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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 ________________________________
 FORM 10-Q
________________________________
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM                      TO                     
COMMISSION FILE NUMBER 1-39681
 ________________________________
  THE AARON'S COMPANY, INC.
(Exact name of registrant as specified in its charter)
 _________________________________
Georgia
85-2483376
(State or other jurisdiction of
incorporation or organization)		(I. R. S. Employer
Identification No.)
400 Galleria Parkway SESuite 300AtlantaGeorgia30339-3182
(Address of principal executive offices)(Zip Code)
(678) 402-3000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading SymbolName of each exchange on which registered
Common Stock, $0.50 Par ValueAAN New York Stock Exchange

 ___________________________________

    Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 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 ☒    No  ☐
    Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ☒    No ☐
    Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.








Large Accelerated Filer☐Accelerated filer☒
Non-Accelerated Filer☐Smaller Reporting Company☐
Emerging Growth Company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
    Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
    Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Title of Each ClassShares Outstanding as of
July 28, 2023
Common Stock, $0.50 Par Value30,869,006

1

THE AARON'S COMPANY, INC.
INDEX
 
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
2

PART I – FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
THE AARON’S COMPANY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30,
2023		December 31,
2022
(In Thousands, Except Share Data)
ASSETS:
Cash and Cash Equivalents$38,369 $27,716 
Accounts Receivable (net of allowances of $7,898 at June 30, 2023 and $8,895 at December 31, 2022)
30,198 38,191 
Lease Merchandise (net of accumulated depreciation and allowances of $426,066 at June 30, 2023 and $431,092 at December 31, 2022)
636,596 693,795 
Merchandise Inventories, Net92,852 95,964 
Property, Plant and Equipment, Net265,061 267,457 
Operating Lease Right-of-Use Assets466,068 459,950 
Goodwill55,750 54,710 
Other Intangibles, Net113,269 118,528 
Income Tax Receivable10,220 5,716 
Prepaid Expenses and Other Assets110,837 96,436 
Total Assets$1,819,220 $1,858,463 
LIABILITIES & SHAREHOLDERS’ EQUITY:
Accounts Payable and Accrued Expenses$260,851 $264,043 
Deferred Tax Liabilities87,801 87,008 
Customer Deposits and Advance Payments70,943 73,196 
Operating Lease Liabilities502,982 496,401 
Debt186,063 242,413 
Total Liabilities 1,108,640 1,163,061 
Commitments and Contingencies (Note 6)
SHAREHOLDERS' EQUITY:
Common Stock, Par Value $0.50 Per Share: Authorized: 112,500,000 Shares at June 30, 2023 and December 31, 2022; Shares Issued: 36,619,930 at June 30, 2023 and 36,100,011 at December 31, 2022
18,310 18,050 
Additional Paid-in Capital744,015 738,428 
Retained Earnings90,548 79,073 
Accumulated Other Comprehensive Loss(197)(1,396)
852,676 834,155 
Less: Treasury Shares at Cost
 5,753,552 Shares at June 30, 2023 and 5,480,353 Shares at December 31, 2022
(142,096)(138,753)
Total Shareholders’ Equity710,580 695,402 
Total Liabilities & Shareholders’ Equity$1,819,220 $1,858,463 
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
3

THE AARON’S COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
 
Three Months Ended
June 30,		Six Months Ended
June 30,
2023202220232022
(In Thousands, Except Per Share Data)
REVENUES:
Lease Revenues and Fees$353,751 $386,513 $727,546 $795,831 
Retail Sales148,046 190,848 298,592 203,455 
Non-Retail Sales22,800 27,042 46,735 54,869 
Franchise Royalties and Other Revenues5,775 5,981 11,860 12,311 
530,372 610,384 1,084,733 1,066,466 
COSTS OF REVENUES:
Depreciation of Lease Merchandise and Other Lease Revenue Costs117,400 127,772 242,541 264,436 
Retail Cost of Sales111,284 165,228 224,813 174,343 
Non-Retail Cost of Sales19,416 24,237 39,413 49,593 
248,100 317,237 506,767 488,372 
GROSS PROFIT282,272 293,147 577,966 578,094 
OPERATING EXPENSES:
Personnel Costs124,945 130,257 256,390 251,367 
Other Operating Expenses, Net121,670 136,387 245,815 240,746 
Provision for Lease Merchandise Write-Offs19,001 22,113 39,161 44,070 
Restructuring Expenses, Net4,835 5,582 10,124 8,917 
Separation Costs— 230 129 770 
Acquisition-Related Costs546 8,033 2,394 11,497 
270,997 302,602 554,013 557,367 
OPERATING PROFIT (LOSSES)11,275 (9,455)23,953 20,727 
Interest Expense(3,910)(2,463)(8,268)(2,813)
Other Non-Operating Income (Expense), Net637 (1,556)1,209 (2,483)
EARNINGS (LOSSES) BEFORE INCOME TAXES8,002 (13,474)16,894 15,431 
INCOME TAX EXPENSE (BENEFIT)1,485 (8,132)(2,421)(759)
NET EARNINGS (LOSSES)$6,517 $(5,342)$19,315 $16,190 
EARNINGS (LOSSES) PER SHARE$0.21 $(0.17)$0.63 $0.52 
EARNINGS (LOSSES) PER SHARE ASSUMING DILUTION$0.21 $(0.17)$0.62 $0.51 
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
4

THE AARON’S COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSSES)
(Unaudited)
 
Three Months Ended
June 30,		Six Months Ended
June 30,
(In Thousands)2023202220232022
Net Earnings (Losses)$6,517 $(5,342)$19,315 $16,190 
Other Comprehensive Income (Losses):
Unrealized Gain on Derivative Instruments, net of Tax1
1,685 85 695 239 
Foreign Currency Translation Adjustment, net of Tax1
180 (346)504 (108)
Total Other Comprehensive Income (Losses)1,865 (261)1,199 131 
Comprehensive Income (Losses)$8,382 $(5,603)$20,514 $16,321 
1 The Unrealized Gain on Derivative Instruments is presented net of tax expense of $0.5 million and $0.2 million for the three and six months ended June 30, 2023, respectively, and the Foreign Currency Translation Adjustment is presented net of tax expense of $0.1 million and a tax benefit of $0.3 million for the three and six months ended June 30, 2023, respectively. The tax components of the prior year amounts are insignificant.

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

5

THE AARON’S COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
20232022
(In Thousands)
OPERATING ACTIVITIES:
Net Earnings$19,315 $16,190 
Adjustments to Reconcile Net Earnings to Cash Provided by Operating Activities:
Depreciation of Lease Merchandise238,783 260,507 
Other Depreciation and Amortization44,837 40,395 
Provision for Lease Merchandise Write-Offs39,161 44,070 
Non-Cash Inventory Fair Value Adjustment— 23,023 
Accounts Receivable Provision21,111 17,484 
Stock-Based Compensation5,835 6,835 
Deferred Income Taxes(6,553)(1,644)
Impairment of Assets1,716 6,048 
Non-Cash Lease Expense58,755 53,850 
Other Changes, Net(3,398)(6,349)
Changes in Operating Assets and Liabilities:
Lease Merchandise(221,851)(279,949)
Merchandise Inventories3,285 (2,480)
Accounts Receivable(13,019)(13,189)
Prepaid Expenses and Other Assets(6,935)5,829 
Income Tax Receivable(4,504)(3,144)
Operating Lease Right-of-Use Assets and Liabilities (59,811)(59,642)
Accounts Payable and Accrued Expenses1,712 (33,909)
Customer Deposits and Advance Payments(4,075)(16,849)
Cash Provided by Operating Activities114,364 57,076 
INVESTING ACTIVITIES:
Purchases of Property, Plant, and Equipment(41,565)(57,687)
Proceeds from Dispositions of Property, Plant, and Equipment4,878 10,191 
Acquisition of BrandsMart U.S.A., Net of Cash Acquired— (266,772)
Acquisition of Businesses and Customer Agreements, Net of Cash Acquired— (917)
Proceeds from Other Investing-Related Activities— 968 
Cash Used in Investing Activities(36,687)(314,217)
FINANCING ACTIVITIES:
Repayments on Swing Line Loans, Net(19,250)(10,000)
Proceeds from Revolver and Term Loan31,094 291,700 
Repayments on Revolver and Term Loan(68,281)(4,200)
Proceeds on Inventory Loan Program, Net— 8,121 
Dividends Paid(7,306)(6,611)
Acquisition of Treasury Stock(804)(11,055)
Issuance of Stock Under Stock Option Plans60 912 
Shares Withheld for Tax Payments(2,539)(3,541)
Debt Issuance Costs— (2,758)
Cash (Used in) Provided by Financing Activities(67,026)262,568 
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS2 (10)
Increase in Cash and Cash Equivalents10,653 5,417 
Cash and Cash Equivalents at Beginning of Period27,716 22,832 
Cash and Cash Equivalents at End of Period$38,369 $28,249 
    The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
6

THE AARON’S COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

For a discussion of trends that we believe have affected our business during the periods covered by these financial statements, see Part I, Item 2. "Management’s Discussion and Analysis of Financial Condition and Results of Operations", including the "Highlights," "Consolidated Results of Operations" and "Liquidity and Capital Resources", below, and Part I, Item 1A "Risk Factors" of our Annual Report on Form 10-K, filed with the United States Securities and Exchange Commission on March 1, 2023 (the "2022 Annual Report").
Description of Business
The Aaron's Company, Inc. (the "Company") is a leading, technology-enabled, omni-channel provider of lease-to-own ("LTO") and retail purchase solutions of furniture, electronics, appliances, and other home goods across its brands: Aaron's, BrandsMart U.S.A., BrandsMart Leasing, and Woodhaven Furniture Industries ("Woodhaven").
Unless the context otherwise requires or we specifically indicate otherwise, references to "we," "us," "our," and the "Company," refer to The Aaron's Company, Inc., which holds, directly or indirectly, the Pre-Spin Aaron’s Business (as described in the 2022 Annual Report) and all other subsidiaries of the Company, which are wholly owned, as well as other lines of business described above.
As of June 30, 2023, the Company's operating and reportable segments are the Aaron's Business and BrandsMart, each as described below. Effective as of April 1, 2022 and in connection with the acquisition of BrandsMart U.S.A., the Company changed its composition of reportable segments to align the reportable segments with the current organizational structure and the operating results that the chief operating decision maker regularly reviews to analyze performance and allocate resources, which includes separate segments for the Aaron's Business and BrandsMart, along with an Unallocated Corporate category for remaining unallocated costs.
The Aaron's Business segment is comprised of (i) Aaron's branded Company-operated and franchise-operated stores; (ii) aarons.com e-commerce platform ("aarons.com"); (iii) Woodhaven; and (iv) BrandsMart Leasing (collectively, the "Aaron’s Business").
The operations of BrandsMart U.S.A. (excluding BrandsMart Leasing) comprise the BrandsMart segment (collectively, "BrandsMart").
BrandsMart U.S.A. Acquisition
On April 1, 2022, the Company completed the previously announced transaction to acquire a 100% ownership of Interbond Corporation of America, doing business as BrandsMart U.S.A. The Company paid total consideration of approximately $230 million in cash under the terms of the agreement and additional amounts for working capital adjustments and transaction related fees. Refer to Note 2 to these condensed consolidated financial statements for additional information regarding the BrandsMart U.S.A. acquisition.
Management believes that the BrandsMart U.S.A. acquisition will strengthen the Company's ability to deliver on its mission of enhancing people’s lives by providing easy access to high quality furniture, appliances, electronics, and other home goods through affordable lease-to-own and retail purchase options. Management also believes that value creation opportunities include leveraging the Company's lease-to-own expertise to provide BrandsMart U.S.A.'s customers enhanced payment options and offering a wider selection of products to millions of Aaron's customers, as well as generating procurement savings and other cost synergies.
Aaron's Business Segment
Since its founding in 1955, Aaron's has been committed to serving the overlooked and underserved customer with a dedication to inclusion and improving the communities in which it operates. Through a portfolio of approximately 1,260 stores and its aarons.com e-commerce platform, Aaron's, together with its franchisees, provide consumers with LTO and retail purchase solutions for the products they need and want, with a focus on providing its customers with unparalleled customer service, high approval rates, lease plan flexibility, and an attractive value proposition, including competitive monthly payments and total cost of ownership, as compared to other LTO providers.
Woodhaven manufactures and supplies a significant portion of the upholstered furniture leased and sold in Company-operated and franchised Aaron's stores.
Launched in 2022, BrandsMart Leasing offers LTO purchase solutions to customers of BrandsMart U.S.A.
7

THE AARON’S COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
BrandsMart Segment
Founded in 1977, BrandsMart U.S.A. is one of the leading appliance and consumer electronics retailers in the southeast United States and one of the largest appliance retailers in the country with ten stores in Florida and Georgia and a growing e-commerce presence on brandsmartusa.com. The operations of BrandsMart U.S.A. (other than BrandsMart Leasing) comprise the BrandsMart segment.
The following table presents store count by ownership type:
Stores as of June 30 (Unaudited)20232022
Company-operated Aaron's Stores1
1,026 1,060 
GenNext (included in Company-Operated)230 171 
Franchisee-operated Aaron's Stores230 234 
BrandsMart U.S.A. Stores2
10 10 
Systemwide Stores1,266 1,304 
Company-operated Aaron's Store Types as of June 30, 2023 (Unaudited)GenNextLegacyTotal
Store175 649 824 
Hub48 53 101 
Showroom7 94 101 
Total230 796 1,026 
1 The typical layout for a Company-operated Aaron's store is a combination of showroom, customer service and warehouse space, averaging approximately 9,500 square feet. Certain Company-operated Aaron's stores consist solely of a showroom.
2 BrandsMart U.S.A. stores average approximately 100,000 square feet and have been included in this table subsequent to the acquisition date of April 1, 2022.
Basis of Presentation
The financial statements as of and for the three and six months ended June 30, 2023 and comparable prior year periods are condensed consolidated financial statements of the Company and its subsidiaries, each of which is wholly-owned, and is based on the financial position and results of operations of the Company. Intercompany balances and transactions between consolidated entities have been eliminated. These condensed consolidated financial statements reflect the historical results of operations, financial position and cash flows of the Company in accordance with accounting principles generally accepted in the United States ("U.S. GAAP").
The preparation of the Company's condensed consolidated financial statements in conformity with U.S. GAAP for interim financial information requires management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates. The extent to which inflationary and other economic pressures will impact the Company's business will depend on future developments. These developments are uncertain and cannot be precisely predicted at this time. In many cases, management's estimates and assumptions are dependent on estimates of such future developments and may change in the future.
The accompanying unaudited condensed consolidated financial statements do not include all information required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included in the accompanying unaudited condensed consolidated financial statements. These financial statements should be read in conjunction with the financial statements and notes thereto included in the 2022 Annual Report. The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of operating results that may be achieved for any other interim period or for the full year.
Accounting Policies and Estimates
See Note 1 to the consolidated and combined financial statements in the 2022 Annual Report for an expanded discussion of accounting policies and estimates.
8

THE AARON’S COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Earnings (Losses) Per Share
Earnings per share is computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the period. The computation of earnings per share assuming dilution includes the dilutive effect of stock options, restricted stock units ("RSUs"), restricted stock awards ("RSAs"), performance share units ("PSUs") and other awards issuable under the Company's 2020 Equity and Incentive Plan or employee stock purchase plan ("ESPP"), (collectively, "share-based awards"), as determined under the treasury stock method, unless the inclusion of such awards would have been anti-dilutive.
The following table shows the calculation of weighted-average shares outstanding assuming dilution:
Three Months Ended
June 30,		Six Months Ended
June 30,
(Shares In Thousands)2023202220232022
Weighted Average Shares Outstanding30,993 30,827 30,894 30,944 
Dilutive Effect of Share-Based Awards1
314 — 380 546 
Weighted Average Shares Outstanding Assuming Dilution31,307 30,827 31,274 31,490 
1 There was no dilutive effect of share-based awards for the three months ended June 30, 2022 due to the net loss incurred in the period.
Approximately 1.2 million weighted-average share based awards were excluded from the computation of earnings per share assuming dilution during the three and six months ended June 30, 2023, and 0.7 million during the six months ended June 30, 2022, respectively, as the awards would have been anti-dilutive for the periods presented.
Revenue Recognition
The Company provides lease and retail merchandise, consisting of appliances, electronics, furniture, and other home goods to its customers for lease under certain terms agreed to by the customer and through retail sales. The Company's Aaron's stores, aarons.com e-commerce platform, and BrandsMart Leasing components of the Aaron's Business segment offer leases with flexible ownership plans that can be generally renewed weekly, bi-weekly, semi-monthly, or monthly up to 12, 18 or 24 months. The Aaron's Business segment also earns revenue from the sale of merchandise to customers and Aaron's franchisees, and earns ongoing revenue from Aaron's franchisees in the form of royalties and through advertising efforts that benefit the franchisees.
The Company's BrandsMart U.S.A. stores and related brandsmartusa.com e-commerce platform offer the sale of merchandise directly to its customers via retail sales.
See Note 5 to these condensed consolidated financial statements for further information regarding the Company's revenue recognition policies and disclosures.
Advertising
The Company expenses advertising costs as incurred. Advertising production costs are initially recognized as a prepaid advertising asset and are expensed when an advertisement appears for the first time. Total advertising costs were $6.6 million and $19.6 million during the three and six months ended June 30, 2023, respectively, (three and six months ended June 30, 2022: $12.6 million and $23.3 million, respectively) and are classified within other operating expenses, net in the condensed consolidated statements of earnings. These advertising costs are presented net of cooperative advertising considerations received from vendors, which represents reimbursement of specific, identifiable and incremental costs incurred in selling those vendors’ products. The amount of cooperative advertising consideration recorded as a reduction of such advertising costs was $8.6 million and $16.1 million during the three and six months ended June 30, 2023, respectively, (three and six months ended June 30, 2022: $9.4 million and $16.4 million, respectively). The prepaid advertising asset was $4.2 million and $4.6 million at June 30, 2023 and December 31, 2022, respectively, and is reported within prepaid expenses and other assets on the condensed consolidated balance sheets.
Accounts Receivable
Accounts receivable consist of receivables due from customers on lease agreements, corporate receivables incurred during the normal course of business (primarily for vendor consideration and third-party warranty providers), and franchisee obligations.
9

THE AARON’S COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Accounts receivable, net of allowances, consist of the following: 
(In Thousands)June 30, 2023December 31, 2022
Customers$7,385 $9,721 
Corporate17,051 20,597 
Franchisee5,762 7,873 
$30,198 $38,191 
The Company maintains an accounts receivable allowance for the Aaron's Business customer lease agreements, under which its policy is to record a provision for returns and uncollectible contractually due renewal payments based on historical payments experience, which is recognized as a reduction of lease revenues and fees within the condensed consolidated statements of earnings. Other qualitative factors are considered in estimating the allowance, such as current and forecasted business trends. The Company writes off customer lease receivables, excluding customer lease receivables for its BrandsMart Leasing operations, that are 60 days or more past due on pre-determined dates twice monthly. The Company writes off customer lease receivables for its BrandsMart Leasing operations that are 90 days or more past due on pre-determined dates twice monthly.
The Company also maintains an allowance for outstanding franchisee accounts receivable. The Company's policy is to estimate future losses related to certain franchisees that are deemed to have a higher risk of non-payment and record an allowance for these estimated losses. The estimated allowance on franchisee accounts receivable includes consideration of the financial position of each franchisee and qualitative consideration of potential losses associated with uncertainties impacting the franchisee's ability to satisfy their obligations. Uncertainties include inflationary and other economic pressures in the current macroeconomic environment. Accordingly, actual accounts receivable write-offs could differ from the allowance. The provision for uncollectible franchisee accounts receivable is recorded as bad debt expense in other operating expenses, net within the condensed consolidated statements of earnings.
The allowance related to corporate receivables is not significant as of June 30, 2023 and December 31, 2022.
The following table shows the components of the accounts receivable allowance:
Six Months Ended
June 30,
(In Thousands)20232022
Beginning Balance$8,895 $7,163 
Accounts Written Off, net of Recoveries(22,108)(16,761)
Accounts Receivable Provision21,111 17,484 
Ending Balance$7,898 $7,886 
The following table shows the components of the accounts receivable provision, which includes amounts recognized for bad debt expense and the provision for returns and uncollected payments:
Six Months Ended
June 30,
(In Thousands)20232022
Bad Debt Expense (Reversal)$25 $(203)
Provision for Returns and Uncollectible Renewal Payments21,086 17,687 
Accounts Receivable Provision$21,111 $17,484 
Lease Merchandise
The Company’s lease merchandise is recorded at the lower of depreciated cost, including overhead costs from our distribution centers, or net realizable value. The cost of merchandise manufactured by our Woodhaven operations is recorded at cost and includes overhead from production facilities, shipping costs and warehousing costs. The Company begins depreciating lease merchandise at the earlier of 12 months and one day from its purchase of the merchandise or when the merchandise is leased to customers. Lease merchandise fully depreciates over the lease agreement period when on lease, generally 12 to 24 months, and generally 36 months when not on lease. Depreciation is accelerated upon early payout.
10

THE AARON’S COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following is a summary of lease merchandise, net of accumulated depreciation and allowances:
(In Thousands)June 30, 2023December 31, 2022
Merchandise on Lease, net of Accumulated Depreciation and Allowances$408,314 $446,923 
Merchandise Not on Lease, net of Accumulated Depreciation and Allowances1
228,282 246,872 
Lease Merchandise, net of Accumulated Depreciation and Allowances$636,596 $693,795 
1 Includes Woodhaven raw materials, finished goods and work-in-process inventory that has been classified within lease merchandise in the condensed consolidated balance sheets of $11.0 million and $12.9 million as of June 30, 2023 and December 31, 2022, respectively.
The Aaron's store-based operations' policies require weekly merchandise counts at its store-based operations, which include write-offs for unsalable, damaged, or missing merchandise inventories. Monthly cycle counting procedures are performed at both the Aaron's distribution centers and Woodhaven manufacturing facilities. Physical inventories are also taken at the manufacturing facilities annually. The Company also monitors merchandise levels and mix by division, store, and distribution center, as well as the average age of merchandise on hand. If obsolete merchandise cannot be returned to vendors, its carrying amount is adjusted to its net realizable value or written off. Generally, all merchandise not on lease is available for lease or sale. On a monthly basis, all damaged, lost or unsalable merchandise identified is written off and is included as a component of the provision for lease merchandise write-offs in the accompanying condensed consolidated statements of earnings.
The Company records a provision for write-offs using the allowance method, which is included within lease merchandise, net within the condensed consolidated balance sheets. The allowance method for lease merchandise write-offs estimates the merchandise losses incurred but not yet identified by management as of the end of the accounting period based primarily on historical write-off experience. Other qualitative factors are considered in estimating the allowance, such as seasonality and the impacts of uncertainty surrounding inflationary and other economic pressures in the current macroeconomic environment and the normalization of business trends associated with the effects of the COVID-19 pandemic on our customers. Therefore, actual lease merchandise write-offs could differ from the allowance. The provision for write-offs is included in provision for lease merchandise write-offs in the accompanying condensed consolidated statements of earnings. The Company writes off lease merchandise on lease agreements, excluding lease agreements for its BrandsMart Leasing operations, that are 60 days or more past due on pre-determined dates twice monthly. The Company writes off lease merchandise on lease agreements for its BrandsMart Leasing operations that are 90 days or more past due on pre-determined dates twice monthly.
The following table shows the components of the allowance for lease merchandise write-offs:
Six Months Ended
June 30,
(In Thousands)20232022
Beginning Balance$13,894 $12,339 
Merchandise Written off, net of Recoveries(39,181)(43,140)
Provision for Write-offs39,161 44,070 
Ending Balance$13,874 $13,269 
Merchandise Inventories
The Company’s merchandise inventories are stated at the lower of weighted average cost or net realizable value and consist entirely of merchandise held for sale by the BrandsMart segment. In-bound freight-related costs from vendors, net of allowances and vendor rebates, are included as part of the net cost of merchandise inventories. Costs associated with storing and transporting merchandise inventories to our retail stores are expensed as incurred and included within retail cost of sales in the condensed consolidated statements of earnings.
The Company periodically evaluates aged and distressed inventory and establishes an inventory markdown which represents the excess of the carrying value over the amount the Company expects to realize from the ultimate sale of the inventory. Markdowns establish a new cost basis for the inventory and are recorded within retail cost of sales within the condensed consolidated statement of earnings. The write-offs of merchandise inventories associated with the Company's cycle and physical inventory count processes are also included within retail cost of sales in the condensed consolidated statement of earnings. The Company records an inventory reserve for the anticipated loss associated with selling inventories below cost. This reserve is based on management’s current knowledge with respect to inventory levels, sales trends, and historical experience selling or disposing of aged or obsolete inventory.
11

THE AARON’S COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following is a summary of merchandise inventories, net of allowances:
(In Thousands)June 30, 2023December 31, 2022
Merchandise Inventories, gross$93,773 $96,945 
Reserve for Merchandise Inventories(921)(981)
Merchandise Inventories, net$92,852 $95,964 
The following table shows the components of the reserve for merchandise inventories:
Six Months Ended
(In Thousands)June 30, 2023
Beginning Balance$981 
Merchandise Written off— 
Provision for Write-offs(60)
Ending Balance1
$921 
1 There were no significant markdown provisions recorded during the three and six months ended June 30, 2022.
Prepaid Expenses and Other Assets
Prepaid expenses and other assets consist of the following:
(In Thousands)June 30, 2023December 31, 2022
Prepaid Expenses$19,159 $20,218 
Insurance Related Assets31,505 25,103 
Company-Owned Life Insurance14,633 13,443 
Assets Held for Sale1,113 1,857 
Deferred Tax Assets23,686 16,277 
Other Assets1
20,741 19,538 
$110,837 $96,436 
1 Amounts as of June 30, 2023 and December 31, 2022 included restricted cash of $1.6 million held as collateral for BrandsMart U.S.A.'s workers' compensation and general liability insurance policies.
Sale-Leaseback Transactions
During the six months ended June 30, 2022, the Company entered into two sale and leaseback transactions related to five Company-owned Aaron's store properties for a total sales price of $9.0 million, $5.7 million of which was received during the six months ended June 30, 2022. Such proceeds are presented within proceeds from dispositions of property, plant and equipment in the condensed consolidated statements of cash flows. The Company recognized gains of $1.9 million and $5.7 million associated with these transactions during the three and six months ended June 30, 2022, respectively, which was classified within other operating expenses, net in the condensed consolidated statements of earnings. As of June 30, 2022 proceeds of $3.3 million related to such transactions remained outstanding and were received during the third quarter of 2022.

12

THE AARON’S COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Derivative Instruments
In March 2023, the Company entered into a non-speculative interest rate swap agreement for an aggregate notional amount of $100.0 million with an effective date of April 28, 2023 and a termination date of March 31, 2027. The purpose of this hedge is to limit the Company's exposure of its variable interest rate debt by effectively converting it to fixed interest rate debt. Under the terms of the agreement, the Company will receive a floating interest rate based on 1-month Chicago Mercantile Exchange ("CME") Term Secured Overnight Financing Rate ("SOFR") and pay a fixed interest rate of 3.87% on the notional amount. The Company has accounted for the interest rate swap as a cash flow hedge instrument in accordance with ASC 815, Derivatives and Hedging ("ASC 815"). Accordingly, the effective portion of the gains and losses associated with the changes in the fair value of the cash flow hedge instrument are recognized as a component of accumulated other comprehensive loss in the Company's condensed consolidated balance sheets. Such amounts are reclassified into earnings in the same period during which the cash flow hedging instrument affects earnings. As of June 30, 2023, the facts and circumstances of the hedged relationship remain consistent with the initial effectiveness assessment and the hedging instrument remains an effective accounting hedge.
The fair value of the hedge as of June 30, 2023 was an asset of $1.0 million, and has been recorded within prepaid expenses and other assets in the Company's condensed consolidated balance sheets. During the three and six months ended June 30, 2023, the Company reclassified $0.2 million of net losses from accumulated other comprehensive loss to interest expense. See Note 3 to these condensed consolidated financial statements for further information regarding the fair value determination of the Company's interest rate swap agreement. Derivative instruments in place during the prior year were not significant.
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following:
(In Thousands)June 30, 2023December 31, 2022
Accounts Payable$108,314 $106,966 
Estimated Claims Liability Costs60,790 58,549 
Accrued Salaries and Benefits34,779 33,932 
Accrued Real Estate and Sales Taxes23,390 24,030 
Other Accrued Expenses and Liabilities33,578 40,566 
$260,851 $264,043 
Estimated Claims Liability Costs
Estimated claims liability costs are accrued primarily for workers compensation and vehicle liability, as well as general liability and group health insurance benefits provided to team members. These liabilities are recorded within estimated claims liability costs within accounts payable and accrued expenses in the condensed consolidated balance sheets. Estimates for these claims liabilities are made based on actual reported but unpaid claims and actuarial analysis of the projected claims run off for both reported and incurred but not reported claims. This analysis is based upon an assessment of the likely outcome or historical experience and considers a variety of factors, including the actuarial loss forecasts, company-specific development factors, general industry loss development factors and third-party claim administrator loss estimates of individual claims. The Company makes periodic prepayments to its insurance carriers to cover the projected claims run off for both reported and incurred but not reported claims, considering its retention or stop loss limits. In addition, we have prefunding balances on deposit and other insurance receivables with the insurance carriers which are recorded within prepaid expenses and other assets in our condensed consolidated balance sheets.
Goodwill
Goodwill represents the excess of the purchase price paid over the fair value of the identifiable net tangible and intangible assets acquired in connection with business acquisitions. All acquisition-related goodwill balances are allocated amongst the Company's reporting units based on the nature of the acquired operations that originally created the goodwill. During the fourth quarter of 2022, in connection with its annual impairment testing, management evaluated the various components of the operating segments further described above and in Note 8 to these condensed consolidated financial statements and identified three reporting units, Aaron's Business, BrandsMart, and BrandsMart Leasing, each as described below.
The Aaron's Business reporting unit is comprised of (i) Aaron's branded Company-operated and franchise operated stores; (ii) aarons.com e-commerce platform ("aarons.com"); and (iii) Woodhaven (collectively, the "Aaron’s Business reporting unit"). The Aaron's Business reporting unit is a component of the Aaron's Business operating segment.
13

THE AARON’S COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The operations of BrandsMart Leasing comprise the BrandsMart Leasing reporting unit (collectively, the "BrandsMart Leasing reporting unit"), and is a component of the Aaron's Business operating segment.
Management considered the aggregation of the BrandsMart Leasing reporting unit and Aaron's Business reporting unit as a single reporting unit and determined that these components were economically dissimilar and also reviewed separately by the segment managers of the Aaron's Business operating segment, and therefore should not be aggregated.
The operations of BrandsMart, comprise the BrandsMart reporting unit (collectively, the "BrandsMart reporting unit") and is also the sole component of the BrandsMart operating segment.
The acquisition of BrandsMart U.S.A. in the second quarter of 2022 resulted in the recognition of approximately $55.8 million of goodwill, inclusive of measurement period adjustments further described in Note 2 to these condensed consolidated financial statements. Of this amount, $29.2 million was assigned to the BrandsMart reporting unit and $26.5 million was assigned to the BrandsMart Leasing reporting unit. The following table provides information related to the carrying amount of goodwill by operating segment.
(In Thousands)Aaron's BusinessBrandsMartBrandsMart LeasingTotal
Balance at December 31, 2022
$— $28,193 $26,517 $54,710 
Acquisitions— — — — 
Acquisition Accounting Adjustments— 1,040 — 1,040 
Impairment Loss— — — — 
Balance at June 30, 2023
$— $29,233 $26,517 $55,750 
The Company’s goodwill is not amortized but is subject to an impairment test at the reporting unit level annually as of October 1 and more frequently if events or circumstances indicate that an interim impairment may have occurred. An interim goodwill impairment test is required if the Company believes it is more likely than not that the carrying amount of its reporting unit exceeds the reporting unit's fair value. The Company determined that there were no events that occurred or circumstances that changed during the six months ended June 30, 2023 that would more likely than not reduce the fair value of its reporting units below their carrying amount.
The Company may be required to recognize material impairments to the BrandsMart or BrandsMart Leasing goodwill balances in the future if: (i) the Company fails to successfully execute on one or more elements of the BrandsMart strategic plan; (ii) actual results are unfavorable to the Company's estimates and assumptions used to calculate fair value; (iii) the BrandsMart or BrandsMart Leasing carrying values increase without an associated increase in the fair value; and/or (iv) BrandsMart or BrandsMart Leasing is materially impacted by further deterioration of macroeconomic conditions, including inflation and other economic pressures, including rising interest rates.
Acquisition-Related Costs
Acquisition-related costs of $0.5 million and $2.4 million were incurred during the three and six months ended June 30, 2023, and Acquisition-related costs of $8.0 million and $11.5 million were incurred during the three and six months ended 2022. These primarily represent internal control readiness third-party consulting, banking and legal expenses and retention bonuses associated with the acquisition of BrandsMart U.S.A. completed April 1, 2022.
Related Party Transactions with the Sellers of BrandsMart U.S.A.
Effective as of the BrandsMart U.S.A. acquisition date, the Company entered into lease agreements for six store locations retained by the sellers of BrandsMart U.S.A., including Michael Perlman, who was employed by the Company for a short period following the acquisition. While Mr. Perlman is no longer employed by the Company as of December 31, 2022, the Company intends to continue its treatment of the lease agreements as potential related party transactions under the Company’s Related Party Transactions Policy until December 2023. The agreements include initial terms of ten years, with options to renew each location for up to 20 years thereafter. The Company recorded these leases within operating lease right-of-use assets and operating lease liabilities in the Company's condensed consolidated balance sheets. The six operating leases have aggregate annual rental payments of approximately $10.0 million and are considered to be above market. The value of the off-market element of the lease agreements was included as a component of the consideration transferred to the sellers of BrandsMart U.S.A. and was recognized as a reduction to the operating lease right-of-use-asset. The total amounts paid to the sellers of BrandsMart U.S.A. during the three and six months ended June 30, 2023 related to real estate activities, including rental payments, maintenance and taxes, were approximately $3.2 million and $6.5 million, respectively.
14

THE AARON’S COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Stockholders' Equity
Changes in stockholders' equity for the three and six months ended June 30, 2023 and 2022 are as follows:
 Treasury StockCommon StockAdditional
Paid-in Capital		Retained EarningsAccumulated Other Comprehensive LossTotal Shareholders’ Equity
(In Thousands, Except Per Share)SharesAmountSharesAmount
Balance, December 31, 2022(5,480)$(138,753)36,100 $18,050 $738,428 $79,073 $(1,396)$695,402 
Cash Dividends, $0.125 per share
— — — — — (3,966)— (3,966)
Stock-Based Compensation— — — — 2,874 — — 2,874 
Issuance of Shares under Equity Plans(207)(2,539)496 248 (248)— — (2,539)
Net Earnings— — — — — 12,798 — 12,798 
Unrealized (Loss) on Derivative Instruments, net of tax— — — — — — (990)(990)
Foreign Currency Translation Adjustment, net of tax— — — — — — 324 324 
Balance, March 31, 2023(5,687)$(141,292)36,596 $18,298 $741,054 $87,905 $(2,062)$703,903 
Cash Dividends, $0.125 per share
— — — — — (3,874)— (3,874)
Stock-Based Compensation— — — — 2,913 — — 2,913 
Issuance of Shares under Equity Plans— — 24 12 48 — — 60 
Acquisition of Treasury Stock(66)(804)— — — — — (804)
Net Earnings— — — — — 6,517 — 6,517 
Unrealized Gain on Derivative Instruments, net of tax— — — — — — 1,685 1,685 
Foreign Currency Translation Adjustment, net of tax— — — — — — 180 180 
Balance, June 30, 2023(5,753)$(142,096)36,620 $18,310 $744,015 $90,548 $(197)$710,580 

15

THE AARON’S COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Treasury StockCommon StockAdditional
Paid-in Capital		Retained EarningsAccumulated Other Comprehensive LossTotal Shareholders’ Equity
(In Thousands, Except Per Share)SharesAmountSharesAmount
Balance, December 31, 2021(4,580)$(121,804)35,559 $17,779 $724,384 $98,546 $(739)$718,166 
Cash Dividends, $0.11 per share
— — — — — (3,584)— (3,584)
Stock-Based Compensation— — — — 3,611 — — 3,611 
Issuance of Shares Under Equity Plans(163)(3,541)410 205 (153)— — (3,489)
Acquisition of Treasury Stock(262)(5,720)— — — — — (5,720)
Net Earnings— — — — — 21,532 — 21,532 
Unrealized Gain on Fuel Hedge Derivative Instrument— — — — — — 154 154 
Foreign Currency Translation Adjustment— — — — — — 238 238 
Balance, March 31, 2022(5,005)$(131,065)35,969 $17,984 $727,842 $116,494 $(347)$730,908 
Cash Dividends, $0.11 per share
— — — — — (3,541)— (3,541)
Stock-Based Compensation— — — — 3,224 — — 3,224 
Issuance of Shares Under Equity Plans— — 68 35 825 — — 860 
Acquisition of Treasury Stock(255)(5,335)— — — — — (5,335)
Net Loss— — — — — (5,342)(5,342)
Unrealized Gain on Fuel Hedge Derivative Instrument— — — — — — 85 85 
Foreign Currency Translation Adjustment— — — — — — (346)(346)
Balance, June 30, 2022(5,260)$(136,400)36,037 $18,019 $731,891 $107,611 $(608)$720,513 
Fair Value Measurement
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:
Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.
Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3—Valuations based on unobservable inputs reflecting the Company's own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.
The fair values of the Company's assets and liabilities as of June 30, 2023 and December 31, 2022 are further described in Note 3 to these condensed consolidated financial statements.
16

THE AARON’S COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Accumulated Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income (loss) ("AOCI") by component for the six months ended June 30, 2023 and June 30, 2022 are summarized below:
Six Months Ended June 30, 2023
(In Thousands)Derivative InstrumentsForeign CurrencyTotal
Balance at December 31, 2022$(17)$(1,379)$(1,396)
Other Comprehensive Income, net of Tax695 504 1,199 
Balance at June 30, 2023$678 $(875)$(197)
Six Months Ended June 30, 2022
(In Thousands)Derivative InstrumentsForeign CurrencyTotal
Balance at December 31, 2021$— $(739)$(739)
Other Comprehensive Income (Loss), net of Tax239 (108)131 
Balance at June 30, 2022$239 $(847)$(608)
Recent Accounting Pronouncements
There were no new accounting standards that had a material impact on the Company’s condensed consolidated financial statements during the six months ended June 30, 2023, and there were no other new accounting standards or pronouncements that were issued but not yet effective as of June 30, 2023 that the Company expects to have a material impact on its condensed consolidated financial statements.
NOTE 2. ACQUISITIONS
BrandsMart U.S.A. Acquisition
On April 1, 2022, the Company completed the previously announced acquisition of all of the issued and outstanding shares of capital stock of BrandsMart U.S.A. Founded in 1977, BrandsMart U.S.A. is one of the leading appliance and consumer electronics retailers in the southeastern United States and one of the largest appliance retailers in the country, with ten stores in Florida and Georgia and a growing e-commerce presence on brandsmartusa.com. The Company paid total consideration of approximately $230 million in cash under the terms of the agreement and additional amounts for working capital adjustments and transaction related fees. Consideration transferred also included the off-market value associated with certain operating leases entered into in conjunction with the transaction, which is further described in the table below.
Management believes that the BrandsMart U.S.A. acquisition will strengthen the Company's ability to deliver on its mission of enhancing people’s lives by providing easy access to high quality furniture, appliances, electronics, and other home goods through affordable lease-to-own and retail purchase options. Management also believes that value creation opportunities include leveraging the Company's lease-to-own expertise to provide BrandsMart U.S.A.'s customers enhanced payment options and offering a wider selection of products to millions of Aaron's customers, as well as generating procurement savings and other cost synergies.
The BrandsMart U.S.A. acquisition has been accounted for as a business combination, and the BrandsMart results of operations are included in the Company's results of operations from the April 1, 2022 acquisition date. BrandsMart contributed revenues of $143.8 million and $287.9 million during the three and six months ended June 30, 2023, and $181.4 million during the three and six months ended June 30, 2022, respectively. BrandsMart also contributed net earnings of $1.1 million and $0.2 million during the three and six months ended June 30, 2023, and net losses of $15.9 million during the three and six months ended June 30, 2022, respectively.

17

THE AARON’S COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Acquisition Accounting
The consideration transferred and the estimated fair values of the assets acquired and liabilities assumed in the BrandsMart U.S.A. acquisition as of the April 1, 2022 acquisition date are as follows:
(In Thousands)
Preliminary Amounts Recognized as of Acquisition Date1
2023 Measurement Period Adjustments2
Final Amounts Recognized as of Acquisition Date
Cash Consideration to BrandsMart U.S.A.$230,000 $— $230,000 
Acquired Cash15,952 — 15,952 
Estimated Excess Working Capital, net of Cash35,599 — 35,599 
Non-Cash Off-Market Lease Agreement3
6,823 — 6,823 
Aggregate Consideration Transferred288,374 — 288,374 
Total Purchase Consideration, Net of Cash Acquired272,422 — 272,422 
Estimated Fair Value of Identifiable Assets Acquired and Liabilities Assumed
Accounts Receivable4,310 — 4,310 
Merchandise Inventories124,064 173 124,237 
Property, Plant and Equipment22,053 (1,361)20,692 
Operating Lease Right-of-Use Assets160,210 — 160,210 
Other Intangibles4
122,950 — 122,950 
Prepaid Expenses and Other Assets5
9,049 (80)8,969 
Total Identifiable Assets Acquired442,636 (1,268)441,368 
Accounts Payable and Accrued Expenses25,340 (2,050)23,290 
Customer Deposits and Advance Payments25,332 1,822 27,154 
Operating Lease Liabilities158,712 — 158,712 
Debt15,540 — 15,540 
Total Liabilities Assumed224,924 (228)224,696 
Net Assets Acquired217,712 (1,040)216,672 
Goodwill6
54,710 1,040 55,750 
Total Estimated Fair Value of Net Assets Acquired$272,422 $— $272,422 
1 As previously reported in the notes to the consolidated and combined financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
2 The measurement period adjustments recorded in 2023 primarily relate to opening balance sheet adjustments to certain asset and liability balances further illustrated in the table above.
3 Effective as of the acquisition date, the Company entered into lease agreements for six store locations retained by the sellers of BrandsMart U.S.A. The agreement includes initial terms of ten years, with options to renew each location for up to 20 years thereafter. The annual rent is considered to be above market. The value of the off-market element of the lease agreements has been included in consideration transferred and as a reduction to the operating lease right-of-use-asset.
4 Identifiable intangible assets are further disaggregated in the table set forth below.
5 Includes restricted cash of $2.5 million at the acquisition date that was held as collateral for BrandsMart U.S.A.'s workers' compensation and general liability insurance policies.
18

THE AARON’S COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
6 The purchase price exceeded the fair value of the net assets acquired, which resulted in the recognition of goodwill, all of which is expected to be deductible for tax purposes. Goodwill is comprised of synergies created from the expected future benefits to the Company, including those related to the expansion of BrandsMart stores into new markets, expanded product assortment, procurement synergies, the projected growth of the BrandsMart Leasing business, and certain other intangible assets that do not qualify for separate recognition, such as an assembled workforce. See Note 1 to these condensed consolidated financial statements for further discussion of the identification of the Company's reporting units and the allocation of goodwill and Note 8 for the discussion of operating segments associated with the BrandsMart U.S.A. acquisition.
Intangible assets attributable to the BrandsMart U.S.A. acquisition are comprised of the following:
Fair Value
(In Thousands)		Weighted Average Life
(In Years)
Trade Names$108,000 20.0
Non-Compete Agreements250 3.0
Customer List14,700 4.0
Total Acquired Intangible Assets$122,950 
The Company incurred $0.5 million and $2.4 million, and $8.0 million and $11.5 million of transaction costs during the three and six months ended June 30, 2023, and June 30, 2022, respectively, in connection with the acquisition of BrandsMart U.S.A. These costs were included within "Acquisition-Related Costs" in the condensed consolidated statements of earnings. Acquisition-Related Costs that will affect the Company's income statement throughout the remainder of 2023 are not expected to be material.
Pro Forma Financial Information
The following table presents unaudited consolidated pro forma information as if the acquisition of BrandsMart U.S.A. had occurred on January 1, 2021, compared to actual, historical results.
(Unaudited)Three Months Ended June 30, 2022
(In Thousands)As ReportedPro Forma Combined Results
Revenues$610,384 $610,384 
(Losses) Earnings Before Income Taxes(13,474)17,609 
Net (Losses) Earnings$(5,342)$17,908 

(Unaudited)Six Months Ended June 30, 2022
(In Thousands)As ReportedPro Forma Combined Results
Revenues$1,066,466 $1,239,237 
Earnings Before Income Taxes15,431 53,053 
Net Earnings$16,190 $44,068 
The unaudited pro forma combined financial information does not reflect the costs of any integration activities or dis-synergies, or benefits that may result from future costs savings due to revenue synergies, procurement savings or operational efficiencies expected to result from the BrandsMart U.S.A. acquisition. Accordingly, the unaudited pro forma financial information above is not intended to represent or be indicative of the consolidated results of operations of the Company that would have been reported had the BrandsMart U.S.A. acquisition been completed as of the dates presented, and should not be construed as representative of the future consolidated results of operations or financial condition of the combined entity.
The unaudited pro forma combined financial information for the three and six months ended June 30, 2022 includes adjustments to, among other things, record depreciation expense, amortization expense and income taxes based upon the fair value allocation of the purchase price to BrandsMart U.S.A.'s tangible and intangible assets acquired and liabilities assumed as though the acquisition had occurred on January 1, 2021.
19

THE AARON’S COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Interest expense on the additional debt incurred by the Company to fund the acquisition and personnel costs incurred related to the acquisition are also included in the unaudited pro forma combined information as if the BrandsMart U.S.A. acquisition had occurred on January 1, 2021 for the pro forma three and six months ended June 30, 2022.
NOTE 3. FAIR VALUE MEASUREMENT
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
The fair value of the Company's current financial assets and liabilities, such as cash and cash equivalents, accounts receivable and accounts payable, approximate their carrying values due to their short-term nature. The Company's outstanding debt borrowings as of June 30, 2023 and December 31, 2022 were subject to a variable interest rate. Therefore, the fair value of these borrowings also approximates its carrying value. Debt borrowings are measured within Level 2 of the fair value hierarchy. The Company also measures certain non-financial assets at fair value on a nonrecurring basis, such as goodwill, intangible assets, operating lease right-of-use assets, property, plant, and equipment and assets held for sale, in connection with periodic evaluations for potential impairment.
The following table summarizes financial liabilities measured at fair value on a recurring basis:
(In Thousands)June 30, 2023December 31, 2022
 Level 1Level 2Level 3Level 1Level 2Level 3
Deferred Compensation Liability$— $(10,015)$— $— $(8,621)$— 
Interest Rate Swap Asset (Liability)$— $980 $— $— $— $— 
The Company maintains The Aaron's Company, Inc. Deferred Compensation Plan, which is an unfunded, nonqualified deferred compensation plan for a select group of management, highly compensated employees and non-employee directors. The liability represents benefits accrued for plan participants and is valued at the quoted market prices of the participants’ investment elections, which consist of equity and debt "mirror" funds. As such, the Company has classified the deferred compensation liability as a Level 2 liability, which is recorded in accounts payable and accrued expenses in the condensed consolidated balance sheets.
In March 2023, the Company entered into an interest rate swap agreement for an aggregate notional amount of $100.0 million which is further described in Note 1 to these condensed consolidated financial statements. The fair value of the interest rate swap agreement is derived by using widely accepted valuation techniques and reflects the contractual terms of the interest rate swap including the period to maturity and uses observable market-based inputs, including interest rate curves. The fair value associated with the interest rate swap is recorded within prepaid expenses and other assets (when the resulting fair value is an asset) or accounts payable and accrued expenses (when the resulting fair value is a liability) within the Company's condensed consolidated balance sheets.
Non-Financial Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
The following table summarizes non-financial assets measured at fair value on a nonrecurring basis:
(In Thousands)June 30, 2023December 31, 2022
Level 1Level 2Level 3Level 1Level 2Level 3
Assets Held for Sale$— $1,113 $— $— $1,857 $— 
Assets classified as held for sale are recorded at the lower of carrying value or fair value less estimated costs to sell, and any adjustment is recorded in other operating expenses, net or restructuring expenses, net (if the asset is a part of the Company's restructuring programs as described in Note 7 to these condensed consolidated financial statements) in the condensed consolidated statements of earnings. The highest and best use of the primary components of assets held for sale are as real estate land parcels for development or real estate properties for use or lease; however, the Company has chosen not to develop or use these properties, and plans to sell the properties to third parties as quickly as practicable.
On April 1, 2022, the Company completed the previously announced acquisition of all of the issued and outstanding shares of capital stock of BrandsMart U.S.A. For the fair value measurements performed related to the net assets acquired, including acquired intangible assets, the Company utilized multiple Level 3 inputs and assumptions, such as estimates about costs of capital, future projected performance and cash flows. See Note 2 to these condensed consolidated financial statements for further details regarding the acquired assets.
20

THE AARON’S COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4. INDEBTEDNESS
The following is a summary of the Company's debt, net of unamortized debt issuance costs as applicable:
(In Thousands)June 30, 2023December 31, 2022
Revolving Facility$15,000 $69,250 
Term Loan, Due in Installments through April 20271
171,063 173,163 
Total Debt186,063 242,413 
Less: Current Maturities4,375 23,450 
Long-Term Debt$181,688 $218,963 
1 Includes unamortized debt issuance costs of $0.7 million and $0.7 million as of June 30, 2023 and December 31, 2022. The Company has included $2.5 million and $2.9 million of debt issuance costs as of June 30, 2023 and December 31, 2022, respectively, related to the new and previous revolving credit facility, within prepaid expenses and other assets in the condensed consolidated balance sheets.
Revolving Credit Facility and Term Loan
To finance the BrandsMart U.S.A. acquisition, on April 1, 2022 the Company entered into a new unsecured credit facility (the "Credit Facility") which replaced its previous $250 million unsecured credit facility dated as of November 9, 2020 (as amended, the "Previous Credit Facility"). The Previous Credit Facility is further described in Note 8 to the consolidated and combined financial statements of the 2022 Annual Report. The Credit Facility provides for a $175 million term loan (the "Term Loan") and a $375 million revolving credit facility (the "Revolving Facility"), which includes (i) a $35 million sublimit for the issuance of letters of credit on customary terms, and (ii) a $35 million sublimit for swing line loans on customary terms. The Company pays a commitment fee on unused balances related to the revolving facility, which ranges from 0.20% to 0.30% as determined by the Company's ratio of total net debt to EBITDA (as defined by the agreement).
On April 1, 2022, the Company borrowed $175 million under the Term Loan and $117 million under the Revolving Facility to finance the purchase price for the BrandsMart U.S.A. acquisition and other customary acquisition and financing-related closing costs and adjustments. The Company expects that future additional borrowings under the Revolving Facility will be used to provide for working capital and capital expenditures, to finance future permitted acquisitions and for other general corporate purposes. As of June 30, 2023, $171.7 million and $15.0 million remained outstanding under the Term Loan and Revolving Facility, respectively, compared to $173.9 million and $69.3 million outstanding at December 31, 2022. Amounts outstanding under the letters of credit, which reduce availability under the Revolving Facility, were $19.0 million and $17.3 million as of June 30, 2023 and December 31, 2022, respectively.
Borrowings under the Revolving Facility and the Term Loan bear interest at a rate per annum equal to, at the option of the Company, (i) the forward-looking term rate based on SOFR plus an applicable margin ranging between 1.50% and 2.25%, based on the Company's Total Net Debt to EBITDA Ratio, or (ii) the base rate (as defined in the Credit Facility) plus an applicable margin, which is 1.00% lower than the applicable margin for SOFR loans.
The loans and commitments under the Revolving Facility mature or terminate on April 1, 2027. The Term Loan amortizes in quarterly installments, commencing on December 31, 2022, in an aggregate annual amount equal to (i) 2.50% of the original principal amount of the Term Loan during the first and second years after the closing date, (ii) 5.00% of the original principal amount of the Term Loan during the third, fourth and fifth years after the closing date, with the remaining principal balance of the Term Loan to be due and payable in full on April 1, 2027.
Franchise Loan Facility Amendment
On April 1, 2022, the Company also entered into a new $12.5 million unsecured franchise loan facility (the "Franchise Loan Facility"), which replaced its previous $15.0 million amended and restated unsecured franchise loan facility dated as of November 10, 2021. The Franchise Loan Facility operates as a guarantee by the Company of certain debt obligations of certain Aaron's franchisees (the "Borrower") under a franchise loan program.
21

THE AARON’S COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In the event these franchisees are unable to meet their debt service payments or otherwise experience an event of default, the Company would be unconditionally liable for the outstanding balance of the franchisees’ debt obligations under the Franchise Loan Facility, which would be due in full within 90 days of such event of default. Borrowings under the Franchise Loan Facility bear interest at a rate per annum equal to SOFR plus an applicable margin ranging between 1.50% and 2.25%, based on the Company's Total Net Debt to EBITDA Ratio (as defined in the Franchise Loan Facility). The Franchise Loan Facility is available for a period of 364 days commencing on April 1, 2022, and permits the Borrower to request extensions for additional 364-day periods. On February 10, 2023, the Company amended its Franchise Loan Facility to extend the maturity date from March 31, 2023 to March 30, 2024. Subsequently on February 23, 2023, the Company amended its Franchise Loan Facility to reduce the total commitment amount from $12.5 million to $10.0 million.
Financial Covenants
The Credit Facility and the Franchise Loan Facility contain customary financial covenants including (a) a maximum Total Net Debt to EBITDA Ratio of 2.75 to 1.00 and (b) a minimum Fixed Charge Coverage Ratio of 1.75 to 1.00.
If the Company fails to comply with these covenants, the Company will be in default under these agreements, and all borrowings outstanding could become due immediately. Under the Credit Facility and Franchise Loan Facility, the Company may pay cash dividends in any year so long as, after giving pro forma effect to the dividend payment, the Company maintains compliance with its financial covenants and no event of default has occurred or would result from the payment. The Company is in compliance with all covenants under the Credit Facility at June 30, 2023.
NOTE 5. REVENUE RECOGNITION
The following table disaggregates revenue by source:
Three Months Ended June 30,Six Months Ended June 30,
(In Thousands)2023202220232022
Lease Revenues and Fees$353,751 $386,513 $727,546 $795,831 
Retail Sales148,046 190,848 298,592 203,455 
Non-Retail Sales22,800 27,042 46,735 54,869 
Franchise Royalties and Fees5,588 5,792 11,486 11,910 
Other187 189 374 401 
Total Revenues1
$530,372 $610,384 $1,084,733 $1,066,466 
1 Includes revenues from Canadian operations of $4.3 million and $8.7 million during the three and six months ended June 30, 2023, respectively, (three and six months ended June 30, 2022: $4.8 million and $9.7 million, respectively), which are primarily lease revenues and fees.
Lease Revenues and Fees
The Aaron's Business segment, which includes BrandsMart Leasing, provides lease merchandise, consisting of furniture, appliances, electronics, computers, and other home goods to their customers for lease under certain terms agreed to by the customer. The Aaron's Business segment offers leases with flexible ownership plans that can be generally renewed weekly, bi-weekly, semi-monthly, or monthly up to 12, 18 or 24 months and does not require deposits upon inception of customer agreements. The customer has the right to acquire ownership either through an early purchase option or through payment of all required lease payments through the end of the ownership plan. Aaron's also offers customers the option to obtain a membership in the Aaron’s Club program. The benefits to customers of the Aaron's Club program are separated into three general categories: (a) lease protection benefits; (b) health & wellness discounts; and (c) dining, shopping and consumer savings. Lease agreements offered by the Aaron's Business segment including the Aaron's Club program memberships and BrandsMart Leasing, are cancellable at any time by either party without penalty, and as such, these offerings are renewable period to period arrangements.
Lease revenues related to the leasing of merchandise and Aaron's Club membership fees are recognized as revenue in the month they are earned. Payments received prior to the month earned are recorded as deferred lease revenue, and this amount is included in customer deposits and advance payments in the accompanying condensed consolidated balance sheets. Lease payments due but not received prior to month end are recorded as accounts receivable in the accompanying condensed consolidated balance sheets. Lease revenues are recorded net of a provision for returns and uncollectible renewal payments.
22

THE AARON’S COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
All of Aaron's customer lease agreements, including BrandsMart Leasing, are considered operating leases. The Company maintains ownership of the lease merchandise until all payment obligations are satisfied under lease agreements. Initial direct costs related to customer agreements are expensed as incurred and have been classified as other operating expenses, net in the condensed consolidated statements of earnings. The statement of earnings effects of expensing the initial direct costs as incurred are not materially different from amortizing initial direct costs over the lease ownership plan.
Substantially all lease revenues and fees were within the scope of ASC 842, Leases, during the three and six months ended June 30, 2023 and 2022. Included in lease revenues and fees above, the Company had $6.2 million and $12.5 million of other revenue during the three and six months ended June 30, 2023, respectively, (three and six months ended June 30, 2022: $7.0 million and $14.0 million, respectively) within the scope of ASC 606, Revenue from Contracts with Customers, which is included in lease revenues and fees above. Lease revenues and fees are recorded within lease revenues and fees in the accompanying condensed consolidated statements of earnings.
Retail Sales
All retail sales revenue is within the scope of ASC 606, Revenue from Contracts with Customers, during the three and six months ended June 30, 2023 and 2022.
Aaron's Business
Revenues from the retail sale of lease merchandise to individual consumers are recognized at the point of sale and are recorded within retail sales in the accompanying condensed consolidated statements of earnings. Generally, the transfer of control occurs near or at the point of sale for retail sales. Aaron's Business retail sales are not subject to a returns policy.
BrandsMart