Special Note Regarding Forward-Looking Information: Except for historical information contained herein, the matters set forth in this Form 10-Q are forward-looking statements. These statements are based on management's current expectations and plans, which involve risks and uncertainties. Such forward-looking statements generally can be identified by the use of forward-looking terminology such as "anticipate," "believe," "could," "estimate," "expect," "intend," "plan," "project," "would," "should," and similar expressions. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the filing date of this Quarterly Report and which involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements. These risks and uncertainties include factors such as (i) the impact of the COVID-19 pandemic and related measures taken by governmental or regulatory authorities to combat the pandemic, including the impact of the pandemic and such measures on: (a) demand for the lease-to-own products offered by ourProgressive Leasing and Aaron's Business segments, (b)Progressive Leasing's retail partners, (c) our customers, including their ability and willingness to satisfy their obligations under their lease agreements, (d) our suppliers' ability to provide us with the merchandise we need to obtain from them, (e) our associates, (f) our labor needs, including our ability to adequately staff our operations, (g) our financial and operational performance and (h) our liquidity; (ii) changes in the enforcement of existing laws and regulations and the adoption of new laws and regulations that may unfavorably impact our businesses; (iii) the effects of our announcement ofProgressive Leasing's settlement and court-approved consent order with theFTC on our reputation and business; (iv) our strategic plan, including the Aaron's Business real estate repositioning and consolidation components of that plan, failing to deliver the benefits and outcomes we expect, with respect to improving our Aaron's Business in particular; (v) increased competition from traditional and virtual lease-to-own competitors, as well as from traditional and on-line retailers and other competitors; (vi) financial challenges faced by our franchisees, which we believe may be exacerbated by the COVID-19 pandemic and related governmental or regulatory measures to combat the pandemic; and (vii) other risks and uncertainties discussed under Item 1A, "Risk Factors," in the Company's Annual Report on Form 10-K for the fiscal year endedDecember 31, 2019 (the "2019 Annual Report") and under Item 1A, "Risk Factors" of Part II of this Form 10-Q below. Except as required by law, the Company undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances after the filing date of this Quarterly Report. The following discussion should be read in conjunction with the condensed consolidated financial statements as of and for the three months endedMarch 31, 2020 and 2019, including the notes to those statements, appearing elsewhere in this report. We also suggest that management's discussion and analysis appearing in this report be read in conjunction with the management's discussion and analysis and consolidated financial statements included in our 2019 Annual Report. Business OverviewAaron's, Inc. ("we", "our", "us" or the "Company") is a leading omnichannel provider of lease-purchase solutions. As ofMarch 31, 2020 , the Company's operating and reportable segments areProgressive Leasing , Aaron's Business and Vive.Progressive Leasing is a virtual lease-to-own company that provides lease-purchase solutions through approximately 22,000 retail locations in 46 states and theDistrict of Columbia . It does so by purchasing merchandise from third-party retailers desired by those retailers' customers and, in turn, leasing that merchandise to the customers through a cancellable lease-to-own transaction.Progressive Leasing consequently has no stores of its own, but rather offers lease-purchase solutions to the customers of traditional and e-commerce retailers. Aaron's Business offers furniture, home appliances, consumer electronics and accessories to consumers with a lease-to-own agreement through its Company-operated stores inthe United States ,Canada andPuerto Rico , as well as through its e-commerce platform, Aarons.com. This operating segment also supports franchisees of its Aaron's stores. In addition, the Aaron's Business segment includes the operations of Woodhaven, which manufactures and supplies the majority of the bedding and a significant portion of the upholstered furniture leased and sold in Company-operated and franchised stores. Vive partners with merchants to provide a variety of revolving credit products originated through third-party federally insured banks to customers that may not qualify for traditional prime lending (called "second-look" financing programs). 26 -------------------------------------------------------------------------------- Recent Developments OnMarch 11, 2020 , theWorld Health Organization declared the outbreak of COVID-19 a pandemic. In response, local, state and federal governmental authorities have since issued various forms of stay-at-home orders. Those orders resulted in store closures or reduced hours and scope of operations for many ofProgressive Leasing's retail partners. In addition, demand for those retail partners' merchandise was unfavorably impacted by their customers voluntarily electing to stay-at-home, even for those retail partners whose stores were able to remain open due to being classified as essential businesses. These developments have had a significant unfavorable impact onProgressive Leasing's generation of new lease agreements, invoice volumes and revenues. As disclosed in the Current Report on Form 8-K that we filed with theSEC onMarch 23, 2020 , although our Aaron's Business was classified as a provider of essential products in most jurisdictions, and thus, its store showrooms generally were not required to close, the Aaron's Business closed it showrooms and shifted to e-commerce and curbside service only for all of its Company-operated Aaron's stores in order to protect the health and safety of its customers and associates, except where such curbside service was prohibited by governmental authorities. Since that time, we have reopened the majority of our Aaron's Business store showrooms and expect to reopen the remainder of them during the second quarter of 2020, but there can be no assurance that those showrooms will not be closed in future months if, for example, there is a "second wave" or other increase in the number of COVID-19 cases in the areas where our stores are located and we voluntarily close our showrooms to protect the health and safety of our customers and associates, or if governmental authorities issue orders requiring such closures due to COVID-19. We anticipate that the COVID-19 pandemic will continue to adversely impact our operations, financial condition, liquidity and cash flow, the extent of which will depend on the length and severity of the outbreak and related business disruptions, including, for example, whether there is a "second wave" outbreak of COVID-19 cases later in the year. The following summarizes significant developments and operational measures taken by the Company in response to the COVID-19 pandemic: • Our primary concern continues to be the health and safety of our
associates and customers. Beginning in mid-March, we transitioned nearly
all management,Progressive Leasing and store support associates to working remotely from home.
• Progressive continues to support its retail partners and has adapted to
the needs of those who remain open for business via e-commerce and curbside lease transactions, including expanding purchasing options. Progressive is also assisting in local community volunteer efforts inDraper, Utah .
• We understand many of our customers may be experiencing significant
family, health, and/or financial challenges. We are working with our
customers to provide various forms of payment deferment options and/or
other alternative payment schedules to customers in need.
• Our commitment to the health and safety of our associates and customers is
further evident by our decision to temporarily close the Aaron's Business
store showrooms and shift to e-commerce and curbside services only (i.e.,
customers are not to enter the store showrooms, but may pick up
merchandise and make payments outside of the store), which was not a
government-mandated action in most jurisdictions as our store operations
have been classified as essential operations and are therefore permitted
to remain open for business. Further, we are taking significant steps to
reduce the risk of exposure, while continuing to provide our customers
with the essential products they need such as refrigerators, freezers,
mattresses and computers. We are adapting our operations to protect our associates and customers, while still serving our customers who need our
products now more than ever. Until further notice, our store associates
are not permitted to enter customers' homes for product deliveries or product returns, but rather, must deliver the products to the front door of the customers' homes. • As we begin a phased re-opening of our store showrooms over the next
several months, we are committing to doing so in a manner that complies
with local, state and federal guidelines and that ensures the safety of
our associates and customers. Our store associates will wear masks,
continue to practice social distancing practices and will adhere to strict
cleaning guidelines. Protective sneeze guards will be installed at all
store locations, and the configuration of the showrooms will be modified
in order to regulate customer traffic. • In conjunction with the operational adjustments made at our
Company-operated stores, we have accelerated the rollout of Rapid Customer
Onboarding, which is a decisioning tool designed to improve our customers'
experience by streamlining and standardizing the decisioning process,
shortening transaction times, and establishing appropriate transaction
sizes and lease payment amounts, given the customer's profile. As ofApril 30, 2020 , Rapid Customer Onboarding is being utilized in all Aaron'sBusiness Company -operated stores inthe United States .
• Our franchisees are facing similar adverse impacts to their businesses;
therefore, the Company has, among other things, offered relief through a
royalty fee abatement untilMay 16, 2020 and has made various modifications to payment terms on outstanding accounts receivable from franchisees and to its franchise loan facility. 27
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• We recognize that during these unprecedented times, it is more important
than ever to continue to give back to the communities we serve. Our
Woodhaven manufacturing facility in
operations to produce personal protection equipment, including masks and
gowns, which have been donated to medical and assisted living facilities
across
to our communities in other ways, including manufacturing and supplying
mattresses to homeless shelters and donating laptop computers to support
remote learning for the children of economically challenged families.
• We continue to monitor the Company's liquidity as the COVID-19 situation
evolves. In response to anticipated adverse impacts of COVID-19, the
Company temporarily borrowed
facility in
subsequently repaid on
had
under its revolving credit facility. In addition, the Company has taken
the following actions to further preserve and protect its cash position:
(i) our executive officers and members of our Board of Directors have taken significant pay cuts; (ii) ourProgressive Leasing and Aaron's Business segments furloughed approximately 2,500 associates; (iii) our Aaron's Business significantly reduced the amount of inventory it
purchased and manufactured; (iv) reduced discretionary spending across the
organization; and (v) we are currently negotiating rent concessions with
the landlords of Company-operated Aaron's Business stores. As of
2020, the Company had$136.5 million of cash and$486.2 million of additional availability under its revolving credit facility.
• Due to the uncertainties resulting from the COVID-19 pandemic, the Company
withdrew its full year 2020 outlook on
The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") In response to the global impacts of COVID-19 onU.S. companies and citizens, the government enacted the CARES Act onMarch 27, 2020 . We believe a significant portion of ourProgressive Leasing , Aaron's Business and Vive customers have received stimulus payments and/or federally supplemented unemployment payments, pursuant to the CARES Act, which have enabled them to continue making the payments they owe us under their lease-to-own or credit card agreements, despite the economically challenging times resulting from the COVID-19 pandemic. However, we cannot be certain whether those customers will be in a position to continue making payments to us once those CARES Act benefits have been fully utilized by the customers. It is possible that many of our customers will experience unemployment or other economic challenges arising from the COVID-19 pandemic well past their full utilization, and/or the expiration, of those CARES Act stimulus and unemployment benefits, and any related state benefits, which could result in a reduction in the portion of our customers who continue making payments owed to us under their lease-to-own or credit card agreements. The CARES Act also included several tax relief options for companies, which resulted in the following provisions available to the Company: • The Company has elected to carryback its 2018 net operating losses of$242.2 million to 2013, thus generating an anticipated refund of$84.4 million and an income tax benefit of$34.2 million as ofMarch 31, 2020 . The tax benefit is the result of the federal income tax rate differential between the current statutory rate of 21% and the 35% rate applicable to 2013. • The Company will defer all payroll taxes permissible in the Act, which
generally applies to
2022. • Certain Aaron's Business, Woodhaven and Progressive furlough wages and
benefits may be eligible for an employee retention credit of up to 50% of
wages paid to eligible associates.
Separate from the CARES Act, theIRS extended the due dates for estimated tax payments for the first and second quarters of 2020 toJuly 15, 2020 . Additionally, many states are offering similar deferrals. The extent to which the COVID-19 pandemic, governmental and regulatory measures related to the pandemic, and our precautionary measures in response thereto may impact our business will depend on future developments, which are highly uncertain and cannot be predicted at this time. 28 -------------------------------------------------------------------------------- Business Environment In addition to the recent developments from the COVID-19 pandemic discussed above, the Company remains committed to executing a strategic plan that focuses on the following items that we believe positions us for success over the long-term: • Champion compliance;
• Strengthen relationships of
and merchant partners;
• Focus on converting existing pipeline into
partners;
• Enhance our virtual offering at
• Drive omnichannel demand generation at the Aaron's Business;
• Evaluate potential opportunities to reposition and reinvest in our real estate at the Aaron's Business; and
• Manage the Aaron's Business stores with operational excellence.
We believe Aarons.com represents an opportunity to provide our customers with expanded product selections and shopping convenience in the lease-to-own industry, especially during the COVID-19 pandemic. We are focused on engaging customers in ways that are safe and convenient for them by providing them a seamless, direct-to-door platform through which to shop in store or online across our product offerings. Finally, we continue to evaluate various Aaron's Business store optimization and real estate initiatives, which may include geographically repositioning and consolidating a significant number of our store locations into larger buildings and/or different geographic locations that we believe will be more advantageous. As a result of store optimization initiatives and other cost-reduction initiatives, the Company initiated a new restructuring program in 2020 to further optimize and reposition its Company-operated Aaron's store base portfolio, which resulted in the closure and consolidation of 40 underperforming Company-operated stores during the first three months of 2020 with the expectation to close approximately 65 additional stores over the next twelve months. The Company also further rationalized its store support center and field support staff, which resulted in a reduction in associate headcount in those areas to more closely align with current business conditions. The Company closed and consolidated a total of 294 underperforming Company-operated stores throughout 2016, 2017, 2018 and 2019 under similar restructuring initiatives. The Company continually evaluates its Company-operated Aaron's Business store portfolio to determine if it will further reposition and consolidate its store base to better align with marketplace demand. Additional restructuring charges may result from our strategy to reposition and reinvest in our next generation store concepts to appeal to our target customer market in better, more profitable locations. Highlights The following summarizes significant financial highlights from the three months endedMarch 31, 2020 : • The Company reported revenues of$1.1 billion in the first quarter of 2020
compared to
income taxes were
of
losses before income taxes during the first quarter of 2020 were primarily
due to Aaron's Business goodwill impairment charges of
•
quarter of 2020, an increase of 25.8% over the first quarter of 2019.
invoice volume, which was driven by a 10.2% increase in the number of
active doors and a 2.9% increase in invoice volume per active door.
million compared to$55.4 million during the first quarter of 2019, due mainly to its higher revenue, partially offset by$16.1 million of incremental provisions for uncollectible renewal payments and lease merchandise write-offs recognized due to potential adverse impacts in
customer payment behavior driven by the direct or indirect impacts of the
COVID-19 pandemic.
• Aaron's Business revenues decreased to
quarter of 2020, compared to
decrease is primarily due to the net reduction of 183 Company-operated
stores during the 15-month period ended
in same store revenues in the first quarter of 2020.
• Aaron's Business losses before income taxes were
first quarter of 2020 compared to earnings before income taxes of
million in the prior year period. Losses before income taxes for the
Aaron's Business during the first quarter of 2020 includes a goodwill
impairment charge of
termination fee for a sales and marketing agreement, and restructuring
charges of
consolidation of stores in 2020 and changes in estimates of future
sublease activity of vacant closed store properties. Aaron's Business also
recognized
write-offs, franchisee accounts receivable, and reserves on the franchise
loan guarantees due to the potential adverse impacts of the COVID-19 pandemic. 29
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• The Company recorded a net income tax benefit of
first quarter of 2020 as compared to income tax expense of
in the prior year comparable period. The net income tax benefit recognized
in 2020 was primarily the result of losses before income taxes of
million as well as a$34.2 million net tax benefit generated by a net operating loss carryback that the Company will be taking pursuant to the provisions of the CARES Act, as further discussed above.
• The Company generated cash from operating activities of
the three months ended
comparable period in 2019. The increase in net cash from operating
activities was primarily driven by the continued growth of Progressive
Leasing as well as lower lease merchandise purchases by the Aaron's Business, partially offset by net income tax refunds of$0.4 million during the first quarter of 2020 compared to net income tax refunds of$15.3 million in the same period in 2019. Invoice Volume. We believe that invoice volume is a key performance indicator of ourProgressive Leasing segment. Invoice volume is defined as the retail price of lease merchandise acquired and then leased to customers during the period, net of returns. The following table presents total invoice volume for theProgressive Leasing segment: For the Three Months EndedMarch 31 (Unaudited and In Thousands) 2020
2019
Progressive Leasing Invoice Volume$ 447,817 $
394,727
The increase in invoice volume was driven by a 10.2% increase in active doors and a 2.9% increase in invoice volume per active door. Active Doors.Progressive Leasing active doors are comprised of both (i) each retail store location where at least one virtual lease-to-own transaction has been completed during the trailing three-month period; and (ii) with respect to an e-commerce merchant, each state where at least one virtual lease-to-own transaction has been completed through that e-commerce merchant during the trailing three-month period. The following table presents active doors for theProgressive Leasing segment: Active Doors at March 31 (Unaudited) 2020 2019 Progressive Leasing Active Doors 21,816 19,795 Same Store Revenues. We believe that changes in same store revenues are a key performance indicator of the Aaron's Business. For the three months endedMarch 31, 2020 , we calculated this amount by comparing revenues for the three months endedMarch 31, 2020 to revenues for the comparable period in 2019 for all stores open for the entire 15-month period endedMarch 31, 2020 , excluding stores that received lease agreements from other acquired, closed or merged stores. Same store revenues decreased 4.6% for the three months endedMarch 31, 2020 . Seasonality Our revenue mix is moderately seasonal for both ourProgressive Leasing and Aaron's Business segments. Adjusting for growth, the first quarter of each year generally has higher revenues than any other quarter. This is primarily due to realizing the full benefit of business that historically gradually increases in the fourth quarter as a result of the holiday season, as well as the receipt by our customers in the first quarter of federal and state income tax refunds. Our customers will more frequently exercise the early purchase option on their existing lease agreements or purchase merchandise off the showroom floor during the first quarter of the year. We expect these trends to continue in future periods. Due to the seasonality of our business, results for any quarter are not necessarily indicative of the results that may be achieved for a full fiscal year. 30 -------------------------------------------------------------------------------- Key Components of Earnings Before Income Taxes In this management's discussion and analysis section, we review our condensed consolidated results. For the three months endedMarch 31, 2020 and the comparable prior year period, some of the key revenue, cost and expense items that affected earnings before income taxes were as follows: Revenues. We separate our total revenues into six components: (i) lease revenues and fees; (ii) retail sales; (iii) non-retail sales; (iv) franchise royalties and fees; (v) interest and fees on loans receivable; and (vi) other. Lease revenues and fees primarily include all revenues derived from lease agreements at retail locations serviced byProgressive Leasing and the Aaron'sBusiness Company -operated stores and e-commerce platform. Lease revenues and fees are recorded net of a provision for uncollectible accounts receivable renewal payments. Retail sales represent sales of both new and returned lease merchandise from our Company-operated stores. Non-retail sales primarily represent new merchandise sales to our franchisees. Franchise royalties and fees represent fees from the sale of franchise rights and royalty payments from franchisees, as well as other related income from our franchised stores. Interest and fees on loans receivable primarily represents merchant fees, finance charges and annual and other fees earned on loans originated by Vive. Other revenues primarily relate to revenues from leasing Company-owned real estate properties to unrelated third parties, as well as other miscellaneous revenues. Depreciation of Lease Merchandise. Depreciation of lease merchandise primarily reflects the expense associated with depreciating merchandise held for lease and leased to customers byProgressive Leasing and our Company-operated Aaron's stores and through our e-commerce platform. Retail Cost of Sales. Retail cost of sales represents the depreciated cost of merchandise sold through our Company-operated stores. Non-Retail Cost of Sales. Non-retail cost of sales primarily represents the cost of merchandise sold to our franchisees. Operating Expenses. Operating expenses include personnel costs, occupancy costs, store maintenance, provision for lease merchandise write-offs, shipping and handling, advertising and marketing, the provision for loan losses in our Vive segment, franchisee bad debt expense and provision for franchise loan guarantees, depreciation of property, plant and equipment, intangible asset amortization expense and professional services expense, among other expenses. Restructuring Expenses, Net. Restructuring expenses, net primarily represent the cost of optimization efforts and cost reduction initiatives related to the Aaron's Business store support center and field support functions. Restructuring expenses, net are comprised principally of closed store operating lease right-of-use asset impairment and operating lease charges, fixed asset impairment charges and workforce reductions. Impairment ofGoodwill . Impairment of goodwill is the full write-off of the goodwill balance at the Aaron's Business reporting unit. Refer to Note 1 of these condensed consolidated financial statements for further discussion of the interim goodwill impairment assessment and resulting impairment charge. Other Operating Expense (Income). Other operating expense (income) consists of gains or losses on sales of Company-operated stores and delivery vehicles, fair value adjustments on assets held for sale, gains or losses on other transactions involving property, plant and equipment, and gains related to property damage and business interruption insurance claim recoveries. Interest Expense. Interest expense consists of interest incurred on the Company's fixed and variable rate debt. Other Non-Operating (Expense) Income, Net. Other non-operating (expense) income, net includes the impact of foreign currency remeasurement, as well as gains and losses resulting from changes in the cash surrender value of Company-owned life insurance related to the Company's deferred compensation plan. 31 --------------------------------------------------------------------------------
Results of Operations - Three months ended
Three Months Ended March 31, Change (In Thousands) 2020 2019 $ % REVENUES: Lease Revenues and Fees$ 1,047,913 $ 944,157 $ 103,756 11.0 % Retail Sales 9,531 12,809 (3,278 ) (25.6 ) Non-Retail Sales 26,846 36,981 (10,135 ) (27.4 ) Franchise Royalties and Fees 6,724 9,207 (2,483 ) (27.0 ) Interest and Fees on Loans Receivable 9,908 8,646 1,262 14.6 Other 352 303 49 16.2 1,101,274 1,012,103 89,171 8.8 COSTS AND EXPENSES: Depreciation of Lease Merchandise 597,407 500,820 96,587 19.3 Retail Cost of Sales 6,862 8,632 (1,770 ) (20.5 ) Non-Retail Cost of Sales 23,581 29,196 (5,615 ) (19.2 ) Operating Expenses 412,970 387,216 25,754 6.7 Restructuring Expenses, Net 22,286 13,281 9,005 67.8 Impairment of Goodwill 446,893 - 446,893 nmf Other Operating Expense (Income) 170 (897 ) 1,067 nmf 1,510,169 938,248 571,921 61.0 OPERATING (LOSS) PROFIT (408,895 ) 73,855 (482,750 ) nmf Interest Income 192 101 91 90.1 Interest Expense (3,799 ) (4,956 ) (1,157 ) (23.3 ) Other Non-Operating (Expense) Income, Net (1,951 ) 1,308 (3,259 ) nmf (LOSS) EARNINGS BEFORE INCOME TAXES (414,453 ) 70,308 (484,761 ) nmf INCOME TAX (BENEFIT) EXPENSE (134,448 ) 14,230 (148,678 ) nmf NET (LOSS) EARNINGS$ (280,005 ) $ 56,078 $ (336,083 ) nmf nmf-Calculation is not meaningful Revenues Information about our revenues by reportable segment is as follows: Three Months Ended March 31, Change (In Thousands) 2020 2019 $ % REVENUES: Progressive Leasing$ 658,534 $ 523,401 $ 135,133 25.8 % Aaron's Business 432,832 480,056 (47,224 ) (9.8 ) Vive 9,908 8,646
1,262 14.6
Total Revenues from External Customers
32 -------------------------------------------------------------------------------- The following table presents revenue by source and by segment for the three months endedMarch 31, 2020 : Three Months Ended March 31, 2020 Aaron's (In Thousands) Progressive Leasing Business Vive Total Lease Revenues and Fees $ 658,534 $
389,379 $ -$ 1,047,913 Retail Sales - 9,531 - 9,531 Non-Retail Sales - 26,846 - 26,846 Franchise Royalties and Fees - 6,724 - 6,724 Interest and Fees on Loans Receivable - - 9,908 9,908 Other - 352 - 352 Total Revenues $ 658,534 $
432,832
The following table presents revenue by source and by segment for the three months endedMarch 31, 2019 : Three Months Ended March 31, 2019 Aaron's (In Thousands) Progressive Leasing Business Vive Total Lease Revenues and Fees $ 523,401$ 420,756 $ -$ 944,157 Retail Sales - 12,809 - 12,809 Non-Retail Sales - 36,981 - 36,981 Franchise Royalties and Fees - 9,207 - 9,207 Interest and Fees on Loans Receivable - - 8,646 8,646 Other - 303 - 303 Total Revenues $ 523,401 $
480,056
Progressive Leasing .Progressive Leasing segment revenues increased primarily due to an increase in total invoice volume, which was driven by a 10.2% increase in active doors and a 2.9% increase in invoice volume per active door, partially offset by an additional provision for uncollectible renewal payments, which was recorded as a reduction to lease revenues and fees, of$4.4 million due to potential adverse customer payment behavior driven by the direct or indirect impacts of the COVID-19 pandemic.The Progressive Leasing segment has experienced declining invoice volumes since the COVID-19 pandemic began in March as a result of many of our retail partners being fully or partly closed temporarily or operating with reduced hours. We expect a reduction in the number of new lease originations from customers through our retail partners. Additionally, a continuation or worsening of current economic conditions may lead to lower consumer confidence which could result in a change in customer behavior, such as our customers not continuing their current lease agreements or not entering into new lease agreements with us. We believe these factors will have an unfavorable impact on the revenues and earnings ofProgressive Leasing in future periods, including during 2020, and also may have an unfavorable impact on the Company's liquidity, as discussed below in the "Liquidity and Capital Resources" section. Aaron's Business. Aaron's Business segment revenues decreased during the three months endedMarch 31, 2020 due to a$31.4 million decrease in lease revenues and fees and a$10.1 million decrease in non-retail sales. Lease revenues and fees decreased during the three months endedMarch 31, 2020 primarily due to the net reduction of 183 Company-operated stores during the 15-month period endedMarch 31, 2020 and a 4.6% decrease in same store revenues. The decrease in non-retail sales is primarily due to the net reduction of 59 franchised stores during the 15-month period endedMarch 31, 2020 and lower product purchases by franchisees. The Company launched certain sales and marketing initiatives towards the end of 2019, which led to an increase in new customer agreements into the portfolio but also resulted in a redeployment of store labor towards sales activities. This redeployment of store labor resulted in lower collections activity at the end of 2019 which had an unfavorable impact on the size of the Aaron's Business lease portfolio, resulting in decreases in lease revenues and same store revenues in the first quarter of 2020 compared to the prior year period. 33 -------------------------------------------------------------------------------- In response to the risk presented by the COVID-19 pandemic, inMarch 2020 , the Company voluntarily closed the showrooms for all of its Company-operated Aaron's Business stores, and moved to an e-commerce and curbside only service model, to protect the health and safety of the Aaron's Business' customers and associates, while continuing to provide our customers with the essential products they need such as refrigerators, freezers, mattresses and computers. That closure of all Company-operated store showrooms negatively impacted the volume of new in-store lease agreements, partially offset by increases in e-commerce agreements, in late March and intoApril 2020 . Aaron's Business e-commerce revenues were approximately 11% and 9% of Aaron's Business total lease revenues and fees during the three months endedMarch 31, 2020 and 2019, respectively. We expect a reduction in the number of new in-store lease agreements generated by the Aaron's Business as a result of the voluntary closure of its showrooms. Additionally, a continuation or worsening of current economic conditions may lead to lower consumer confidence which could result in a change in customer behavior, such as our customers not continuing their current lease agreements or not entering into new lease agreements with us. Further, our temporary suspension of the franchise royalty fee along with the potential decline in agreement volumes and revenues generated by our franchisees will negatively impact our revenues from franchise royalties and fees. We believe these factors will have an unfavorable impact on the revenues and earnings of the Aaron's Business in future periods, including during 2020, and also may have an unfavorable impact on the Company's liquidity, as discussed below in the "Liquidity and Capital Resources" section. Operating Expenses Information about certain significant components of operating expenses for the first quarter of 2020 as compared to the first quarter of 2019 is as follows: Three Months Ended March 31, Change (In Thousands) 2020 2019 $ % Personnel Costs$ 168,390 $ 181,750 $ (13,360 ) (7.4 )% Occupancy Costs 57,493 58,128 (635 ) (1.1 ) Provision for Lease Merchandise Write-Offs 79,675 56,995 22,680 39.8 Bad Debt Expense and Provision for Franchise Loan Guarantees 3,036 2,767 269 9.7 Shipping and Handling 16,525 19,188 (2,663 ) (13.9 ) Advertising 12,702 13,583 (881 ) (6.5 ) Provision for Loan Losses 12,722 4,255 8,467 199.0 Intangible Amortization 7,407 9,997 (2,590 ) (25.9 ) Professional Services 22,197 6,695 15,502 231.5 Other Operating Expenses 32,823 33,858 (1,035 ) (3.1 ) Operating Expenses$ 412,970 $ 387,216 $ 25,754 6.7 % nmf-Calculation is not meaningful As a percentage of total revenues, operating expenses decreased to 37.5% for the first quarter of 2020 from 38.3% in the same period in 2019. Personnel costs decreased primarily due to a$16.5 million decrease at our Aaron's Business driven by the reduction of store support center and field support staff from our restructuring programs in 2019 and 2020. This was partially offset by a$4.0 million increase at ourProgressive Leasing segment due to hiring to support the growth of Progressive. Beginning in lateMarch 2020 , the Aaron's Business and Progressive instituted significant pay cuts for executive officers and furloughed or terminated associates to better align the organization with current operations resulting from the closure of our Aaron's Business showrooms and declining lease originations caused by the COVID-19 pandemic, and thus, we expect its personnel costs in the second quarter to reflect those actions. The provision for lease merchandise write-offs as a percentage of lease revenues for theProgressive Leasing segment was 8.5% in 2020 compared to 7.0% in 2019. This increase was primarily driven by an incremental provision of$11.7 million recognized due to potential adverse impacts of the COVID-19 pandemic. The provision for lease merchandise write-offs as a percentage of lease revenues for the Aaron's Business increased to 6.2% in 2020 from 4.8% in 2019. This increase is primarily driven by an incremental provision of$2.7 million recognized due to potential adverse impacts of the COVID-19 pandemic, an increase in the number and type of promotional offerings, higher ticket leases and an increasing mix of e-commerce as a percentage of revenues, which typically results in higher charge-off rates than in-store lease agreements, during the three months endedMarch 31, 2020 . 34 -------------------------------------------------------------------------------- Bad debt expense and provision for franchise loan guarantees increased as a result of additional allowances and reserves of$3.0 million recognized due to the potential financial health deterioration of certain franchisees as a result of the COVID-19 pandemic. The provision for loan losses increased primarily due to an incremental allowance of$7.0 million for the forecasted adverse macroeconomic conditions stemming primarily from the COVID-19 pandemic, including higher unemployment rates and market volatility, which were used in estimating our allowance for loan losses as ofMarch 31, 2020 . The Company adopted CECL during the first quarter of 2020, which requires entities to consider forecasted macroeconomic conditions in determining their allowance for loan losses. Professional services increased primarily due to an Aaron's Business early termination fee of$14.1 million for a sales and marketing agreement. Other Costs and Expenses Depreciation of lease merchandise. As a percentage of total lease revenues and fees, depreciation of lease merchandise increased to 57.0% from 53.0% in the prior year period, primarily due to a shift in lease merchandise mix from the Aaron's Business toProgressive Leasing , which is consistent with the increasing proportion ofProgressive Leasing's revenue to total lease revenue.Progressive Leasing generally experiences higher depreciation as a percentage of lease revenues because, among other factors, its merchandise has a shorter average life on lease, a higher rate of customer early buyouts, and the merchandise is generally purchased at retail prices compared to the Aaron's Business, which procures merchandise at wholesale prices.Progressive Leasing's depreciation of lease merchandise as a percentage ofProgressive Leasing's lease revenues and fees was 70.4% in 2020 compared to 68.8% in 2019, due to an increase in early buyouts, which have a lower margin, quarter over quarter. Aaron's Business depreciation of lease merchandise as a percentage of Aaron's Business lease revenues and fees increased to 34.3% in 2020 from 33.5% in the prior year due to higher depreciation on merchandise not on lease during 2020 as compared to 2019 and the impact of COVID-19 driving lower cash collections during the second half ofMarch 2020 . Retail cost of sales. Retail cost of sales as a percentage of retail sales increased to 72.0% from 67.4% primarily due to higher sales price discounting of pre-leased merchandise and higher inventory purchase cost during 2020 as compared to 2019. Non-retail cost of sales. Non-retail cost of sales as a percentage of non-retail sales increased to 87.8% from 78.9% primarily due to higher inventory purchase cost during 2020 as compared to 2019. Restructuring expenses, net. Restructuring activity for the three months endedMarch 31, 2020 was comprised of expenses of$22.3 million , which were primarily operating lease right-of-use asset impairment and operating lease charges, fixed asset impairment charges and workforce reductions for Aaron's Business stores identified for future closure during the first quarter of 2020. Impairment of goodwill. During the three months endedMarch 31, 2020 , the Company recorded a loss of$446.9 million within the Aaron's Business segment to fully write-off its goodwill balance. Refer to Note 1 of these condensed consolidated financial statements for further discussion of the interim goodwill impairment assessment and resulting impairment charge. Other operating expense (income). Other operating expense (income) consists of gains or losses on sales of Company-operated stores and delivery vehicles, fair value adjustments on assets held for sale, gains or losses on other transactions involving property, plant and equipment, and gains related to property damage and business interruption insurance claim recoveries. Other operating expense was not significant during the three months endedMarch 31, 2020 . Other operating income during the three months endedMarch 31, 2019 included a$0.9 million gain on insurance recoveries related to payments received from insurance carriers for Hurricanes Harvey and Irma claims in excess of the related property insurance receivables. Operating (Loss) Profit Interest expense. Interest expense decreased to$3.8 million in 2020 from$5.0 million in 2019 due primarily to a lower outstanding average debt balance in the period and lower average interest rate on our revolving credit and term loan facility during the three months endedMarch 31, 2020 , partially offset by interest expense incurred related to the temporary$300.0 million draw on our revolving credit facility inMarch 2020 , which we subsequently repaid onApril 30, 2020 . Other non-operating (expense) income, net. Other non-operating (expense) income, net includes the impact of foreign currency remeasurement, as well as gains or losses resulting from changes in the cash surrender value of Company-owned life insurance related to the Company's deferred compensation plan. Foreign exchange remeasurement losses and gains resulting from net changes in the value of theU.S. dollar against the Canadian dollar were not significant during the three months endedMarch 31, 2020 or 2019. The changes in the cash surrender value of Company-owned life insurance resulted in net losses of$1.9 million during the three months endedMarch 31, 2020 and net gains of$1.3 million during the three months endedMarch 31, 2019 . 35 -------------------------------------------------------------------------------- (Loss) Earnings Before Income Taxes Information about our (loss) earnings before income taxes by reportable segment is as follows: Three Months Ended March 31, Change (In Thousands) 2020 2019 $ % (LOSS) EARNINGS BEFORE INCOME TAXES: Progressive Leasing$ 58,987 $ 55,388 $ 3,599 6.5 % Aaron's Business (465,357 ) 17,588 (482,945 ) nmf Vive (8,083 ) (2,668 )
(5,415 ) (203.0 )
Total (Loss) Earnings Before Income Taxes
nmf nmf-Calculation is not meaningful The factors impacting the change in (loss) earnings before income taxes are discussed above. Income Tax (Benefit) Expense The Company recorded a net income tax benefit of$134.4 million for the three months endedMarch 31, 2020 as compared to income tax expense of$14.2 million in the prior year comparable period. The net income tax benefit recognized in 2020 was primarily the result of losses before income taxes of$414.5 million as well as a discrete income tax benefit generated by the provisions of the CARES Act. The CARES Act, among other things, (i) waived the 80% taxable income limitation on the use of net operating losses which was previously set forth under the Tax Cuts and Jobs Act of 2017 and (ii) provided that net operating losses arising in a taxable year beginning afterDecember 31, 2017 and beforeJanuary 1, 2021 may be treated as a carryback to each of the five preceding taxable years. These CARES Act provisions resulted in a$34.2 million net tax benefit driven by the rate differential on the carryback of the Company's 2018 net operating loss previously recorded at 21% to the 2013 tax year, where the benefit is recognized at 35%. 36 -------------------------------------------------------------------------------- Overview of Financial Position The major changes in the condensed consolidated balance sheet fromDecember 31, 2019 toMarch 31, 2020 include: • Cash and cash equivalents increased$493.3 million to$551.0 million atMarch 31, 2020 . For additional information, refer to the "Liquidity and Capital Resources" section below. • Lease merchandise decreased$155.8 million due to lower inventory purchases at the Aaron's Business as a result of store closures and related initiatives in 2020 and reduction in inventory balances at
higher in the first quarter.
• Operating lease right-of-use assets decreased
to impairment charges recorded in connection with restructuring actions at
the Aaron's Business. •Goodwill decreased to$288.8 million atMarch 31, 2020 due to an
impairment charge of
goodwill within the Aaron's Business reporting unit. For additional
information, refer to Note 1 to these condensed consolidated financial
statements. • Income tax receivable increased$44.1 million due primarily to the anticipated refund of$84.4 million generated by provisions of the CARES Act as described above, partially offset by current tax expense, which results in a future tax payment obligation recognized during the three months endedMarch 31, 2020 .
• Debt increased
the Company's revolving credit facility inMarch 2020 , which was subsequently repaid onApril 30, 2020 , and additional borrowings of$5.6 million under the term loan inJanuary 2020 . 37
-------------------------------------------------------------------------------- Liquidity and Capital Resources Actions Taken in Response to the COVID-19 Pandemic and its Impact on Our Future Cash Position Due to the adverse impact the COVID-19 pandemic has had on theU.S. economy and on the operations and financial performance of our business segments, including a significant decline in the number of new lease agreements generated by ourProgressive Leasing and Aaron's Business segments during March, April and earlyMay 2020 , and given the uncertainty regarding the duration and extent of the unfavorable impacts the pandemic may have on the economy, including the capital markets, and on our customers and the operations and financial performance of our business segments, the Company has been especially focused on preserving and protecting its liquidity position. It has taken several steps to increase, preserve and protect its cash position, for example, including: (i) temporarily borrowing$300 million from its revolving credit facility duringMarch 2020 , which we subsequently repaid onApril 30, 2020 ; (ii) instituting significant pay cuts for our executive officers and members of our Board of Directors; (iii) furloughing approximately 2,500 associates; (iv) significantly reducing the amount of inventory the Aaron's Business purchased and manufactured; (v) reduced discretionary spending across the organization; and (vi) negotiating rent concessions with the landlords of Company-operated Aaron's Business stores. Offsetting these steps to increase and preserve liquidity were cash outflows for (i) the$175 million cash payment onApril 27, 2020 to settle the Progressive Leasing FTC matter, and (ii) the scheduled$60 million principal payment on our outstanding unsecured senior notes. Despite taking the steps discussed above, we believe the Company may experience a temporary decrease in its liquidity position in future periods due primarily to the combination of: (i) a reduction in revenue attributable to the decrease in the number of new customer lease agreements generated by theProgressive Leasing and Aaron's Business segments during March, April and earlyMay 2020 , as a result of the COVID-19 pandemic, including our decision to close all of our Aaron's Business showrooms to protect the health and safety of our customers and associates, as well as changes in customer behaviors driven by a continuation or worsening of current economic conditions; (ii) an increase in cash outflows, before there has been a meaningful increase in cash inflows derived from newly generated customer leases, as the Aaron's Business brings back a portion of its furloughed associates to staff its showrooms and other operations that have reopened, and begins to purchase and manufacture inventory again, andProgressive Leasing brings back a portion of its furloughed associates in anticipation of an increase in its requirements for revenues, customer service and other associates; (iii) if invoice volumes were to increase forProgressive Leasing , the cash outflows for the purchase of inventory from the third-party retailers will be required at the time of lease origination, while the associated cash inflows from customer lease payments is estimated to be received over time; (iv) the temporary suspension of the franchisee royalty fee obligation; and (v) the various forms of payment deferment options we are providing our customers that are experiencing hardships. The Company intends to continue to closely monitor its liquidity position and capital requirements as the impacts of the COVID-19 pandemic on the economy and the Company's businesses and financial position continue to unfold in the coming periods. General Our ongoing primary capital requirements consist of buying merchandise for the operations ofProgressive Leasing and the Aaron's Business. AsProgressive Leasing continues to grow, the need for additional lease merchandise is expected to remain our major capital requirement. Other capital requirements include (i) purchases of property, plant and equipment, including leasehold improvements for our next generation store concepts; (ii) expenditures for acquisitions, including franchisee acquisitions; (iii) expenditures related to our corporate operating activities; (iv) personnel expenditures; (v) income tax payments; (vi) funding of loans receivable for Vive; and (vii) servicing our outstanding debt obligations. The Company has also historically paid quarterly cash dividends and periodically repurchases stock. Our capital requirements have been financed through: • cash flows from operations; • private debt offerings; • bank debt; and • stock offerings. As ofMarch 31, 2020 , the Company had$551.0 million of cash and$186.2 million of availability under its revolving credit facility. As discussed in Note 4 to the condensed consolidated financial statements, the Company has accrued$175.0 million related toProgressive Leasing's settlement of theFTC matter. Following theFTC's approval of that settlement onApril 17, 2020 , and the approval of the consent order related thereto by theUnited States District Court for the Northern District of Georgia onApril 22, 2020 , the Company made that payment to theFTC onApril 27, 2020 with cash on hand. 38 -------------------------------------------------------------------------------- InApril 2020 , the Company made its regularly scheduled principal payments of$60 million plus accrued interest on its outstanding senior unsecured notes and repaid in full the$300.0 million outstanding balance on its revolving credit facility. As ofApril 30, 2020 , the Company had$136.5 million of cash and$486.2 million of availability under its revolving credit facility. Cash Provided by Operating Activities Cash provided by operating activities was$227.8 million and$164.7 million during the three months endedMarch 31, 2020 and 2019, respectively. The$63.0 million increase in operating cash flows was primarily driven by the continued growth ofProgressive Leasing as well as lower lease merchandise purchases at the Aaron's Business, partially offset by net income tax refunds of$0.4 million during the first quarter of 2020 compared to net income tax refunds of$15.3 million in the same period in 2019. Other changes in cash provided by operating activities are discussed above in our discussion of results for the three months endedMarch 31, 2020 . Cash Used in Investing Activities Cash used in investing activities was$30.6 million and$26.0 million during the three months endedMarch 31, 2020 and 2019, respectively. The$4.6 million increase in investing cash outflows was primarily due to$7.0 million higher net cash outflows for investments in Vive loans receivable, partially offset by$2.6 million lower outflows for the acquisition of businesses and customer agreements in 2020 as compared to 2019. Cash Provided by (Used in) Financing Activities Cash provided by financing activities was$296.2 million during the three months endedMarch 31, 2020 compared to cash used in financing activities of$29.9 million during the three months endedMarch 31, 2019 . The$326.1 million fluctuation in financing cash outflows was primarily due to net borrowings of debt of$305.2 million during 2020 compared to net repayments of$16.6 million during 2019. Share Repurchases We purchase our stock in the market from time to time as authorized by our Board of Directors. As ofMarch 31, 2020 , we have the authority to purchase additional shares up to our remaining authorization limit of$262.0 million . Dividends We have paid quarterly cash dividends for 33 consecutive years. At itsNovember 2019 meeting, our board of directors increased the quarterly dividend to$0.04 per share from$0.035 per share, representing the Company's 17th consecutive annual increase. Aggregate dividend payments for the three months endedMarch 31, 2020 were$2.7 million . We expect to continue paying this quarterly cash dividend. Debt Financing As ofMarch 31, 2020 ,$225.0 million in term loans and$300.0 million in borrowings were outstanding under the revolving credit and term loan agreement that matures onJanuary 21, 2025 . The Company subsequently repaid the$300.0 million outstanding on the revolving credit facility onApril 30, 2020 . The total available credit under our revolving credit facility as ofMarch 31, 2020 was$186.2 million . The revolving credit and term loan agreement includes an uncommitted incremental facility increase option (an "accordion facility") which, subject to certain terms and conditions, permits the Company at any time prior to the maturity date to request an increase in extensions of credit available thereunder by an aggregate additional principal amount of up to$250.0 million . As ofMarch 31, 2020 , the Company had outstanding$120.0 million in aggregate principal amount of senior unsecured notes issued in a private placement. The notes bear interest at the rate of 4.75% per year and mature onApril 14, 2021 . Quarterly payments of interest commencedJuly 14, 2014 , and annual principal payments of$60.0 million commencedApril 14, 2017 . InApril 2020 , the Company made its regularly scheduled principal payments of$60 million plus accrued interest on its outstanding senior unsecured notes. 39 -------------------------------------------------------------------------------- Our revolving credit and term loan agreement contains certain financial covenants, which include requirements that the Company maintain ratios of (i) adjusted EBITDA plus lease expense to fixed charges of no less than 2.50:1.00 and (ii) total debt to adjusted EBITDA of no greater than 3.00:1.00. In each case, adjusted EBITDA refers to the Company's consolidated net income before interest and tax expense, depreciation (other than lease merchandise depreciation), amortization expense, and other cash and non-cash charges. If we fail to comply with these covenants, we will be in default under these agreements, and all amounts could become due immediately. We are in compliance with all of these covenants atMarch 31, 2020 and believe that we will continue to be in compliance in the future. However, given the uncertainties associated with the COVID-19 pandemic's impact on our operations and financial performance in future periods, there can be no assurances that we will not be required to seek amendments or modifications to one or more of the covenants in our debt agreements and/or waivers of potential or actual defaults of those covenants. Commitments Income Taxes During the three months endedMarch 31, 2020 , we received net tax refunds of$0.4 million . Within the next nine months, we anticipate we will make$76.0 million in estimated tax payments forU.S. federal income taxes and$7.0 million for state income taxes. In response to the global impacts of COVID-19 onU.S. companies and citizens, the government enacted the CARES Act onMarch 27, 2020 . The CARES Act included several tax relief options for companies, including a five-year net operating loss carryback. The Company has elected to carryback its 2018 net operating losses of$242.2 million to 2013, thus generating an anticipated federal income tax refund of$84.4 million . Furthermore, the Company estimates it will receive$3.0 million in federal income tax refunds during the year endedDecember 31, 2021 . Refer to "CARES Act Considerations" for further discussion of tax relief options under the CARES Act. The Tax Act, which was enacted inDecember 2017 , provides for 100% expense deduction of certain qualified depreciable assets, including lease merchandise inventory, purchased by the Company afterSeptember 27, 2017 (but would be phased down starting in 2023). Because of our sales and lease ownership model, in which the Company remains the owner of merchandise on lease, we benefit more from bonus depreciation, relatively, than traditional furniture, electronics and appliance retailers. We estimate the deferred tax liability associated with bonus depreciation from the Tax Act and the prior tax legislation is approximately$321.0 million as ofDecember 31, 2019 , of which approximately 88% is expected to reverse as a deferred income tax benefit in 2020 and most of the remainder during 2021. These amounts exclude bonus depreciation the Company will receive on qualifying expenditures afterDecember 31, 2019 . Franchise Loan Guarantee We have guaranteed the borrowings of certain independent franchisees under a franchise loan agreement with several banks, under which the maximum facility commitment amount under the franchisee loan program was$25.0 million as ofMarch 31, 2020 . AtMarch 31, 2020 , the total amount that we might be obligated to repay in the event franchisees defaulted was$19.6 million . However, due to franchisee borrowing limits, we believe any losses associated with defaults would be substantially mitigated through recovery of lease merchandise and other assets. Since the inception of the franchise loan program in 1994, the Company's losses associated with the program have been immaterial. However, due to the uncertainty related to the impact of the COVID-19 pandemic and possible related governmental measures to control the pandemic, there can be no assurance that the Company will not incur future losses on outstanding franchisee borrowings under the franchise loan facility in the event of defaults or impending defaults by franchisees. The Company records a liability related to estimated future losses from repaying the franchisees' outstanding debt obligations upon any possible future events of default, which is included in accounts payable and accrued expenses in the condensed consolidated balance sheets. That liability was$2.4 million and$0.4 million as ofMarch 31, 2020 andDecember 31, 2019 , respectively. Contractual Obligations and Commitments As part of our ongoing operations, we enter into various arrangements that obligate us to make future payments, including debt agreements, operating leases, and other purchase obligations. The future cash commitments owed under these arrangements generally fluctuate in the normal course of business as we, for example, borrow on or pay down our revolving lines of credit, make scheduled payments on other debt, leases or purchase obligations and renegotiate arrangements or enter into new arrangements. Other than the$300.0 million temporary draw on the Company's revolving credit facility, which was repaid by the Company onApril 30, 2020 , and the$175.0 million payment to theFTC for settlement of the Progressive Leasing FTC matters as described within the "Liquidity and Capital Resources" section above, there were no material changes outside the normal course of business in our material cash commitments and contractual obligations from those reported in our Annual Report on Form 10-K for the year endedDecember 31, 2019 . 40
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Unfunded Lending Commitments The Company, through its Vive business, has unconditionally cancellable unfunded lending commitments totaling approximately$224.0 million and$225.0 million as ofMarch 31, 2020 andDecember 31, 2019 , respectively, that do not give rise to revenues and cash flows. 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 represent 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. Critical Accounting Policies Refer to the 2019 Annual Report. Accounting policies herein have also been updated as applicable to describe the impacts of the COVID-19 pandemic. Recent Accounting Pronouncements Refer to Note 1 to the condensed consolidated financial statements for a discussion of recently issued accounting pronouncements, including pronouncements that were adopted in the current year.
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