and liabilities, including investments and fixed-rate long-term debt, that are not measured at fair value but for which fair value is disclosed. The fair values of the Company’s other current financial assets and liabilities, including cash and cash equivalents, accounts receivable and accounts payable, approximate their carrying values due to their short-term nature. Recent Accounting Pronouncements Revenue Recognition. In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers . ASU 2014-09 is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU 2015-14, Deferral of the Effective Date, which deferred the effective date for ASU 2014-09 by one year to annual reporting periods, and interim periods within that period, beginning after December 15, 2017. Companies may use either a full retrospective or a modified retrospective approach to adopt ASU 2014-09. The Company has not yet determined the potential effects of adopting ASU 2014-09 on its consolidated financial statements. Debt Issuance Costs . In April 2015, the FASB issued No. ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs , which requires debt issuance costs to be presented in the balance sheet as a deduction from the corresponding debt liability rather than as a separate asset. ASU 2015-03 is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company does not expect the provisions of ASU 2015-03 to have a material impact on its consolidated financial statements. Cloud Computing. In April 2015, the FASB issued ASU No. 2015-05, Customer's Accounting for Fees Paid in a Cloud Computing Arrangement. Among other things, ASU 2015-05 clarifies how a customer in a cloud computing arrangement should determine whether the arrangement includes a software license, and clarifies that the acquisition of a software license must be accounted for in the same manner as other licenses of intangible assets. ASU 2015-05 is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company does not expect the provisions of ASU 2015-05 to have a material impact on its consolidated financial statements. Measurement-Period Adjustments . In September 2015, the FASB issued No. ASU 2015-16, Simplifying the Accounting for Measurement-Period Adjustments . The ASU eliminates the requirement that an acquirer in a business combination account for a measurement-period adjustment retrospectively. Instead, acquirers must recognize measurement-period adjustments during the period in which they determine the adjustment amounts. The adjustment amounts must include the effect on earnings of any amounts the acquirer would have recorded in previous periods if the accounting had been completed at the acquisition date. ASU 2015-16 is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The ASU is applied prospectively to adjustments to provisional amounts that occur after the effective date. That is, the ASU applies to open measurement periods, regardless of the acquisition date. The Company does not expect the provisions of ASU 2015-16 to have a material impact on its consolidated financial statements. |
Acquisitions
Acquisitions | 9 Months Ended |
Sep. 30, 2015 | |
Business Combinations [Abstract] | |
Acquisitions | ACQUISITIONS During the nine months ended September 30, 2015 and 2014 , net cash payments related to the acquisitions of businesses and contracts were $16.8 million and $695.8 million , respectively. Cash payments made during the nine months ended September 30, 2014 primarily related to the acquisition of Progressive. The effect of the Company's other acquisitions on the condensed consolidated financial statements for the nine months ended September 30, 2015 and 2014 was not significant. Progressive Acquisition On April 14, 2014, the Company acquired a 100% ownership interest in Progressive. The Company completed the acquisition accounting for this transaction during the three months ended March 31, 2015. The following table presents unaudited consolidated pro forma information as if the acquisition of Progressive had occurred on January 1, 2013: Nine Months Ended September 30, 2014 (In Thousands) As Reported Pro Forma Revenues $ 1,946,331 $ 2,102,929 Net Earnings 56,139 61,601 The unaudited pro forma financial information presented above does not purport to represent what the actual results of the Company's operations would have been if the acquisition of Progressive had occurred on January 1, 2013, nor is it indicative of future performance. The unaudited pro forma financial information does not reflect the impact of future events that may occur after the acquisition, including, but not limited to, anticipated cost savings from operating synergies. The unaudited pro forma financial information presented in the table above has been adjusted to give effect to adjustments that are (1) directly related to the business combination; (2) factually supportable; and (3) expected to have a continuing impact. These adjustments include, but are not limited to, amortization related to fair value adjustments to intangible assets and the adjustment of interest expense to reflect the additional borrowings of the Company in conjunction with the acquisition. |
Fair Value Measurement
Fair Value Measurement | 9 Months Ended |
Sep. 30, 2015 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurement | FAIR VALUE MEASUREMENT Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis The following table summarizes financial liabilities measured at fair value on a recurring basis: (In Thousands) September 30, 2015 December 31, 2014 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Deferred Compensation Liability $ — $ (11,600 ) $ — $ — $ (12,677 ) $ — The Company maintains a deferred compensation plan as described in Note 1 to these condensed consolidated financial statements. The liability representing benefits accrued for plan participants is valued at the quoted market prices of the participants’ investment elections, which consist of equity and debt "mirror" funds. As such, the Company has classified the deferred compensation liability as a Level 2 liability. Non-Financial Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis The following table summarizes non-financial assets measured at fair value on a nonrecurring basis: (In Thousands) September 30, 2015 December 31, 2014 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Assets Held for Sale $ — $ 7,542 $ — $ — $ 6,356 $ — The highest and best use of these assets held for sale is as real estate land parcels for development or real estate properties for use or lease; however, the Company has chosen not to develop or use these properties. Assets held for sale are written down to fair value less cost to sell, and the adjustment is recorded in other operating income, net . Certain Financial Assets and Liabilities Not Measured at Fair Value The following table summarizes the fair value of assets (liabilities) that are not measured at fair value in the condensed consolidated balance sheets, but for which the fair value is disclosed: (In Thousands) September 30, 2015 December 31, 2014 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Perfect Home Notes 1 $ — $ — $ 22,334 $ — $ — $ 21,311 Fixed-Rate Long-Term Debt 2 — (398,286 ) — — (429,049 ) — 1 The Perfect Home notes were initially measured at cost. The Company periodically reviews the carrying amount utilizing company-specific transactions or changes in Perfect Home’s financial performance to determine if fair value adjustments are necessary. 2 The fair value of fixed-rate long-term debt is estimated using the present value of underlying cash flows discounted at a current market yield for similar instruments. The carrying value of fixed-rate long-term debt was $375.0 million and $400.0 million at September 30, 2015 and December 31, 2014 , respectively. At September 30, 2015 and December 31, 2014 , investments classified as held-to-maturity securities consisted of the following: Gross Unrealized (In Thousands) Amortized Cost Gains Losses Fair Value September 30, 2015 Perfect Home Notes $ 22,334 $ — $ — $ 22,334 December 31, 2014 Perfect Home Notes $ 21,311 $ — $ — $ 21,311 The Perfect Home notes are described in Note 1. The Company has estimated that the carrying amount of its Perfect Home notes approximates fair value and, therefore, no impairment is considered to have occurred as of September 30, 2015 . |
Indebtedness
Indebtedness | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
Indebtedness | INDEBTEDNESS See Note 6 in the consolidated financial statements in the 2014 Annual Report and Note 9 in these condensed consolidated financial statements. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES Leases The Company leases warehouse and retail store space for most of its store-based operations, call center space for Progressive's operations, and management and information technology space for corporate functions under operating leases expiring at various times through 2033 . The Company also leases certain properties under capital or financing type leases that are more fully described in Note 6 to the consolidated financial statements in the 2014 Annual Report. Most of the leases contain renewal options for additional periods ranging from one to 20 years. In addition, certain properties occupied under operating leases contain normal purchase options. Leasehold improvements related to these leases are generally amortized over periods that do not exceed the lesser of the lease term or 15 years. While a majority of leases do not require escalating payments, for the leases which do contain such provisions, the Company records the related expense on a straight-line basis over the lease term. The Company also leases transportation vehicles under operating leases. These leases generally expire during the next four years. Management expects that most leases will be renewed or replaced by other leases in the normal course of business. Guarantees The Company has guaranteed certain debt obligations of some of its franchisees under a franchisee loan program with several banks. In the event these franchisees are unable to meet their debt service payments or otherwise experience an event of default, the Company would be unconditionally liable for the outstanding balance of the franchisees’ debt obligations under the franchisee loan program, which would be due in full within 90 days of the event of default. At September 30, 2015 , the maximum amount that the Company would be obligated to repay in the event franchisees defaulted was $78.0 million . The Company has recourse rights to franchisee assets securing the debt obligations, which consist primarily of lease merchandise and fixed assets. As a result, the Company has never incurred, nor does management expect to incur, any significant losses under these guarantees. The carrying amount of the franchisee-related borrowings guarantee, which is included in accounts payable and accrued expenses in the condensed consolidated balance sheets, is $1.0 million as of September 30, 2015 . The maximum facility commitment amount under the franchisee loan program is $175.0 million , including a Canadian subfacility commitment amount for loans to franchisees that operate stores in Canada of Cdn $50.0 million . The Company remains subject to the financial covenants under the franchisee loan facility. Legal Proceedings From time to time, the Company is party to various legal and regulatory proceedings arising in the ordinary course of business. Certain proceedings to which we are currently a party are described below. We believe we have defenses to all of the claims described below, and intend to vigorously defend against the claims. However, these proceedings are still developing and due to the inherent uncertainty in litigation, regulatory and similar adversarial proceedings, there can be no guarantee that we will ultimately be successful in these proceedings, or in others to which we are currently a party. Substantial losses from these proceedings or the costs of defending them could have a material adverse impact upon our business, financial position and results of operations. The Company establishes an accrued liability for legal and regulatory proceedings when it determines that a loss is both probable and the amount of the loss can be reasonably estimated. The Company continually monitors its litigation and regulatory exposure and reviews the adequacy of its legal and regulatory reserves on a quarterly basis. The amount of any loss ultimately incurred in relation to matters for which an accrual has been established may be higher or lower than the amounts accrued for such matters. At September 30, 2015 , the Company had accrued $16.2 million for pending legal and regulatory matters for which it believes losses are probable, which is management's best estimate of the Company's exposure to loss. The accrual mostly related to the now-settled regulatory investigation by the California Attorney General described below. The Company estimates that the aggregate range of possible loss in excess of the amounts accrued is between $0 and $2.9 million . At September 30, 2015 , the Company estimated that the aggregate range of loss for all material pending legal and regulatory proceedings for which a loss is reasonably possible, but less likely than probable (i.e., excluding the contingencies described in the preceding paragraph), is between $125,000 and $1.3 million . Those matters for which a reasonable estimate is not possible are not included within estimated ranges and, therefore, the estimated ranges do not represent the Company's maximum possible loss exposure. The Company's estimates for legal and regulatory accruals, aggregate probable loss amounts and reasonably possible loss amounts are all subject to the uncertainties and variables described above. Consumer In Margaret Korrow, et al. v. Aaron's, Inc., originally filed in the Superior Court of New Jersey, Middlesex County, Law Division on October 26, 2010, plaintiff filed suit on behalf of herself and others similarly situated alleging that the Company is liable in damages to plaintiff and each class member because the Company's lease agreements issued after March 16, 2006 purportedly violated certain New Jersey state consumer statutes. Plaintiff's complaint seeks treble damages under the New Jersey Consumer Fraud Act, and statutory penalty damages of $100 per violation of all contracts issued in New Jersey, and also claims that there are multiple violations per contract. The Company removed the lawsuit to the United States District Court for the District of New Jersey on December 6, 2010 (Civil Action No.: 10-06317(JAP)(LHG)). Plaintiff on behalf of herself and others similarly situated seeks equitable relief, statutory and treble damages, pre- and post-judgment interest and attorneys' fees. Discovery on this matter is closed. On July 31, 2013, the Court certified a class comprising all persons who entered into a rent-to-own contract with the Company in New Jersey from March 16, 2006 through March 31, 2011. In August 2013, the Court of Appeals denied the Company’s request for an interlocutory appeal of the class certification issue. The Company filed a motion to allow counterclaims against all newly certified class members who may owe legitimate fees or damages to the Company or who failed to return merchandise to the Company prior to obtaining ownership. That motion was denied by the magistrate judge on June 30, 2014, but an appeal of that ruling is pending with the District Court. On August 14, 2015, the Company filed a motion for partial summary judgment seeking judicial dismissal of a portion of the claims in the case. That motion is pending. Privacy and Related Matters In Crystal and Brian Byrd v. Aaron's, Inc., Aspen Way Enterprises, Inc., John Does (1-100) Aaron's Franchisees and Designerware, LLC, filed on May 16, 2011, in the United States District Court, Western District of Pennsylvania (Case No. 1:11-CV-00101-SPB), plaintiffs alleged that the Company and its independently owned and operated franchisee Aspen Way Enterprises (“Aspen Way”) knowingly violated plaintiffs' privacy in violation of the Electronic Communications Privacy Act (“ECPA”) and the Computer Fraud Abuse Act and sought certification of a putative nationwide class. Plaintiffs based these claims on Aspen Way's use of a software program called “PC Rental Agent.” Although the District Court dismissed the Company from the original lawsuit on March 20, 2012, after certain procedural motions, on May 23, 2013, the Court granted plaintiffs' motion for leave to file a third amended complaint, which asserted the claims under the ECPA, common law invasion of privacy, added a request for injunction, and named additional independently owned and operated Company franchisees as defendants. Plaintiffs filed the third amended complaint, and the Company moved to dismiss that complaint on substantially the same grounds as it sought to dismiss plaintiffs' prior complaints. Plaintiffs seek monetary damages as well as injunctive relief. Plaintiffs filed their motion for class certification on July 1, 2013, and the Company's response was filed in August 2013. On March 31, 2014, the U.S. District Judge dismissed all claims against all franchisees other than Aspen Way Enterprises, LLC. The Court also dismissed claims for invasion of privacy, aiding and abetting, and conspiracy against all defendants. In addition, the Court denied the plaintiffs’ motion to certify the class. Finally, the Judge denied the Company’s motion to dismiss the violation of ECPA claims. Plaintiffs requested and received immediate appellate review of these rulings by the U.S. Third Circuit Court of Appeals. On April 10, 2015, the U.S. Third Circuit Court of Appeals reversed the denial of class certification on the grounds stated by the District Court, and remanded the case back to the District Court for further consideration of that and the other elements necessary for class certification. The District Court has not issued a new ruling on those matters. In Michael Winslow and Fonda Winslow v. Sultan Financial Corporation, Aaron's, Inc., John Does (1-10), Aaron's Franchisees and Designerware, LLC, filed on March 5, 2013 in the Los Angeles Superior Court (Case No. BC502304), plaintiffs assert claims against the Company and its independently owned and operated franchisee, Sultan Financial Corporation (as well as certain John Doe franchisees), for unauthorized wiretapping, eavesdropping, electronic stalking, and violation of California's Comprehensive Computer Data Access and Fraud Act and its Unfair Competition Law. Each of these claims arises out of the alleged use of PC Rental Agent software. The plaintiffs are seeking injunctive relief and damages in connection with the allegations of the complaint. Plaintiffs are also seeking certification of a putative California class. Plaintiffs are represented by the same counsel as in the above-described Byrd litigation. In April 2013, the Company timely removed this matter to federal court. On May 8, 2013, the Company filed a motion to stay this litigation pending resolution of the Byrd litigation, a motion to dismiss for failure to state a claim, and a motion to strike certain allegations in the complaint. The Court subsequently stayed the case. The Company's motions to dismiss and strike certain allegations remain pending. On June 6, 2015, the plaintiffs filed a motion to lift the stay, which was denied on July 11, 2015. In Lomi Price v. Aaron's, Inc. and NW Freedom Corporation , filed on February 27, 2013, in the State Court of Fulton County, Georgia (Case No. 13-EV-016812B), an individual plaintiff asserts claims against the Company and its independently owned and operated franchisee, NW Freedom Corporation, for invasion of privacy/intrusion on seclusion, computer invasion of privacy and infliction of emotional distress. Each of these claims arises out of the alleged use of PC Rental Agent software. The plaintiff is seeking compensatory and punitive damages of not less than $250,000 . On April 3, 2013, the Company filed an answer and affirmative defenses. On that same day, the Company also filed a motion to stay the litigation pending resolution of the Byrd litigation, a motion to dismiss for failure to state a claim and a motion to strike certain allegations in the complaint. The Court stayed the proceeding pending rulings on certain motions in the Byrd case, which expired upon remand of the case back to the District Court. On April 24, 2015, the Company filed a renewed motion to stay, which was granted on June 15, 2015. In Michael Peterson v. Aaron’s, Inc. and Aspen Way Enterprises, Inc. , filed on June 19, 2014, in the United States District Court for the Northern District of Georgia (Case No. 1:14-cv-01919-TWT), several plaintiffs allege that they leased computers for use in their law practice. The plaintiffs claim that the Company and Aspen Way knowingly violated plaintiffs' privacy and the privacy of plaintiff’s legal clients in violation of the ECPA and the Computer Fraud Abuse Act. Plaintiffs seek certification of a putative nationwide class. Plaintiffs based these claims on Aspen Way's use of PC Rental Agent software. The plaintiffs claim that information and data obtained by defendants through PC Rental Agent was attorney-client privileged. The Company has filed a motion to dismiss plaintiffs' amended complaint. On June 4, 2015, the Court granted the Company’s motion to dismiss all claims except a claim for aiding and abetting invasion of privacy. Plaintiffs then filed a second amended complaint alleging only the invasion of privacy claims that survived the June 4, 2015 court order, and adding a claim for unjust enrichment. The Company filed a motion to dismiss the second amended complaint, and on September 16, 2015, the Court granted the Company’s motion to dismiss plaintiffs’ unjust enrichment claim. The only remaining claims against the Company is a claim for aiding and abetting invasion of privacy. Regulatory Investigations California Attorney General Investigation. The California Attorney General investigated the Company's retail transactional practices, including various leasing and marketing practices, information security and privacy policies and practices related to the alleged use of PC Rental Agent software by certain independently owned and operated Company franchisees. The Company reached a comprehensive resolution of this matter without litigation. The final settlement and consent order were announced on October 13, 2014. The Court filed the final judgment on February 10, 2015. Payments have begun under the anticipated schedule outlined in the judgment. Pennsylvania Attorney General Investigation. There is a pending investigation by the Pennsylvania Attorney General relating to the Company's privacy practices in Pennsylvania. The privacy issues are related to the alleged use of PC Rental Agent software by certain independently owned and operated Company franchisees, and the Company's alleged responsibility for that use. The Company cooperated in the investigation and on June 18, 2015, reached a tentative settlement of the matter. The settlement documentation has been signed and is pending finalization with the Pennsylvania Attorney General. Other Matters In Foster v. Aaron’s, Inc., filed on August 21, 2015, in the United States District Court in Phoenix, Arizona (No. CV-15-1637-PHX-SRB), the plaintiff in this putative class action alleges that the Company violates the Telephone Consumer Protection Act (“TCPA”) by placing automated calls to customer references, or otherwise violates the TCPA in the manner in which the Company contacts customer references. The Company's initial responsive pleading was filed on October 7, 2015. Other Commitments At September 30, 2015 , the Company had non-cancelable commitments primarily related to certain advertising and marketing programs of $9.1 million . The Company is a party to various claims and legal and regulatory proceedings arising in the ordinary course of business. Management regularly assesses the Company’s insurance deductibles, monitors the Company's litigation and regulatory exposure with the Company's attorneys and evaluates its loss experience. The Company also enters into various contracts in the normal course of business that may subject it to risk of financial loss if counterparties fail to perform their contractual obligations. See Note 8 to the consolidated financial statements in the 2014 Annual Report for further information. |
Restructuring
Restructuring | 9 Months Ended |
Sep. 30, 2015 | |
Restructuring and Related Activities [Abstract] | |
Restructuring | RESTRUCTURING On July 15, 2014, the Company announced that a rigorous evaluation of the Company-operated store portfolio had been performed. As a result of this evaluation and other cost-reduction initiatives, the Company closed 44 underperforming Company-operated stores and restructured its home office and field support under a restructuring plan to more closely align with current business conditions. The restructuring was completed during the third quarter of 2014 and total restructuring charges of $9.1 million were recorded during the year ended December 31, 2014, comprised of $4.8 million related to contractual lease obligations, $3.3 million related to the write-off and impairment of property, plant and equipment, $620,000 related to workforce reductions and $395,000 related to other charges. During the three months ended September 30, 2014 , total restructuring charges of $2.6 million were included in the Sales and Lease Ownership segment and total restructuring charges of $4.3 million were included in the Other category. During the nine months ended September 30, 2014 , total restructuring charges of $4.8 million were included in the Sales and Lease Ownership segment and total restructuring charges of $4.3 million were included in the Other category. Restructuring charges are included in the line item “Restructuring expenses” in the condensed consolidated statements of earnings. The Company does not currently anticipate any remaining costs related to this restructuring plan to be material. The following table summarizes the change in the liability associated with the restructuring charges: (In Thousands) Contractual Obligations Under Canceled Leases Balance at January 1, 2015 $ 3,227 Payments (1,501 ) Balance at September 30, 2015 $ 1,726 In the ordinary course of business, we continually review, and as appropriate adjust, the amount and mix of Company-operated and franchised stores to help optimize overall performance. Costs incurred to close stores during the nine months ended September 30, 2015 were not significant. |
Segments
Segments | 9 Months Ended |
Sep. 30, 2015 | |
Segment Reporting [Abstract] | |
Segments | SEGMENTS As of September 30, 2015 , the Company had five operating and reportable segments: Sales and Lease Ownership, Progressive, HomeSmart, Franchise and Manufacturing. The results of Progressive, which is presented as a reportable segment, have been included in the Company's consolidated results from the April 14, 2014 acquisition date. The Aaron’s Sales & Lease Ownership division offers furniture, electronics, appliances and computers to consumers primarily on a monthly payment basis with no credit needed. Progressive is a leading virtual lease-to-own company that provides lease-purchase solutions on a variety of products, including furniture and bedding, wireless phones, consumer electronics, appliances and jewelry. The HomeSmart division offers furniture, electronics, appliances and computers to consumers primarily on a weekly payment basis with no credit needed. The Company’s Franchise operation awards franchises and supports franchisees of its sales and lease ownership concept. The Manufacturing segment manufactures upholstered furniture and bedding predominantly for use by Company-operated and franchised stores. Therefore, the Manufacturing segment's revenues and earnings before income taxes are primarily the result of intercompany transactions, substantially all of which revenues and earnings are eliminated through the elimination of intersegment revenues and intersegment profit or loss. Three Months Ended Nine Months Ended (In Thousands) 2015 2014 2015 2014 Revenues From External Customers: Sales and Lease Ownership $ 468,794 $ 481,340 $ 1,479,300 $ 1,525,100 Progressive 265,986 180,680 773,551 309,539 HomeSmart 15,075 15,445 47,322 48,598 Franchise 15,574 15,838 48,069 50,147 Manufacturing 24,014 20,794 78,048 75,692 Other 308 361 1,002 2,626 Revenues of Reportable Segments 789,751 714,458 2,427,292 2,011,702 Elimination of Intersegment Revenues (23,803 ) (20,713 ) (76,783 ) (74,375 ) Cash to Accrual Adjustments 1,746 4,673 8,048 9,004 Total Revenues from External Customers $ 767,694 $ 698,418 $ 2,358,557 $ 1,946,331 Earnings (Loss) Before Income Taxes: Sales and Lease Ownership 1 $ 30,080 $ 21,415 $ 113,514 $ 109,166 Progressive 5,617 1,689 44,761 1,366 HomeSmart (403 ) (986 ) 8 (1,717 ) Franchise 11,327 12,542 37,218 38,173 Manufacturing 349 (17 ) 2,007 441 Other 2 (12,398 ) (23,945 ) (35,545 ) (62,419 ) Earnings Before Income Taxes for Reportable Segments 34,572 10,698 161,963 85,010 Elimination of Intersegment (Profit) Loss (353 ) 22 (2,019 ) (405 ) Cash to Accrual and Other Adjustments 2,337 2,479 18,796 2,866 Total Earnings Before Income Taxes $ 36,556 $ 13,199 $ 178,740 $ 87,471 1 Sales and Lease Ownership segment earnings before income taxes were impacted by $4.8 million of restructuring charges incurred during the nine months ended September 30, 2014 , related to the Company's strategic decision to close 44 Company-operated stores, of which $2.6 million was incurred during the three months ended September 30, 2014 . 2 Loss before income taxes in the other category for the three and nine months ended September 30, 2014 was impacted by $9.1 million due to the retirements of both the Company's Chief Executive Officer and Chief Operating Officer, $4.3 million of restructuring charges related to the closure of 44 Company-operated stores and $1.2 million of regulatory income that reduced previously recognized regulatory expense upon the resolution of the regulatory investigation by the California Attorney General. For the nine months ended September 30, 2014 , pretax losses include $13.7 million in financial and advisory costs related to addressing strategic matters, including proxy contests, of which $385,000 was incurred during the three months ended September 30, 2014 , and $6.6 million in transaction costs related to the Progressive acquisition, of which $371,000 was incurred during the three months ended September 30, 2014 . Revenues in the Other category are primarily revenues attributable to (i) the RIMCO segment through the date of sale in January 2014, (ii) leasing space to unrelated third parties in the corporate headquarters building and (iii) several minor unrelated activities. The pre-tax losses or earnings in the Other category are the net result of the activity mentioned above, net of the portion of corporate overhead not allocated to the reportable segments for management purposes. (In Thousands) September 30, December 31, Assets: Sales and Lease Ownership $ 1,190,224 $ 1,246,325 Progressive 861,591 858,159 HomeSmart 41,939 47,585 Franchise 38,971 46,755 Manufacturing 1 27,461 23,050 Other 175,488 234,970 Total Assets $ 2,335,674 $ 2,456,844 1 Includes inventory (principally raw materials and work-in-process) that has been classified within lease merchandise in the condensed consolidated balance sheets of $18.4 million and $13.2 million as of September 30, 2015 and December 31, 2014 , respectively. The Company determines earnings (loss) before income taxes for all reportable segments in accordance with U.S. GAAP with the following adjustments: • Revenues in the Sales and Lease Ownership and HomeSmart segments are reported on a cash basis for management reporting purposes. • A predetermined amount of each reportable segment’s revenues is charged to the reportable segment as an allocation of corporate overhead. • Accruals related to store closures are not recorded on the reportable segments’ financial statements, but are maintained and controlled by corporate headquarters. • The capitalization and amortization of manufacturing variances are recorded on the consolidated financial statements as part of Cash to Accrual and Other Adjustments and are not allocated to the segment that holds the related lease merchandise. • Advertising expense in the Sales and Lease Ownership and HomeSmart segments is estimated at the beginning of each year and then allocated to the division ratably over time for management reporting purposes. For financial reporting purposes, advertising expense is recognized when the related advertising activities occur. The difference between these two methods is reflected as part of Cash to Accrual and Other Adjustments. • Sales and lease ownership lease merchandise write-offs are recorded using the direct write-off method for management reporting purposes and using the allowance method for financial reporting purposes. The difference between these two methods is reflected as part of Cash to Accrual and Other Adjustments. • Interest is allocated to the Sales and Lease Ownership and HomeSmart segments based a percentage of their revenues. Interest is allocated to the Progressive segment based on a percentage of the outstanding balances of its intercompany borrowings and of the debt incurred when it was acquired. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2015 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | RELATED PARTY TRANSACTIONS The Company leases certain properties under capital leases from related parties that are described in Notes 6 and 13 to the consolidated financial statements in the 2014 Annual Report. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2015 | |
Subsequent Events [Abstract] | |
Subsequent Events | SUBSEQUENT EVENTS Acquisition The Company, through its subsidiary Progressive, acquired all of the outstanding shares of Dent-A-Med, Inc. and its subsidiaries (collectively, “DAMI”) on October 15, 2015 for total merger consideration of $99.7 million (the "DAMI Acquisition"). The merger consideration consisted of $54.9 million in cash and $44.8 million in debt assumed, which is described further below. DAMI offers a variety of open-end financing programs originated through a federally insured bank and, along with Progressive's existing product line, will allow the Company to provide retail partners one source for financing and leasing transactions for below-prime consumers. Secured Revolving Credit Agreement In connection with acquiring DAMI, the Company assumed the Loan and Security Agreement, dated as of May 18, 2011 (as so amended, the “Loan Agreement”), which provides for a secured revolving credit facility in an amount not to exceed $85.0 million in outstanding principal balance, including a letter of credit subfacility not to exceed $2.0 million . In addition, the Loan Agreement includes an accordion facility, which gives the DAMI the right to increase the maximum facility amount up to $25.0 million . The secured revolving credit facility is currently set to mature on the second anniversary of the DAMI Acquisition and contains representations, warranties and covenants consistent with those of other facilities of similar size and type. Collateral under the Loan Agreement is limited to the assets and operations of DAMI, and its wholly-owned subsidiary, HC Recovery, Inc. Dividends At its November 2015 meeting, our board of directors increased the quarterly dividend by 8.7% , raising it to $.025 per share from $.023 per share. |
Basis and Summary of Signific16
Basis and Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Description of Business | Description of Business Aaron’s, Inc. (the “Company” or “Aaron’s”) is a leading specialty retailer primarily engaged in the business of leasing and selling furniture, consumer electronics, computers, appliances and household accessories throughout the United States and Canada. On April 14, 2014, the Company acquired a 100% ownership interest in Progressive Finance Holdings, LLC (“Progressive”), a leading virtual lease-to-own company, for merger consideration of $700.0 million , net of cash acquired. Progressive provides lease-purchase solutions in 46 states. It does so by purchasing merchandise from third-party retailers desired by those retailers' customers and, in turn, leasing that merchandise to the customers on a lease-to-own basis. Progressive consequently has no stores of its own, but rather offers lease-purchase solutions to the customers of traditional retailers. Our major operating divisions are the Aaron’s Sales & Lease Ownership division (established as a monthly payment concept), Progressive, HomeSmart (established as a weekly payment concept) and Woodhaven Furniture Industries, which manufactures and supplies the majority of the upholstered furniture and bedding leased and sold in our stores. |
Basis of Presentation | Basis of Presentation The preparation of the Company’s condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information requires management to make estimates and assumptions that affect amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates. Generally, actual experience has been consistent with management’s prior estimates and assumptions. Management does not believe these estimates or assumptions will change significantly in the future absent unsurfaced and unforeseen events. The accompanying unaudited condensed consolidated financial statements do not include all information required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included in the accompanying unaudited condensed consolidated financial statements. These financial statements should 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 U.S. Securities and Exchange Commission for the year ended December 31, 2014 (the “ 2014 Annual Report”). The results of operations for the nine months ended September 30, 2015 are not necessarily indicative of operating results for the full year. |
Reclassifications | Reclassifications Certain reclassifications have been made to the prior periods to conform to the current period presentation. The Company presents sales net of related taxes for its traditional lease-to-own (“core”) business. Prior to 2015, Progressive presented lease revenues on a gross basis with sales taxes included. Effective January 1, 2015, Progressive conformed its presentation of sales tax to that of the core business. For the three and nine months ended September 30, 2014 , reclassification adjustments of $9.1 million and $19.2 million , respectively, have been made to present sales net of related taxes on a consolidated basis. These adjustments reduce lease revenues and fees and operating expenses |
Principles of Consolidation and Variable Interest Entities | Principles of Consolidation and Variable Interest Entities The condensed consolidated financial statements include the accounts of Aaron’s, Inc. and its subsidiaries, each of which is wholly owned. Intercompany balances and transactions between consolidated entities have been eliminated. The Company holds notes issued by Perfect Home Holdings Limited (“Perfect Home”), a privately-held lease-to-own company that is primarily financed by share capital and subordinated debt. Perfect Home is based in the U.K. and operates 70 retail stores as of September 30, 2015 . Perfect Home is a variable interest entity (“VIE”) because it does not have sufficient equity at risk. However, the Company is not the primary beneficiary and does not consolidate Perfect Home because the Company lacks the power through voting or similar rights to direct the activities that most significantly affect Perfect Home's economic performance. The Company’s maximum exposure to any potential losses associated with this VIE is equal to its total recorded investment, which is $22.3 million at September 30, 2015 . |
Accounting Policies and Estimates | Accounting Policies and Estimates See Note 1 to the consolidated financial statements in the 2014 Annual Report. |
Income Taxes | Income Taxes The Company files a federal consolidated income tax return in the United States, and the Company and its subsidiaries file in various state and foreign jurisdictions. With few exceptions, the Company is no longer subject to federal, state and local tax examinations by tax authorities for years before 2012 . As of September 30, 2015 and December 31, 2014 , the amount of uncertain tax benefits that, if recognized, would affect the effective tax rate is $2.9 million and $2.1 million , respectively, including interest and penalties. The Company recognizes potential interest and penalties related to uncertain tax benefits as a component of income tax expense. |
Earnings Per Share | Earnings Per Share Earnings per share is computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the period. The computation of earnings per share assuming dilution includes the dilutive effect of stock options, restricted stock units, restricted stock awards and performance share units (collectively, “share-based awards”) as determined under the treasury stock method. |
Lease Merchandise | Lease Merchandise All lease merchandise is available for lease or sale. On a monthly basis, all damaged, lost or unsalable merchandise identified is written off. The Company records lease merchandise adjustments on the allowance method, which estimates the merchandise losses incurred but not yet identified by management as of the end of the accounting period based on historical write-off experience. As of September 30, 2015 and December 31, 2014 , the allowance for lease merchandise write-offs was $32.2 million and $27.6 million , respectively. Lease merchandise adjustments totaled $38.8 million and $29.9 million for the three months ended September 30, 2015 and 2014 , respectively, and $98.3 million and $64.6 million for the nine months ended September 30, 2015 and 2014 , respectively. Lease merchandise adjustments are included in operating expenses in the accompanying condensed consolidated statements of earnings. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company classifies highly liquid investments with maturity dates of three months or less when purchased as cash equivalents. The Company maintains its cash and cash equivalents in a limited number of banks. Bank balances typically exceed coverage provided by the Federal Deposit Insurance Corporation. However, due to the size and strength of the banks in which the balances are held, such exposure to loss is believed to be minimal. |
Investments | Investments The Company holds British pound-denominated notes issued by Perfect Home. The Perfect Home notes, which totaled £14.8 million ( $22.3 million ) and £13.7 million ( $21.3 million ) at September 30, 2015 and December 31, 2014 , respectively, are classified as held-to-maturity securities because the Company has the positive intent and ability to hold the investments to maturity. The Perfect Home notes are carried at amortized cost in investments in the condensed consolidated balance sheets and mature on June 30, 2016. The increase in the carrying amount of the notes during the nine months ended September 30, 2015 relates to accretion of the original discount on the notes, which had a face value of £10.0 million . The Company evaluates held-to-maturity securities for other-than-temporary impairment on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. The Company does not intend to sell its remaining securities and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases. Historically, the Company maintained investments in various corporate debt securities, or bonds, that were classified as held-to-maturity securities. |
Accounts Receivable | Accounts Receivable Accounts receivable consist primarily of receivables due from customers of Company-operated stores and Progressive, corporate receivables incurred during the normal course of business (primarily for vendor consideration and in-transit credit card transactions) and franchisee obligations. |
Assets Held for Sale | Assets Held for Sale Certain properties, consisting of parcels of land and commercial buildings, met the held for sale classification criteria as of September 30, 2015 and December 31, 2014 . After adjustment to fair value, the $7.5 million and $6.4 million carrying amount of these properties has been classified as assets held for sale in the condensed consolidated balance sheets as of September 30, 2015 and December 31, 2014 , respectively. The Company estimated the fair values of real estate properties using the market values for similar properties. These properties are considered Level 2 assets as described in Note 3. |
Deferred Compensation | Deferred Compensation The Company maintains the Aaron’s, Inc. Deferred Compensation Plan, an unfunded, nonqualified deferred compensation plan for a select group of management, highly compensated employees and non-employee directors. On a pre-tax basis, eligible employees can defer receipt of up to 75% of their base compensation and up to 100% of their incentive pay compensation, and eligible non-employee directors can defer receipt of up to 100% of both their cash and stock director fees. Compensation deferred under the plan is credited to each participant’s deferral account and a deferred compensation liability is recorded in accounts payable and accrued expenses in the condensed consolidated balance sheets. The deferred compensation liability was $11.6 million and $12.7 million as of September 30, 2015 and December 31, 2014 , respectively. Liabilities under the plan are recorded at amounts due to participants, based on the fair value of participants’ selected investments. The Company has established a rabbi trust to fund obligations under the plan with Company-owned life insurance. The obligations are unsecured general obligations of the Company and the participants have no right, interest or claim in the assets of the Company, except as unsecured general creditors. |
Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss Changes in accumulated other comprehensive loss by component for the nine months ended September 30, 2015 are as follows: (In Thousands) Foreign Currency Total Balance at January 1, 2015 $ (90 ) $ (90 ) Other comprehensive income (132 ) (132 ) Balance at September 30, 2015 $ (222 ) $ (222 ) There were no reclassifications out of accumulated other comprehensive loss for the nine months ended September 30, 2015 . |
Fair Value Measurement | Fair Value Measurement Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value: Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets. Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. Level 3—Valuations based on unobservable inputs reflecting the Company's own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment. The Company measures assets held for sale at fair value on a nonrecurring basis and records impairment charges when they are deemed to be impaired. The Company maintains certain financial assets and liabilities, including investments and fixed-rate long-term debt, that are not measured at fair value but for which fair value is disclosed. The fair values of the Company’s other current financial assets and liabilities, including cash and cash equivalents, accounts receivable and accounts payable, approximate their carrying values due to their short-term nature. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Revenue Recognition. In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers . ASU 2014-09 is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU 2015-14, Deferral of the Effective Date, which deferred the effective date for ASU 2014-09 by one year to annual reporting periods, and interim periods within that period, beginning after December 15, 2017. Companies may use either a full retrospective or a modified retrospective approach to adopt ASU 2014-09. The Company has not yet determined the potential effects of adopting ASU 2014-09 on its consolidated financial statements. Debt Issuance Costs . In April 2015, the FASB issued No. ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs , which requires debt issuance costs to be presented in the balance sheet as a deduction from the corresponding debt liability rather than as a separate asset. ASU 2015-03 is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company does not expect the provisions of ASU 2015-03 to have a material impact on its consolidated financial statements. Cloud Computing. In April 2015, the FASB issued ASU No. 2015-05, Customer's Accounting for Fees Paid in a Cloud Computing Arrangement. Among other things, ASU 2015-05 clarifies how a customer in a cloud computing arrangement should determine whether the arrangement includes a software license, and clarifies that the acquisition of a software license must be accounted for in the same manner as other licenses of intangible assets. ASU 2015-05 is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company does not expect the provisions of ASU 2015-05 to have a material impact on its consolidated financial statements. Measurement-Period Adjustments . In September 2015, the FASB issued No. ASU 2015-16, Simplifying the Accounting for Measurement-Period Adjustments . The ASU eliminates the requirement that an acquirer in a business combination account for a measurement-period adjustment retrospectively. Instead, acquirers must recognize measurement-period adjustments during the period in which they determine the adjustment amounts. The adjustment amounts must include the effect on earnings of any amounts the acquirer would have recorded in previous periods if the accounting had been completed at the acquisition date. ASU 2015-16 is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The ASU is applied prospectively to adjustments to provisional amounts that occur after the effective date. That is, the ASU applies to open measurement periods, regardless of the acquisition date. The Company does not expect the provisions of ASU 2015-16 to have a material impact on its consolidated financial statements. |
Basis and Summary of Signific17
Basis and Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Schedule Of Company Operated Store Activity | The following table presents store count by ownership type for the Company's store-based operations: Stores (Unaudited) September 30, 2015 September 30, 2014 Company-operated stores Sales and Lease Ownership 1,218 1,234 HomeSmart 82 82 Total Company-operated stores 1,300 1,316 Franchised stores 764 785 Systemwide stores 2,064 2,101 The following table presents active doors for the Progressive segment: (Unaudited) September 30, 2015 September 30, 2014 Progressive Active Doors 1 12,132 11,955 1 An active door is a retail store location at which at least one virtual lease-to-own transaction has been completed during the trailing three month period. |
Calculation of Dilutive Stock Awards | The following table shows the calculation of dilutive share-based awards for the three and nine months ended September 30, 2015 and 2014 : Three Months Ended Nine Months Ended (Shares In Thousands) 2015 2014 2015 2014 Weighted average shares outstanding 72,586 72,340 72,558 72,350 Effect of dilutive securities: Dilutive effect of share-based awards 490 320 408 363 Weighted average shares outstanding assuming dilution 73,076 72,660 72,966 72,713 |
Accounts Receivable Net of Allowances | Accounts receivable, net of allowances, consist of the following: (In Thousands) September 30, 2015 December 31, 2014 Customers $ 32,826 $ 30,438 Corporate 15,986 32,572 Franchisee 36,412 44,373 $ 85,224 $ 107,383 |
Changes in Accumulated Other Comprehensive Loss by Component | Changes in accumulated other comprehensive loss by component for the nine months ended September 30, 2015 are as follows: (In Thousands) Foreign Currency Total Balance at January 1, 2015 $ (90 ) $ (90 ) Other comprehensive income (132 ) (132 ) Balance at September 30, 2015 $ (222 ) $ (222 ) |
Acquisitions (Tables)
Acquisitions (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Business Combinations [Abstract] | |
Business Acquisition, Pro Forma Information | The following table presents unaudited consolidated pro forma information as if the acquisition of Progressive had occurred on January 1, 2013: Nine Months Ended September 30, 2014 (In Thousands) As Reported Pro Forma Revenues $ 1,946,331 $ 2,102,929 Net Earnings 56,139 61,601 |
Fair Value Measurement (Tables)
Fair Value Measurement (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Fair Value Disclosures [Abstract] | |
Summary of Financial Assets and Liabilities Measured at Fair Value on Recurring Basis | The following table summarizes financial liabilities measured at fair value on a recurring basis: (In Thousands) September 30, 2015 December 31, 2014 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Deferred Compensation Liability $ — $ (11,600 ) $ — $ — $ (12,677 ) $ — |
Assets Measured at Fair Value on Nonrecurring Basis | The following table summarizes non-financial assets measured at fair value on a nonrecurring basis: (In Thousands) September 30, 2015 December 31, 2014 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Assets Held for Sale $ — $ 7,542 $ — $ — $ 6,356 $ — |
Fair Value of Assets (Liabilities) Not Measured at Fair Value In Consolidated Balance Sheets | The following table summarizes the fair value of assets (liabilities) that are not measured at fair value in the condensed consolidated balance sheets, but for which the fair value is disclosed: (In Thousands) September 30, 2015 December 31, 2014 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Perfect Home Notes 1 $ — $ — $ 22,334 $ — $ — $ 21,311 Fixed-Rate Long-Term Debt 2 — (398,286 ) — — (429,049 ) — 1 The Perfect Home notes were initially measured at cost. The Company periodically reviews the carrying amount utilizing company-specific transactions or changes in Perfect Home’s financial performance to determine if fair value adjustments are necessary. 2 The fair value of fixed-rate long-term debt is estimated using the present value of underlying cash flows discounted at a current market yield for similar instruments. The carrying value of fixed-rate long-term debt was $375.0 million and $400.0 million at September 30, 2015 and December 31, 2014 , respectively. |
Investments Classified as Held to Maturity Securities | At September 30, 2015 and December 31, 2014 , investments classified as held-to-maturity securities consisted of the following: Gross Unrealized (In Thousands) Amortized Cost Gains Losses Fair Value September 30, 2015 Perfect Home Notes $ 22,334 $ — $ — $ 22,334 December 31, 2014 Perfect Home Notes $ 21,311 $ — $ — $ 21,311 |
Restructuring (Tables)
Restructuring (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Restructuring and Related Activities [Abstract] | |
Restructuring and Related Costs | The following table summarizes the change in the liability associated with the restructuring charges: (In Thousands) Contractual Obligations Under Canceled Leases Balance at January 1, 2015 $ 3,227 Payments (1,501 ) Balance at September 30, 2015 $ 1,726 |
Segments (Tables)
Segments (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Segment Reporting [Abstract] | |
Information on Segments and Reconciliation to Earnings Before Income Taxes from Continuing Operations | (In Thousands) September 30, December 31, Assets: Sales and Lease Ownership $ 1,190,224 $ 1,246,325 Progressive 861,591 858,159 HomeSmart 41,939 47,585 Franchise 38,971 46,755 Manufacturing 1 27,461 23,050 Other 175,488 234,970 Total Assets $ 2,335,674 $ 2,456,844 1 Includes inventory (principally raw materials and work-in-process) that has been classified within lease merchandise in the condensed consolidated balance sheets of $18.4 million and $13.2 million as of September 30, 2015 and December 31, 2014 , respectively. Three Months Ended Nine Months Ended (In Thousands) 2015 2014 2015 2014 Revenues From External Customers: Sales and Lease Ownership $ 468,794 $ 481,340 $ 1,479,300 $ 1,525,100 Progressive 265,986 180,680 773,551 309,539 HomeSmart 15,075 15,445 47,322 48,598 Franchise 15,574 15,838 48,069 50,147 Manufacturing 24,014 20,794 78,048 75,692 Other 308 361 1,002 2,626 Revenues of Reportable Segments 789,751 714,458 2,427,292 2,011,702 Elimination of Intersegment Revenues (23,803 ) (20,713 ) (76,783 ) (74,375 ) Cash to Accrual Adjustments 1,746 4,673 8,048 9,004 Total Revenues from External Customers $ 767,694 $ 698,418 $ 2,358,557 $ 1,946,331 Earnings (Loss) Before Income Taxes: Sales and Lease Ownership 1 $ 30,080 $ 21,415 $ 113,514 $ 109,166 Progressive 5,617 1,689 44,761 1,366 HomeSmart (403 ) (986 ) 8 (1,717 ) Franchise 11,327 12,542 37,218 38,173 Manufacturing 349 (17 ) 2,007 441 Other 2 (12,398 ) (23,945 ) (35,545 ) (62,419 ) Earnings Before Income Taxes for Reportable Segments 34,572 10,698 161,963 85,010 Elimination of Intersegment (Profit) Loss (353 ) 22 (2,019 ) (405 ) Cash to Accrual and Other Adjustments 2,337 2,479 18,796 2,866 Total Earnings Before Income Taxes $ 36,556 $ 13,199 $ 178,740 $ 87,471 1 Sales and Lease Ownership segment earnings before income taxes were impacted by $4.8 million of restructuring charges incurred during the nine months ended September 30, 2014 , related to the Company's strategic decision to close 44 Company-operated stores, of which $2.6 million was incurred during the three months ended September 30, 2014 . 2 Loss before income taxes in the other category for the three and nine months ended September 30, 2014 was impacted by $9.1 million due to the retirements of both the Company's Chief Executive Officer and Chief Operating Officer, $4.3 million of restructuring charges related to the closure of 44 Company-operated stores and $1.2 million of regulatory income that reduced previously recognized regulatory expense upon the resolution of the regulatory investigation by the California Attorney General. |
Basis and Summary of Signific22
Basis and Summary of Significant Accounting Policies - Additional Information (Detail) shares in Thousands, $ in Thousands | Apr. 14, 2014USD ($)state | Sep. 30, 2015USD ($)shares | Sep. 30, 2014USD ($)shares | Sep. 30, 2015USD ($)shares | Sep. 30, 2014USD ($)shares | Sep. 30, 2015GBP (£)Store | Sep. 30, 2015USD ($)Store | Dec. 31, 2014GBP (£) | Dec. 31, 2014USD ($) |
Significant Accounting Policies [Line Items] | |||||||||
Reclassification adjustment to present sales net of taxes | $ (661,856) | $ (594,455) | $ (2,017,610) | $ (1,606,765) | |||||
Uncertain tax benefits that, if recognized, would affect effective tax rate | $ 2,900 | $ 2,100 | |||||||
Anti-dilutive securities excluded from the computation of earnings per share assuming dilution (in shares) | shares | 281 | 166 | 431 | 143 | |||||
Inventory valuation reserves | 32,200 | 27,600 | |||||||
Lease merchandise adjustments | $ 38,800 | $ 29,900 | $ 98,300 | $ 64,600 | |||||
Held-to-maturity securities, amortized cost of investments sold | 68,700 | 68,700 | |||||||
Held-to-maturity securities, net realized gain (loss) | 95 | ||||||||
Assets Held For Sale | 7,542 | 6,356 | |||||||
Cash surrender value of company-owned life insurance ("COLI") contracts | 15,100 | 14,500 | |||||||
Benefits paid | 1,400 | 1,400 | 1,000 | ||||||
Level 2 | |||||||||
Significant Accounting Policies [Line Items] | |||||||||
Assets Held For Sale | 7,542 | 6,356 | |||||||
Deferred compensation liability | $ 11,600 | 12,677 | |||||||
Employee | |||||||||
Significant Accounting Policies [Line Items] | |||||||||
Percentage of receipt of base compensation (up to) | 75.00% | ||||||||
Percentage of receipt of incentive pay compensation (up to) | 100.00% | ||||||||
Non Employee Director | |||||||||
Significant Accounting Policies [Line Items] | |||||||||
Percentage of receipt of base compensation (up to) | 100.00% | ||||||||
Percentage of receipt of incentive pay compensation (up to) | 100.00% | ||||||||
Variable Interest Entity, Not Primary Beneficiary | |||||||||
Significant Accounting Policies [Line Items] | |||||||||
Number of retail stores | Store | 70 | 70 | |||||||
Maximum exposure to any potential losses associated with VIE | $ 22,300 | ||||||||
Held to maturity securities | £ 14,800,000 | $ 22,300 | £ 13,700,000 | $ 21,300 | |||||
Held to maturity securities, face value | £ | £ 10,000,000 | ||||||||
Progressive | |||||||||
Significant Accounting Policies [Line Items] | |||||||||
Business acquisition, percentage of voting interests acquired | 100.00% | ||||||||
Acquisitions of businesses, net of cash acquired | $ 700,000 | ||||||||
Number of states in which entity operates | state | 46 | ||||||||
Reclassification | |||||||||
Significant Accounting Policies [Line Items] | |||||||||
Reclassification adjustment to present sales net of taxes | $ 9,100 | $ 19,200 |
Basis and Summary of Signific23
Basis and Summary of Significant Accounting Policies - Store Count by Ownership Type (Details) - Operating Segments | 9 Months Ended | |
Sep. 30, 2015transactionStore | Sep. 30, 2014transactionStore | |
Significant Accounting Policies [Line Items] | ||
Number of retail stores | 1,300 | 1,316 |
Sales And Lease Ownership Excluding Rimco | ||
Significant Accounting Policies [Line Items] | ||
Number of retail stores | 1,218 | 1,234 |
HomeSmart | ||
Significant Accounting Policies [Line Items] | ||
Number of retail stores | 82 | 82 |
Franchise | ||
Significant Accounting Policies [Line Items] | ||
Number of retail stores | 764 | 785 |
Systemwide Stores | ||
Significant Accounting Policies [Line Items] | ||
Number of retail stores | 2,064 | 2,101 |
Progressive | ||
Significant Accounting Policies [Line Items] | ||
Virtual Lease to Own Transactions Completed, Number | transaction | 1 | 1,000 |
Number of retail stores | 12,132 | 11,955 |
Basis and Summary of Signific24
Basis and Summary of Significant Accounting Policies - Calculation of Dilutive Stock Awards (Detail) - shares shares in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Accounting Policies [Abstract] | ||||
Weighted average shares outstanding | 72,586 | 72,340 | 72,558 | 72,350 |
Dilutive effect of share-based awards (in shares) | 490 | 320 | 408 | 363 |
Weighted average shares outstanding assuming dilution | 73,076 | 72,660 | 72,966 | 72,713 |
Basis and Summary of Signific25
Basis and Summary of Significant Accounting Policies - Accounts Receivable Net of Allowances (Detail) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts receivable, net of allowances | $ 85,224 | $ 107,383 |
Customers | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts receivable, net of allowances | 32,826 | 30,438 |
Corporate | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts receivable, net of allowances | 15,986 | 32,572 |
Franchisee | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts receivable, net of allowances | $ 36,412 | $ 44,373 |
Basis and Summary of Signific26
Basis and Summary of Significant Accounting Policies - Changes in Accumulated Other Comprehensive Loss by Component (Detail) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Accumulated Other Comprehensive Income [Roll Forward] | ||||
Beginning Balance | $ (90) | |||
Other comprehensive income | $ (156) | $ (26) | (132) | $ (19) |
Ending Balance | (222) | (222) | ||
Foreign Currency | ||||
Accumulated Other Comprehensive Income [Roll Forward] | ||||
Beginning Balance | (90) | |||
Other comprehensive income | (132) | |||
Ending Balance | $ (222) | $ (222) |
Acquisitions - Progressive Acqu
Acquisitions - Progressive Acquisition Narrative (Details) - USD ($) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Apr. 14, 2014 | |
Business Acquisition [Line Items] | |||
Acquisitions of businesses and contracts | $ 16,841 | $ 695,765 | |
Progressive | |||
Business Acquisition [Line Items] | |||
Business acquisition, percentage of voting interests acquired | 100.00% |
Acquisitions - Progressive Ac28
Acquisitions - Progressive Acquisition Pro Forma Financial Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Business Acquisition [Line Items] | ||||
Revenues, as reported | $ 767,694 | $ 698,418 | $ 2,358,557 | $ 1,946,331 |
Net earnings, as reported | $ 24,194 | $ 9,295 | $ 113,983 | 56,139 |
Progressive | ||||
Business Acquisition [Line Items] | ||||
Revenues, as reported | 1,946,331 | |||
Net earnings, as reported | 56,139 | |||
Revenues, pro forma | 2,102,929 | |||
Net earnings, pro forma | $ 61,601 |
Fair Value Measurement - Summar
Fair Value Measurement - Summary of Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Level 2 | ||
Fair Value Assets Liabilities Measured On Recurring Basis [Line Items] | ||
Deferred Compensation Liability | $ (11,600) | $ (12,677) |
Fair Value Measurement - Assets
Fair Value Measurement - Assets Measured At Fair Value on Nonrecurring Basis (Details) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets Held For Sale | $ 7,542 | $ 6,356 |
Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets Held For Sale | $ 7,542 | $ 6,356 |
Fair Value Measurement - Fair V
Fair Value Measurement - Fair Value of Assets (Liabilities) Not Measured at Fair Value In Consolidated Balance Sheets (Details) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 | |
Level 2 | Long-term Debt | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Long term debt, fair value | [1] | $ (398,286) | $ (429,049) |
Level 3 | Debt Securities | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Fair Value | [2] | $ 22,334 | $ 21,311 |
[1] | The fair value of fixed-rate long-term debt is estimated using the present value of underlying cash flows discounted at a current market yield for similar instruments. The carrying value of fixed-rate long-term debt was $375.0 million and $400.0 million at September 30, 2015 and December 31, 2014, respectively. | ||
[2] | The Perfect Home notes were initially measured at cost. The Company periodically reviews the carrying amount utilizing company-specific transactions or changes in Perfect Home’s financial performance to determine if fair value adjustments are necessary. |
Fair Value Measurement - Fair32
Fair Value Measurement - Fair Value of Assets (Liabilities) Not Measured at Fair Value In Consolidated Balance Sheet - Additional Information (Details) - USD ($) $ in Millions | Sep. 30, 2015 | Dec. 31, 2014 |
Long-term Debt | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long term debt, carrying value | $ 375 | $ 400 |
Fair Value Measurement - Amorti
Fair Value Measurement - Amortized Cost, Gross Unrealized Gains and Losses, and Fair Value of Investment Securities Held to Maturity (Details) - Perfect Home Bonds - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Schedule of Held-to-maturity Securities [Line Items] | ||
Amortized Cost | $ 22,334 | $ 21,311 |
Fair Value | $ 22,334 | $ 21,311 |
Commitments and Contingencies (
Commitments and Contingencies (Details) | Feb. 27, 2013USD ($) | Sep. 30, 2015CAD | Sep. 30, 2015USD ($) | Oct. 26, 2010$ / violation |
Commitments and Contingencies Disclosure [Line Items] | ||||
Leases of warehouse and retail store space under operating lease, expiring time | 2,033 | |||
Lease term (in years) | 15 years | |||
Event of default, loan due In full, term (in days) | 90 days | |||
Portion that company might be obligated to repay in the event franchisees defaulted | $ 78,000,000 | |||
Fair value of franchise related borrowings | 1,000,000 | |||
Loan facility to franchisees, maximum commitment amount | 175,000,000 | |||
Loss contingency accrual | 16,200,000 | |||
Minimum range of possible loss | 125,000 | |||
Maximum range of possible loss | 1,300,000 | |||
Marketing and Advertising Expense | ||||
Commitments and Contingencies Disclosure [Line Items] | ||||
Contractual commitments future minimum payments due | 9,100,000 | |||
Margaret Korrow | ||||
Commitments and Contingencies Disclosure [Line Items] | ||||
Statutory penalty damages, per violation (in dollars per violation) | $ / violation | 100 | |||
Minimum | ||||
Commitments and Contingencies Disclosure [Line Items] | ||||
Renewal options of leases for additional periods (in years) | 1 year | |||
Range of possible loss not accrued | 0 | |||
Maximum | ||||
Commitments and Contingencies Disclosure [Line Items] | ||||
Renewal options of leases for additional periods (in years) | 20 years | |||
Leases of transportation and computer equipment under operating leases, expiring period (in years) | 4 years | |||
Range of possible loss not accrued | $ 2,900,000 | |||
Maximum | Lomi Price | ||||
Commitments and Contingencies Disclosure [Line Items] | ||||
Loss contingency, damages sought, value (not less than) | $ 250,000 | |||
Amendment | Franchise Loan Facility | ||||
Commitments and Contingencies Disclosure [Line Items] | ||||
Loan facility maximum Canadian sub facility commitment amount | CAD | CAD 50,000,000 |
Restructuring (Details)
Restructuring (Details) $ in Thousands | Jul. 15, 2014Store | Sep. 30, 2015USD ($) | Sep. 30, 2014USD ($)Store | Sep. 30, 2015USD ($) | Sep. 30, 2014USD ($)Store | Dec. 31, 2014USD ($) |
Restructuring Cost and Reserve [Line Items] | ||||||
Restructuring and related cost, number of store closures | Store | 44 | |||||
Restructuring Expenses | $ 0 | $ 6,876 | $ 0 | $ 9,140 | $ 9,100 | |
Contractual Obligations Under Canceled Leases | ||||||
Restructuring Cost and Reserve [Line Items] | ||||||
Restructuring Expenses | 4,800 | |||||
Restructuring Reserve [Roll Forward] | ||||||
Balance at January 1, 2015 | 3,227 | |||||
Payments | (1,501) | |||||
Balance at September 30, 2015 | $ 1,726 | $ 1,726 | 3,227 | |||
Fixed Assets | ||||||
Restructuring Cost and Reserve [Line Items] | ||||||
Restructuring Expenses | 3,300 | |||||
Severance | ||||||
Restructuring Cost and Reserve [Line Items] | ||||||
Restructuring Expenses | 620 | |||||
Other | ||||||
Restructuring Cost and Reserve [Line Items] | ||||||
Restructuring Expenses | $ 395 | |||||
Operating Segments | Sales and Lease Ownership | ||||||
Restructuring Cost and Reserve [Line Items] | ||||||
Restructuring and related cost, number of store closures | Store | 44 | |||||
Restructuring Expenses | $ 2,600 | $ 4,800 | ||||
Operating Segments | Other Segments | ||||||
Restructuring Cost and Reserve [Line Items] | ||||||
Restructuring and related cost, number of store closures | Store | 44 | 44 | ||||
Restructuring Expenses | $ 4,300 | $ 4,300 |
Segments - Additional Informati
Segments - Additional Information (Details) $ in Thousands | Jul. 15, 2014Store | Sep. 30, 2015USD ($) | Sep. 30, 2014USD ($)Store | Sep. 30, 2015USD ($)segments | Sep. 30, 2014USD ($)Store | Dec. 31, 2014USD ($) |
Segment Reporting Information [Line Items] | ||||||
Number of operating segments | segments | 5 | |||||
Restructuring Expenses | $ 0 | $ 6,876 | $ 0 | $ 9,140 | $ 9,100 | |
Retirement and Vacation Charges | 0 | 9,094 | 0 | 9,094 | ||
Restructuring and related cost, number of store closures | Store | 44 | |||||
Regulatory income | 0 | 1,200 | 0 | 1,200 | ||
Financial Advisory and Legal Costs | 0 | 385 | 0 | 13,661 | ||
Progressive-Related Transaction Costs | $ 0 | 371 | $ 0 | 6,638 | ||
Operating Segments | Sales and Lease Ownership | ||||||
Segment Reporting Information [Line Items] | ||||||
Restructuring Expenses | 2,600 | $ 4,800 | ||||
Restructuring and related cost, number of store closures | Store | 44 | |||||
Operating Segments | Other Segments | ||||||
Segment Reporting Information [Line Items] | ||||||
Restructuring Expenses | 4,300 | $ 4,300 | ||||
Retirement and Vacation Charges | $ 9,100 | $ 9,100 | ||||
Restructuring and related cost, number of store closures | Store | 44 | 44 | ||||
Regulatory income | $ 1,200 | $ 1,200 | ||||
Financial Advisory and Legal Costs | 385 | 13,700 | ||||
Progressive-Related Transaction Costs | $ 371 | $ 6,600 |
Segments - Information on Segme
Segments - Information on Segments and Reconciliation to Earnings Before Income Taxes from Continuing Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | ||
Segment Reporting Information [Line Items] | ||||||
Revenues | $ 767,694 | $ 698,418 | $ 2,358,557 | $ 1,946,331 | ||
Earnings (Loss) Before Income Taxes | 36,556 | 13,199 | 178,740 | 87,471 | ||
Assets | 2,335,674 | 2,335,674 | $ 2,456,844 | |||
Operating Segments | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenues | 789,751 | 714,458 | 2,427,292 | 2,011,702 | ||
Earnings (Loss) Before Income Taxes | 34,572 | 10,698 | 161,963 | 85,010 | ||
Assets | 2,335,674 | 2,335,674 | 2,456,844 | |||
Operating Segments | Sales and Lease Ownership | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenues | 468,794 | 481,340 | 1,479,300 | 1,525,100 | ||
Earnings (Loss) Before Income Taxes | [1] | 30,080 | 21,415 | 113,514 | 109,166 | |
Assets | 1,190,224 | 1,190,224 | 1,246,325 | |||
Operating Segments | Progressive | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenues | 265,986 | 180,680 | 773,551 | 309,539 | ||
Earnings (Loss) Before Income Taxes | 5,617 | 1,689 | 44,761 | 1,366 | ||
Assets | 861,591 | 861,591 | 858,159 | |||
Operating Segments | HomeSmart | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenues | 15,075 | 15,445 | 47,322 | 48,598 | ||
Earnings (Loss) Before Income Taxes | (403) | (986) | 8 | (1,717) | ||
Assets | 41,939 | 41,939 | 47,585 | |||
Operating Segments | Franchise | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenues | 15,574 | 15,838 | 48,069 | 50,147 | ||
Earnings (Loss) Before Income Taxes | 11,327 | 12,542 | 37,218 | 38,173 | ||
Assets | 38,971 | 38,971 | 46,755 | |||
Operating Segments | Manufacturing | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenues | 24,014 | 20,794 | 78,048 | 75,692 | ||
Earnings (Loss) Before Income Taxes | 349 | (17) | 2,007 | 441 | ||
Assets | [2] | 27,461 | 27,461 | 23,050 | ||
Operating Segments | Other Segments | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenues | 308 | 361 | 1,002 | 2,626 | ||
Earnings (Loss) Before Income Taxes | [3] | (12,398) | (23,945) | (35,545) | (62,419) | |
Assets | 175,488 | 175,488 | $ 234,970 | |||
Intersegment Eliminations | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenues | (23,803) | (20,713) | (76,783) | (74,375) | ||
Earnings (Loss) Before Income Taxes | (353) | 22 | (2,019) | (405) | ||
Segment Reconciling Items | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenues | 1,746 | 4,673 | 8,048 | 9,004 | ||
Earnings (Loss) Before Income Taxes | $ 2,337 | $ 2,479 | $ 18,796 | $ 2,866 | ||
[1] | Sales and Lease Ownership segment earnings before income taxes were impacted by $4.8 million of restructuring charges incurred during the nine months ended September 30, 2014, related to the Company's strategic decision to close 44 Company-operated stores, of which $2.6 million was incurred during the three months ended September 30, 2014. | |||||
[2] | Includes inventory (principally raw materials and work-in-process) that has been classified within lease merchandise in the condensed consolidated balance sheets of $18.4 million and $13.2 million as of September 30, 2015 and December 31, 2014, respectively. | |||||
[3] | Loss before income taxes in the other category for the three and nine months ended September 30, 2014 was impacted by $9.1 million due to the retirements of both the Company's Chief Executive Officer and Chief Operating Officer, $4.3 million of restructuring charges related to the closure of 44 Company-operated stores and $1.2 million of regulatory income that reduced previously recognized regulatory expense upon the resolution of the regulatory investigation by the California Attorney General. |
Segments - Information on Seg38
Segments - Information on Segments and Reconciliation to Earnings Before Income Taxes from Continuing Operations- Additional Information (Details) - USD ($) $ in Millions | Sep. 30, 2015 | Dec. 31, 2014 |
Operating Segments | Manufacturing | ||
Segment Reporting Information [Line Items] | ||
Inventory (principally raw materials and work-in-process) | $ 18.4 | $ 13.2 |
Subsequent Events (Details)
Subsequent Events (Details) $ / shares in Units, $ in Millions | Nov. 09, 2015$ / shares | Oct. 15, 2015USD ($)source | Sep. 30, 2015$ / shares |
Subsequent Event [Line Items] | |||
Dividends declared (in dollars per share) | $ / shares | $ 0.023 | ||
Subsequent Event | |||
Subsequent Event [Line Items] | |||
Dividends declared, percentage increase | 8.70% | ||
Dividends declared (in dollars per share) | $ / shares | $ 0.025 | ||
Progressive Subsidiary | Dent-A-Med, Inc. | Subsequent Event | |||
Subsequent Event [Line Items] | |||
Total merger consideration | $ 99.7 | ||
Cash consideration | 54.9 | ||
Debt assumed | $ 44.8 | ||
Number of sources of financial and leasing transactions acquired | source | 1 | ||
Revolving Credit Facility | Progressive Subsidiary | Dent-A-Med, Inc. | Subsequent Event | |||
Subsequent Event [Line Items] | |||
Long-term debt assumed | $ 85 | ||
Letter of Credit | Progressive Subsidiary | Dent-A-Med, Inc. | Subsequent Event | |||
Subsequent Event [Line Items] | |||
Long-term debt assumed | 2 | ||
Accordion Facility | Progressive Subsidiary | Dent-A-Med, Inc. | Subsequent Event | |||
Subsequent Event [Line Items] | |||
Long-term debt assumed | $ 25 |