Skip To NavigationSkip To ContentSkip To Footer


Press Release

Rent-A-Center, Inc. Reports Third Quarter 2003 Results; Diluted Earnings per Share Rise 23.9%; Same Store Sales Increase 3.4%

PLANO, Texas--(BUSINESS WIRE)--Oct. 27, 2003--

Board Approves New $100 Million Share Repurchase Program

Rent-A-Center, Inc. (the "Company") (Nasdaq/NNM:RCII), the leading rent-to-own operator in the U.S., today announced revenues and net earnings for the quarter ended September 30, 2003.

The Company, the nation's largest rent-to-own operator, reported net earnings for the quarter ended September 30, 2003 of $48.5 million, or $0.57 per diluted share, when excluding the non-recurring finance charge of approximately $7.5 million associated with finalizing the Company's recapitalization program, an increase of 23.9% from the same quarter of the prior year. Total revenues for the quarter ended September 30, 2003 increased to $549.8 million as compared to $494.6 million for the same quarter of the prior year. Incremental revenues generated in new and acquired stores, as well as growth in same store revenues primarily drove this 11.2% increase. Same store revenues during the third quarter of 2003 increased 3.4% above the comparable quarter of 2002. The Company's quarterly growth in net earnings resulted primarily from the increase of revenues as outlined above, as well as the benefits associated with the Company's recapitalization program.

Net earnings for the nine months ended September 30, 2003 were $151.7 million, or $1.72 per diluted share, when excluding the non-recurring finance charge of approximately $35.3 million associated with the recapitalization program, an increase of 19.5% over the net earnings of $127.0 million, or $1.39 per diluted share for the same period in the prior year. Total revenues for the nine months ended September 30, 2003 increased to $1.669 billion from $1.488 billion in 2002, representing an increase of 12.2%. Same store revenues for the nine-month period ending September 30, 2003 increased 3.9%.

"We are pleased to be reporting earnings within our expectations," commented Mark E. Speese, the Company's Chairman and Chief Executive Officer, "and are excited about our opportunities in 2004. While the child tax credit refunds led to increased payouts and lower units on rent in August and September," continued Mr. Speese, "the fourth quarter has begun with positive momentum, which we believe positions us for our continued growth."

During the third quarter of 2003, the Company opened 27 new store locations and acquired 13 stores as well as accounts from nine additional locations. Through the nine month period ending September 30, 2003, the Company opened 65 new stores, acquired a total of 143 others as well as accounts from 199 additional locations while consolidating 15 stores into existing locations. To date through the fourth quarter, the Company has opened three new store locations, acquired two stores and accounts from two additional locations.

The Company's cash flow from operations was $117.2 million for the third quarter of 2003 and $300.6 million for the nine months ended September 30, 2003. The Company also announced that its board of directors has authorized a new $100 million share repurchase program. "We continue to believe that the growth potential of this company and the industry as a whole is significant," Speese commented, "and that our strong recurring cash flow continues to allow us to pursue our growth initiatives, as well as to think and act strategically in managing our capital structure for the benefit of all of our stakeholders."

Rent-A-Center will host a conference call to discuss the third quarter financial results on Tuesday morning, October 28, 2003, 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 2,605 company-owned stores nationwide and in Puerto Rico. The stores generally offer high-quality, durable goods such as home electronics, appliances, computers and furniture and accessories to consumers 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 327 rent-to-own stores, 315 of which operate under the trade name of "ColorTyme," and the remaining 12 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 share repurchases that may be completed after October 27, 2003.

    FOURTH QUARTER 2003 GUIDANCE:

    Revenues

    --  The Company expects total revenues to be in the range of $555
        million to $560 million.

    --  Store rental and fee revenues are expected to be between $500
        million and $504 million.

    --  Total store revenues are expected to be in the range of $540
        million to $545 million.

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

    --  The Company expects to open 20-30 new store locations.

    Expenses

    --  The Company expects depreciation of rental merchandise to be
        between 21.6% and 22.0% of store rental and fee revenue and
        cost of goods merchandise sales to be between 75% and 80% of
        store merchandise sales.

    --  Store salaries and other expenses are expected to be in the
        range of 55.0% to 56.0% of total store revenue.

    --  General and administrative expenses are expected to be between
        3.0% and 3.2% of total revenue.

    --  Net interest expense is expected to be approximately $9.0
        million and amortization of intangibles is expected to be
        approximately $3.0 million.

    --  The effective tax rate is expected to be approximately 37.25%
        of pre-tax income.

    --  Diluted earnings per share are estimated to be in the range of
        $0.60 to $0.61.

    --  Diluted shares outstanding are estimated to be between 83.6
        million and 84.4 million.

    FISCAL 2004 GUIDANCE:

    Revenues

    --  The Company expects total revenues to be in the range of
        $2.300 billion and $2.330 billion.

    --  Store rental and fee revenues are expected to be between
        $2.065 billion and $2.090 billion.

    --  Total store revenues are expected to be in the range of $2.250
        billion and $2.278 billion.

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

    --  The Company expects to open approximately 80 to 120 new store
        locations.

    Expenses

    --  The Company expects depreciation of rental merchandise to be
        between 21.6% and 22.0% of store rental and fee revenue and
        cost of goods merchandise sales to be between 75% and 80% of
        store merchandise sales.

    --  Store salaries and other expenses are expected to be in the
        range of 54.0% to 55.5% of total store revenue.

    --  General and administrative expenses are expected to be between
        3.0% and 3.2% of total revenue.

    --  Net interest expense is expected to be between $34.0 million
        and $38.0 million and amortization of intangibles is expected
        to be approximately $6.5 million.

    --  The effective tax rate is expected to be between 37.5% and
        38.0% of pre-tax income.

    --  Diluted earnings per share are estimated to be in the range of
        $2.62 to $2.70.

    --  Diluted shares outstanding are estimated to be between 84.0
        million and 86.0 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 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, including the stores acquired in the Rent-Way acquisition; the Company's ability to control store level costs; the results of the Company's litigation; the passage of legislation adversely affecting the rent-to-own industry; interest rates; the Company's ability to collect on its rental purchase agreements; changes in the Company's effective tax rate; changes in the Company's stock price and the number of shares of common stock that the Company may or may not repurchase; and the other risks detailed from time to time in the Company's SEC filings, including but not limited to, its annual report on Form 10-K for the year ended December 31, 2002, its quarterly report on Form 10-Q for the quarter ended March 31, 2003 and its quarterly report on Form 10-Q for the quarter ended June 30, 2003. 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 September 30,
                                   -----------------------------------
                                      2003      2003 (1)      2002
                                   ----------- ----------- -----------
                                   Before Non- After Non-
                                    Recurring   Recurring
                                     Finance     Finance
                                      Charge      Charge
                                   ----------- ----------- -----------
                                                Unaudited

Total Revenue                        $549,825    $549,825    $494,561
Operating Profit                       87,502      87,502      84,087
Net Earnings                           48,469      43,738      41,449
Diluted Earnings per Common Share       $0.57       $0.52       $0.46
EBITDA                               $101,801    $101,801     $95,292

Reconciliation to EBITDA:

Reported earnings before income
 taxes                                 77,242      69,730      69,374
Add back:
    Non-recurring financing charge         --       7,512          --
    Interest expense, net              10,260      10,260      14,713
    Depreciation of property assets    11,116      11,116       9,647
    Amortization of intangibles         3,183       3,183       1,557
                                   ----------- ----------- -----------

EBITDA                               $101,801    $101,801     $95,291


                                     Nine Months Ended September 30,
                                   -----------------------------------
                                      2003      2003 (2)      2002
                                   ----------- ----------- -----------
                                   Before Non- After Non-
                                    Recurring   Recurring
                                     Finance     Finance
                                      Charge      Charge
                                   ----------- ----------- -----------
                                                Unaudited

Total Revenue                      $1,669,491  $1,669,491  $1,487,831
Operating Profit                      281,031     281,031     260,623
Net Earnings                          151,721     129,997     126,955
Diluted Earnings per Common Share       $1.72       $1.47       $1.39
EBITDA                               $322,451    $322,451    $292,347

Reconciliation to EBITDA:

Reported earnings before income
 taxes                                246,157     210,897     213,074
Add back:
    Non-recurring financing charge         --      35,260          --
    Interest expense, net              34,874      34,874      47,549
    Depreciation of property assets    32,068      32,068      28,525
    Amortization of intangibles         9,352       9,352       3,199
                                   ----------- ----------- -----------

EBITDA                               $322,451    $322,451    $292,347


(1) Including the effects of a pre-tax finance charge of $7.5 million
    associated with the recapitalization of the Company. These charges
    reduced diluted earnings per share in the third quarter of 2003 by
    $0.05 from $0.57 per diluted share to $0.52.

(2) Including the effects of a pre-tax finance charge of $35.3 million
    associated with the recapitalization of the Company. These charges
    reduced diluted earnings per share for the nine month period
    ending September 30, 2003 by $0.25 from $1.72 per diluted share to
    $1.47.


Selected Balance Sheet Data:  (in Thousands of Dollars)
                                         September 30,   September 30,
                                              2003            2002
                                         -------------   -------------
Cash and cash equivalents                    $155,974        $110,261
Prepaid expenses and other assets              29,879          28,043
Rental merchandise, net
           On rent                            508,183         505,397
           Held for rent                      133,732         119,197
 Total Assets                               1,748,721       1,611,058

 Senior debt                                  399,000         260,000
 Subordinated notes payable                   300,000         273,312
 Total Liabilities                            986,248         801,674
 Stockholders' Equity                         762,473         809,384



                 Rent-A-Center, Inc. and Subsidiaries


                 CONSOLIDATED STATEMENTS OF EARNINGS

(In Thousands of Dollars, except per share data)   Three Months Ended
                                                      September 30,
                                                   -------------------
                                                     2003      2002
                                                   --------- ---------
                                                        Unaudited

Store Revenue
   Rentals and Fees                                $497,881  $456,208
   Merchandise Sales                                 34,453    24,710
   Installment Sales                                  4,633        --
   Other                                                697       561
                                                   --------- ---------
                                                    537,664   481,479

Franchise Revenue
   Franchise Merchandise Sales                       10,754    11,566
   Royalty Income and Fees                            1,407     1,516
                                                   --------- ---------
       Total Revenue                                549,825   494,561

Operating Expenses
   Direct Store Expenses
       Depreciation of Rental Merchandise           107,777    95,508
       Cost of Merchandise Sold                      25,901    18,471
       Cost of Installment Sales                      2,120        --
       Salaries and Other Expenses                  296,427   268,552
   Franchise Operation Expenses
       Cost of Franchise Merchandise Sales           10,298    11,061
                                                   --------- ---------
                                                    442,523   393,592

   General and Administrative Expenses               16,617    15,325
   Amortization of Intangibles                        3,183     1,557
                                                   --------- ---------

       Total Operating Expenses                     462,323   410,474
                                                   --------- ---------

       Operating Profit                              87,502    84,087

Non-Recurring Finance Charge                          7,512        --
Interest Expense                                     11,565    15,301
Interest Income                                      (1,305)     (588)
                                                   --------- ---------

       Earnings Before Income Taxes                  69,730    69,374

Income Tax Expense                                   25,992    27,925
                                                   --------- ---------

       NET EARNINGS                                  43,738    41,449

Preferred Dividends                                      --     1,321
                                                   --------- ---------

Net earnings allocable to common stockholders       $43,738   $40,128
                                                   ========= =========

BASIC WEIGHTED AVERAGE SHARES                        81,253    80,888
                                                   ========= =========

BASIC EARNINGS PER COMMON SHARE                       $0.54     $0.50
                                                   ========= =========

DILUTED WEIGHTED AVERAGE SHARES                      84,406    91,078
                                                   ========= =========

DILUTED EARNINGS PER COMMON SHARE                     $0.52     $0.46
                                                   ========= =========



                 Rent-A-Center, Inc. and Subsidiaries


                 CONSOLIDATED STATEMENTS OF EARNINGS

(In Thousands of Dollars, except per share       Nine Months Ended
 data)                                              September 30,
                                               -----------------------
                                                  2003        2002
                                               ----------- -----------
                                                      Unaudited

Store Revenue
   Rentals and Fees                            $1,495,652  $1,356,062
   Merchandise Sales                              119,645      88,309
   Installment Sales                               15,423          --
   Other                                            2,224       1,742
                                               ----------- -----------
                                                1,632,944   1,446,113

Franchise Revenue
   Franchise Merchandise Sales                     32,087      37,305
   Royalty Income and Fees                          4,460       4,413
                                               ----------- -----------
       Total Revenue                            1,669,491   1,487,831

Operating Expenses
   Direct Store Expenses
       Depreciation of Rental Merchandise         323,778     282,085
       Cost of Merchandise Sold                    86,684      62,950
       Cost of Installment Sales                    7,441          --
       Salaries and Other Expenses                880,649     795,649
   Franchise Operation Expenses
       Cost of Franchise Merchandise Sales         30,795      35,598
                                               ----------- -----------
                                                1,329,347   1,176,282

   General and Administrative Expenses             49,761      47,727
   Amortization of Intangibles                      9,352       3,199
                                               ----------- -----------

       Total Operating Expenses                 1,388,460   1,227,208
                                               ----------- -----------

       Operating Profit                           281,031     260,623

Non-Recurring Finance Charge                       35,260          --
Interest Expense                                   38,158      49,565
Interest Income                                    (3,284)     (2,016)
                                               ----------- -----------

       Earnings Before Income Taxes               210,897     213,074

Income Tax Expense                                 80,900      86,119
                                               ----------- -----------

       NET EARNINGS                               129,997     126,955

Preferred Dividends                                    --      10,211
                                               ----------- -----------

Net earnings allocable to common stockholders    $129,997    $116,744
                                               =========== ===========

BASIC WEIGHTED AVERAGE SHARES                      85,331      68,815
                                               =========== ===========

BASIC EARNINGS PER COMMON SHARE                     $1.52       $1.70
                                               =========== ===========

DILUTED WEIGHTED AVERAGE SHARES                    88,337      91,223
                                               =========== ===========

DILUTED EARNINGS PER COMMON SHARE                   $1.47       $1.39
                                               =========== ===========

CONTACT: Rent-A-Center, Inc., Plano
David E. Carpenter, 972-801-1214
dcarpenter@racenter.com
or
Robert D. Davis, 972-801-1204
rdavis@racenter.com
or
Mitchell E. Fadel, 972-801-1114
mfadel@racenter.com
or
Mark E. Speese, 972-801-1199
mspeese@racenter.com

SOURCE: Rent-A-Center, Inc.