FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report under Section 13 or 15 (d)
of the Securities Exchange Act of l934
June 30, 1995 0-12385
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For Quarter Ended Commission File No.
AARON RENTS, INC.
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(Exact name of registrant as
specified in its charter)
GEORGIA 58-0687630
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(State or other jurisdiction of (I.R. S. Employer
incorporation or organization) Identification No.
309 EAST PACES FERRY ROAD, N.E.
Atlanta, Georgia 30305-2377
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(Address of principal executive offices) (Zip Code)
(404) 231-0011
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether registrant (l) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
l934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Shares Outstanding as of
Title of Each Class August 12, 1995
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Class A Common Stock, $.50 Par Value 4,018,263
Class B Common Stock, $.50 Par Value 5,703,730
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
AARON RENTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
June 30, March 31,
1995 1995
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(in thousands)
ASSETS:
Cash $ 91 $ 95
Accounts Receivable 8,600 8,391
Rental Merchandise 173,891 172,741
Less: Accumulated Depreciation (52,494) (51,385)
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121,397 121,356
Property, Plant and Equipment, Net 24,051 24,181
Prepaid Expenses and Other Assets 3,224 3,504
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Total Assets $ 157,363 $ 157,527
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LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts Payable and Accrued Expenses $ 18,872 $ 19,062
Dividends Payable 367
Current Income Taxes Payable 1,545
Deferred Income Taxes Payable 3,903 4,126
Customer Deposits and Advance Payments 6,292 6,229
Bank Debt 39,445 42,172
Other Debt 658 987
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71,082 72,576
Shareholders' Equity:
Common Stock, Class A, Par Value $.50 Per
Share-Authorized 25,000,000 shares:
5,361,761 Shares Issued 2,681 2,681
Common Stock, Class B, Par Value $.50 Per
Share-Authorized 25,000,000 shares:
6,636,761 Shares Issued 3,318 3,318
Additional Paid in Capital 15,314 15,314
Retained Earnings 80,165 77,216
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101,478 98,529
Less Treasury Shares at Cost,
Class A Common Stock, 1,344,498 Shares
at June 30, 1995 and 1,234,748
Shares at March 31, 1995 (9,943) (8,324)
Class B Common Stock, 944,031 Shares
at June 30, 1995 and 944,031 Shares at
March 31, 1995 (5,254) (5,254)
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86,281 84,951
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Total Liabilities and
Shareholders' Equity $ 157,363 $ 157,527
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See Notes to Consolidated Financial Statements
AARON RENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended
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June 30,
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1995 1994
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(in thousands,
except per share amounts)
REVENUES:
Rentals and Fees $45,690 $41,708
Sales 12,858 13,459
Other 587 428
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59,135 55,595
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COSTS AND EXPENSES:
Cost of Sales 9,114 9,692
Operating Expenses 30,025 28,230
Depreciation
of Rental Merchandise 13,899 12,720
Interest 750 680
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53,788 51,322
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EARNINGS BEFORE TAXES 5,347 4,273
INCOME TAXES 2,032 1,666
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NET EARNINGS $ 3,315 $ 2,607
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EARNINGS PER SHARE $ .33 $ .27
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WEIGHTED AVERAGE
SHARES OUTSTANDING 10,037 9,603
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AARON RENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
June 30,
1995 1994
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(in thousands)
OPERATING ACTIVITIES:
Net Income $ 3,315 $ 2,607
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 15,356 13,889
Decrease in deferred taxes (223) (315)
Decrease in accounts payable
and accrued expenses (190) (613)
Increase in accounts receivable (209) (472)
Other changes, net 1,889 879
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Cash provided by operations 19,938 15,975
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INVESTING ACTIVITIES:
Additions to property, plant and equipment (2,793) (2,493)
Book value of property retired or sold 1,467 149
Additions to rental merchandise (23,760) (31,569)
Book value of rental merchandise sold 9,819 9,973
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Cash used by investing activities (15,267) (23,940)
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FINANCING ACTIVITIES:
Proceeds from Revolving Credit Agreement 19,644 65,625
Repayments on Revolving Credit Agreement (22,371) (71,489)
Decrease in other debt (329) (364)
Acquisition of treasury stock (1,619)
Sale of common stock 14,140
Issuance of stock under stock option plan 54
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Cash (used) provided by financing activities (4,675) 7,966
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(DECREASE) INCREASE IN CASH (4) 1
Cash at Beginning of Period 95 86
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Cash at End of Period $ 91 $ 87
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See Notes to Consolidated Financial Statements
AARON RENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Principles of Consolidation:
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The consolidated financial statements include the accounts of
Aaron Rents, Inc. ("the Company") and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated.
Interim Financial Statement:
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The Consolidated Balance Sheet as of June 30, 1995, and the
Consolidated Statements of Earnings and Cash Flows for the three months ended
June 30, 1995 and 1994, have been prepared without audit. In the opinion of
management, all adjustments necessary to present fairly the financial position,
results of operations and cash flows at June 30, 1995 and for all periods
presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission for the year ended March 31, 1995. The
results of operations for the period ended June 30, 1995, are not necessarily
indicative of the operating results for the full year.
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PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
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FIRST QUARTER OF FISCAL YEAR 1996 COMPARED TO FIRST QUARTER OF FISCAL YEAR
1995:
Total revenues for the first quarter of fiscal year 1996 increased $3.5
million (6.4%) to $59.1 million from $55.6 million for the same period a year
ago. This increase was due to a $4.0 million (9.5%) increase in rentals and
fees revenues. Of this increase in rental revenues, $4.9 million was
attributable to Aaron's Rental Purchase stores in which rental revenues
increased 30% to $21.5 million in the first quarter of fiscal year 1996 compared
to $16.6 million for the same quarter a year ago.
Revenues from sales declined $601,000 (4.5%) to $12.9 million from $13.5
million a year ago. This decrease is due to a lower amount of sales of new
furniture in the current fiscal year.
Other revenues in the first quarter increased $159,000 (37.1%) to $587,000
compared to $428,000 a year ago. Included in other revenues is franchise and
royalty fee income from franchised operations. Franchise and royalty fee income
for the current quarter was $345,000 compared to $168,000 for the same period a
year ago.
Cost of sales decreased $578,000 million (6.0%) to $9.1 million compared to
$9.7 million for the first quarter last year, and as a percentage of sales
decreased to 70.9% from 72.0%. The improvement in gross margins is primarily
due to improved margins on the sale of rental return furniture.
Operating expenses increased $1.8 million (6.4%) to $30.0 million from
$28.2 million. As a percentage of total revenues, operating expenses were 50.8%
in both years.
Depreciation of rental merchandise increased $1.2 million (9.3%) to $13.9
million from $12.7 million last year, and as a percentage of total rentals and
fees was 30.4% in the current quarter compared to 30.5% for the same quarter a
year ago.
Interest expense increased $70,000 (10.3%) to $750,000 in the first quarter
of fiscal year 1996 compared to $680,000 for the same quarter last year. The
increase in interest expense was primarily due to increased borrowing rates in
the current quarter.
Income tax expense increased $366,000 (22.0%) to $2.0 million compared to
$1.7 million a year ago, and the Company's effective tax rate was 38.0% for the
first quarter of the current year compared to 39.0% in the previous year's
quarter. The decrease in the effective tax rate is due to lower amounts
provided for permanent differences.
As a result, net earnings increased $708,000 (27.2%) to $3.3 million in the
first quarter of fiscal year 1996 compared to $2.6 million a year ago. As a
percentage of total revenues, net earnings were 5.6% in the first quarter
compared to 4.7% a year ago.
The weighted average number of shares outstanding during the first quarter
of fiscal year 1996 was 10,037,000 compared to 9,603,000 for the same period
last year. The increase in the number of shares is due to the issuance of
1,275,000 shares of Class B Common Stock on May 2, 1994.
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LIQUIDITY AND CAPITAL RESOURCES:
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On May 2, 1994, the Company issued through a public offering 1,275,000
shares of Class B Common Stock. The net proceeds to the Company after deducting
underwriting discounts and offering expenses were $14.1 million. The net
proceeds were used to reduce bank debt.
During the first quarter of fiscal year 1996, the Company declared a semi-
annual dividend payable on July 6, 1995 of $.02 per share on Class A Common
Stock and $.05 per share on Class B Common Stock.
Management believes its expected cash flow from operations, proceeds from
the sale of rental return merchandise, bank borrowings, and vendor credit are
adequate to supply short-term capital needs, and that it has the ability to
obtain additional long-term capital if needed.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K:
(a) The following exhibits are furnished herewith:
Exhibit
Number Description of Exhibit
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10(b) Letter agreements dated June 19, 1995, between
First Union National Bank of North Carolina and
the Company and June 20, 1995, between Trust
Company Bank and the Company regarding an
Interest Rate Swap Transaction
11 Computation of Earnings Per Share
27 Financial Data Schedule
(b) No reports on Form 8-K were filed by the Registrant during the
three months ended June 30, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of l934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AARON RENTS, INC.
(Registrant)
Date - August 11, 1995 /s/ GILBERT L. DANIELSON
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Gilbert L. Danielson
Vice President, Finance
Chief Financial Officer
Date - August 11 , 1995 /s/ ROBERT P. SINCLAIR, JR.
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Robert P. Sinclair, Jr.
Controller
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