Rent-A-Center: Furniture - Appliances - Computers - Electronics
NASDAQ GS: RCII
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Sep 20, 2017 4:00 p.m.(20 minute delay)
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Rent-A-Center, Inc. Reports Second Quarter 2012 Results

Total Revenues Increased 7.4%

Same Store Sales Increased 2.8%

Diluted Earnings per Share of $0.74

Repurchased Approximately 489,000 Shares of Common Stock

PLANO, Texas--(BUSINESS WIRE)--Jul. 23, 2012-- 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, 2012.

Second Quarter 2012 Results

Total revenues for the quarter ended June 30, 2012, were $749.7 million, an increase of $51.4 million from total revenues of $698.3 million for the same period in the prior year. This 7.4% increase in total revenues was primarily due to growth in the RAC Acceptance segment. Same store sales for the quarter ended June 30, 2012, increased 2.8%.

Net earnings and net earnings per diluted share for the three months ended June 30, 2012, were $44.2 million and $0.74, respectively, as compared to $39.9 million and $0.63, respectively, for the same period in the prior year. Net earnings and net earnings per diluted share for the three months ended June 30, 2011, were reduced by $4.9 million, and approximately $0.05 per share, respectively, due to a pre-tax restructuring charge related to the acquisition of The Rental Store, Inc., as discussed below.

Net earnings per diluted share for the three months ended June 30, 2012, were $0.74, as compared to adjusted net earnings per diluted share of $0.68, when excluding the pre-tax restructuring charge above, for the three months ended June 30, 2011, an increase of 8.8%. These results include dilution related to the Company’s international growth initiatives of approximately $0.08 per share for the three months ended June 30, 2012, and $0.03 per share for the same period in the prior year.

“We are generally pleased with our results in the quarter, as total revenues increased over 7% and earnings per share increased close to 9%,” said Mark E. Speese, the Company's Chairman and Chief Executive Officer. “The RAC Acceptance segment performed exceptionally well nearly doubling revenue from a year ago to $77 million, with a gross profit margin of 58% and an operating profit of $7 million,” Speese continued. “Our Core U.S. segment experienced a 1.6% growth in total revenue in the quarter keeping us on track to achieve our 2012 total revenue guidance of 7% to 10% growth and our 2012 diluted earnings per share guidance of $3.00 to $3.20,” Speese concluded.

Six Months Ended June 30, 2012 Results

Total revenues for the six months ended June 30, 2012, were $1.585 billion, an increase of $145.0 million from total revenues of $1.440 billion for the same period in the prior year. This 10.1% increase in total revenues was primarily due to growth in the RAC Acceptance segment as well as growth in the Core U.S. segment. Same store sales for the six months ended June 30, 2012, increased 4.5%.

Net earnings and net earnings per diluted share for the six months ended June 30, 2012, were $96.1 million and $1.61, respectively, as compared to $84.1 million and $1.32, respectively, for the same period in the prior year.

Net earnings and net earnings per diluted share for the six months ended June 30, 2011, were impacted by the following significant items, as discussed below:

  • A $4.9 million pre-tax restructuring charge, or approximately $0.05 per share, related to the acquisition of The Rental Store, Inc.;
  • A $7.3 million pre-tax impairment charge, or approximately $0.07 per share, related to the discontinuation of the financial services business; and
  • A $2.8 million pre-tax litigation expense, or approximately $0.03 per share, related to the settlement of wage and hour claims in California.

Collectively, these items reduced net earnings per diluted share by approximately $0.15 for the six months ended June 30, 2011.

Net earnings per diluted share for the six months ended June 30, 2012, were $1.61, as compared to adjusted net earnings per diluted share for the six months ended June 30, 2011, of $1.47 when excluding the items above, an increase of 9.5%.

Through the six month period ended June 30, 2012, the Company generated cash flow from operations of approximately $161.1 million, while ending the quarter with approximately $101.1 million of cash on hand. During the six month period ended June 30, 2012, the Company repurchased 488,731 shares of its common stock for approximately $16.5 million in cash under its common stock repurchase program. To date, the Company has repurchased a total of 29,811,484 shares and has utilized approximately $732.0 million of the $800.0 million authorized by its Board of Directors since the inception of the plan. Also, reflecting continued confidence in its strong cash flows by returning cash to stockholders, the Company will pay its ninth consecutive quarterly cash dividend on July 25, 2012.

2012 Guidance

The Company began presenting segmented financial information commencing with its Annual Report on Form 10-K for the year ended December 31, 2011. Accordingly, quarterly segmented operating results were initiated with the quarter ended March 31, 2012. The Company is committed to high levels of disclosure and transparency with respect to its operating segments.

In addition, the Company made certain changes to its guidance practices. Beginning with the fourth quarter 2011 earnings press release, the Company began providing annual guidance with quarterly updates on the metrics below. The Company will no longer provide quarterly earnings per share guidance; however, the Company has made available on its web site (investor.rentacenter.com) a range of the percentage contribution to full year diluted earnings per share by quarter based on historical results since 2009. In future years, the Company will provide its initial annual guidance for the following fiscal year with the fourth quarter earnings press release. We believe these changes in guidance practice will allow management to focus on the Company’s long-term performance and the execution of our strategic plan as communicated in November 2010.

2012 Guidance

  • 7% to 10% total revenue growth.
    • Low single digit growth in the Core U.S.
    • Over $300 million contribution from RAC Acceptance.
  • 2.5% to 4.5% same store sales growth.
    • Split evenly between Core U.S. and the impact of RAC Acceptance.
  • 100 basis points gross profit margin decrease.
    • Primarily due to the impact of RAC Acceptance.
  • 50 basis points operating profit margin decrease.
  • Diluted earnings per share in the range of $3.00 to $3.20, including approximately $0.25 to $0.30 per share dilution related to our international growth initiatives, which now includes corporate allocations consistent with our segment reporting.
  • Capital expenditures of approximately $105 million.
  • The Company expects to open approximately 50 domestic rent-to-own store locations.
  • The Company expects to open approximately 200 domestic RAC Acceptance kiosks.
  • The Company expects to open approximately 60 rent-to-own store locations in Mexico.
  • The Company expects to open approximately 10 rent-to-own store locations in Canada.
  • The 2012 guidance does not include the potential impact of any repurchases of common stock the Company may make, changes in future dividends, material changes in outstanding indebtedness, or the potential impact of acquisitions, dispositions or store closures that may be completed or occur after July 23, 2012.

2011 Significant Items

Restructuring Charge. As previously reported, the Company recorded a $4.9 million pre-tax restructuring charge during the second quarter of 2011 related to post-acquisition lease terminations in connection with the December 2010 acquisition of The Rental Store, Inc. This pre-tax restructuring charge of $4.9 million reduced net earnings per diluted share by approximately $0.05 in both the three month and six month periods ended June 30, 2011.

Financial Services Charge. As previously reported, the Company recorded a pre-tax impairment charge of $7.3 million during the first quarter of 2011 related primarily to loan write-downs, fixed asset disposals (store reconstruction) and other miscellaneous items in connection with the discontinuation of the financial services business. For the six months ended June 30, 2011, this pre-tax impairment charge of $7.3 million reduced net earnings per diluted share by approximately $0.07.

Settlement of Wage & Hour Claims in California. As previously reported, the Company recorded a $2.8 million pre-tax litigation expense during the first quarter of 2011 in connection with the settlement of certain putative class actions pending in California alleging various claims, including violations of California wage and hour laws. For the six months ended June 30, 2011, this pre-tax litigation expense of $2.8 million reduced net earnings per diluted share by approximately $0.03.

Rent-A-Center, Inc. will host a conference call to discuss the second quarter results, guidance and other operational matters on Tuesday morning, July 24, 2012, at 10:45 a.m. ET. 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, is the largest rent-to-own operator in North America, focused on improving the quality of life for its customers by providing them the opportunity to obtain ownership of high-quality, durable goods such as consumer electronics, appliances, computers, furniture and accessories, under flexible rental purchase agreements with no long-term obligation. The Company owns and operates approximately 3,070 stores in the United States, Canada, Mexico and Puerto Rico, and approximately 810 RAC Acceptance kiosk locations in the United States and Puerto Rico. ColorTyme, Inc., a wholly owned subsidiary of the Company, is a national franchiser of approximately 220 rent-to-own stores operating under the trade name of "ColorTyme." For additional information about the Company, please visit www.rentacenter.com.

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 locations; the Company’s ability to acquire additional stores or customer accounts on favorable terms; the Company’s ability to control costs and increase profitability; the Company’s ability to enhance the performance of acquired stores; the Company’s ability to retain the revenue associated with acquired customer accounts; 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 or lease purchase agreements; the passage of legislation adversely affecting the rent-to-own industry; the Company’s failure to comply with applicable statutes or regulations governing its transactions; changes in interest rates; changes in the unemployment rate; economic pressures, such as high fuel costs, affecting the disposable income available to the Company’s current and potential customers; economic conditions affecting consumer spending; changes in the Company’s stock price, the number of shares of common stock that it may or may not repurchase, and future dividends, if any; changes in estimates relating to self-insurance liabilities and income tax and litigation reserves; changes in the Company’s effective tax rate; fluctuations in foreign currency exchange rates; 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; 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, 2011 and its quarterly report on Form 10-Q for the quarter ended March 31, 2012. 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 June 30,
2012     2011     2011
 
After Before After
Significant Items Significant Items Significant Items
(GAAP (Non-GAAP (GAAP
Earnings) Earnings) Earnings)
 
Total Revenues $ 749,698 $ 698,253 $ 698,253
Operating Profit 79,027 78,085 73,152

(1)

Net Earnings 44,182 42,975 39,888

(1)

Diluted Earnings per Common Share $ 0.74 $ 0.68 $ 0.63

(1)

Adjusted EBITDA $ 98,846 $ 95,370 $ 95,370
 
Reconciliation to Adjusted EBITDA:
 
Earnings Before Income Taxes $ 70,806 $ 68,709 $ 63,776
Add back:
Restructuring Charge 4,933
Interest Expense, net 8,221 9,376 9,376
Depreciation of Property Assets 18,338 16,153 16,153
Amortization and Write-down of Intangibles   1,481   1,132   1,132    
 
Adjusted EBITDA $ 98,846 $ 95,370 $ 95,370
 
(In thousands of dollars, except per share data) Six Months Ended June 30,
2012 2011 2011
 
After Before After
Significant Items Significant Items Significant Items
(GAAP (Non-GAAP (GAAP
Earnings) Earnings) Earnings)
 
Total Revenues $ 1,584,952 $ 1,440,431 $ 1,440,431
Operating Profit 171,061 168,624 153,571

(1)(2)(3)

Net Earnings 96,123 93,526 84,118

(1)(2)(3)

Diluted Earnings per Common Share $ 1.61 $ 1.47 $ 1.32

(1)(2)(3)

Adjusted EBITDA $ 210,209 $ 202,445 $ 202,445
 
Reconciliation to Adjusted EBITDA:
 
Earnings Before Income Taxes $ 154,044 $ 149,642 $ 134,589
Add back:
Impairment Charge 7,320
Restructuring Charge 4,933
Litigation Expense 2,800
Interest Expense, net 17,017 18,982 18,982
Depreciation of Property Assets 36,332 31,831 31,831
Amortization and Write-down of Intangibles   2,816   1,990   1,990    
 
Adjusted EBITDA $ 210,209 $ 202,445 $ 202,445

(1)

  Includes the effects of a $4.9 million pre-tax restructuring charge in the second quarter of 2011 for lease terminations related to The Rental Store acquisition. The charge reduced net earnings per diluted share by approximately $0.05 in both the three month and six month periods ended June 30, 2011.

(2)

Includes the effects of a $7.3 million pre-tax impairment charge in the first quarter of 2011 related to the discontinuation of the financial services business. The charge reduced net earnings per diluted share by approximately $0.07 for the six month period ended June 30, 2011.

(3)

Includes the effects of a $2.8 million pre-tax litigation expense in the first quarter of 2011 related to the settlement of wage and hour claims in California. The expense reduced net earnings per diluted share by approximately $0.03 for the six month period ended June 30, 2011.
 
 
SELECTED BALANCE SHEET HIGHLIGHTS
       
(In thousands of dollars) June 30,
2012 2011
 
Cash and Cash Equivalents $ 101,131 $ 74,031
Receivables, net 45,383 44,573
Prepaid Expenses and Other Assets 70,207 66,872
Rental Merchandise, net
On Rent 731,433 673,431
Held for Rent 189,203 194,239
Total Assets $ 2,789,383 $ 2,643,599
 
Senior Debt $ 367,755 $ 361,544
Senior Notes 300,000 300,000
Total Liabilities 1,355,885 1,272,501
Stockholders’ Equity $ 1,433,498 $ 1,371,098
 
 
Rent-A-Center, Inc. and Subsidiaries
 
CONSOLIDATED STATEMENTS OF EARNINGS
 
(In thousands of dollars, except per share data)     Three Months Ended June 30,
  2012         2011  
 
Unaudited
Revenues
Store
Rentals and Fees $ 658,987 $ 617,796
Merchandise Sales 60,622 50,973
Installment Sales 16,170 16,571
Other   4,537     4,143  
 
740,316 689,483
Franchise
Merchandise Sales 8,022 7,525
Royalty Income and Fees   1,360     1,245  
 
Total Revenues 749,698 698,253
 
Cost of Revenues
Store
Cost of Rentals and Fees 159,790 139,295
Cost of Merchandise Sold 49,525 39,510
Cost of Installment Sales 5,728 5,898
Franchise Cost of Merchandise Sold   7,682     7,195  
 
Total Cost of Revenues 222,725 191,898
 
Gross Profit 526,973 506,355
 
Operating Expenses
Salaries and Other Expenses 412,035 395,091
General and Administrative Expenses 34,430 32,047
Amortization and Write-down of Intangibles 1,481 1,132
Restructuring Charge       4,933  
 
Total Operating Expenses 447,946 433,203
 
Operating Profit 79,027 73,152
 
Interest Expense 8,343 9,613
Interest Income   (122 )   (237 )
 
Earnings Before Income Taxes 70,806 63,776
 
Income Tax Expense   26,624     23,888  
 
NET EARNINGS $ 44,182   $ 39,888  
 
BASIC WEIGHTED AVERAGE SHARES   59,160     62,450  
 
BASIC EARNINGS PER COMMON SHARE $ 0.75   $ 0.64  
 
DILUTED WEIGHTED AVERAGE SHARES   59,578     63,148  
 
DILUTED EARNINGS PER COMMON SHARE $ 0.74   $ 0.63  
 
 
Rent-A-Center, Inc. and Subsidiaries
 
CONSOLIDATED STATEMENTS OF EARNINGS
 
(In thousands of dollars, except per share data)     Six Months Ended June 30,
  2012         2011  
 
Unaudited
Revenues
Store
Rentals and Fees $ 1,336,968 $ 1,228,224
Merchandise Sales 183,481 150,239
Installment Sales 33,665 33,258
Other   9,469     9,482  
 
1,563,583 1,421,203
Franchise
Merchandise Sales 18,635 16,671
Royalty Income and Fees   2,734     2,557  
 
Total Revenues 1,584,952 1,440,431
 
Cost of Revenues
Store
Cost of Rentals and Fees 323,149 274,944
Cost of Merchandise Sold 144,541 108,089
Cost of Installment Sales 12,026 11,946
Franchise Cost of Merchandise Sold   17,846     15,949  
 
Total Cost of Revenues 497,562 410,928
 
Gross Profit 1,087,390 1,029,503
 
Operating Expenses
Salaries and Other Expenses 842,838 792,289
General and Administrative Expenses 70,675 66,600
Amortization and Write-down of Intangibles 2,816 1,990
Impairment Charge 7,320
Restructuring Charge 4,933
Litigation Expense       2,800  
 
Total Operating Expenses 916,329 875,932
 
Operating Profit 171,061 153,571
 
Interest Expense 17,320 19,373
Interest Income   (303 )   (391 )
 
Earnings Before Income Taxes 154,044 134,589
 
Income Tax Expense   57,921     50,471  
 
NET EARNINGS $ 96,123   $ 84,118  
 
BASIC WEIGHTED AVERAGE SHARES   59,206     62,902  
 
BASIC EARNINGS PER COMMON SHARE $ 1.62   $ 1.34  
 
DILUTED WEIGHTED AVERAGE SHARES   59,757     63,720  
 
DILUTED EARNINGS PER COMMON SHARE $ 1.61   $ 1.32  
 
 
Rent-A-Center, Inc. and Subsidiaries
 
SEGMENT INFORMATION HIGHLIGHTS
 
(In thousands of dollars)     Three Months Ended June 30, 2012
               
Core U.S. RAC Acceptance International ColorTyme Total
 
 
Revenues $ 654,356 $ 77,060 $ 8,900 $ 9,382 $ 749,698
Gross profit 474,414 44,617 6,242 1,700 526,973
Operating profit 79,463 6,897 (7,811 ) 478 79,027
Depreciation 15,952 856 1,506 24 18,338
Amortization 585 896 1,481
Capital expenditures 16,692 1,047 3,153 20,892
 
 
(In thousands of dollars) Three Months Ended June 30, 2011
 
Core U.S. RAC Acceptance International ColorTyme Total
 
 
Revenues $ 644,129 $ 40,892 $ 4,462 $ 8,770 $ 698,253
Gross profit 476,649 24,959 3,172 1,575 506,355
Operating profit 82,556 (7,540 ) (2,556 ) 692 73,152
Depreciation 15,137 521 455 40 16,153
Amortization 94 1,038 1,132
Capital expenditures 27,758 1,794 2,520 32,072
 
 
(In thousands of dollars) Six Months Ended June 30, 2012
 
Core U.S. RAC Acceptance International ColorTyme Total
 
 
Revenues $ 1,382,186 $ 164,788 $ 16,609 $ 21,369 $ 1,584,952
Gross profit 984,471 87,787 11,609 3,523 1,087,390
Operating profit 174,671 9,765 (14,571 ) 1,196 171,061
Depreciation 31,708 1,684 2,891 49 36,332
Amortization 1,023 1,793 2,816
Capital expenditures 37,033 2,391 8,896 48,320
Rental merchandise, net
On rent 553,683 165,798 11,952 731,433
Held for rent 180,351 2,130 6,722 189,203
Total assets 2,476,417 247,854 62,132 2,980 2,789,383
 
 
(In thousands of dollars) Six Months Ended June 30, 2011
 
Core U.S. RAC Acceptance International ColorTyme Total
 
 
Revenues $ 1,333,659 $ 79,305 $ 8,239 $ 19,228 $ 1,440,431
Gross profit 973,333 47,044 5,847 3,279 1,029,503
Operating profit 164,616 (8,126 ) (4,379 ) 1,460 153,571
Depreciation 30,052 925 775 79 31,831
Amortization 200 1,790 1,990
Capital expenditures 48,267 2,719 8,230 59,216
Rental merchandise, net
On rent 580,834 87,071 5,526 673,431
Held for rent 190,106 1,133 3,000 194,239
Total assets 2,451,699 165,723 23,329 2,848 2,643,599
 
 
Location Activity - Three Months Ended June 30, 2012
 
Core U.S. RAC Acceptance International ColorTyme Total
 
 
Locations at beginning of period 2,983 763 87 218 4,051
New location openings 8 77 13 2 100
Closed locations
Merged with existing locations 15 29 44
Sold or closed with no surviving location   3       1     1   5
Locations at end of period 2,973 811 99 219 4,102

Acquired locations closed and accounts merged with existing locations

4 4
 
 
Location Activity - Six Months Ended June 30, 2012
 
Core U.S. RAC Acceptance International ColorTyme Total
 
 
Locations at beginning of period 2,994 750 80 216 4,040
New location openings 12 122 20 6 160
Closed locations
Merged with existing locations 29 47 76
Sold or closed with no surviving location   4   14     1     3   22
Locations at end of period 2,973 811 99 219 4,102

Acquired locations closed and accounts merged with existing locations

6 6

Source: Rent-A-Center, Inc.

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



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