Rent-A-Center: Furniture - Appliances - Computers - Electronics
NASDAQ GS: RCII
$8.230.00)
Feb 21, 2017 4:00 p.m.(20 minute delay)
Press Release

Printer Friendly Version View printer-friendly version
<< Back
Rent-A-Center, Inc. Reports Second Quarter 2008 Results
Same Store Sales Increase 0.9% Diluted Earnings per Share of $0.56 Cash Flow from Operations Exceeds $213 Million Year-To-Date
PLANO, Texas, Jul 28, 2008 (BUSINESS WIRE) -- 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 June 30, 2008.

Second Quarter 2008 Results

Total revenues for the quarter ended June 30, 2008 were $719.0 million, a decrease of $5.2 million from the total revenues of $724.2 million for the same period in the prior year. This decrease in revenues was primarily the result of approximately 325 fewer stores over the past year principally due to the previously announced restructuring plan, offset by a 0.9% increase in same store sales.

Net earnings for the quarter ended June 30, 2008 were $37.7 million, as compared to the net earnings of $41.3 million for the same period in the prior year. Net earnings per diluted share for the quarter ended June 30, 2008 were $0.56, as compared to the net earnings per diluted share of $0.58 for the same period in the prior year.

"Our operating team executed well in the second quarter in spite of the difficult economic conditions," commented Mark E. Speese, the Company's Chairman and Chief Executive Officer. "We exceeded our guidance for same store sales and were within our guidance for store rental and fee revenue and diluted earnings per share," Speese continued. "We continue to be cautiously optimistic about the near term. We believe that we are well positioned with our marketing and advertising plans in place and should also benefit from customers attracted to our transaction due to the difficult credit environment. And we will continue to use our account-management skills to maintain a focus on our collections," Speese concluded.

Six Months Ended June 30, 2008 Results

Total revenues for the six months ended June 30, 2008 were $1.476 billion, a decrease of $3.0 million from the total revenues of $1.479 billion for the same period in the prior year. This decrease in revenues was primarily the result of approximately 325 fewer stores over the past year principally due to the previously announced restructuring plan, offset by a 2.2% increase in same store sales.

Net earnings for the six months ended June 30, 2008 were $74.1 million, as compared to the net earnings of $56.4 million for the same period in the prior year. Net earnings for the six months ended June 30, 2008 were reduced by a $2.9 million pre-tax restructuring expense related to the previously announced restructuring plan, as discussed below. Net earnings for the six months ended June 30, 2007 were reduced by a $51.3 million pre-tax litigation charge related to the Hilda Perez matter, as discussed below.

Net earnings per diluted share for the six months ended June 30, 2008 were $1.10, as compared to the net earnings per diluted share of $0.79 for the same period in the prior year. Net earnings per diluted share for the six months ended June 30, 2008 were reduced by approximately $0.03 per share as a result of the restructuring expense related to the previously announced restructuring plan, as discussed below. Net earnings per diluted share for the six months ended June 30, 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.

"As a result of our strong operating results, we generated cash flow from operations of approximately $213.1 million for the six month period through June 30, 2008, while ending the quarter with approximately $75.1 million of cash on hand," commented Robert D. Davis, the Company's Executive Vice President and Chief Financial Officer. "With our significant cash flow year-to-date, we were able to strengthen our balance sheet by reducing our outstanding indebtedness by approximately $200.9 million," Davis continued. "Since June 30, 2008, the Company has further reduced its outstanding indebtedness by $24.0 million," Davis concluded.

During the six month period ended June 30, 2008, the Company also repurchased 150,000 shares of its common stock for $3.1 million in cash under its common stock repurchase program. To date, the Company has repurchased a total of 18,610,950 shares and has utilized approximately $447.4 million of the $500.0 million authorized by its Board of Directors since the inception of the plan.

Operations Highlights

During the second quarter of 2008, the Company opened one new store location, acquired one store as well as accounts from 10 additional locations, consolidated nine stores into existing locations and sold six stores, for a net reduction of 13 stores and an ending balance as of June 30, 2008 of 3,053 company-owned stores. During the second quarter of 2008, the Company added financial services to 26 existing rent-to-own store locations, acquired accounts from one location, and closed two locations, for a net addition of 24 store locations and an ending balance as of June 30, 2008 of 304 store locations providing financial services.

Through the six month period ended June 30, 2008, the Company opened three new store locations, acquired one store as well as accounts from 16 additional locations, consolidated 19 stores into existing locations and sold 13 stores, for a net reduction of 28 stores since December 31, 2007. Through the six month period ending June 30, 2008, the Company added financial services to 33 existing rent-to-own store locations, acquired accounts from one location, consolidated two stores with financial services into existing locations, and closed three locations, for a net addition of 28 store locations since December 31, 2007.

Since June 30, 2008, the Company has opened one new store location and acquired accounts from one location. The Company has added financial services to 19 existing rent-to-own store locations since June 30, 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 by approximately $0.03 in the first quarter of 2008 and for the six month period ended June 30, 2008. 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 the restructuring plan 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. 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 and for the six month period ended June 30, 2007.

Rent-A-Center, Inc. will host a conference call to discuss the second quarter results, guidance and other operational matters on Tuesday morning, July 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 3,054 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 228 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 July 28, 2008.

THIRD QUARTER 2008 GUIDANCE:

Revenues

-- The Company expects total revenues to be in the range of $700 million to $715 million.

-- Store rental and fee revenues are expected to be between $619 million and $631 million.

-- Total store revenues are expected to be in the range of $692 million to $707 million.

-- Same store sales are expected to be in the 3% to 4% range.

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

-- The Company expects to add financial services to approximately 60 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 75% and 79% of store merchandise sales.

-- Store salaries and other expenses are expected to be in the range of 58.4% to 59.9% 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 $14 million, depreciation of property assets is expected to be approximately $18 million and amortization of intangibles is expected to be approximately $3.5 million.

-- The effective tax rate is expected to be in the range of 36.0% to 36.5% of pre-tax income.

-- Diluted earnings per share are estimated to be in the range of $0.45 to $0.50.

-- Diluted shares outstanding are estimated to be between 67.0 million and 68.0 million.

FISCAL 2008 GUIDANCE:

Revenues

-- The Company expects total revenues to be in the range of $2.890 billion and $2.920 billion.

-- Store rental and fee revenues are expected to be between $2.520 billion and $2.550 billion.

-- Total store revenues are expected to be in the range of $2.851 billion and $2.881 billion.

-- Same store sales are expected to be in the 1% to 3% range.

-- The Company expects to open approximately 20 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 75% and 79% 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 $62 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 $2.20 to $2.30.

-- Diluted shares outstanding are estimated to be between 67.0 million and 68.0 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; 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, and its quarterly report for the quarter ended March 31, 2008. 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

                                                  Three Months Ended
(In Thousands of Dollars, except per share data)        June 30,
                                                 ---------------------
                                                   2008         2007
                                                 ------------ --------

Total Revenue                                    $719,031     $724,158
Operating Profit                                   74,434 (1)   87,024
Net Earnings                                       37,741       41,251
Diluted Earnings per Common Share                $   0.56     $   0.58
Adjusted EBITDA                                  $ 96,271     $108,608

       Reconciliation to Adjusted EBITDA:

Earnings before Income Taxes                     $ 59,984     $ 65,066
Add back:
  Restructuring Expense                               (15)          --
  Interest Expense, net                            14,450       21,958
  Depreciation of Property Assets                  18,190       17,650
  Amortization of Intangibles                       3,662        3,934
                                                 ------------ --------

Adjusted EBITDA                                  $ 96,271     $108,608

(In Thousands                 Six Months Ended June 30,
 of Dollars,
 except per
 share data)
               -------------------------------------------------------
                     2008         2008           2007       2007
               -------------- -------------- ----------- -------------
                  Before          After        Before       After
                Restructuring  Restructuring  Litigation  Litigation
                Expense (Non-    Expense       Expense      Expense
                    GAAP)         (GAAP)      (Non-GAAP)     (GAAP)
               -------------- -------------- ----------- -------------

Total Revenue   $   1,475,667  $1,475,667    $ 1,479,457 $1,479,457
Operating
 Profit               154,859     151,974(2)     184,429    133,179(3)
Net Earnings           75,902      74,099(2)      88,545     56,354(3)
Diluted
 Earnings per
 Common Share   $        1.13  $     1.10(2) $      1.25 $     0.79(3)
Adjusted EBITDA $     199,829  $  199,829    $   226,978 $  226,978

Reconciliation
 to Adjusted
 EBITDA:

Earnings before
 Income Taxes   $     121,346  $  118,461    $   140,136 $   88,886
Add back:
  Litigation
   Expense                 --          --             --     51,250
  Restructuring
   Expense                 --       2,885             --         --
  Interest
   Expense, net        33,513      33,513         44,293     44,293
  Depreciation
   of Property
   Assets              36,378      36,378         34,577     34,577
  Amortization
   of
   Intangibles          8,592       8,592          7,972      7,972
               -------------- -------------- ----------- ----------

Adjusted EBITDA $     199,829  $  199,829    $   226,978 $  226,978

(1) Includes a $0.015 million pre-tax restructuring credit in the second quarter of 2008 related to the December 3, 2007 announced restructuring plan. The restructuring credit had no impact on the diluted earnings per share in the second quarter of 2008.

(2) 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 for the six months ended June 30, 2008.

(3) 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 litigation expense reduced diluted earnings per share by approximately $0.46 for the six months ended June 30, 2007.


                  SELECTED BALANCE SHEET HIGHLIGHTS

Selected Balance Sheet Data: (in
 Thousands of Dollars)                   June 30, 2008  June 30, 2007
                                         -------------- --------------

  Cash and Cash Equivalents                $     75,100 $       79,020
  Prepaid Expenses and Other Assets              54,411         47,300
  Rental Merchandise, net
    On Rent                                     676,607        798,285
    Held for Rent                               204,472        237,876
  Total Assets                                2,538,780      2,726,243

  Senior Debt                                   788,011        932,974
  Subordinated Notes Payable                    270,375        300,000
  Total Liabilities                           1,517,374      1,753,831
  Stockholders' Equity                        1,021,406        972,412


                 Rent-A-Center, Inc. and Subsidiaries
                 CONSOLIDATED STATEMENTS OF EARNINGS

                                                   Three Months Ended
(In Thousands of Dollars, except per share data)         June 30,
                                                   -------------------
                                                     2008      2007
                                                   --------- ---------
                                                        Unaudited

Store Revenue
  Rentals and Fees                                 $634,618  $662,096
  Merchandise Sales                                  55,703    39,584
  Installment Sales                                   9,246     7,646
  Other                                              10,589     6,570
                                                   --------- ---------

                                                    710,156   715,896

Franchise Revenue
  Franchisee Merchandise Sales                        7,650     6,955
  Royalty Income and Fees                             1,225     1,307
                                                   --------- ---------

    Total Revenue                                   719,031   724,158

Operating Expenses
  Direct Store Expenses
    Cost of Rentals and Fees                        145,511   145,927
    Cost of Merchandise Sold                         45,167    29,948
    Cost of Installment Sales                         3,790     3,129
    Salaries and Other Expenses                     406,572   417,114
    Franchise Cost of Merchandise Sold                7,234     6,663
                                                   --------- ---------

                                                    608,274   602,781

  General and Administrative Expenses                32,676    30,419
  Amortization of Intangibles                         3,662     3,934
  Restructuring Expense                                 (15)        -
                                                   --------- ---------

    Total Operating Expenses                        644,597   637,134
                                                   --------- ---------

    Operating Profit                                 74,434    87,024

Interest Expense                                     16,739    23,431
Interest Income                                      (2,289)   (1,473)
                                                   --------- ---------

    Earnings before Income Taxes                     59,984    65,066

Income Tax Expense                                   22,243    23,815
                                                   --------- ---------

    NET EARNINGS                                     37,741    41,251

BASIC WEIGHTED AVERAGE SHARES                        66,684    69,822
                                                   ========= =========

BASIC EARNINGS PER COMMON SHARE                    $   0.57  $   0.59
                                                   ========= =========

DILUTED WEIGHTED AVERAGE SHARES                      67,360    70,764
                                                   ========= =========

DILUTED EARNINGS PER COMMON SHARE                  $   0.56  $   0.58
                                                   ========= =========


                 Rent-A-Center, Inc. and Subsidiaries
                 CONSOLIDATED STATEMENTS OF EARNINGS

(In Thousands of Dollars, except per share
 data)                                      Six Months Ended June 30,
                                            --------------------------
                                                2008         2007
                                            ------------ -------------
                                                    Unaudited

Store Revenue
  Rentals and Fees                          $ 1,275,304  $  1,322,209
  Merchandise Sales                             141,042       107,921
  Installment Sales                              19,131        16,056
  Other                                          20,208        13,746
                                            ------------ -------------

                                              1,455,685     1,459,932

Franchise Revenue
  Franchisee Merchandise Sales                   17,417        16,880
  Royalty Income and Fees                         2,565         2,645
                                            ------------ -------------

    Total Revenue                             1,475,667     1,479,457

Operating Expenses
  Direct Store Expenses
    Cost of Rentals and Fees                    291,673       288,996
    Cost of Merchandise Sold                    108,492        75,978
    Cost of Installment Sales                     7,810         6,674
    Salaries and Other Expenses                 823,986       837,841
    Franchise Cost of Merchandise Sold           16,630        16,150
                                            ------------ -------------

                                              1,248,591     1,225,639

  General and Administrative Expenses            63,625        61,417
  Amortization of Intangibles                     8,592         7,972
  Litigation Expense                                  -        51,250
  Restructuring Expense                           2,885             -
                                            ------------ -------------

    Total Operating Expenses                  1,323,693     1,346,278
                                            ------------ -------------

    Operating Profit                            151,974       133,179

Interest Expense                                 37,666        47,527
Interest Income                                  (4,153)       (3,234)
                                            ------------ -------------

    Earnings before Income Taxes                118,461        88,886

Income Tax Expense                               44,362        32,532
                                            ------------ -------------

    NET EARNINGS                                 74,099        56,354

BASIC WEIGHTED AVERAGE SHARES                    66,697        70,054
                                            ============ =============

BASIC EARNINGS PER COMMON SHARE             $      1.11  $       0.80
                                            ============ =============

DILUTED WEIGHTED AVERAGE SHARES                  67,267        71,051
                                            ============ =============

DILUTED EARNINGS PER COMMON SHARE           $      1.10  $       0.79
                                            ============ =============

SOURCE: Rent-A-Center, Inc.

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


Data provided by Nasdaq. Minimum 15 minutes delayed.
© 2007 Rent-A-Center® All Rights Reserved.