The Aaron’s pany(AAN) - 2024 Q2 - Quarterly Report

Company Operations - The Aaron's Company operates approximately 1,210 stores and an e-commerce platform, focusing on lease-to-own and retail purchase solutions for home goods[17]. - BrandsMart U.S.A. operates 12 stores in Florida and Georgia, contributing to the company's retail presence in the southeast United States[19]. Financial Performance - Total revenues for the three months ended June 30, 2024, were $503.1 million, a decrease of 5.2% from $530.4 million in the same period of 2023[78]. - Total revenues for the six months ended June 30, 2024, reached $1,014,622,000, compared to $1,084,733,000 for the same period in 2023, indicating a decline of 6.5%[109][113]. - Gross profit for the three months ended June 30, 2024, was $272,018,000, down from $282,272,000 in the prior year, reflecting a decrease of 3.6%[103][106]. - The gross profit for the six months ended June 30, 2024, was $545,901,000, down from $577,966,000 in the previous year, representing a decrease of 5.5%[110][114]. - The company reported a gross profit margin of approximately 54.0% for the three months ended June 30, 2024, compared to 53.2% for the same period in 2023[103][106]. - The net loss for the quarter ending June 30, 2024, was $11,903,000, compared to a net loss of $14,181,000 for the previous quarter, indicating an improvement of about 16.5%[56]. Costs and Expenses - For the three months ended June 30, 2024, the company incurred acquisition-related costs of $7.5 million primarily related to the merger with IQVentures[24]. - The total advertising costs for the three months ended June 30, 2024, were $19.9 million, with net advertising costs of $11.8 million after cooperative advertising considerations[31]. - The company recorded a provision for write-offs of $41.1 million for the six months ended June 30, 2024, compared to $39.2 million for the same period in 2023, an increase of 4.9%[39]. - The loss before income taxes for the Unallocated Corporate category for the three months ended June 30, 2024, was $16,250,000, impacted by restructuring charges of $2.9 million and acquisition-related costs of $8.0 million[102][103]. Assets and Liabilities - Accounts receivable as of June 30, 2024, totaled $35.1 million, a decrease from $39.8 million as of December 31, 2023[33]. - The company maintains an allowance for accounts receivable, with an ending balance of $9.2 million as of June 30, 2024[35]. - Merchandise on lease as of June 30, 2024, is $412.0 million, a decrease of 1.2% from $419.5 million on December 31, 2023[37]. - Merchandise not on lease increased to $210.6 million as of June 30, 2024, up from $202.7 million as of December 31, 2023, representing a growth of 3.9%[37]. - Accounts payable decreased to $114.3 million as of June 30, 2024, from $134.2 million as of December 31, 2023, a reduction of 14.8%[51]. - The company reported total debt of $215.8 million as of June 30, 2024, an increase of 11.3% from $194.0 million at December 31, 2023[73]. - Long-term debt increased to $203.3 million as of June 30, 2024, compared to $187.6 million at the end of 2023[73]. Shareholder Equity - As of June 30, 2024, total shareholders' equity decreased to $657,686,000 from $670,536,000 as of March 31, 2024, reflecting a decline of approximately 1.3%[56]. - The balance of additional paid-in capital increased to $756,207,000 as of June 30, 2024, up from $753,253,000 as of March 31, 2024, reflecting a growth of approximately 0.13%[56]. - The total stock amount decreased from $(149,038,000) as of March 31, 2024, to $(149,111,000) as of June 30, 2024, indicating a decline of about 0.05%[56]. - The company’s common shares increased from 37,095,000 as of March 31, 2024, to 37,189,000 as of June 30, 2024, representing an increase of approximately 0.25%[56]. Cash Flow and Dividends - Cash dividends paid were $3,937,000 for the quarter ending June 30, 2024, consistent with the previous quarter's dividends of $3,929,000[56]. Restructuring Programs - The Operational Efficiency and Optimization Restructuring Program resulted in total net restructuring expenses of $7.3 million for the six months ended June 30, 2024, compared to $4.4 million in the same period of the prior year[94]. - Since the inception of the Operational Efficiency and Optimization Restructuring Program, the Company has incurred cumulative charges of $25.4 million[94]. - The Real Estate Repositioning and Optimization Restructuring Program has led to total net restructuring expenses of $3.5 million for the six months ended June 30, 2024, down from $5.7 million in the same period of the prior year[96]. - Cumulative charges under the Real Estate Repositioning and Optimization Program amount to $74.3 million since its inception[96]. - The Company closed or consolidated 65 stores under the Operational Efficiency and Optimization Restructuring Program through June 30, 2024[94]. - The Company has closed, consolidated, or relocated 262 stores under the Real Estate Repositioning and Optimization Restructuring Program through June 30, 2024[96]. Legal and Regulatory Matters - As of June 30, 2024, the Company accrued $1.0 million for pending legal and regulatory matters, up from $0.7 million at December 31, 2023[90]. Interest Rate Management - The company entered into an interest rate swap agreement with a notional amount of $100.0 million, aimed at converting variable interest rate debt to fixed at a rate of 3.87%[49]. - The company entered into a non-speculative interest rate swap agreement for $100.0 million to convert variable interest rate debt to fixed interest rate debt, effective from April 28, 2023, to March 31, 2027[115]. - A hypothetical 10% increase or decrease in interest rates would affect interest expense by approximately $0.8 million annually based on the company's variable-rate debt[115].