(State or other Jurisdiction of Incorporation)
309 E. Paces Ferry Road, N.E.
(Address of principal executive offices)
Progressive Acquisition. On April 14, 2014, the Company completed its acquisition of Progressive Finance Holdings, LLC (“Progressive”) for cash consideration of approximately $700 million. The press release presents earnings and EPS excluding (1) $8.8 million in amortization of intangibles and $1.5 million in deferred revenue fair value adjustments related to the acquisition during the fourth quarter of 2014, (2) $11.3 million in amortization of intangibles and $700,000 in deferred revenue fair value adjustments related to the acquisition during the third quarter of 2014, (3) $9.7 million in amortization of intangibles and $600,000 in deferred revenue fair value adjustments related to the acquisition and (4) acquisition-related fees and expenses (including financial advisory and legal fees) of $6.8 million during 2014. The Company had never previously completed an acquisition of the magnitude of the Progressive transaction.
Retirement Charges. As previously disclosed, Ronald W. Allen, formerly Chief Executive Officer of the Company, retired from the Company, effective August 31, 2014, and on July 24, 2014, David L. Buck, formerly Chief Operating Officer of the Company, notified the Company that he is retiring as an employee of the Company effective December 31, 2014, and in connection with his retirement relinquished his duties as Chief Operating Officer effective August 1, 2014. The Company incurred $9.1 million in expenses pertaining to the retirement of these two officers during the third quarter of 2014. While charges related to retirement do arise from time to time, management regards the charges incurred in the third quarter of 2014 as uncommon in nature and size.
California Regulatory Investigation. During the third quarter of 2014, the Company resolved the previously reported regulatory investigation by the California Attorney General into the Company’s business. The press release presents earnings and EPS excluding a $1.2 million reduction during the third quarter of 2014 of previously recognized regulatory expense upon such
Strategic Matters. The Company and its Board addressed various strategic matters during 2014, including an unsolicited acquisition offer, two proxy contests and shareholder proposals. The Company incurred $13.7 million in financial advisory and legal costs to address them during 2014. These matters were unprecedented in the Company’s history, and the level of the professional fees associated with them was similarly exceptional.
Restructuring Charges. In connection with its previously announced new strategy, which includes an initiative to rationalize the Company’s store base, the Company incurred approximately $6.9 million and $2.3 million in restructuring charges related to store closures in the third and second quarters of 2014, respectively. While the Company has routinely closed and sold stores on an disposed of non-core businesses in substantially their entirety, it has not previously implemented a store rationalization program across the Company’s entire core business, so management regards these restructuring charges as unusual.
California Regulatory Investigation. The Company accrued $13.4 million and $15.0 million for loss contingencies in connection with this now-resolved investigation during the third quarter of 2013 and second quarter of 2013, respectively.
Retirement and Vacation Related Charges. As previously disclosed, William K. Butler, Jr., formerly Chief Operating Officer of the Company, retired from the Company effective May 1, 2013. The Company also implemented changes to its vacation policies last year. The Company recorded $4.9 million in charges in the second quarter related to this retirement and change in vacation policies. While charges related to retirement or employee benefit actions or policy changes do arise from time to time, management regards the charges incurred in the quarter ended June 30, 2013 as uncommon in both nature and size.
Aaron’s, Inc. press release dated February 6, 2015, announcing the Company’s financial results for the fourth quarter and full year of 2014.
/s/ Gilbert L. Danielson
Date: February 6, 2015
Gilbert L. Danielson
Executive Vice President and Chief Financial Officer