Aarons 1997 Annual Report Download - page 3

The furniture manufacturing division,MacTavish Furniture Industries,
turned in another record year, increasing production to $45 million of furniture at cost, which
was supplied primarily to our stores. We continued to invest in our manufacturing capacity
with an 18,000 square foot plant addition and new equipment.
Strengthening our management in 1997,Robert C. Loudermilk, Jr., who
had served as Vice President, Real Estate since 1993, was appointed President and Chief
Operating Officer of Aaron Rents after more than a decade of experience in all aspects of
the business. Ronald W. Allen, retired Chairman, President and Chief Executive O fficer of
Delta Air Lines, was named to the Aaron Rents’ Board of Directors, adding his insight and
knowledge to our Company.
I believe Aaron Rents is on the threshold of the greatest opportunity
for growth in its 43-year history. Our rent-to-rent business performs at a strong and consistent
level and, to answer heightened market demand, we plan to expand this business in both
existing and new markets in 1998. Over the next several years, we expect to enter some 20
new markets with this profitable core business. The pace of this growth will be controlled
and conservative to minimize the normal effects of start-up costs, thereby allowing us to con-
tinue solid profit gains.
Rental purchase offers almost unlimited potential for profitable
expansion. Every town in America should have an Aaron’s Rental Purchase store. Our goal is
to become the supplier of choice to the higher end of the lower-income segment of American
consumers. Aaron’s will be the name in rental purchase. That is our vision. Through our fast-
growing unique franchise program and our Company-operated stores, we plan to reach that
goal within the next decade. In 1998 we expect 50 more franchise stores and 15 Company-
operated stores to be opened, which will result in more than 345 rental purchase stores open
by year end. With this base, and through internal growth alone, we should reach the 700-mark
in total stores open in 2000.
Aaron Rents has the financial resources to execute our ambitious plan
for growth. During the year, we negotiated a new $40 million credit facility to provide fund-
ing to franchisees for growing our franchise program. Our revolving credit facility with four
banks was increased during the year to $90 million. The Company’s foundation is our
conservative fiscal policy and stringent financial controls of our internal and franchise
operations. We are committed to maintaining our strong balance sheet, assuring our ability
to prosper in any economic cycle.
During the year, the Company was named by Forbes Magazine
as one of the 200 best small companies in America. We are proud of this recognition which
sets us apart from others in our industry. Your Company’s stock price excelled in 1997, with
the Common Stock closing at the end of the year at $19.375. At December 31, 1997, the
five-year total return for the Common Stock was 36.9%, a significant achievement.
On March 20, 1998, the Company’s Common Stock and Class A Common Stock
were listed on the New York Stock Exchange under the symbols RNT and RNT.A, respec-
tively. Our move to the New York Stock Exchange should increase the Company’s visibility
in the investment community and expand our potential investor base.
The future of our Company looks stronger now than at any time since its founding
in 1955. It’s exciting to be part of Aaron Rents today!
R. Charles Loudermilk, Sr.
Chairman and Chief Executive Officer
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What a tremendous year!
Aaron Rents expanded coast to coast and achieved record-breaking growth in all facets of the
business in 1997 —the best year in our Company’s history. Total store count during the year
increased nearly one-third to almost 400 stores, adding strong momentum going forward. We
are now uniquely positioned for growth as “America’s Premier Name in Furniture Rental and
Rental Purchase.”
Record revenues reached $310.8 million compared to $274.2 million last
year, up 13%. Record earnings rose 20% to $18.4 million compared to $15.4 million in the
previous year. Earnings per share were $.96 ($.94 assuming dilution) compared with $.81
($.77 assuming dilution) for 1996. Your Company has now achieved over six consecutive
years of record revenues and earnings.
Aaron Rents expanded nationwide during the year and achieved
our goal of having at least 100 franchise stores open by year end. We entered five new states
in 1997, opening operations in California, Connecticut, Illinois, Iowa and Pennsylvania,
increasing our state count to 31. The franchise division alone added 40 stores during the year,
a 66% growth in stores open!
A major acquisition added 40 rental purchase stores in Texas,
doubling our size in that state —the largest rental purchase market in the United States. In
December, we acquired the assets of RentMart Rent-To-O wn, Inc., including its stores in
Dallas, Houston and San Antonio. All less than 18 months old, these stores fit naturally with
the Aaron’s Rental Purchase store model, with bigger stores in more desirable market loca-
tions. The RentMart transaction demonstrated our commitment to acquisitions when
the fit is right.
In another key acquisition, we purchased the assets of Blackhawk
Convention Services, Inc. in December, doubling the size of our convention furnishings
division and extending that service nationwide. Blackhawk operations in the Chicago, New
York and Las Vegas markets, combined with our existing presence in Atlanta, Cincinnati,
Dallas and Orlando, will enable us to serve most of the major convention cities of the United
States. We expect this acquisition will also result in spin-off business to our present and future
rent-to-rent stores.
Our rent-to-rent division posted record revenues and earnings
with steady and profitable growth. We opened two new stores during 1997 and began a
program of expanding this business at a stronger rate. The emphasis for this division in 1998
will be on adding corporate and national accounts while maintaining our superior
relationships with existing customers.
To
Our
Shareholders:
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