Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2017 | Jul. 28, 2017 | |
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2017 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q2 | |
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 (in shares) | 70,726,804 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
ASSETS: | ||
Cash and Cash Equivalents | $ 260,335 | $ 308,561 |
Investments | 22,252 | 20,519 |
Accounts Receivable (net of allowances of $36,589 in 2017 and $35,690 in 2016) | 84,822 | 95,777 |
Lease Merchandise (net of accumulated depreciation and allowances of $744,077 in 2017 and $743,222 in 2016) | 994,236 | 999,381 |
Loans Receivable (net of allowances and unamortized fees of $16,572 in 2017 and $13,830 in 2016) | 83,737 | 84,804 |
Property, Plant and Equipment at Cost (net of accumulated depreciation of $235,828 in 2017 and $231,062 in 2016) | 200,842 | 211,271 |
Goodwill | 527,924 | 526,723 |
Other Intangibles (net of accumulated amortization of $88,122 in 2017 and $75,459 in 2016) | 235,041 | 247,672 |
Prepaid Expenses and Other Assets | 138,941 | 121,028 |
Total Assets | 2,548,130 | 2,615,736 |
LIABILITIES & SHAREHOLDERS’ EQUITY: | ||
Accounts Payable and Accrued Expenses | 281,920 | 297,766 |
Deferred Income Taxes Payable | 260,032 | 276,116 |
Customer Deposits and Advance Payments | 62,992 | 62,427 |
Debt | 401,113 | 497,829 |
Total Liabilities | 1,006,057 | 1,134,138 |
Commitments and Contingencies (Note 4) | ||
SHAREHOLDERS' EQUITY: | ||
Common Stock, Par Value $0.50 Per Share: Authorized: 225,000,000 Shares at June 30, 2017 and December 31, 2016; Shares Issued: 90,752,123 at June 30, 2017 and December 31, 2016 | 45,376 | 45,376 |
Additional Paid-in Capital | 256,032 | 254,512 |
Retained Earnings | 1,620,699 | 1,534,983 |
Accumulated Other Comprehensive Income (Loss) | 118 | (531) |
Stockholders' Equity before Treasury Stock, Total | 1,922,225 | 1,834,340 |
Less: Treasury Shares at Cost | ||
Common Stock: 20,029,149 Shares at June 30, 2017 and 19,303,578 at December 31, 2016 | (380,152) | (352,742) |
Total Shareholders’ Equity | 1,542,073 | 1,481,598 |
Total Liabilities & Shareholders’ Equity | $ 2,548,130 | $ 2,615,736 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowances | $ 36,589 | $ 35,690 |
Lease Merchandise, Accumulated depreciation | 744,077 | 743,222 |
Loans Receivable, allowances | 16,572 | 13,830 |
Property, Plant and Equipment at Cost, accumulated depreciation and amortization | 235,828 | 231,062 |
Other Intangibles, accumulated amortization | $ 88,122 | $ 75,459 |
Common Stock, Par Value (in dollars per share) | $ 0.50 | $ 0.50 |
Common Stock, Shares Authorized (in shares) | 225,000,000 | 225,000,000 |
Common Stock, Shares Issued (in shares) | 90,752,123 | 90,752,123 |
Treasury Shares (in shares) | 20,029,149 | 19,303,578 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Earnings - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
REVENUES: | ||||
Lease Revenues and Fees | $ 718,089 | $ 688,677 | $ 1,461,711 | $ 1,430,288 |
Retail Sales | 6,106 | 6,460 | 14,884 | 17,415 |
Non-Retail Sales | 69,602 | 72,610 | 138,929 | 151,915 |
Franchise Royalties and Fees | 12,824 | 14,772 | 27,025 | 31,067 |
Interest and Fees on Loans Receivable | 8,532 | 5,302 | 16,733 | 10,065 |
Other | 491 | 1,532 | 916 | 3,030 |
Revenues, Total | 815,644 | 789,353 | 1,660,198 | 1,643,780 |
COSTS AND EXPENSES: | ||||
Depreciation of Lease Merchandise | 345,398 | 321,969 | 707,396 | 670,271 |
Retail Cost of Sales | 3,940 | 3,892 | 9,331 | 10,957 |
Non-Retail Cost of Sales | 61,818 | 63,984 | 123,903 | 135,369 |
Operating Expenses | 330,548 | 330,601 | 659,373 | 679,025 |
Restructuring Expenses | 13,445 | 0 | 13,772 | 0 |
Other Operating (Income) Expense, Net | (511) | 755 | (1,072) | (5,974) |
Costs and Expenses, Total | 754,638 | 721,201 | 1,512,703 | 1,489,648 |
OPERATING PROFIT | 61,006 | 68,152 | 147,495 | 154,132 |
Interest Income | 378 | 507 | 1,352 | 928 |
Interest Expense | (5,552) | (5,904) | (11,367) | (12,216) |
Other Non-Operating Income (Expense), Net | 1,163 | (1,631) | 2,138 | (1,992) |
EARNINGS BEFORE INCOME TAXES | 56,995 | 61,124 | 139,618 | 140,852 |
INCOME TAXES | 20,660 | 22,623 | 49,983 | 52,664 |
NET EARNINGS | $ 36,335 | $ 38,501 | $ 89,635 | $ 88,188 |
EARNINGS PER SHARE | ||||
Basic (in dollars per share) | $ 0.51 | $ 0.53 | $ 1.26 | $ 1.21 |
Assuming Dilution (in dollars per share) | 0.51 | 0.53 | 1.24 | 1.20 |
CASH DIVIDENDS DECLARED PER SHARE: | ||||
Common Stock (in dollars per share) | $ 0.0275 | $ 0.025 | $ 0.055 | $ 0.050 |
WEIGHTED AVERAGE SHARES OUTSTANDING: | ||||
Basic (in shares) | 70,686 | 72,761 | 71,001 | 72,697 |
Assuming Dilution (in shares) | 71,697 | 73,279 | 72,040 | 73,248 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Statement of Comprehensive Income [Abstract] | ||||
Net Earnings | $ 36,335 | $ 38,501 | $ 89,635 | $ 88,188 |
Other Comprehensive Income: | ||||
Foreign Currency Translation Adjustment | 446 | 93 | 649 | 686 |
Total Other Comprehensive Income | 446 | 93 | 649 | 686 |
Comprehensive Income | $ 36,781 | $ 38,594 | $ 90,284 | $ 88,874 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
OPERATING ACTIVITIES: | ||
Net Earnings | $ 89,635 | $ 88,188 |
Adjustments to Reconcile Net Earnings to Cash Provided by Operating Activities: | ||
Depreciation of Lease Merchandise | 707,396 | 670,271 |
Other Depreciation and Amortization | 40,302 | 40,956 |
Accounts Receivable Provision | 82,106 | 74,968 |
Provision for Credit Losses on Loans Receivable | 9,130 | 4,211 |
Stock-Based Compensation | 11,705 | 10,446 |
Deferred Income Taxes | (16,084) | (9,522) |
Other Changes, Net | (3,795) | (5,640) |
Changes in Operating Assets and Liabilities, Net of Effects of Acquisitions and Dispositions: | ||
Additions to Lease Merchandise | (905,693) | (789,768) |
Book Value of Lease Merchandise Sold or Disposed | 202,734 | 210,547 |
Accounts Receivable | (71,081) | (45,475) |
Prepaid Expenses and Other Assets | (13,618) | 36,882 |
Income Tax Receivable | (751) | 164,790 |
Accounts Payable and Accrued Expenses | (16,940) | (109,888) |
Accrued Regulatory Expense | 0 | (4,737) |
Customer Deposits and Advance Payments | 562 | (10,746) |
Cash Provided by Operating Activities | 115,608 | 325,483 |
INVESTING ACTIVITIES: | ||
Investments in Loans Receivable | (37,139) | (36,500) |
Proceeds from Loans Receivable | 31,053 | 35,236 |
Outflows on Purchases of Property, Plant and Equipment | (26,822) | (30,955) |
Proceeds from Property, Plant and Equipment | 7,256 | 18,457 |
Outflows on Acquisitions of Businesses | (940) | (332) |
Proceeds from Dispositions of Businesses | 948 | 34,968 |
Cash (Used in) Provided by Investing Activities | (25,644) | 20,874 |
FINANCING ACTIVITIES: | ||
Proceeds from Debt | 7,000 | 90,678 |
Repayments on Debt | (104,309) | (204,512) |
Dividends Paid | (3,903) | (3,636) |
Acquisition of Treasury Stock | (34,302) | 0 |
Issuance of Stock Under Stock Option Plans | 2,982 | 248 |
Shares Withheld for Tax Payments | (5,715) | (1,838) |
Cash Used in Financing Activities | (138,247) | (119,060) |
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | 57 | 0 |
(Decrease) Increase in Cash and Cash Equivalents | (48,226) | 227,297 |
Cash and Cash Equivalents at Beginning of Period | 308,561 | 14,942 |
Cash and Cash Equivalents at End of Period | $ 260,335 | $ 242,239 |
Basis and Summary of Significan
Basis and Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2017 | |
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") is a leading omnichannel provider of lease-purchase solutions. As of June 30, 2017 , the Company's operating segments are Aaron's Business, Progressive Leasing and DAMI. The Aaron's Business offers furniture, consumer electronics, home appliances and accessories to consumers primarily on a month-to-month, lease-to-own basis with no credit needed through the Company's Aaron's stores in the United States and Canada. This operating segment also awards franchises and supports franchisees of its Aaron's stores. In addition, the Aaron's Business segment also includes the operations of Woodhaven Furniture Industries, which manufactures and supplies the majority of the upholstered furniture and bedding leased and sold in Company-operated and franchised stores. Progressive Leasing is a virtual lease-to-own company that 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 Leasing consequently has no stores of its own, but rather offers lease-purchase solutions to the customers of traditional retailers. DAMI partners with merchants to provide a variety of revolving credit products originated through two third-party federally insured banks to customers that may not qualify for traditional prime lending (called "second-look" financing programs). On May 13, 2016 , the Company sold the 82 Company-operated HomeSmart stores and ceased operations of that division. See the Assets Held for Sale section below for further discussion of the disposition. The following table presents store count by ownership type for the Aaron's Business operations: Stores as of June 30 (Unaudited) 2017 2016 Company-operated Aaron's Branded Stores 1,093 1,221 Franchised Stores 680 722 Systemwide Stores 1,773 1,943 The following table presents active doors for Progressive Leasing: Active Doors at June 30 (Unaudited) 2017 2016 Progressive Leasing Active Doors 1 19,148 13,930 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 the 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 unidentified 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, 2016 (the " 2016 Annual Report"). The results of operations for the three and six months ended June 30, 2017 are not necessarily indicative of operating results for the full year. Principles of Consolidation 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. Accounting Policies and Estimates See Note 1 to the consolidated financial statements in the 2016 Annual Report. 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 ("RSUs"), restricted stock awards ("RSAs") and performance share units ("PSUs") (collectively, "share-based awards") as determined under the treasury stock method. The following table shows the calculation of dilutive share-based awards: Three Months Ended Six Months Ended (Shares In Thousands) 2017 2016 2017 2016 Weighted Average Shares Outstanding 70,686 72,761 71,001 72,697 Dilutive Effect of Share-Based Awards 1,011 518 1,039 551 Weighted Average Shares Outstanding Assuming Dilution 71,697 73,279 72,040 73,248 Approximately 1,000 and 265,000 weighted-average share-based awards were excluded from the computations of earnings per share assuming dilution during the three and six months ended June 30, 2017 , respectively, as the awards would have been anti-dilutive for the periods presented. Approximately 1,265,000 and 1,057,000 weighted-average share-based awards were excluded from the computations of earnings per share assuming dilution during the three and six months ended June 30, 2016 , respectively, as the awards would have been anti-dilutive for the periods presented. Investments At June 30, 2017 and December 31, 2016 , investments classified as held-to-maturity securities consisted of British pound-denominated notes issued by Perfect Home Holdings Limited ("Perfect Home"). Perfect Home is based in the U.K. and operates 35 retail stores as of June 30, 2017 . The Perfect Home Notes ("Notes") consisted of outstanding principal and accrued interest of £17.1 million ( $22.3 million ) and £16.6 million ( $20.5 million ) at June 30, 2017 and December 31, 2016 , respectively. The Notes are classified as held-to-maturity securities as the Company held the investment to the maturity date of June 30, 2017. As a result of Perfect Home's constrained liquidity during the second quarter, the Company ceased accruing additional interest income of the annualized 12% stated interest rate on the Notes effective April 1, 2017. The Company has not received payment of the outstanding Notes that were due June 30, 2017. While Perfect Home is currently in negotiations to obtain alternative sources of financing, the Company is also in negotiations with Perfect Home to: (i) receive full payment of the outstanding Notes; (ii) receive partial repayment of the Notes and refinance the remaining outstanding balance; (iii) refinance the outstanding Notes; (iv) extend the maturity date of the existing Note agreement; or (v) a combination thereof. The Company has a subordinated security interest in substantially all the assets of Perfect Home, which consists primarily of outstanding loans receivable, merchandise inventory and cash. As of June 30, 2017 , the Company believes the present value of the estimated future net cash inflows of the secured assets is sufficient to recover the outstanding balance of the Notes. Therefore, no impairment has been considered to have occurred as of June 30, 2017 . If Perfect Home is unable to access additional capital and fails to execute on its business strategy, there could be a change in the valuation of the Notes that may result in an impairment loss in future periods. Accounts Receivable Accounts receivable consist primarily of receivables due from customers of Company-operated stores and Progressive Leasing, corporate receivables incurred during the normal course of business (primarily for in-transit credit card transactions, real estate leasing activities and vendor consideration) and franchisee obligations. Accounts receivable, net of allowances, consist of the following: (In Thousands) June 30, 2017 December 31, 2016 Customers $ 36,782 $ 36,227 Corporate 21,397 26,375 Franchisee 26,643 33,175 Accounts Receivable $ 84,822 $ 95,777 The following table shows the amounts recognized for bad debt expense and provision for returns and uncollected payments: Six Months Ended June 30, (In Thousands) 2017 2016 Bad Debt Expense $ 68,044 $ 56,210 Provision for Returns and Uncollected Renewal Payments 14,062 18,758 Accounts Receivable Provision $ 82,106 $ 74,968 Refer to Note 1 to the consolidated financial statements in the 2016 Annual Report for information on the Company's accounting policy for the accounts receivable provision. Lease Merchandise The Company’s lease merchandise consists primarily of furniture, consumer electronics, home appliances and accessories and is recorded at the lower of cost or net realizable value. The cost of merchandise manufactured by our Woodhaven Furniture Industries operations is determined using standard cost and includes overhead from production facilities, shipping costs and warehousing costs. The Company-operated stores depreciate merchandise to a 0% salvage value over the lease agreement period when on lease, generally 12 to 24 months , and generally 36 months when not on lease. The Company’s Progressive Leasing segment, at which substantially all merchandise is on lease, depreciates merchandise generally over 12 months. Depreciation is accelerated upon early payout. The following is a summary of lease merchandise, net of accumulated depreciation and allowances: (In Thousands) June 30, 2017 December 31, 2016 Merchandise on Lease $ 790,505 $ 786,936 Merchandise Not on Lease 203,731 212,445 Lease Merchandise, net of Accumulated Depreciation and Allowances $ 994,236 $ 999,381 The Company’s policies require weekly lease merchandise counts at its store-based operations, which include write-offs for unsalable, damaged, or missing merchandise inventories. In addition to daily cycle counting, full physical inventories are generally taken at the fulfillment and manufacturing facilities annually and appropriate provisions are made for missing, damaged and unsalable merchandise. In addition, the Company monitors lease merchandise levels and mix by division, store, and fulfillment center, as well as the average age of merchandise on hand. If unsalable lease merchandise cannot be returned to vendors, its carrying amount is adjusted to its net realizable value or written off. 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 a provision for write-offs 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. The provision for write-offs is included in operating expenses in the accompanying condensed consolidated statements of earnings. The following table shows the components of the allowance for lease merchandise write-offs: Six Months Ended June 30, (In Thousands) 2017 2016 Beginning Balance $ 33,399 $ 33,405 Merchandise Written off, net of Recoveries (61,034 ) (63,312 ) Provision for Write-offs 63,938 62,031 Ending Balance $ 36,303 $ 32,124 Loans Receivable, Net Gross loans receivable represents the principal balances of credit card charges at DAMI's participating merchants that remain outstanding to cardholders, plus unpaid interest and fees due from cardholders. The allowances and unamortized fees represents an allowance for uncollectible amounts; merchant fee discounts, net of capitalized origination costs; promotional fee discounts; and deferred annual card fees. Loans acquired in the October 15, 2015 DAMI acquisition (the "Acquired Loans") were recorded at their estimated fair value at the acquisition date. The projected net cash flows from expected payments of principal, interest, fees and servicing costs and anticipated charge-offs were included in the determination of fair value; therefore, an allowance for loan losses and an amount for unamortized fees were not recognized for the Acquired Loans. The difference, or discount, between the expected cash flows to be received and the fair value of the Acquired Loans is accreted to interest and fees on loans receivable based on the effective interest method. At each period end, the Company evaluates the appropriateness of the accretable discount on the Acquired Loans based on actual and revised projected future cash receipts. Losses on loans receivable are recognized when they are incurred, which requires the Company to make its best estimate of probable losses inherent in the portfolio. The Company evaluates loans receivable collectively for impairment. The method for calculating the best estimate of probable losses takes into account the Company’s historical experience, adjusted for current conditions and the Company's judgment concerning the probable effects of relevant observable data, trends and market factors. Economic conditions and loan performance trends are closely monitored to manage and evaluate exposure to credit risk. Trends in delinquency ratios are an indicator of credit risk within the loans receivable portfolio, including the migration of loans between delinquency categories over time (roll rates). Charge-off rates represent another indicator of the potential for future credit losses. The risk in the loans receivable portfolio is correlated with broad economic trends, such as unemployment rates, gross domestic product growth and gas prices, which can have a material effect on credit performance. To the extent that actual results differ from estimates of uncollectible loans receivable, the Company’s results of operations and liquidity could be materially affected. The Company calculates the allowance for loan losses based on actual delinquency balances and historical average loss experience on loans receivable by aging category for the prior eight quarters. The allowance for loan losses is maintained at a level considered adequate to cover probable losses of principal, interest and fees on active loans in the loans receivable portfolio. The adequacy of the allowance is evaluated at each period end. Delinquent loans receivable are those that are 30 days or more past due based on their contractual billing dates. The Company places loans receivable on nonaccrual status when they are greater than 90 days past due or upon notification of cardholder bankruptcy, death or fraud. The Company discontinues accruing interest and fees and amortizing deferred merchant fees (net of origination costs) and promotional fees for loans receivable in nonaccrual status. Loans receivable are removed from nonaccrual status when cardholder payments resume, the loan becomes less than 90 days past due and collection of the remaining amounts outstanding is deemed probable. Payments received on nonaccrual loans are allocated according to the same payment hierarchy methodology applied to loans that are accruing interest. Loans receivable are charged off at the end of the month following the billing cycle in which the loans receivable become 120 days past due. DAMI extends or declines credit to an applicant through its bank partners based upon the applicant’s credit rating. Below is a summary of the credit quality of the Company’s loan portfolio as of June 30, 2017 and December 31, 2016 by Fair Issac and Company (FICO) score as determined at the time of loan origination: FICO Score Category June 30, 2017 December 31, 2016 600 or Less 1.7 % 1.8 % Between 600 and 700 77.2 % 78.1 % 700 or Greater 21.1 % 20.1 % Prepaid Expenses and Other Assets Prepaid expenses and other assets consist of the following: (In Thousands) June 30, 2017 December 31, 2016 Prepaid Expenses $ 85,844 $ 75,485 Assets Held for Sale 12,054 8,866 Deferred Tax Asset 5,912 5,912 Income Tax Receivable 12,635 11,884 Other Assets 22,496 18,881 Prepaid Expenses and Other Assets $ 138,941 $ 121,028 Assets Held for Sale Certain properties, consisting of parcels of land and commercial buildings, met the held for sale classification criteria as of June 30, 2017 and December 31, 2016 . Assets held for sale are recorded at the lower of their carrying value or fair value less estimated cost to sell and are classified within prepaid expenses and other assets in the condensed consolidated balance sheets. Depreciation is suspended on assets upon classification to held for sale. The carrying amount of the properties held for sale as of June 30, 2017 and December 31, 2016 is $12.1 million and $8.9 million , respectively. The Company estimated the fair values of real estate properties using the market values for similar properties. On May 13, 2016 , the Company sold its 82 remaining Company-operated HomeSmart stores for $35.0 million and ceased operations of that division. The sale did not represent a strategic shift that would have a major effect on the Company’s operations and financial results and therefore the HomeSmart segment was not classified as discontinued operations. During the six months ended June 30, 2016 , the Company recognized an impairment loss of $4.2 million on the disposition and recorded additional charges of $1.4 million related to exiting the HomeSmart business, primarily consisting of impairment charges on certain assets related to the division that were not included in the May 2016 disposition. The impairment loss and additional charges were recorded in other operating (income) expense, net in the condensed consolidated statements of earnings. On January 29, 2016 , the Company sold its corporate headquarters building for cash of $13.6 million , resulting in a gain of $11.1 million for the six months ended June 30, 2016 . The cash proceeds were recorded in proceeds from sales of property, plant and equipment in the condensed consolidated statements of cash flows and the gain was recorded in other operating (income) expense, net in the condensed consolidated statements of earnings. Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consist of the following: (In Thousands) June 30, 2017 December 31, 2016 Accounts Payable $ 54,663 $ 71,941 Accrued Insurance Costs 44,120 47,649 Accrued Salaries and Benefits 40,628 41,612 Accrued Real Estate and Sales Taxes 29,521 32,986 Deferred Rent 31,193 31,859 Other Accrued Expenses and Liabilities 81,795 71,719 Accounts Payable and Accrued Expenses $ 281,920 $ 297,766 Debt At June 30, 2017 , the Company was in compliance with all covenants related to its outstanding debt. See Note 7 to the consolidated financial statements in the 2016 Annual Report for further information regarding the Company's indebtedness. Accumulated Other Comprehensive (Loss) Income Changes in accumulated other comprehensive (loss) income for the six months ended June 30, 2017 are as follows: (In Thousands) Foreign Currency Balance at January 1, 2017 $ (531 ) Other Comprehensive Income 649 Balance at June 30, 2017 $ 118 There were no reclassifications out of accumulated other comprehensive (loss) income for the six months ended June 30, 2017 . 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. The fair value for the loans receivable, net of allowances, and the revolving credit borrowings also approximate their carrying amounts. Related Party Transactions The Company leases certain properties under capital leases from related parties that are described in Notes 7 and 14 to the consolidated financial statements in the 2016 Annual Report. Supplemental Disclosure of Noncash Investing Transactions During the six months ended June 30, 2017 , the Company entered into exchange transactions to acquire and sell certain customer agreements and related lease merchandise with third parties which are accounted for as business combinations and business disposals. The fair value of the noncash consideration exchanged in these transactions was $3.7 million . Recent Accounting Pronouncements Adopted Share-Based Payments. In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-09, Improvements to Employee Share-Based Payment Accounting . The objective of the update is to simplify the accounting for employee share-based awards, including the income tax effects of awards and the classification on the statement of cash flows. The Company adopted this ASU in the first quarter of 2017. The ASU requires excess tax benefits and deficiencies that result from the difference between what is deductible for tax purposes and the compensation cost recognized for financial reporting purposes to be recognized prospectively as income tax benefit or expense in the statement of earnings in the reporting period in which they occur. Previously, the excess tax benefits and deficiencies were recognized in additional paid-in capital. During the six months ended June 30, 2017 , the recognition of tax benefits on exercised options and vested restricted stock reduced our income tax provision by $0.7 million . The ASU also requires excess tax benefits and deficiencies to be classified as an operating activity on the statement of cash flows. Prior to the update, excess tax benefits and deficiencies were classified as a financing activity. This amendment has been adopted by the Company on a retrospective basis and as a result we have reclassified $0.7 million of excess tax deficiencies previously disclosed as a financing activity in the statement of cash flows to operating activities for the six months ended June 30, 2016 . The ASU requires cash paid by the Company when directly withholding shares for tax-withholding purposes to be classified retrospectively as a financing activity on the statement of cash flows. As a result, cash outflows of $1.8 million representing cash payments to tax authorities for shares withheld during the six months ended June 30, 2016 were reclassified from operating activities to financing activities. The Company has elected to continue to estimate forfeitures in determining the amount of stock compensation expense. Pending Adoption Revenue Recognition. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers . ASU 2014-09 replaces substantially all existing revenue recognition guidance with a single, comprehensive revenue recognition model that requires a company to recognize revenue to depict the transfer of promised goods and services to customers at the amount to which it expects to be entitled in exchange for transferring those goods or services. Companies may use either a full retrospective or a modified retrospective approach to adopt ASU 2014-09, and, as a result of a subsequent update, it will be effective in annual reporting periods, and interim periods within that period, beginning after December 15, 2017. While the majority of the Company's revenues are related to leasing activities and not within the scope of ASU 2014-09, certain of the Company's revenue streams related to its franchise business will likely result in changes to the timing of revenue recognition as well as the presentation of certain revenues. The Company believes the standard will change the timing of recognition of pre-opening revenue from franchisees. The Company's current accounting policy is to recognize initial franchise pre-opening revenue when earned, which is generally when a new store opens. Under the new standard, the initial franchise pre-opening services are not distinct from the continuing franchise services as they would not transfer a benefit to the franchisee directly without use of the franchise license and should be bundled with the franchise license as a single performance obligation. As a result, the pre-opening revenues will likely be recognized over the life of the franchise license term. The Company also believes the standard will change the presentation of advertisement fees charged to franchisees. Advertising fees charged to franchisees are currently recorded as a reduction to operating expenses within the consolidated statements of earnings. The new standard will result in the presentation of advertisement fees charged to franchisees to be reported on a gross basis within the consolidated statements of earnings. The Company does not currently believe these matters will result in a material impact to the consolidated statements of earnings. The Company is evaluating whether to use the full or modified retrospective approach upon adoption in the first quarter of 2018. Leases. In February 2016, the FASB issued ASU 2016-02, Leases , which would require lessees to recognize assets and liabilities for most leases and would change certain aspects of today’s lessor accounting, among other things. ASU 2016-02 is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. Companies must use a modified retrospective approach to adopt ASU 2016-02. A majority of the Company's revenue generating activities will be within the scope of ASU 2016-02. The Company has preliminarily determined that the new standard will not materially impact the timing of revenue recognition. The new standard will likely result in the Company classifying bad debt expense incurred within its Progressive segment as a reduction of lease revenue and fees within the consolidated statements of earnings. The new standard will impact the Company as a lessee by requiring substantially all of its operating leases to be recognized on the balance sheet as a right-to-use asset and lease liability. The Company is currently quantifying the impacts of its operating leases to the consolidated financial statements, as well as evaluating the other impacts of adopting ASU 2016-02. The Company intends to adopt the new standard in the first quarter of 2019. Financial Instruments - Credit Losses . In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. The main objective of the update is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by companies at each reporting date. For trade and other receivables, held to maturity debt securities and other instruments, companies will be required to use a new forward-looking "expected losses" model that generally will result in the recognition of allowances for losses earlier than under current accounting guidance. The standard will be adopted on a prospective basis with a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted. The Company has not yet determined the potential effects of adopting ASU 2016-13 on its consolidated financial statements. Business Combinations . In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business . The objective of the update is to add guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. Companies must use a prospective approach to adopt ASU 2017-01, which is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. The Company believes the new standard will result in certain store acquisitions (disposals), which do not transfer a substantive process, to be accounted for as asset acquisitions (disposals). The Company currently accounts for these transactions as business acquisitions (disposal). These store asset acquisitions will result in any economic goodwill to be subsumed in the definite-lived assets being acquired and subsequently recorded as depreciation and amortization expense through the consolidated statements of earnings. Transactions that will now be accounted for as asset disposals, instead of business disposals, will not result in the write-off of goodwill as part of the disposal. The Company will adopt the new standard in the first quarter of 2018. |
Fair Value Measurement
Fair Value Measurement | 6 Months Ended |
Jun. 30, 2017 | |
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) June 30, 2017 December 31, 2016 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Deferred Compensation Liability $ — $ (12,869 ) $ — $ — $ (11,978 ) $ — The Company maintains the Aaron’s, Inc. Deferred Compensation Plan, which is an unfunded, nonqualified deferred compensation plan for a select group of management, highly compensated employees and non-employee directors. The liability is recorded in accounts payable and accrued expenses in the condensed consolidated balance sheets. 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) June 30, 2017 December 31, 2016 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Assets Held for Sale $ — $ 12,054 $ — $ — $ 8,866 $ — Assets classified as held for sale are recorded at the lower of carrying value or fair value less estimated costs to sell, and any adjustment is recorded in other operating (income) expense, net or restructuring expenses in the condensed consolidated statements of earnings. The highest and best use of the 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. 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) June 30, 2017 December 31, 2016 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Perfect Home Notes 1 $ — $ — $ 22,252 $ — $ — $ 20,519 Fixed-Rate Long-Term Debt 2 — (279,418 ) — — (368,408 ) — 1 The Perfect Home Notes are carried at cost, which approximates fair value. The Company periodically reviews the carrying amount utilizing company-specific transactions or changes in Perfect Home’s financial performance to determine if the Notes are impaired. As of June 30, 2017, the Company considered the fair value of the Note's secured assets in determining if the Notes are impaired. The fair value of the secured assets is determined based on the present value of the estimated future net cash inflows of the Perfect Home assets that are pledged as security interest on the Notes. If Perfect Home is unable to access additional capital and fails to execute on its business strategy, there could be a change in the valuation of the Notes that may result in an impairment loss in future periods. 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 amount of fixed-rate long-term debt was $265.0 million and $350.0 million at June 30, 2017 and December 31, 2016 , respectively. |
Loans Receivable
Loans Receivable | 6 Months Ended |
Jun. 30, 2017 | |
Receivables [Abstract] | |
Loans Receivable | LOANS RECEIVABLE The following is a summary of the Company’s loans receivable, net: (In Thousands) June 30, 2017 December 31, 2016 Credit Card Loans $ 77,280 $ 64,794 Acquired Loans 23,029 33,840 Loans Receivable, Gross 100,309 98,634 Allowance for Loan Losses (9,013 ) (6,624 ) Unamortized Fees (7,559 ) (7,206 ) Loans Receivable, Net $ 83,737 $ 84,804 Included in the table below is an aging of the loans receivable, gross balance: (Dollar Amounts in Thousands) Aging Category 1 June 30, 2017 December 31, 2016 30-59 days past due 7.1 % 6.8 % 60-89 days past due 3.6 % 3.2 % 90 or more days past due 4.2 % 4.3 % Past due loans receivable 14.9 % 14.3 % Current loans receivable 85.1 % 85.7 % Balance of Credit Card Loans on Nonaccrual Status $ 1,219 $ 1,072 Balance of Loans Receivable 90 or More Days Past Due and Still Accruing Interest and Fees $ — $ — 1 This aging is based on the contractual amounts outstanding for each loan as of period end, and does not reflect the fair value adjustments for the Acquired Loans. The table below presents the components of the allowance for loan losses: Six Months Ended June 30, (In Thousands) 2017 2016 Beginning Balance 1 $ 6,624 $ 937 Provision for Loan Losses 9,130 4,211 Charge-offs (6,985 ) (1,056 ) Recoveries 244 4 Ending Balance $ 9,013 $ 4,096 1 The Company acquired DAMI on October 15, 2015 and recorded $89.1 million of loans receivable as of the acquisition date. No corresponding allowance for loan losses was recorded as the loans receivable were established at fair value in acquisition accounting. The January 1, 2016 balance represents the provision for loan losses incurred from October 15, 2015 to December 31, 2015. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES Guarantees The Company has guaranteed certain debt obligations of some of the franchisees under a franchise 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 June 30, 2017 , the maximum amount that the Company would be obligated to repay in the event franchisees defaulted was $52.6 million . The Company has recourse rights to franchisee assets securing the debt obligations, which consist primarily of lease merchandise and fixed assets. Since the inception of the franchise loan program in 1994, the Company has had no significant associated losses. The Company believes the likelihood of any significant amounts being funded by the Company in connection with these guarantees to be remote. 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 approximately $0.9 million as of June 30, 2017 . The maximum facility commitment amount under the franchisee loan program is $125.0 million , including a Canadian subfacility commitment amount for loans to franchisees that operate stores in Canada (other than the province of Quebec) of CAD $25.0 million . The Company remains subject to the financial covenants under the franchisee loan facility. We are in compliance with the covenants at June 30, 2017 and believe that we will continue to be in compliance in the future. Legal Proceedings From time to time, the Company is party to various legal and regulatory proceedings arising in the ordinary course of business. Some of the proceedings to which the Company is currently a party are described below. The Company believes it has meritorious defenses to all of the claims described below, and intends 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 the Company will ultimately be successful in these proceedings, or in others to which it is currently a party. Substantial losses from these proceedings or the costs of defending them could have a material adverse impact upon the Company's 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 June 30, 2017 , the Company had accrued $6.3 million for pending legal and regulatory matters for which it believes losses are probable and is the Company's best estimate of its exposure to loss. The Company records these liabilities in accounts payable and accrued expenses in the condensed consolidated balance sheets. The Company estimates that the aggregate range of reasonably possible loss in excess of accrued liabilities for such probable loss contingencies is between $0 and $1 million . At June 30, 2017 , 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 $1 million and $4 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 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 equitable relief, 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 complaint also seeks pre-and-post judgment interest and attorneys' fees. 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. On February 23, 2016, the Court granted in part and denied in part the Company’s motion for partial summary judgment filed August 14, 2015, dismissing plaintiff’s claims that a pro-rate feature of the lease agreements violated the New Jersey Consumer Fraud Act, but denying summary judgment on the claim that Aaron’s Service Plus violated the same act. In December 2016, a class notice was mailed to certain individuals who were customers of Company-operated stores in New Jersey from March 16, 2006 to March 31, 2011. The parties participated in a settlement conference and reached tentative settlement terms in March 2017. The parties continue to work on a final comprehensive settlement agreement and final court approval. 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, plaintiffs allege 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." Plaintiffs have filed an amended complaint, which asserts claims under the ECPA, common law invasion of privacy, seeks an injunction, and names additional independently owned and operated Company franchisees as defendants. Plaintiffs seek monetary damages as well as injunctive relief. In March 2014, the United States District Court dismissed all claims against all franchisees other than Aspen Way Enterprises, LLC, dismissed claims for invasion of privacy, aiding and abetting, and conspiracy against all defendants, and denied plaintiffs’ motion to certify a class action, but denied the Company’s motion to dismiss the claims alleging ECPA violations. In April 2015, the United States Court of Appeals for the Third Circuit 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. On January 24, 2017, final briefs were submitted on the remand of plaintiffs’ motion for class certification with the District Court, and oral arguments were held on March 30, 2017. The Court's decision is pending. 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, 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 as well as certification of a putative California class. In April 2013, the Company removed this matter to federal court. In May 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. In June 2015, the plaintiffs filed a motion to lift the stay, which was denied in July 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, 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. This case has been stayed pending resolution of the Byrd litigation. 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, plaintiffs claim that the Company and Aspen Way knowingly violated plaintiffs' privacy and the privacy of plaintiffs' law firm's 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 Court has dismissed all claims except a claim for aiding and abetting invasion of privacy. Plaintiffs filed a motion for class certification which the Court denied on January 25, 2017. On May 5, 2017, the Company filed a motion for summary judgment on the remaining single plaintiff case. The briefing on that motion was completed in late June 2017, and it remains pending. Securities Employees' Retirement System of the City of Baton Rouge and Parish of East Baton Rouge v. Aaron's, Inc., John W. Robinson, III, Ryan K. Woodley, and Gilbert L. Danielson , was filed June 16, 2017, in the United States District Court for the Northern District of Georgia. The litigation relates to the temporary drop in Aaron’s stock price following the Company’s announcement of 2015 third quarter results. The Complaint alleges that during the period from February 6, 2015 through October 29, 2015, Aaron's made misleading public statements about the Company's expected financial results and business prospects. The allegations underlying the lawsuit principally relate to the loss of certain data feeds experienced by Progressive Leasing beginning in February 2015 and the alleged failure to disclose the same in a timely manner, as well as certain software issues that allegedly hindered the identification of delinquent accounts during certain limited times in 2015. The Company believes the claims are without merit and intends to vigorously defend against this lawsuit. Other Contingencies The Company is a party to various claims and legal 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. Unfunded Lending Commitments The Company, through its DAMI business, has unfunded lending commitments totaling $378.4 million and $366.4 million as of June 30, 2017 and December 31, 2016 , respectively. These unfunded commitments arise in the ordinary course of business from credit card agreements with individual cardholders that give them the ability to borrow, against unused amounts, up to the maximum credit limit assigned to their account. While these unfunded amounts represented the total available unused lines of credit, the Company does not anticipate that all cardholders will utilize their entire available line at any given point in time. Commitments to extend unsecured credit are agreements to lend to a cardholder so long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The reserve for losses on unfunded loan commitments is calculated by the Company based on historical usage patterns of cardholders after the initial charge and is approximately $0.5 million as of June 30, 2017 and December 31, 2016 , respectively. The reserve for losses on unfunded loan commitments is included in accounts payable and accrued expenses in the condensed consolidated balance sheets. See Note 9 to the consolidated financial statements in the 2016 Annual Report for further information. |
Segments
Segments | 6 Months Ended |
Jun. 30, 2017 | |
Segment Reporting [Abstract] | |
Segments | SEGMENTS As of December 31, 2016 , the Company had five reportable segments: Sales and Lease Ownership, Franchise, Woodhaven, Progressive Leasing and DAMI. As of June 30, 2017 , the Company has three operating and reportable segments: Aaron's Business, Progressive Leasing and DAMI. During the six months ended June 30, 2017 , the Company changed its composition of reportable segments by combining Sales and Lease Ownership, Franchise and Woodhaven into one reportable segment, the Aaron's Business, to align the reportable segments with the current organizational structure and the operating results that the chief operating decision maker regularly reviews to analyze performance and allocate resources. The Company has retroactively adjusted, for all periods presented, its segment disclosures to align with the current composition of reportable segments. The Aaron's Business offers furniture, consumer electronics, home appliances and accessories to consumers primarily on a month-to-month, lease-to-own basis with no credit needed through the Company's Aaron's stores in the United States and Canada. This operating segment also awards franchises and supports franchisees of its Aaron's stores. In addition, the Aaron's Business segment also includes the operations of Woodhaven Furniture Industries, which manufactures and supplies the majority of the upholstered furniture and bedding leased and sold in Company-operated and franchised stores. The HomeSmart operations, prior to its disposition in May 2016, is reflected within the Aaron's Business segment and offered furniture, electronics, appliances and computers to customers primarily on a weekly payment basis with no credit needed. Progressive Leasing is a leading virtual lease-to-own company that provides lease-purchase solutions on a variety of products, including furniture and bedding, consumer electronics, appliances and jewelry. DAMI offers a variety of second-look financing programs originated through two third-party federally insured banks to customers of participating merchants and, together with Progressive Leasing, allows the Company to provide retail partners with below-prime customers one source for financing and leasing transactions. The Company determines earnings (loss) before income taxes for all reportable segments in accordance with U.S. GAAP. Interest expense is allocated to the Progressive Leasing and DAMI segments based on a percentage of the outstanding balances of its intercompany borrowings and of the debt incurred when it was acquired. Three Months Ended Six Months Ended (In Thousands) 2017 2016 2017 2016 Revenues: Aaron's Business $ 433,613 $ 485,477 $ 903,851 $ 1,028,476 Progressive Leasing 373,499 298,574 739,614 605,239 DAMI 8,532 5,302 16,733 10,065 Total Revenues from External Customers $ 815,644 $ 789,353 $ 1,660,198 $ 1,643,780 Earnings (Loss) Before Income Taxes: Aaron's Business 1 $ 21,450 $ 34,321 $ 70,080 $ 95,017 Progressive Leasing 38,240 29,083 73,998 50,997 DAMI (2,695 ) (2,280 ) (4,460 ) (5,162 ) Total Earnings Before Income Taxes $ 56,995 $ 61,124 $ 139,618 $ 140,852 1 Earnings before income taxes for the Aaron's Business during the six months ended June 30, 2017 includes restructuring charges of $13.5 million related to store contractual lease obligations, severance costs and impairment charges in connection with the Company's strategic decision to close Company-operated stores, of which $13.3 million was incurred during the three months ended June 30, 2017 . Earnings before income taxes for the Aaron's Business during the six months ended June 30, 2016 were impacted by: (1) a gain of $11.1 million on the January 29, 2016 sale of the Company's corporate office building; (2) a loss of $5.6 million related to exiting the HomeSmart business and the write-down of the HomeSmart disposal group to its fair value less cost to sell upon its classification as held for sale; and (3) charges of $3.7 million related to the retirement of the Company's Chief Financial Officer. Corporate-related assets that benefit multiple segments are reported as other assets in the table below. (In Thousands) June 30, December 31, Assets: Aaron's Business 1 $ 1,103,084 $ 1,199,213 Progressive Leasing 940,300 919,487 DAMI 102,183 102,958 Other 402,563 394,078 Total Assets $ 2,548,130 $ 2,615,736 1 Includes inventory (principally raw materials and work-in-process) that has been classified within lease merchandise in the condensed consolidated balance sheets of $15.6 million and $14.3 million as of June 30, 2017 and December 31, 2016 , respectively. |
Restructuring
Restructuring | 6 Months Ended |
Jun. 30, 2017 | |
Restructuring and Related Activities [Abstract] | |
Restructuring | RESTRUCTURING 2016 Restructuring Program During the year ended December 31, 2016 , the Company initiated a restructuring program that included a thorough review of the Company-operated Aaron's store portfolio and the subsequent closure or planned closure of underperforming stores. As a result of this restructuring program, the Company closed 56 underperforming Company-operated stores during 2016 and 63 stores during the first six months of 2017, and anticipates closing an additional six stores during the remainder of 2017. The Company also optimized its home office and field support staff during 2016 and 2017, which resulted in a reduction in employee headcount in those areas to more closely align with current business conditions. Total restructuring charges of $13.4 million and $13.8 million were recorded during the three and six months ended June 30, 2017 , respectively. Charges for the three months ended June 30, 2017 were comprised of $11.8 million related to Aaron's store contractual lease obligations for closed stores, $1.1 million related to workforce reductions, and $0.5 million primarily related to the write-down to fair value, less estimated selling costs, of land and buildings from stores closed under the restructuring program. These costs were included in the line item "Restructuring expenses" in the condensed consolidated statements of earnings. The Company expects to incur approximately $1.5 million of additional charges related to the previously announced store closures, but will continue to evaluate its store base for strategic growth and consolidation activities in future periods. To date, the Company has incurred charges of $34.0 million under the restructuring program that was initiated in 2016 and has continued to be implemented in 2017. The following table summarizes the balance of the accruals, which are recorded in accounts payable and accrued expenses in the condensed consolidated balance sheets, and the activity for the six months ended June 30, 2017 : (In Thousands) Contractual Lease Obligations Severance Balance at January 1, 2017 $ 10,583 $ 2,079 Charges 12,259 1,591 Adjustments 1 (941 ) — Restructuring Charges 11,318 1,591 Payments (4,700 ) (1,330 ) Balance at June 30, 2017 $ 17,201 $ 2,340 1 Adjustments relate to early buyouts of leases, changes in sublease assumptions and interest accretion. The following table summarizes restructuring charges by segment for the three and six months ended June 30, 2017 : Three Months Ended June 30, 2017 Six Months Ended June 30, 2017 (In Thousands) Aaron's Business DAMI 1 Total Aaron's Business DAMI 1 Total Contractual Lease Obligations $ 11,841 $ — $ 11,841 $ 11,318 $ — $ 11,318 Fixed Asset Impairment/Other 460 — 460 864 — 864 Severance 996 148 1,144 1,352 238 1,590 Total Restructuring Expense $ 13,297 $ 148 $ 13,445 $ 13,534 $ 238 $ 13,772 1 Restructuring charges for DAMI relate primarily to the segment's relocation efforts. Future DAMI restructuring charges are expected to be immaterial. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | SUBSEQUENT EVENTS Acquisition On July 27, 2017 , the Company acquired substantially all of the assets of the store operations of SEI/Aaron’s, Inc. ("SEI"), its largest franchisee, for approximately $140.0 million in cash, subject to working capital and other adjustments. Those store operations currently serve more than 90,000 customers through 104 Aaron's-branded stores in 11 states primarily in the Northeast. The acquisition is expected to benefit our omnichannel platform through added scale, strengthen the Company's presence in certain geographic markets, and enhance Aaron's ability to drive inventory supply-chain synergies between the Aaron's business and Progressive Leasing in markets that SEI currently serves. |
Basis and Summary of Signific14
Basis and Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2017 | |
Accounting Policies [Abstract] | |
Description of Business | Description of Business Aaron’s, Inc. (the "Company") is a leading omnichannel provider of lease-purchase solutions. As of June 30, 2017 , the Company's operating segments are Aaron's Business, Progressive Leasing and DAMI. The Aaron's Business offers furniture, consumer electronics, home appliances and accessories to consumers primarily on a month-to-month, lease-to-own basis with no credit needed through the Company's Aaron's stores in the United States and Canada. This operating segment also awards franchises and supports franchisees of its Aaron's stores. In addition, the Aaron's Business segment also includes the operations of Woodhaven Furniture Industries, which manufactures and supplies the majority of the upholstered furniture and bedding leased and sold in Company-operated and franchised stores. Progressive Leasing is a virtual lease-to-own company that 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 Leasing consequently has no stores of its own, but rather offers lease-purchase solutions to the customers of traditional retailers. DAMI partners with merchants to provide a variety of revolving credit products originated through two third-party federally insured banks to customers that may not qualify for traditional prime lending (called "second-look" financing programs). |
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 the 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 unidentified 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, 2016 (the " 2016 Annual Report"). The results of operations for the three and six months ended June 30, 2017 are not necessarily indicative of operating results for the full year. |
Principles of Consolidation | Principles of Consolidation 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. |
Accounting Policies and Estimates | Accounting Policies and Estimates See Note 1 to the consolidated financial statements in the 2016 Annual Report. |
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 ("RSUs"), restricted stock awards ("RSAs") and performance share units ("PSUs") (collectively, "share-based awards") as determined under the treasury stock method. |
Investments | Investments At June 30, 2017 and December 31, 2016 , investments classified as held-to-maturity securities consisted of British pound-denominated notes issued by Perfect Home Holdings Limited ("Perfect Home"). Perfect Home is based in the U.K. and operates 35 retail stores as of June 30, 2017 . The Perfect Home Notes ("Notes") consisted of outstanding principal and accrued interest of £17.1 million ( $22.3 million ) and £16.6 million ( $20.5 million ) at June 30, 2017 and December 31, 2016 , respectively. The Notes are classified as held-to-maturity securities as the Company held the investment to the maturity date of June 30, 2017. As a result of Perfect Home's constrained liquidity during the second quarter, the Company ceased accruing additional interest income of the annualized 12% stated interest rate on the Notes effective April 1, 2017. The Company has not received payment of the outstanding Notes that were due June 30, 2017. While Perfect Home is currently in negotiations to obtain alternative sources of financing, the Company is also in negotiations with Perfect Home to: (i) receive full payment of the outstanding Notes; (ii) receive partial repayment of the Notes and refinance the remaining outstanding balance; (iii) refinance the outstanding Notes; (iv) extend the maturity date of the existing Note agreement; or (v) a combination thereof. The Company has a subordinated security interest in substantially all the assets of Perfect Home, which consists primarily of outstanding loans receivable, merchandise inventory and cash. As of June 30, 2017 , the Company believes the present value of the estimated future net cash inflows of the secured assets is sufficient to recover the outstanding balance of the Notes. Therefore, no impairment has been considered to have occurred as of June 30, 2017 . If Perfect Home is unable to access additional capital and fails to execute on its business strategy, there could be a change in the valuation of the Notes that may result in an impairment loss in future periods. |
Accounts Receivable | Accounts Receivable Accounts receivable consist primarily of receivables due from customers of Company-operated stores and Progressive Leasing, corporate receivables incurred during the normal course of business (primarily for in-transit credit card transactions, real estate leasing activities and vendor consideration) and franchisee obligations. Accounts receivable, net of allowances, consist of the following: (In Thousands) June 30, 2017 December 31, 2016 Customers $ 36,782 $ 36,227 Corporate 21,397 26,375 Franchisee 26,643 33,175 Accounts Receivable $ 84,822 $ 95,777 The following table shows the amounts recognized for bad debt expense and provision for returns and uncollected payments: Six Months Ended June 30, (In Thousands) 2017 2016 Bad Debt Expense $ 68,044 $ 56,210 Provision for Returns and Uncollected Renewal Payments 14,062 18,758 Accounts Receivable Provision $ 82,106 $ 74,968 Refer to Note 1 to the consolidated financial statements in the 2016 Annual Report for information on the Company's accounting policy for the accounts receivable provision. |
Lease Merchandise | Lease Merchandise The Company’s lease merchandise consists primarily of furniture, consumer electronics, home appliances and accessories and is recorded at the lower of cost or net realizable value. The cost of merchandise manufactured by our Woodhaven Furniture Industries operations is determined using standard cost and includes overhead from production facilities, shipping costs and warehousing costs. The Company-operated stores depreciate merchandise to a 0% salvage value over the lease agreement period when on lease, generally 12 to 24 months , and generally 36 months when not on lease. The Company’s Progressive Leasing segment, at which substantially all merchandise is on lease, depreciates merchandise generally over 12 months. Depreciation is accelerated upon early payout. The following is a summary of lease merchandise, net of accumulated depreciation and allowances: (In Thousands) June 30, 2017 December 31, 2016 Merchandise on Lease $ 790,505 $ 786,936 Merchandise Not on Lease 203,731 212,445 Lease Merchandise, net of Accumulated Depreciation and Allowances $ 994,236 $ 999,381 The Company’s policies require weekly lease merchandise counts at its store-based operations, which include write-offs for unsalable, damaged, or missing merchandise inventories. In addition to daily cycle counting, full physical inventories are generally taken at the fulfillment and manufacturing facilities annually and appropriate provisions are made for missing, damaged and unsalable merchandise. In addition, the Company monitors lease merchandise levels and mix by division, store, and fulfillment center, as well as the average age of merchandise on hand. If unsalable lease merchandise cannot be returned to vendors, its carrying amount is adjusted to its net realizable value or written off. 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 a provision for write-offs 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. The provision for write-offs is included in operating expenses in the accompanying condensed consolidated statements of earnings. |
Loans Receivable, Net | Loans Receivable, Net Gross loans receivable represents the principal balances of credit card charges at DAMI's participating merchants that remain outstanding to cardholders, plus unpaid interest and fees due from cardholders. The allowances and unamortized fees represents an allowance for uncollectible amounts; merchant fee discounts, net of capitalized origination costs; promotional fee discounts; and deferred annual card fees. Loans acquired in the October 15, 2015 DAMI acquisition (the "Acquired Loans") were recorded at their estimated fair value at the acquisition date. The projected net cash flows from expected payments of principal, interest, fees and servicing costs and anticipated charge-offs were included in the determination of fair value; therefore, an allowance for loan losses and an amount for unamortized fees were not recognized for the Acquired Loans. The difference, or discount, between the expected cash flows to be received and the fair value of the Acquired Loans is accreted to interest and fees on loans receivable based on the effective interest method. At each period end, the Company evaluates the appropriateness of the accretable discount on the Acquired Loans based on actual and revised projected future cash receipts. Losses on loans receivable are recognized when they are incurred, which requires the Company to make its best estimate of probable losses inherent in the portfolio. The Company evaluates loans receivable collectively for impairment. The method for calculating the best estimate of probable losses takes into account the Company’s historical experience, adjusted for current conditions and the Company's judgment concerning the probable effects of relevant observable data, trends and market factors. Economic conditions and loan performance trends are closely monitored to manage and evaluate exposure to credit risk. Trends in delinquency ratios are an indicator of credit risk within the loans receivable portfolio, including the migration of loans between delinquency categories over time (roll rates). Charge-off rates represent another indicator of the potential for future credit losses. The risk in the loans receivable portfolio is correlated with broad economic trends, such as unemployment rates, gross domestic product growth and gas prices, which can have a material effect on credit performance. To the extent that actual results differ from estimates of uncollectible loans receivable, the Company’s results of operations and liquidity could be materially affected. The Company calculates the allowance for loan losses based on actual delinquency balances and historical average loss experience on loans receivable by aging category for the prior eight quarters. The allowance for loan losses is maintained at a level considered adequate to cover probable losses of principal, interest and fees on active loans in the loans receivable portfolio. The adequacy of the allowance is evaluated at each period end. Delinquent loans receivable are those that are 30 days or more past due based on their contractual billing dates. The Company places loans receivable on nonaccrual status when they are greater than 90 days past due or upon notification of cardholder bankruptcy, death or fraud. The Company discontinues accruing interest and fees and amortizing deferred merchant fees (net of origination costs) and promotional fees for loans receivable in nonaccrual status. Loans receivable are removed from nonaccrual status when cardholder payments resume, the loan becomes less than 90 days past due and collection of the remaining amounts outstanding is deemed probable. Payments received on nonaccrual loans are allocated according to the same payment hierarchy methodology applied to loans that are accruing interest. Loans receivable are charged off at the end of the month following the billing cycle in which the loans receivable become 120 days past due. DAMI extends or declines credit to an applicant through its bank partners based upon the applicant’s credit rating. |
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 June 30, 2017 and December 31, 2016 . Assets held for sale are recorded at the lower of their carrying value or fair value less estimated cost to sell and are classified within prepaid expenses and other assets in the condensed consolidated balance sheets. Depreciation is suspended on assets upon classification to held for sale. The carrying amount of the properties held for sale as of June 30, 2017 and December 31, 2016 is $12.1 million and $8.9 million , respectively. The Company estimated the fair values of real estate properties using the market values for similar properties. On May 13, 2016 , the Company sold its 82 remaining Company-operated HomeSmart stores for $35.0 million and ceased operations of that division. The sale did not represent a strategic shift that would have a major effect on the Company’s operations and financial results and therefore the HomeSmart segment was not classified as discontinued operations. During the six months ended June 30, 2016 , the Company recognized an impairment loss of $4.2 million on the disposition and recorded additional charges of $1.4 million related to exiting the HomeSmart business, primarily consisting of impairment charges on certain assets related to the division that were not included in the May 2016 disposition. The impairment loss and additional charges were recorded in other operating (income) expense, net in the condensed consolidated statements of earnings. On January 29, 2016 , the Company sold its corporate headquarters building for cash of $13.6 million , resulting in a gain of $11.1 million for the six months ended June 30, 2016 . The cash proceeds were recorded in proceeds from sales of property, plant and equipment in the condensed consolidated statements of cash flows and the gain was recorded in other operating (income) expense, net in the condensed consolidated statements of earnings. |
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. The fair value for the loans receivable, net of allowances, and the revolving credit borrowings also approximate their carrying amounts. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Adopted Share-Based Payments. In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-09, Improvements to Employee Share-Based Payment Accounting . The objective of the update is to simplify the accounting for employee share-based awards, including the income tax effects of awards and the classification on the statement of cash flows. The Company adopted this ASU in the first quarter of 2017. The ASU requires excess tax benefits and deficiencies that result from the difference between what is deductible for tax purposes and the compensation cost recognized for financial reporting purposes to be recognized prospectively as income tax benefit or expense in the statement of earnings in the reporting period in which they occur. Previously, the excess tax benefits and deficiencies were recognized in additional paid-in capital. During the six months ended June 30, 2017 , the recognition of tax benefits on exercised options and vested restricted stock reduced our income tax provision by $0.7 million . The ASU also requires excess tax benefits and deficiencies to be classified as an operating activity on the statement of cash flows. Prior to the update, excess tax benefits and deficiencies were classified as a financing activity. This amendment has been adopted by the Company on a retrospective basis and as a result we have reclassified $0.7 million of excess tax deficiencies previously disclosed as a financing activity in the statement of cash flows to operating activities for the six months ended June 30, 2016 . The ASU requires cash paid by the Company when directly withholding shares for tax-withholding purposes to be classified retrospectively as a financing activity on the statement of cash flows. As a result, cash outflows of $1.8 million representing cash payments to tax authorities for shares withheld during the six months ended June 30, 2016 were reclassified from operating activities to financing activities. The Company has elected to continue to estimate forfeitures in determining the amount of stock compensation expense. Pending Adoption Revenue Recognition. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers . ASU 2014-09 replaces substantially all existing revenue recognition guidance with a single, comprehensive revenue recognition model that requires a company to recognize revenue to depict the transfer of promised goods and services to customers at the amount to which it expects to be entitled in exchange for transferring those goods or services. Companies may use either a full retrospective or a modified retrospective approach to adopt ASU 2014-09, and, as a result of a subsequent update, it will be effective in annual reporting periods, and interim periods within that period, beginning after December 15, 2017. While the majority of the Company's revenues are related to leasing activities and not within the scope of ASU 2014-09, certain of the Company's revenue streams related to its franchise business will likely result in changes to the timing of revenue recognition as well as the presentation of certain revenues. The Company believes the standard will change the timing of recognition of pre-opening revenue from franchisees. The Company's current accounting policy is to recognize initial franchise pre-opening revenue when earned, which is generally when a new store opens. Under the new standard, the initial franchise pre-opening services are not distinct from the continuing franchise services as they would not transfer a benefit to the franchisee directly without use of the franchise license and should be bundled with the franchise license as a single performance obligation. As a result, the pre-opening revenues will likely be recognized over the life of the franchise license term. The Company also believes the standard will change the presentation of advertisement fees charged to franchisees. Advertising fees charged to franchisees are currently recorded as a reduction to operating expenses within the consolidated statements of earnings. The new standard will result in the presentation of advertisement fees charged to franchisees to be reported on a gross basis within the consolidated statements of earnings. The Company does not currently believe these matters will result in a material impact to the consolidated statements of earnings. The Company is evaluating whether to use the full or modified retrospective approach upon adoption in the first quarter of 2018. Leases. In February 2016, the FASB issued ASU 2016-02, Leases , which would require lessees to recognize assets and liabilities for most leases and would change certain aspects of today’s lessor accounting, among other things. ASU 2016-02 is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. Companies must use a modified retrospective approach to adopt ASU 2016-02. A majority of the Company's revenue generating activities will be within the scope of ASU 2016-02. The Company has preliminarily determined that the new standard will not materially impact the timing of revenue recognition. The new standard will likely result in the Company classifying bad debt expense incurred within its Progressive segment as a reduction of lease revenue and fees within the consolidated statements of earnings. The new standard will impact the Company as a lessee by requiring substantially all of its operating leases to be recognized on the balance sheet as a right-to-use asset and lease liability. The Company is currently quantifying the impacts of its operating leases to the consolidated financial statements, as well as evaluating the other impacts of adopting ASU 2016-02. The Company intends to adopt the new standard in the first quarter of 2019. Financial Instruments - Credit Losses . In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. The main objective of the update is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by companies at each reporting date. For trade and other receivables, held to maturity debt securities and other instruments, companies will be required to use a new forward-looking "expected losses" model that generally will result in the recognition of allowances for losses earlier than under current accounting guidance. The standard will be adopted on a prospective basis with a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted. The Company has not yet determined the potential effects of adopting ASU 2016-13 on its consolidated financial statements. Business Combinations . In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business . The objective of the update is to add guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. Companies must use a prospective approach to adopt ASU 2017-01, which is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. The Company believes the new standard will result in certain store acquisitions (disposals), which do not transfer a substantive process, to be accounted for as asset acquisitions (disposals). The Company currently accounts for these transactions as business acquisitions (disposal). These store asset acquisitions will result in any economic goodwill to be subsumed in the definite-lived assets being acquired and subsequently recorded as depreciation and amortization expense through the consolidated statements of earnings. Transactions that will now be accounted for as asset disposals, instead of business disposals, will not result in the write-off of goodwill as part of the disposal. The Company will adopt the new standard in the first quarter of 2018. |
Basis and Summary of Signific15
Basis and Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Accounting Policies [Abstract] | |
Schedule Of Company Operated Store Activity | The following table presents store count by ownership type for the Aaron's Business operations: Stores as of June 30 (Unaudited) 2017 2016 Company-operated Aaron's Branded Stores 1,093 1,221 Franchised Stores 680 722 Systemwide Stores 1,773 1,943 The following table presents active doors for Progressive Leasing: Active Doors at June 30 (Unaudited) 2017 2016 Progressive Leasing Active Doors 1 19,148 13,930 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: Three Months Ended Six Months Ended (Shares In Thousands) 2017 2016 2017 2016 Weighted Average Shares Outstanding 70,686 72,761 71,001 72,697 Dilutive Effect of Share-Based Awards 1,011 518 1,039 551 Weighted Average Shares Outstanding Assuming Dilution 71,697 73,279 72,040 73,248 |
Accounts Receivable Net of Allowances | Accounts receivable, net of allowances, consist of the following: (In Thousands) June 30, 2017 December 31, 2016 Customers $ 36,782 $ 36,227 Corporate 21,397 26,375 Franchisee 26,643 33,175 Accounts Receivable $ 84,822 $ 95,777 The following is a summary of the Company’s loans receivable, net: (In Thousands) June 30, 2017 December 31, 2016 Credit Card Loans $ 77,280 $ 64,794 Acquired Loans 23,029 33,840 Loans Receivable, Gross 100,309 98,634 Allowance for Loan Losses (9,013 ) (6,624 ) Unamortized Fees (7,559 ) (7,206 ) Loans Receivable, Net $ 83,737 $ 84,804 |
Components of the Accounts Receivable Provision | The following table shows the amounts recognized for bad debt expense and provision for returns and uncollected payments: Six Months Ended June 30, (In Thousands) 2017 2016 Bad Debt Expense $ 68,044 $ 56,210 Provision for Returns and Uncollected Renewal Payments 14,062 18,758 Accounts Receivable Provision $ 82,106 $ 74,968 |
Schedule of Lease Merchandise | The following is a summary of lease merchandise, net of accumulated depreciation and allowances: (In Thousands) June 30, 2017 December 31, 2016 Merchandise on Lease $ 790,505 $ 786,936 Merchandise Not on Lease 203,731 212,445 Lease Merchandise, net of Accumulated Depreciation and Allowances $ 994,236 $ 999,381 |
Allowance for Lease Merchandise | The following table shows the components of the allowance for lease merchandise write-offs: Six Months Ended June 30, (In Thousands) 2017 2016 Beginning Balance $ 33,399 $ 33,405 Merchandise Written off, net of Recoveries (61,034 ) (63,312 ) Provision for Write-offs 63,938 62,031 Ending Balance $ 36,303 $ 32,124 |
Loan Portfolio Credit Quality Indicators | Below is a summary of the credit quality of the Company’s loan portfolio as of June 30, 2017 and December 31, 2016 by Fair Issac and Company (FICO) score as determined at the time of loan origination: FICO Score Category June 30, 2017 December 31, 2016 600 or Less 1.7 % 1.8 % Between 600 and 700 77.2 % 78.1 % 700 or Greater 21.1 % 20.1 % |
Schedule of Prepaid Expenses and Other Assets | Prepaid expenses and other assets consist of the following: (In Thousands) June 30, 2017 December 31, 2016 Prepaid Expenses $ 85,844 $ 75,485 Assets Held for Sale 12,054 8,866 Deferred Tax Asset 5,912 5,912 Income Tax Receivable 12,635 11,884 Other Assets 22,496 18,881 Prepaid Expenses and Other Assets $ 138,941 $ 121,028 |
Schedule of Accounts Payable and Accrued Expenses | Accounts payable and accrued expenses consist of the following: (In Thousands) June 30, 2017 December 31, 2016 Accounts Payable $ 54,663 $ 71,941 Accrued Insurance Costs 44,120 47,649 Accrued Salaries and Benefits 40,628 41,612 Accrued Real Estate and Sales Taxes 29,521 32,986 Deferred Rent 31,193 31,859 Other Accrued Expenses and Liabilities 81,795 71,719 Accounts Payable and Accrued Expenses $ 281,920 $ 297,766 |
Changes in Accumulated Other Comprehensive Loss (Gain) by Component | Changes in accumulated other comprehensive (loss) income for the six months ended June 30, 2017 are as follows: (In Thousands) Foreign Currency Balance at January 1, 2017 $ (531 ) Other Comprehensive Income 649 Balance at June 30, 2017 $ 118 |
Fair Value Measurement (Tables)
Fair Value Measurement (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
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) June 30, 2017 December 31, 2016 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Deferred Compensation Liability $ — $ (12,869 ) $ — $ — $ (11,978 ) $ — |
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) June 30, 2017 December 31, 2016 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Assets Held for Sale $ — $ 12,054 $ — $ — $ 8,866 $ — |
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) June 30, 2017 December 31, 2016 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Perfect Home Notes 1 $ — $ — $ 22,252 $ — $ — $ 20,519 Fixed-Rate Long-Term Debt 2 — (279,418 ) — — (368,408 ) — 1 The Perfect Home Notes are carried at cost, which approximates fair value. The Company periodically reviews the carrying amount utilizing company-specific transactions or changes in Perfect Home’s financial performance to determine if the Notes are impaired. As of June 30, 2017, the Company considered the fair value of the Note's secured assets in determining if the Notes are impaired. The fair value of the secured assets is determined based on the present value of the estimated future net cash inflows of the Perfect Home assets that are pledged as security interest on the Notes. If Perfect Home is unable to access additional capital and fails to execute on its business strategy, there could be a change in the valuation of the Notes that may result in an impairment loss in future periods. 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 amount of fixed-rate long-term debt was $265.0 million and $350.0 million at June 30, 2017 and December 31, 2016 , respectively. |
Loans Receivable (Tables)
Loans Receivable (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Receivables [Abstract] | |
Schedule of the Components of Loans Receivable, Net | Accounts receivable, net of allowances, consist of the following: (In Thousands) June 30, 2017 December 31, 2016 Customers $ 36,782 $ 36,227 Corporate 21,397 26,375 Franchisee 26,643 33,175 Accounts Receivable $ 84,822 $ 95,777 The following is a summary of the Company’s loans receivable, net: (In Thousands) June 30, 2017 December 31, 2016 Credit Card Loans $ 77,280 $ 64,794 Acquired Loans 23,029 33,840 Loans Receivable, Gross 100,309 98,634 Allowance for Loan Losses (9,013 ) (6,624 ) Unamortized Fees (7,559 ) (7,206 ) Loans Receivable, Net $ 83,737 $ 84,804 |
Aging of the Loans Receivable Balance | Included in the table below is an aging of the loans receivable, gross balance: (Dollar Amounts in Thousands) Aging Category 1 June 30, 2017 December 31, 2016 30-59 days past due 7.1 % 6.8 % 60-89 days past due 3.6 % 3.2 % 90 or more days past due 4.2 % 4.3 % Past due loans receivable 14.9 % 14.3 % Current loans receivable 85.1 % 85.7 % Balance of Credit Card Loans on Nonaccrual Status $ 1,219 $ 1,072 Balance of Loans Receivable 90 or More Days Past Due and Still Accruing Interest and Fees $ — $ — 1 This aging is based on the contractual amounts outstanding for each loan as of period end, and does not reflect the fair value adjustments for the Acquired Loans. |
Components of the Allowance for Loan Losses | The table below presents the components of the allowance for loan losses: Six Months Ended June 30, (In Thousands) 2017 2016 Beginning Balance 1 $ 6,624 $ 937 Provision for Loan Losses 9,130 4,211 Charge-offs (6,985 ) (1,056 ) Recoveries 244 4 Ending Balance $ 9,013 $ 4,096 1 The Company acquired DAMI on October 15, 2015 and recorded $89.1 million of loans receivable as of the acquisition date. No corresponding allowance for loan losses was recorded as the loans receivable were established at fair value in acquisition accounting. The January 1, 2016 balance represents the provision for loan losses incurred from October 15, 2015 to December 31, 2015. |
Segments (Tables)
Segments (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Segment Reporting [Abstract] | |
Information on Segments and Reconciliation to Earnings Before Income Taxes from Continuing Operations | Corporate-related assets that benefit multiple segments are reported as other assets in the table below. (In Thousands) June 30, December 31, Assets: Aaron's Business 1 $ 1,103,084 $ 1,199,213 Progressive Leasing 940,300 919,487 DAMI 102,183 102,958 Other 402,563 394,078 Total Assets $ 2,548,130 $ 2,615,736 1 Includes inventory (principally raw materials and work-in-process) that has been classified within lease merchandise in the condensed consolidated balance sheets of $15.6 million and $14.3 million as of June 30, 2017 and December 31, 2016 , respectively. The Company determines earnings (loss) before income taxes for all reportable segments in accordance with U.S. GAAP. Interest expense is allocated to the Progressive Leasing and DAMI segments based on a percentage of the outstanding balances of its intercompany borrowings and of the debt incurred when it was acquired. Three Months Ended Six Months Ended (In Thousands) 2017 2016 2017 2016 Revenues: Aaron's Business $ 433,613 $ 485,477 $ 903,851 $ 1,028,476 Progressive Leasing 373,499 298,574 739,614 605,239 DAMI 8,532 5,302 16,733 10,065 Total Revenues from External Customers $ 815,644 $ 789,353 $ 1,660,198 $ 1,643,780 Earnings (Loss) Before Income Taxes: Aaron's Business 1 $ 21,450 $ 34,321 $ 70,080 $ 95,017 Progressive Leasing 38,240 29,083 73,998 50,997 DAMI (2,695 ) (2,280 ) (4,460 ) (5,162 ) Total Earnings Before Income Taxes $ 56,995 $ 61,124 $ 139,618 $ 140,852 1 Earnings before income taxes for the Aaron's Business during the six months ended June 30, 2017 includes restructuring charges of $13.5 million related to store contractual lease obligations, severance costs and impairment charges in connection with the Company's strategic decision to close Company-operated stores, of which $13.3 million was incurred during the three months ended June 30, 2017 . Earnings before income taxes for the Aaron's Business during the six months ended June 30, 2016 were impacted by: (1) a gain of $11.1 million on the January 29, 2016 sale of the Company's corporate office building; (2) a loss of $5.6 million related to exiting the HomeSmart business and the write-down of the HomeSmart disposal group to its fair value less cost to sell upon its classification as held for sale; and (3) charges of $3.7 million related to the retirement of the Company's Chief Financial Officer. |
Restructuring (Tables)
Restructuring (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Restructuring and Related Activities [Abstract] | |
Restructuring and Related Costs | The following table summarizes the balance of the accruals, which are recorded in accounts payable and accrued expenses in the condensed consolidated balance sheets, and the activity for the six months ended June 30, 2017 : (In Thousands) Contractual Lease Obligations Severance Balance at January 1, 2017 $ 10,583 $ 2,079 Charges 12,259 1,591 Adjustments 1 (941 ) — Restructuring Charges 11,318 1,591 Payments (4,700 ) (1,330 ) Balance at June 30, 2017 $ 17,201 $ 2,340 1 Adjustments relate to early buyouts of leases, changes in sublease assumptions and interest accretion. The following table summarizes restructuring charges by segment for the three and six months ended June 30, 2017 : Three Months Ended June 30, 2017 Six Months Ended June 30, 2017 (In Thousands) Aaron's Business DAMI 1 Total Aaron's Business DAMI 1 Total Contractual Lease Obligations $ 11,841 $ — $ 11,841 $ 11,318 $ — $ 11,318 Fixed Asset Impairment/Other 460 — 460 864 — 864 Severance 996 148 1,144 1,352 238 1,590 Total Restructuring Expense $ 13,297 $ 148 $ 13,445 $ 13,534 $ 238 $ 13,772 1 Restructuring charges for DAMI relate primarily to the segment's relocation efforts. Future DAMI restructuring charges are expected to be immaterial. |
Basis and Summary of Signific20
Basis and Summary of Significant Accounting Policies - Narrative (Details) | Jun. 30, 2017state | May 13, 2016Store |
Disposal Group, Held-for-sale, Not Discontinued Operations | HomeSmart | ||
Significant Accounting Policies [Line Items] | ||
Disposal group, number of stores | Store | 82 | |
Progressive Leasing | ||
Significant Accounting Policies [Line Items] | ||
Number of states in which entity operates | state | 46 |
Basis and Summary of Signific21
Basis and Summary of Significant Accounting Policies - Store Count by Ownership Type (Details) - Operating Segments | 6 Months Ended | ||
Jun. 30, 2017transactionStore | Jun. 30, 2016transactionStore | ||
Progressive Leasing | |||
Significant Accounting Policies [Line Items] | |||
Number of retail stores | [1] | 19,148 | 13,930 |
Number of virtual lease-to-own transactions completed | transaction | 1 | 1 | |
Company-operated Aaron's Branded Stores | |||
Significant Accounting Policies [Line Items] | |||
Number of retail stores | 1,093 | 1,221 | |
Franchised Stores | |||
Significant Accounting Policies [Line Items] | |||
Number of retail stores | 680 | 722 | |
Systemwide Stores | |||
Significant Accounting Policies [Line Items] | |||
Number of retail stores | 1,773 | 1,943 | |
[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 and Summary of Signific22
Basis and Summary of Significant Accounting Policies - Calculation of Dilutive Stock Awards (Details) - shares shares in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Accounting Policies [Abstract] | ||||
Weighted Average Shares Outstanding (in shares) | 70,686 | 72,761 | 71,001 | 72,697 |
Dilutive Effect of Share-Based Awards (in shares) | 1,011 | 518 | 1,039 | 551 |
Weighted Average Shares Outstanding Assuming Dilution (in shares) | 71,697 | 73,279 | 72,040 | 73,248 |
Anti-dilutive securities excluded from the computation of earnings per share assuming dilution (in shares) | 1 | 1,265 | 265 | 1,057 |
Basis and Summary of Signific23
Basis and Summary of Significant Accounting Policies - Investments (Details) - Variable Interest Entity, Not Primary Beneficiary £ in Millions | 6 Months Ended | ||||
Jun. 30, 2017USD ($) | Jun. 30, 2017GBP (£)Store | Jun. 30, 2017USD ($)Store | Dec. 31, 2016GBP (£) | Dec. 31, 2016USD ($) | |
Significant Accounting Policies [Line Items] | |||||
Number of retail stores | Store | 35 | 35 | |||
Held-to-maturity Securities | £ 17.1 | $ 22,300,000 | £ 16.6 | $ 20,500,000 | |
Investment interest rate | 12.00% | ||||
Asset impairment charges | $ | $ 0 |
Basis and Summary of Signific24
Basis and Summary of Significant Accounting Policies - Accounts Receivable Net of Allowances (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts Receivable | $ 84,822 | $ 95,777 |
Customers | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts Receivable | 36,782 | 36,227 |
Corporate | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts Receivable | 21,397 | 26,375 |
Franchisee | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts Receivable | $ 26,643 | $ 33,175 |
Basis and Summary of Signific25
Basis and Summary of Significant Accounting Policies - Components of the Accounts Receivable Provision (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Accounting Policies [Abstract] | ||
Bad Debt Expense | $ 68,044 | $ 56,210 |
Provision for Returns and Uncollected Renewal Payments | 14,062 | 18,758 |
Accounts Receivable Provision | $ 82,106 | $ 74,968 |
Basis and Summary of Signific26
Basis and Summary of Significant Accounting Policies - Lease Merchandise (Details) - USD ($) $ in Thousands | 6 Months Ended | ||||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Dec. 31, 2016 | Jun. 30, 2016 | |
Significant Accounting Policies [Line Items] | |||||
Lease merchandise salvage value percentage | 0.00% | ||||
Lease agreement, lease period used as asset useful life | 12 months | ||||
Lease Merchandise, net of Accumulated Depreciation and Allowances | $ 994,236 | $ 999,381 | |||
Components of the allowance of leases merchandise write-offs: | |||||
Beginning Balance | $ 33,399 | $ 33,405 | |||
Merchandise Written off, net of Recoveries | (61,034) | (63,312) | |||
Provision for Write-offs | 63,938 | 62,031 | |||
Ending Balance | $ 33,399 | $ 33,405 | 36,303 | 33,399 | $ 32,124 |
Merchandise on Lease | |||||
Significant Accounting Policies [Line Items] | |||||
Lease Merchandise, net of Accumulated Depreciation and Allowances | 790,505 | 786,936 | |||
Merchandise on Lease | Minimum | |||||
Significant Accounting Policies [Line Items] | |||||
Lease merchandise useful life | 12 months | ||||
Merchandise on Lease | Maximum | |||||
Significant Accounting Policies [Line Items] | |||||
Lease merchandise useful life | 24 months | ||||
Merchandise Not on Lease | |||||
Significant Accounting Policies [Line Items] | |||||
Lease merchandise useful life | 36 months | ||||
Lease Merchandise, net of Accumulated Depreciation and Allowances | $ 203,731 | $ 212,445 |
Basis and Summary of Signific27
Basis and Summary of Significant Accounting Policies - Credit Quality Indicators (Details) | 6 Months Ended | |
Jun. 30, 2017 | Dec. 31, 2016 | |
Financing Receivable, Recorded Investment [Line Items] | ||
Financing receivable, threshold of past dues financing receivable that requires allowance | 24 months | |
FICO Score, 600 or Less | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Financing receivable, percentage of loan portfolio per FICO Score | 1.70% | 1.80% |
FICO Score, Between 600 and 700 | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Financing receivable, percentage of loan portfolio per FICO Score | 77.20% | 78.10% |
FICO Score, 700 or Greater | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Financing receivable, percentage of loan portfolio per FICO Score | 21.10% | 20.10% |
Basis and Summary of Signific28
Basis and Summary of Significant Accounting Policies - Components of Prepaid Expenses and Other Assets (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Accounting Policies [Abstract] | ||
Prepaid Expenses | $ 85,844 | $ 75,485 |
Assets Held for Sale | 12,054 | 8,866 |
Deferred Tax Asset | 5,912 | 5,912 |
Income Tax Receivable | 12,635 | 11,884 |
Other Assets | 22,496 | 18,881 |
Prepaid Expenses and Other Assets | $ 138,941 | $ 121,028 |
Basis and Summary of Signific29
Basis and Summary of Significant Accounting Policies - Assets Held for Sale (Details) $ in Thousands | May 13, 2016USD ($)Store | Jan. 29, 2016USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) | Dec. 31, 2016USD ($) |
Significant Accounting Policies [Line Items] | |||||
Assets Held for Sale | $ 12,054 | $ 8,866 | |||
Proceeds from divestiture of businesses | $ 948 | $ 34,968 | |||
Proceeds from sales of building | $ 13,600 | ||||
Disposal Group, Held-for-sale, Not Discontinued Operations | HomeSmart | |||||
Significant Accounting Policies [Line Items] | |||||
Disposal group, number of stores | Store | 82 | ||||
Proceeds from divestiture of businesses | $ 35,000 | ||||
Loss on disposal | 4,200 | ||||
Business exit costs | 1,400 | ||||
Building | Other operating expense (income), net | |||||
Significant Accounting Policies [Line Items] | |||||
Gain on sale of corporate office building | $ 11,100 |
Basis and Summary of Signific30
Basis and Summary of Significant Accounting Policies - Accounts Payable and Accrued Expenses (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Accounting Policies [Abstract] | ||
Accounts Payable | $ 54,663 | $ 71,941 |
Accrued Insurance Costs | 44,120 | 47,649 |
Accrued Salaries and Benefits | 40,628 | 41,612 |
Accrued Real Estate and Sales Taxes | 29,521 | 32,986 |
Deferred Rent | 31,193 | 31,859 |
Other Accrued Expenses and Liabilities | 81,795 | 71,719 |
Accounts Payable and Accrued Expenses | $ 281,920 | $ 297,766 |
Basis and Summary of Signific31
Basis and Summary of Significant Accounting Policies - Changes in Accumulated Other Comprehensive (Loss) Income by Component (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Accumulated Other Comprehensive (Loss) Income [Line Items] | ||||
Reclassification out of accumulated other comprehensive (loss) income | $ 0 | |||
Accumulated Other Comprehensive Income [Roll Forward] | ||||
Beginning balance | 1,481,598,000 | |||
Other Comprehensive Income | $ 446,000 | $ 93,000 | 649,000 | $ 686,000 |
Ending balance | 1,542,073,000 | 1,542,073,000 | ||
Foreign Currency | ||||
Accumulated Other Comprehensive Income [Roll Forward] | ||||
Beginning balance | (531,000) | |||
Other Comprehensive Income | 649,000 | |||
Ending balance | $ 118,000 | $ 118,000 |
Basis and Summary of Signific32
Basis and Summary of Significant Accounting Policies - Supplemental Disclosure of Noncash Investing Transactions (Details) $ in Millions | 6 Months Ended |
Jun. 30, 2017USD ($) | |
Accounting Policies [Abstract] | |
Business combination, fair value of the noncash consideration exchanged | $ 3.7 |
Basis and Summary of Signific33
Basis and Summary of Significant Accounting Policies - Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Effective income tax rate reconciliation, excess tax benefit, amount | $ 700 | |
Net cash provided by (used in) operating activities | 115,608 | $ 325,483 |
Net cash provided by (used in) in financing activities | $ (138,247) | (119,060) |
Adjustments for New Accounting Pronouncement | Accounting Standards Update 2016-09, Excess Tax Benefit Component | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Net cash provided by (used in) operating activities | 700 | |
Net cash provided by (used in) in financing activities | (700) | |
Adjustments for New Accounting Pronouncement | Accounting Standards Update 2016-09, Statutory Tax Withholding Component | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Net cash provided by (used in) operating activities | 1,800 | |
Net cash provided by (used in) in financing activities | $ (1,800) |
Fair Value Measurement - Summar
Fair Value Measurement - Summary of Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Deferred Compensation Liability | $ 0 | $ 0 |
Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Deferred Compensation Liability | (12,869) | (11,978) |
Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Deferred Compensation Liability | $ 0 | $ 0 |
Fair Value Measurement - Assets
Fair Value Measurement - Assets Measured At Fair Value on Nonrecurring Basis (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets Held for Sale | $ 12,054 | $ 8,866 |
Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets Held for Sale | 0 | 0 |
Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets Held for Sale | 12,054 | 8,866 |
Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets Held for Sale | $ 0 | $ 0 |
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 | Jun. 30, 2017 | Dec. 31, 2016 | |
Level 1 | Fixed-Rate Long-Term Debt | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Long term debt, fair value | [1] | $ 0 | $ 0 |
Level 1 | Perfect Home Notes | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Fair Value | [2] | 0 | 0 |
Level 2 | Fixed-Rate Long-Term Debt | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Long term debt, fair value | [1] | (279,418) | (368,408) |
Level 2 | Perfect Home Notes | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Fair Value | [2] | 0 | 0 |
Level 3 | Fixed-Rate Long-Term Debt | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Long term debt, fair value | [1] | 0 | 0 |
Level 3 | Perfect Home Notes | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Fair Value | [2] | $ 22,252 | $ 20,519 |
[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 amount of fixed-rate long-term debt was $265.0 million and $350.0 million at June 30, 2017 and December 31, 2016, respectively. | ||
[2] | The Perfect Home Notes are carried at cost, which approximates fair value. The Company periodically reviews the carrying amount utilizing company-specific transactions or changes in Perfect Home’s financial performance to determine if the Notes are impaired. As of June 30, 2017, the Company considered the fair value of the Note's secured assets in determining if the Notes are impaired. The fair value of the secured assets is determined based on the present value of the estimated future net cash inflows of the Perfect Home assets that are pledged as security interest on the Notes. |
Fair Value Measurement - Fair37
Fair Value Measurement - Fair Value of Assets (Liabilities) Not Measured at Fair Value In Consolidated Balance Sheet - Additional Information (Details) - USD ($) $ in Millions | Jun. 30, 2017 | Dec. 31, 2016 |
Fixed-Rate Long-Term Debt | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long term debt, carrying value | $ 265 | $ 350 |
Loans Receivable - Components o
Loans Receivable - Components of Loans Receivable, Net (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 | Jun. 30, 2016 | Dec. 31, 2015 | [1] | |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||
Loans Receivable, Gross | $ 100,309 | $ 98,634 | ||||
Allowance for Loan Losses | (9,013) | (6,624) | [1] | $ (4,096) | $ (937) | |
Unamortized Fees | (7,559) | (7,206) | ||||
Loans Receivable, Net | 83,737 | 84,804 | ||||
Credit Card Loans | ||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||
Loans Receivable, Gross | 77,280 | 64,794 | ||||
Acquired Loans | ||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||
Loans Receivable, Gross | $ 23,029 | $ 33,840 | ||||
[1] | The Company acquired DAMI on October 15, 2015 and recorded $89.1 million of loans receivable as of the acquisition date. No corresponding allowance for loan losses was recorded as the loans receivable were established at fair value in acquisition accounting. The January 1, 2016 balance represents the provision for loan losses incurred from October 15, 2015 to December 31, 2015. |
Loans Receivable - Aging of the
Loans Receivable - Aging of the Loans Receivable Balance (Details) - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2017 | Dec. 31, 2016 | ||
Financing Receivable, Recorded Investment, Past Due [Line Items] | |||
Past due loans receivable (percentage) | [1] | 14.90% | 14.30% |
Current loans receivable (percentage) | [1] | 85.10% | 85.70% |
Balance of credit card loans on nonaccrual status | [1] | $ 1,219 | $ 1,072 |
30-59 days past due | |||
Financing Receivable, Recorded Investment, Past Due [Line Items] | |||
Past due loans receivable (percentage) | [1] | 7.10% | 6.80% |
60-89 days past due | |||
Financing Receivable, Recorded Investment, Past Due [Line Items] | |||
Past due loans receivable (percentage) | [1] | 3.60% | 3.20% |
90 or more days past due | |||
Financing Receivable, Recorded Investment, Past Due [Line Items] | |||
Past due loans receivable (percentage) | [1] | 4.20% | 4.30% |
Balance of Loans Receivable 90 or More Days Past Due and Still Accruing Interest and Fees | [1] | $ 0 | $ 0 |
[1] | This aging is based on the contractual amounts outstanding for each loan as of period end, and does not reflect the fair value adjustments for the Acquired Loans. |
Loans Receivable - Components40
Loans Receivable - Components of the Allowance for Loan Losses (Details) - USD ($) $ in Thousands | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Oct. 15, 2015 | ||
Components of the Allowance For Loan Losses: | ||||
Beginning Balance | [1] | $ 6,624 | $ 937 | |
Provision for Loan Losses | 9,130 | 4,211 | ||
Charge-offs | (6,985) | (1,056) | ||
Recoveries | 244 | 4 | ||
Ending Balance | $ 9,013 | $ 4,096 | ||
DAMI | Progressive Leasing | Progressive Subsidiary | ||||
Financing Receivable, Allowance for Credit Losses [Line Items] | ||||
Loans Receivable | $ 89,100 | |||
[1] | The Company acquired DAMI on October 15, 2015 and recorded $89.1 million of loans receivable as of the acquisition date. No corresponding allowance for loan losses was recorded as the loans receivable were established at fair value in acquisition accounting. The January 1, 2016 balance represents the provision for loan losses incurred from October 15, 2015 to December 31, 2015. |
Commitments and Contingencies (
Commitments and Contingencies (Details) | 6 Months Ended | |||
Jun. 30, 2017CAD | Jun. 30, 2017USD ($) | Dec. 31, 2016USD ($) | Oct. 26, 2010$ / violation | |
Other Commitments [Line Items] | ||||
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 | $ 52,600,000 | |||
Fair value of franchise related borrowings | 900,000 | |||
Loan facility to franchisees, maximum commitment amount | 125,000,000 | |||
Loss contingency accrual | 6,300,000 | |||
Reserve for unfunded loan commitments | 500,000 | $ 500,000 | ||
Unused credit card lines | ||||
Other Commitments [Line Items] | ||||
Remaining credit available | 378,400,000 | $ 366,400,000 | ||
Minimum | ||||
Other Commitments [Line Items] | ||||
Range of possible loss not accrued | 0 | |||
Loss contingency, estimate of possible loss | 1,000,000 | |||
Maximum | ||||
Other Commitments [Line Items] | ||||
Range of possible loss not accrued | 1,000,000 | |||
Loss contingency, estimate of possible loss | $ 4,000,000 | |||
Amendment | Franchise Loan Facility | ||||
Other Commitments [Line Items] | ||||
Loan facility maximum Canadian sub facility commitment amount | CAD | CAD 25,000,000 | |||
Margaret Korrow | ||||
Other Commitments [Line Items] | ||||
Statutory penalty damages, per violation | $ / violation | 100 |
Segments - Narrative (Details)
Segments - Narrative (Details) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2017sourcesegments | Dec. 31, 2016segments | |
Segment Reporting [Abstract] | ||
Number of operating segments | 3 | |
Number of reportable segments | 3 | 5 |
DAMI | Progressive Subsidiary | ||
Business Acquisition [Line Items] | ||
Sources of financial and leasing transactions acquired | source | 1 |
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 | 6 Months Ended | ||||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | ||
Segment Reporting Information [Line Items] | ||||||
Revenues | $ 815,644 | $ 789,353 | $ 1,660,198 | $ 1,643,780 | ||
Earnings (loss) before income taxes | 56,995 | 61,124 | 139,618 | 140,852 | ||
Assets | 2,548,130 | 2,548,130 | $ 2,615,736 | |||
Operating Segments | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenues | 815,644 | 789,353 | 1,660,198 | 1,643,780 | ||
Earnings (loss) before income taxes | 56,995 | 61,124 | 139,618 | 140,852 | ||
Operating Segments | Aaron's Business | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenues | 433,613 | 485,477 | 903,851 | 1,028,476 | ||
Earnings (loss) before income taxes | [1] | 21,450 | 34,321 | 70,080 | 95,017 | |
Assets | [2] | 1,103,084 | 1,103,084 | 1,199,213 | ||
Operating Segments | Progressive Leasing | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenues | 373,499 | 298,574 | 739,614 | 605,239 | ||
Earnings (loss) before income taxes | 38,240 | 29,083 | 73,998 | 50,997 | ||
Assets | 940,300 | 940,300 | 919,487 | |||
Operating Segments | DAMI | ||||||
Segment Reporting Information [Line Items] | ||||||
Revenues | 8,532 | 5,302 | 16,733 | 10,065 | ||
Earnings (loss) before income taxes | (2,695) | $ (2,280) | (4,460) | $ (5,162) | ||
Assets | 102,183 | 102,183 | 102,958 | |||
Operating Segments | Other | ||||||
Segment Reporting Information [Line Items] | ||||||
Assets | $ 402,563 | $ 402,563 | $ 394,078 | |||
[1] | 1 Earnings before income taxes for the Aaron's Business during the six months ended June 30, 2017 includes restructuring charges of $13.5 million related to store contractual lease obligations, severance costs and impairment charges in connection with the Company's strategic decision to close Company-operated stores, of which $13.3 million was incurred during the three months ended June 30, 2017. Earnings before income taxes for the Aaron's Business during the six months ended June 30, 2016 were impacted by: (1) a gain of $11.1 million on the January 29, 2016 sale of the Company's corporate office building; (2) a loss of $5.6 million related to exiting the HomeSmart business and the write-down of the HomeSmart disposal group to its fair value less cost to sell upon its classification as held for sale; and (3) charges of $3.7 million related to the retirement of the Company's Chief Financial Officer. | |||||
[2] | 1 Includes inventory (principally raw materials and work-in-process) that has been classified within lease merchandise in the condensed consolidated balance sheets of $15.6 million and $14.3 million as of June 30, 2017 and December 31, 2016, respectively. |
Segments - Information on Seg44
Segments - Information on Segments and Reconciliation to Earnings Before Income Taxes from Continuing Operations- Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 18 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Dec. 31, 2016 | |
Segment Reporting Information [Line Items] | ||||||
Charges | $ 13,445 | $ 0 | $ 13,772 | $ 0 | ||
Retirement benefits expense | 3,700 | |||||
Operating Segments | Aaron's Business | ||||||
Segment Reporting Information [Line Items] | ||||||
Inventory (principally raw materials and work-in-process) | 15,600 | 15,600 | $ 15,600 | $ 14,300 | ||
Building | Operating Segments | Other Segments | ||||||
Segment Reporting Information [Line Items] | ||||||
Gain on sale of corporate office building | 11,100 | |||||
Restructuring Program 2016 | ||||||
Segment Reporting Information [Line Items] | ||||||
Charges | 13,400 | 13,800 | $ 34,000 | |||
Restructuring Program 2016 | Operating Segments | ||||||
Segment Reporting Information [Line Items] | ||||||
Charges | 13,445 | 13,772 | ||||
Restructuring Program 2016 | Operating Segments | Aaron's Business | ||||||
Segment Reporting Information [Line Items] | ||||||
Charges | $ 13,297 | $ 13,534 | ||||
Other operating expense (income), net | Building | ||||||
Segment Reporting Information [Line Items] | ||||||
Gain on sale of corporate office building | 11,100 | |||||
Other operating expense (income), net | HomeSmart | Disposal Group, Disposed of by Sale, Not Discontinued Operations | ||||||
Segment Reporting Information [Line Items] | ||||||
Loss on disposal | $ 5,600 |
Restructuring (Details)
Restructuring (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | 18 Months Ended | ||||
Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) | Dec. 31, 2017USD ($)Store | Jun. 30, 2017USD ($)Store | Jun. 30, 2016USD ($) | Dec. 31, 2016USD ($)Store | Jun. 30, 2017USD ($) | ||
Restructuring Reserve [Roll Forward] | ||||||||
Charges | $ 13,445 | $ 0 | $ 13,772 | $ 0 | ||||
Restructuring Program 2016 | ||||||||
Restructuring Reserve [Roll Forward] | ||||||||
Charges | 13,400 | 13,800 | $ 34,000 | |||||
Expected additional restructuring charges | 1,500 | 1,500 | 1,500 | |||||
Restructuring Program 2016 | Contractual Lease Obligations | ||||||||
Restructuring Reserve [Roll Forward] | ||||||||
Balance at January 1, 2017 | $ 17,201 | 10,583 | ||||||
Charges | 12,259 | |||||||
Adjustments | [1] | (941) | ||||||
Restructuring Charges | 11,318 | |||||||
Payments | (4,700) | |||||||
Balance at June 30, 2017 | 17,201 | 17,201 | $ 10,583 | 17,201 | ||||
Restructuring Program 2016 | Severance | ||||||||
Restructuring Reserve [Roll Forward] | ||||||||
Balance at January 1, 2017 | $ 2,340 | 2,079 | ||||||
Charges | 1,591 | |||||||
Adjustments | [1] | 0 | ||||||
Restructuring Charges | 1,591 | |||||||
Payments | (1,330) | |||||||
Balance at June 30, 2017 | 2,340 | 2,340 | $ 2,079 | $ 2,340 | ||||
Restructuring Program 2016 | Operating Segments | ||||||||
Restructuring Reserve [Roll Forward] | ||||||||
Charges | 13,445 | $ 13,772 | ||||||
Restructuring Program 2016 | Operating Segments | Facility Closing | ||||||||
Restructuring Cost and Reserve [Line Items] | ||||||||
Restructuring and related cost, number of store closures | Store | 63 | 56 | ||||||
Restructuring Program 2016 | Operating Segments | Contractual Lease Obligations | ||||||||
Restructuring Reserve [Roll Forward] | ||||||||
Charges | 11,841 | $ 11,318 | ||||||
Restructuring Program 2016 | Operating Segments | Severance | ||||||||
Restructuring Reserve [Roll Forward] | ||||||||
Charges | 1,144 | 1,590 | ||||||
Restructuring Program 2016 | Operating Segments | Fixed Asset Impairment/Other | ||||||||
Restructuring Reserve [Roll Forward] | ||||||||
Charges | 460 | 864 | ||||||
Aaron's Business | Restructuring Program 2016 | Operating Segments | ||||||||
Restructuring Reserve [Roll Forward] | ||||||||
Charges | 13,297 | 13,534 | ||||||
Aaron's Business | Restructuring Program 2016 | Operating Segments | Contractual Lease Obligations | ||||||||
Restructuring Reserve [Roll Forward] | ||||||||
Charges | 11,841 | 11,318 | ||||||
Aaron's Business | Restructuring Program 2016 | Operating Segments | Severance | ||||||||
Restructuring Reserve [Roll Forward] | ||||||||
Charges | 996 | 1,352 | ||||||
Aaron's Business | Restructuring Program 2016 | Operating Segments | Fixed Asset Impairment/Other | ||||||||
Restructuring Reserve [Roll Forward] | ||||||||
Charges | 460 | 864 | ||||||
DAMI | Restructuring Program 2016 | Operating Segments | ||||||||
Restructuring Reserve [Roll Forward] | ||||||||
Charges | [2] | 148 | 238 | |||||
DAMI | Restructuring Program 2016 | Operating Segments | Contractual Lease Obligations | ||||||||
Restructuring Reserve [Roll Forward] | ||||||||
Charges | [2] | 0 | 0 | |||||
DAMI | Restructuring Program 2016 | Operating Segments | Severance | ||||||||
Restructuring Reserve [Roll Forward] | ||||||||
Charges | [2] | 148 | 238 | |||||
DAMI | Restructuring Program 2016 | Operating Segments | Fixed Asset Impairment/Other | ||||||||
Restructuring Reserve [Roll Forward] | ||||||||
Charges | [2] | $ 0 | $ 0 | |||||
Scenario, Forecast | Restructuring Program 2016 | Operating Segments | Facility Closing | ||||||||
Restructuring Cost and Reserve [Line Items] | ||||||||
Restructuring and related cost, number of store closures | Store | 6 | |||||||
[1] | Adjustments relate to early buyouts of leases, changes in sublease assumptions and interest accretion. | |||||||
[2] | Restructuring charges for DAMI relate primarily to the segment's relocation efforts. Future DAMI restructuring charges are expected to be immaterial. |
Subsequent Events (Details)
Subsequent Events (Details) - SEI - Subsequent Event customer in Thousands, $ in Millions | Jul. 27, 2017USD ($)customerstate |
Subsequent Event [Line Items] | |
Business combination, consideration transferred | $ | $ 140 |
Business combination, number of customers entity serves | customer | 90 |
Business combination, number of states in which entity operates | state | 11 |