Rent-A-Center: Furniture - Appliances - Computers - Electronics
NASDAQ GS: RCII
$12.77(+0.19)
Jul 21, 2017 4:00 p.m.(20 minute delay)
Press Release

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Rent-A-Center, Inc. Reports First Quarter 2008 Results
    Same Store Sales Increase 2.8%

    Reported Diluted Earnings per Share of $0.54, Exceeds Guidance

            Cash Flow from Operations Exceeds $128 million

PLANO, Texas--(BUSINESS WIRE)--April 28, 2008--Rent-A-Center, Inc. (the "Company") (NASDAQ/NGS:RCII), the nation's largest rent-to-own operator, today announced revenues and earnings for the quarter ended March 31, 2008.

First Quarter 2008 Results

The Company reported total revenues for the quarter ended March 31, 2008 of $756.6 million, an increase of $1.3 million from the reported total revenues of $755.3 million for the same period in the prior year. This increase in revenues was primarily driven by a 2.8% increase in same store sales, offset by a reduction in revenue as a result of approximately 315 fewer stores over the past year primarily due to the previously announced restructuring plan.

Reported net earnings for the quarter ended March 31, 2008 were $36.4 million, as compared to the reported net earnings of $15.1 million for the same period in the prior year. Reported net earnings for the quarter ended March 31, 2008 were reduced by a $2.9 million pre-tax restructuring expense related to the previously announced restructuring plan, as discussed below. Reported net earnings for the quarter ended March 31, 2007 were reduced by a $51.3 million pre-tax litigation charge related to the Hilda Perez matter, as discussed below.

Reported net earnings per diluted share for the quarter ended March 31, 2008 were $0.54, as compared to the reported net earnings per diluted share of $0.21 for the same period in the prior year. Reported net earnings per diluted share for the quarter ended March 31, 2008 were reduced by $0.03 per share as a result of the restructuring expense related to the previously announced restructuring plan, as discussed below. Reported net earnings per diluted share for the quarter ended March 31, 2007 were reduced by approximately $0.46 per share as a result of the litigation expense related to the Hilda Perez matter, as discussed below.

"I am pleased with our results for the first quarter, where we exceeded our guidance for total revenue, same store sales and net earnings per diluted share," commented Mark E. Speese, the Company's Chairman and Chief Executive Officer. "These positive results primarily benefited from higher merchandise sales and an earlier than planned benefit from our restructuring plan," Speese continued. "While we are mindful of the challenging macro-economic environment, we will continue to stay the course and focus on those areas within our control including the customer's in-store experience, collections, and managing our resources wisely," Speese concluded.

Through the three month period ended March 31, 2008, the Company generated cash flow from operations of approximately $128.3 million, while ending the quarter with approximately $78.6 million of cash on hand. In addition, during the three month period ended March 31, 2008, the Company reduced its outstanding indebtedness by approximately $134.1 million. Since March 31, 2008, the Company has further reduced its outstanding indebtedness by approximately $11.7 million.

Operations Highlights

During the first quarter of 2008, the Company opened two new store locations, acquired accounts from six locations, consolidated 10 stores into existing locations and sold seven stores, for a net reduction of 15 stores and an ending balance as of March 31, 2008 of 3,066 company-owned stores. During the first quarter of 2008, the Company added financial services to seven existing rent-to-own store locations, consolidated two stores with financial services into existing locations, and closed one location, ending the quarter with a total of 280 stores providing these services.

Since March 31, 2008, the Company has acquired accounts from six locations, consolidated one store into an existing location and sold five stores. The Company has added financial services to 12 existing rent-to-own store locations, acquired accounts from one location, and closed one location since March 31, 2008.

2008 Significant Item

Restructuring Plan Expenses. During the first quarter of 2008, the Company recorded a pre-tax restructuring expense of approximately $2.9 million in connection with the restructuring plan previously announced on December 3, 2007. This restructuring expense reduced net earnings per diluted share in the first quarter of 2008 by approximately $0.03. As previously reported, the Company recorded a pre-tax restructuring expense of approximately $38.7 million related to this restructuring plan during the fourth quarter of 2007. The costs with respect to these store closings relate primarily to lease terminations, fixed asset disposals and other miscellaneous items.

2007 Significant Item

Hilda Perez. On November 5, 2007, the Company paid an aggregate of $109.3 million, including plaintiffs' attorneys' fees and administration costs, pursuant to the court approved settlement of the Hilda Perez v. Rent-A-Center, Inc. matter pending in New Jersey. Under the terms of the settlement, the Company is entitled to 50% of any undistributed monies in the settlement. As previously reported, the Company recorded a pre-tax expense of $58.0 million in connection with the Perez matter during the fourth quarter of 2006, and an additional pre-tax charge of $51.3 million in the first quarter of 2007, to account for the aforementioned costs. The litigation expense with respect to the Perez settlement reduced net earnings per diluted share by approximately $0.46 in the first quarter of 2007.

Rent-A-Center, Inc. will host a conference call to discuss the first quarter results, guidance and other operational matters on Tuesday morning, April 29, 2008, at 10:45 a.m. EDT. For a live webcast of the call, visit http://investor.rentacenter.com. Certain financial and other statistical information that will be discussed during the conference call will also be provided on the same website.

Rent-A-Center, Inc., headquartered in Plano, Texas, currently operates approximately 3,060 company-owned stores nationwide and in Canada and Puerto Rico. The stores generally offer high-quality, durable goods such as major consumer electronics, appliances, computers and furniture and accessories under flexible rental purchase agreements that generally allow the customer to obtain ownership of the merchandise at the conclusion of an agreed upon rental period. ColorTyme, Inc., a wholly owned subsidiary of the Company, is a national franchiser of approximately 215 rent-to-own stores operating under the trade name of "ColorTyme."

The following statements are based on current expectations. These statements are forward-looking and actual results may differ materially. These statements do not include the potential impact of any repurchases of common stock the Company may make, reduction in outstanding indebtedness, any restructuring expenses related to the restructuring plan announced on December 3, 2007, or the potential impact of acquisitions or dispositions that may be completed after April 28, 2008.

    SECOND QUARTER 2008 GUIDANCE:

    Revenues

    --  The Company expects total revenues to be in the range of $701
        million to $716 million.

    --  Store rental and fee revenues are expected to be between $625
        million and $637 million.

    --  Total store revenues are expected to be in the range of $693
        million to $708 million.

    --  Same store sales are expected to be flat.

    --  The Company expects to open approximately 5 new rent-to-own
        store locations.

    --  The Company expects to add financial services to approximately
        25 rent-to-own store locations.

    Expenses

    --  The Company expects cost of rental and fees to be between
        22.6% and 23.0% of store rental and fee revenue and cost of
        merchandise sold to be between 74% and 78% of store
        merchandise sales.

    --  Store salaries and other expenses are expected to be in the
        range of 57.1% to 58.6% of total store revenue.

    --  General and administrative expenses are expected to be between
        4.3% and 4.5% of total revenue.

    --  Net interest expense is expected to be approximately $16
        million, depreciation of property assets is expected to be
        approximately $18 million and amortization of intangibles is
        expected to be approximately $4 million.

    --  The effective tax rate is expected to be in the range of 37.5%
        to 38.0% of pre-tax income.

    --  Diluted earnings per share are estimated to be in the range of
        $0.53 to $0.59.

    --  Diluted shares outstanding are estimated to be between 66.8
        million and 67.8 million.

    FISCAL 2008 GUIDANCE:

    Revenues

    --  The Company expects total revenues to be in the range of
        $2.868 billion and $2.908 billion.

    --  Store rental and fee revenues are expected to be between
        $2.515 billion and $2.555 billion.

    --  Total store revenues are expected to be in the range of $2.830
        billion and $2.870 billion.

    --  Same store sales are expected to be in the flat to 2% range.

    --  The Company expects to open approximately 30 - 40 new
        rent-to-own store locations.

    --  The Company expects to add financial services to approximately
        150 rent-to-own store locations.

    Expenses

    --  The Company expects cost of rental and fees to be between
        22.6% and 23.0% of store rental and fee revenue and cost of
        merchandise sold to be between 74% and 78% of store
        merchandise sales.

    --  Store salaries and other expenses are expected to be in the
        range of 56.9% to 58.4% of total store revenue.

    --  General and administrative expenses are expected to be between
        4.3% and 4.5% of total revenue.

    --  Net interest expense is expected to be approximately $65
        million, depreciation of property assets is expected to be
        between $70 million and $75 million and amortization of
        intangibles is expected to be approximately $14 million.

    --  The effective tax rate is expected to be approximately 37% of
        pre-tax income.

    --  Diluted earnings per share are estimated to be in the range of
        $2.17 to $2.32.

    --  Diluted shares outstanding are estimated to be between 66.8
        million and 67.8 million.

This press release and the guidance above contain forward-looking statements that involve risks and uncertainties. Such forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "could," "estimate," "should," "anticipate," or "believe," or the negative thereof or variations thereon or similar terminology. Although the Company believes that the expectations reflected in such forward-looking statements will prove to be correct, the Company can give no assurance that such expectations will prove to have been correct. The actual future performance of the Company could differ materially from such statements. Factors that could cause or contribute to such differences include, but are not limited to: uncertainties regarding the ability to open new rent-to-own stores; the Company's ability to acquire additional rent-to-own stores or customer accounts on favorable terms; the Company's ability to successfully add financial services locations within its existing rent-to-own stores; the Company's ability to identify and successfully enter new lines of business offering products and services that appeal to its customer demographic, including its financial services products; the Company's ability to enhance the performance of acquired stores; the Company's ability to control costs; the Company's ability to identify and successfully market products and services that appeal to its customer demographic; the Company's ability to enter into new and collect on its rental purchase agreements; the Company's ability to enter into new and collect on its short term loans; the passage of legislation adversely affecting the rent-to-own or financial services industries; interest rates; economic pressures, such as high fuel and utility costs, affecting the disposable income available to the Company's targeted consumers; changes in the Company's stock price and the number of shares of common stock that it may or may not repurchase; changes in estimates relating to self-insurance liabilities and income tax and litigation reserves; changes in the Company's effective tax rate; the Company's ability to maintain an effective system of internal controls; changes in the number of share-based compensation grants, methods used to value future share-based payments and changes in estimated forfeiture rates with respect to share-based compensation; the resolution of the Company's litigation; one or more parties filing an objection to the Shafer/Johnson settlement; a specified percentage of class members timely and validly opt out of the Shafer/Johnson settlement; the court hearing the Shafer/Johnson matter could refuse to approve the settlement or could require changes to the settlement that are unacceptable to the Company or the plaintiffs; and the other risks detailed from time to time in the Company's SEC reports, including but not limited to, its annual report on Form 10-K for the year ended December 31, 2007. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Except as required by law, the Company is not obligated to publicly release any revisions to these forward-looking statements to reflect the events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.


                 Rent-A-Center, Inc. and Subsidiaries
                   STATEMENT OF EARNINGS HIGHLIGHTS


(In Thousands of Dollars, except
 per share data)                       Three Months Ended March 31,
                                    ----------------------------------
                                         2008           2008
                                    ----------------------------------
                                        Before         After
                                    Restructuring  Restructuring
                                       Expense        Expense
                                      (Non-GAAP)       (GAAP)
                                    ----------------------------------

Total Revenue                             $756,636       $756,636
Operating Profit                            80,440         77,540 (1)
Net Earnings                                38,161         36,358 (1)
Diluted Earnings per Common Share         $   0.57       $   0.54 (1)
Adjusted EBITDA                           $103,558       $103,558

Reconciliation to Adjusted EBITDA:

Earnings before income taxes                61,377         58,477
Add back:
   Litigation expense                           --             --
   Restructuring expense                        --          2,900
   Interest expense, net                    19,063         19,063
   Depreciation of property assets          18,188         18,188
   Amortization of intangibles               4,930          4,930
                                    ----------------------------------

Adjusted EBITDA                           $103,558       $103,558


(In Thousands of Dollars, except per    Three Months Ended March
 share data)                                        31,
                                        ------------------------------
                                             2007         2007
                                        ------------------------------
                                            Before        After
                                          Litigation   Litigation
                                            Expense      Expense
                                          (Non-GAAP)     (GAAP)
                                        ------------------------------

Total Revenue                              $  755,299   $  755,299
Operating Profit                               97,405       46,155 (2)
Net Earnings                                   47,912       15,103 (2)
Diluted Earnings per Common Share          $     0.67   $     0.21 (2)
Adjusted EBITDA                            $  118,370   $  118,370

Reconciliation to Adjusted EBITDA:

Earnings before income taxes                   75,070       23,820
Add back:
   Litigation expense                              --       51,250
   Restructuring expense                           --           --
   Interest expense, net                       22,335       22,335
   Depreciation of property assets             16,927       16,927
   Amortization of intangibles                  4,038        4,038
                                        ---------------------------

Adjusted EBITDA                            $  118,370   $  118,370

(1) Includes the effects of a $2.9 million pre-tax restructuring expense in the first quarter of 2008 as part of the December 3, 2007 announced restructuring plan. The restructuring expense reduced diluted earnings per share by approximately $0.03 in the first quarter of 2008.

(2) Includes the effects of a $51.3 million pre-tax litigation expense in the first quarter of 2007 associated with the settlement in the Perez case. The expense reduced diluted earnings per share by approximately $0.46 in the first quarter of 2007.


                  SELECTED BALANCE SHEET HIGHLIGHTS

(in Thousands of Dollars)                March 31, 2008 March 31, 2007
                                         -----------------------------

      Cash and cash equivalents             $   78,628      $   80,146
      Prepaid expenses and other assets         50,455          55,065
      Rental merchandise, net
           On rent                             725,204         840,627
           Held for rent                       191,121         229,256
      Total Assets                           2,569,997       2,775,371

      Senior debt                              825,238         916,191
      Subordinated notes payable               300,000         300,000
      Total Liabilities                      1,585,342       1,812,459
      Stockholders' Equity                     984,655         962,912

                 Rent-A-Center, Inc. and Subsidiaries

                 CONSOLIDATED STATEMENTS OF EARNINGS

(In Thousands of Dollars, except per
 share data)                              Three Months Ended March 31,
                                          ----------------------------
                                              2008            2007
                                          -------------   ------------
                                                   Unaudited

Store Revenue
   Rentals and Fees                        $   640,686     $  660,113
   Merchandise Sales                            85,339         68,337
   Installment Sales                             9,885          8,410
   Other                                         9,619          7,176
                                          -------------   ------------

                                               745,529        744,036

Franchise Revenue
   Franchisee Merchandise Sales                  9,767          9,925
   Royalty Income and Fees                       1,340          1,338
                                          -------------   ------------

       Total Revenue                           756,636        755,299

Operating Expenses
   Direct Store Expenses
       Cost of Rentals and Fees                146,162        143,069
       Cost of Merchandise Sold                 63,325         46,030
       Cost of Installment Sales                 4,020          3,545
       Salaries and Other Expenses             417,414        420,727
       Franchise Cost of Merchandise Sold        9,396          9,487
                                          -------------   ------------

                                               640,317        622,858

   General and Administrative Expenses          30,949         30,998
   Amortization of Intangibles                   4,930          4,038
   Litigation Expense                                -         51,250
   Restructuring Expense                         2,900              -
                                          -------------   ------------

       Total Operating Expenses                679,096        709,144
                                          -------------   ------------

       Operating Profit                         77,540         46,155

Interest Expense                                20,927         24,096
Interest Income                                 (1,864)        (1,761)
                                          -------------   ------------

       Earnings before Income Taxes             58,477         23,820

Income Tax Expense                              22,119          8,717
                                          -------------   ------------

       NET EARNINGS                             36,358         15,103

BASIC WEIGHTED AVERAGE SHARES                   66,710         70,286
                                          =============   ============

BASIC EARNINGS PER COMMON SHARE            $      0.55     $     0.21
                                          =============   ============

DILUTED WEIGHTED AVERAGE SHARES                 67,175         71,338
                                          =============   ============

DILUTED EARNINGS PER COMMON SHARE          $      0.54     $     0.21
                                          =============   ============

    CONTACT: Rent-A-Center, Inc.
             David E. Carpenter, 972-801-1214
             Vice President of Investor Relations
             david.carpenter@rentacenter.com

    SOURCE: Rent-A-Center, Inc.


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