Rent-A-Center: Furniture - Appliances - Computers - Electronics
NASDAQ GS: RCII
$11.15(-1.01)
Sep 20, 2017 4:00 p.m.(20 minute delay)
Press Release

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Rent-A-Center, Inc. Reports First Quarter 2006 Results; Reported Diluted Earnings per Share of $0.57; Same Store Sales Increase 1.8%; Cash Flow from Operations Exceeds $61.1 Million

PLANO, Texas, Apr 24, 2006 (BUSINESS WIRE) -- Rent-A-Center, Inc. (the "Company") (Nasdaq:RCII), the nation's largest rent-to-own operator, today announced revenues and net earnings for the quarter ended March 31, 2006.

First Quarter 2006 Results

The Company reported total revenues for the quarter ended March 31, 2006 of $607.0 million, a $5.2 million increase from $601.8 million for the same period in the prior year. This increase of 0.9% in revenues was primarily driven by a 1.8% increase in same store sales plus an increase in incremental revenues generated in new and acquired stores, offset by an overall lower average store base as a result of the Company's previously announced store restructuring plan substantially completed in 2005 as well as stores closed due to hurricane damage.

Net earnings for the quarter ended March 31, 2006 were $40.3 million, or $0.57 per diluted share, representing an increase of 1.8% from the $0.56 per diluted share, or net earnings of $42.7 million for the same period in the prior year, when excluding the litigation reversion credit discussed below. The increase in net earnings per diluted share is primarily attributable to the increase in same store sales as well as the reduction in the number of the Company's outstanding shares offset by increases in normal operating costs, such as utility and fuel costs, and expenses related to stock options. When including the litigation reversion credit discussed below, net earnings per diluted share for the quarter decreased 9.5% from the $0.63 per diluted share, or reported net earnings of $47.7 million for the same period in the prior year.

"Our reported first quarter earnings per share exceeded our previous guidance, primarily as a result of higher than anticipated revenue," commented Mark E. Speese, the Company's Chairman and Chief Executive Officer. "Our same store sales increased 1.8% for the quarter, which is primarily related to changes in our promotional activities as well as a slight increase in customer traffic," Speese continued. "We believe that relatively stable utility and fuel costs during the quarter contributed to this slight increase in customer traffic. However, notwithstanding our better than expected first quarter results, we are not increasing our fiscal 2006 guidance at this time, due primarily to concerns regarding rising fuel prices and its potential impact on customer demand as well as our operating costs," Speese stated.

Through the three month period ended March 31, 2006, the Company generated cash flow from operations of approximately $61.1 million, while ending the quarter with $45.9 million of cash on hand. During the three month period ended March 31, 2006, the Company repurchased 202,800 shares of its common stock for $4.7 million in cash under its common stock repurchase program and has utilized a total of $360.8 million of the $400 million authorized by its Board of Directors since the inception of the program.

Operations Highlights

During the first quarter of 2006, the Company opened 10 new rent-to-own store locations, acquired two stores as well as accounts from five additional locations, consolidated 14 stores into existing locations and sold three stores, for a net reduction of five stores since December 31, 2005. In addition, during the first quarter of 2006, the Company added financial services to 17 existing rent-to-own store locations, consolidated one store with financial services into an existing location and ended the first quarter of 2006 with a total of 56 stores providing these services.

2005 Litigation Reversion Credit

During the first quarter of 2005, the Company recorded an $8.0 million pre-tax credit associated with the settlement of the Griego/Carrillo litigation. This pre-tax credit increased diluted earnings per share in the first quarter of 2005 by $0.07.

Rent-A-Center will host a conference call to discuss the first quarter results on Tuesday morning, April 25, 2006, at 10:45 a.m. EST. 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 2,751 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 297 rent-to-own stores, eight of which operate under the trade name of "ColorTyme," and the remaining eight of which operate under the "Rent-A-Center" name.

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 or the potential impact of acquisitions that may be completed after April 24, 2006.

SECOND QUARTER 2006 GUIDANCE:

Revenues

  • The Company expects total revenues to be in the range of $578 million to $586 million.


  • Store rental and fee revenues are expected to be between $523 million and $529 million.


  • Total store revenues are expected to be in the range of $569 million to $577 million.


  • Same store sales are expected to be in the flat to 1.0% range.


  • The Company expects to open 5-15 new rent-to-own store locations.


  • The Company expects to add financial services to 30-40 rent-to-own store locations.

Expenses

  • The Company expects cost of rental and fees to be between 21.5% and 21.9% of store rental and fee revenue and cost of goods merchandise sales to be between 73% and 78% of store merchandise sales.


  • Store salaries and other expenses are expected to be in the range of 58.0% to 59.5% of total store revenue.


  • General and administrative expenses are expected to be between 3.6% and 3.8% of total revenue.


  • Net interest expense is expected to be approximately $12.0 million, depreciation of property assets to be approximately $13.5 million and amortization of intangibles is expected to be approximately $1.0 million.


  • The effective tax rate is expected to be approximately 37.0% of pre-tax income.


  • Diluted earnings per share are estimated to be in the range of $0.50 to $0.54.


  • Diluted shares outstanding are estimated to be between 70.1 million and 71.1 million.

FISCAL 2006 GUIDANCE:

Revenues

  • The Company expects total revenues to be in the range of $2.338 billion and $2.368 billion.


  • Store rental and fee revenues are expected to be between $2.085 billion and $2.110 billion.


  • Total store revenues are expected to be in the range of $2.302 billion and $2.332 billion.


  • Same store sales are expected to be approximately 1%.


  • The Company expects to open 60-80 new store locations.


  • The Company expects to add financial services to 100-160 rent-to-own store locations.

Expenses

  • The Company expects cost of rental and fees to be between 21.5% and 21.9% of store rental and fee revenue and cost of goods merchandise sales to be between 70% and 75% of store merchandise sales.


  • Store salaries and other expenses are expected to be in the range of 58.0% to 59.5% of total store revenue.


  • General and administrative expenses are expected to be between 3.6% and 3.8% of total revenue.


  • Net interest expense is expected to be between $44.0 million and $49.0 million, depreciation of property assets is expected to be between $52.0 million and $57.0 million and amortization of intangibles is expected to be approximately $3.5 million.


  • The effective tax rate is expected to be approximately 37.0% of pre-tax income.


  • Diluted earnings per share are estimated to be in the range of $2.00 to $2.10.


  • Diluted shares outstanding are estimated to be between 70.0 million and 71.5 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 Company's ability to open new rent-to-own stores; the Company's ability to acquire additional rent-to-own stores on favorable terms; the Company's ability to enhance the performance of these acquired stores; the Company's ability to control store level costs; the Company's ability to identify and successfully market products and services that appeal to the Company's customer demographic; the Company's ability to identify and successfully enter into new lines of business offering products and services that appeal to the Company's customer demographic, including the Company's financial services products; the results of the Company's litigation; the passage of legislation adversely affecting the rent-to-own or financial services industries; interest rates; the Company's ability to enter into new and collect on the Company's rental purchase agreements; the Company's ability to enter into new and collect on the Company's short term loans; economic pressures affecting the disposable income available to the Company's targeted consumers, such as high fuel and utility costs; 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; changes in the Company's stock price and the number of shares of common stock that we may or may not repurchase; and other risks detailed from time to time in the Company's SEC reports, including but not limited to, the Company's annual report on Form 10-K for the year ended December 31, 2005. 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,
                                     ---------------------------------
                                       2006       2005        2005
                                     --------- ----------- -----------
                                                 Before      After
                                                Litigation  Litigation
                                                Reversion   Reversion
                                     --------- ----------- -----------

Total Revenue                        $606,975    $601,809    $601,809
Operating Profit                       75,484      77,992      85,992
Net Earnings                           40,328      42,685   47,669 (1)
Diluted Earnings per Common Share       $0.57       $0.56    $0.63 (1)
EBITDA                                $89,837     $93,552     $93,552

Reconciliation to EBITDA:

Reported earnings before income
 taxes                                 63,921      68,526      76,526
Add back:
    Litigation Reversion                   --          --      (8,000)
    Interest expense, net              11,563       9,466       9,466
    Depreciation of property assets    13,467      13,263      13,263
    Amortization of intangibles           886       2,297       2,297
                                     --------- ----------- -----------

EBITDA                                $89,837     $93,552     $93,552

(1) Including the effects of an $8.0 million pre-tax credit associated
    with the litigation reversion. This pre-tax credit increased
    diluted earnings per share in the first quarter of 2005 by $0.07,
    from $0.56 per diluted earnings per share to the reported diluted
    earnings per share of $0.63.


Selected Balance Sheet Data: (in         March 31, 2006 March 31, 2005
 Thousands of Dollars)                   -------------- --------------

          Cash and cash equivalents            $45,884        $75,246
          Prepaid expenses and other
           assets                               40,487         37,138
          Rental merchandise, net
                    On rent                    635,154        610,103
                    Held for rent              157,825        181,652
          Total Assets                       1,982,356      1,987,301

          Senior debt                          367,625        347,375
          Subordinated notes payable           300,000        300,000
          Total Liabilities                  1,115,275      1,140,472
          Stockholders' Equity                 867,081        846,829



                 Rent-A-Center, Inc. and Subsidiaries

                  CONSOLIDATED STATEMENTS OF EARNINGS

(In Thousands of Dollars, except per      Three Months Ended March 31,
 share data)                              ----------------------------
                                              2006           2005
                                          -------------- -------------
                                                   Unaudited

Store Revenue
   Rentals and Fees                            $520,383      $518,622
   Merchandise Sales                             64,163        62,770
         Installment Sales                        5,851         6,584
   Other                                          3,286         1,078
                                          -------------- -------------
                                                593,683       589,054

Franchise Revenue
   Franchise Merchandise Sales                   12,081        11,344
   Royalty Income and Fees                        1,211         1,411
                                          -------------- -------------
       Total Revenue                            606,975       601,809

Operating Expenses
   Direct Store Expenses
       Cost of Rental and Fees                  112,767       112,468
       Cost of Merchandise Sold                  44,130        42,067
                Cost of Installment Sales         2,423         2,863
       Salaries and Other Expenses              338,771       334,041
   Franchise Operation Expenses
       Cost of Franchise Merchandise
        Sales                                    11,556        10,866
                                          -------------- -------------
                                                509,647       502,305


   General and Administrative Expenses           20,958        19,215
   Amortization of Intangibles                      886         2,297
   Litigation Reversion                              --        (8,000)
                                          -------------- -------------

       Total Operating Expenses                 531,491       515,817
                                          -------------- -------------

       Operating Profit                          75,484        85,992

Interest Income                                  (1,460)       (1,402)
Interest Expense                                 13,023        10,868
                                          -------------- -------------

       Earnings before Income Taxes              63,921        76,526

Income Tax Expense                               23,593        28,857
                                          -------------- -------------

       NET EARNINGS                              40,328        47,669

Preferred Dividends                                  --            --
                                          -------------- -------------

Net earnings allocable to common
 stockholders                                   $40,328       $47,669
                                          ============== =============

BASIC WEIGHTED AVERAGE SHARES                    69,256        74,558
                                          ============== =============

BASIC EARNINGS PER COMMON SHARE                   $0.58         $0.64
                                          ============== =============

DILUTED WEIGHTED AVERAGE SHARES                  70,250        76,072
                                          ============== =============

DILUTED EARNINGS PER COMMON SHARE                 $0.57         $0.63
                                          ============== =============

SOURCE: Rent-A-Center, Inc.

Rent-A-Center, Inc., Plano
David E. Carpenter, 972-801-1214
dcarpenter@racenter.com



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