UNITED STATES FORM 10-Q
(Mark One)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
| [ X ] |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2002 |
|
| OR | ||
| [ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From to |
Commission File No. 0-24333
RAINBOW RENTALS, INC.
(Exact name of Registrant as specified in its charter)
| Ohio (State of Incorporation) |
34-1512520 (IRS Employer Identification No.) |
3711 Starr Centre Drive
Canfield, Ohio 44406
(Address of principal executive offices)
330-533-5363
(Registrant’s telephone number)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| CLASS | SHARES OUTSTANDING AT OCTOBER 31, 2002 | |
|
|
||
| Common stock, no par value | 5,929,319 |
RAINBOW RENTALS, INC.
INDEX
| Page No. | ||||||
| PART I. | FINANCIAL INFORMATION | |||||
| Item 1. | Financial Statements | |||||
| Balance Sheets | 3 | |||||
| Statements of Income | 4 | |||||
| Statements of Shareholders’ Equity | 5 | |||||
| Statements of Cash Flows | 6 | |||||
| Notes to Financial Statements | 7 | |||||
| Item 2. | Management’s
Discussion and Analysis of Financial Condition and Results of Operations |
9 | ||||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 12 | ||||
| Item 4. | Controls and Procedures | 12 | ||||
| PART II. | OTHER INFORMATION | |||||
| Item 6. | Exhibits and Reports on Form 8-K | 13 | ||||
| SIGNATURES | 14 | |||||
| SARBANES-OXLEY CERTIFICATIONS | 15 | |||||
2
RAINBOW RENTALS, INC.
BALANCE SHEETS
(Dollars in Thousands)
| (unaudited) | ||||||||||||
| September 30, | December 31, | |||||||||||
| 2002 | 2001 | |||||||||||
Assets |
||||||||||||
Current assets |
||||||||||||
Cash and cash equivalents |
$ | 1,574 | $ | 1,839 | ||||||||
Rental-purchase merchandise, net |
36,050 | 39,330 | ||||||||||
Income tax receivable |
2,009 | — | ||||||||||
Prepaid expenses and other current assets |
1,770 | 2,143 | ||||||||||
Total current assets |
41,403 | 43,312 | ||||||||||
Property and equipment, net |
5,513 | 5,177 | ||||||||||
Deferred income taxes |
1,839 | 1,546 | ||||||||||
Goodwill, net |
9,236 | 9,098 | ||||||||||
Other assets, net |
965 | 988 | ||||||||||
Total assets |
$ | 58,956 | $ | 60,121 | ||||||||
Liabilities
and Shareholders’ Equity |
||||||||||||
Current liabilities |
||||||||||||
Deferred revenue |
$ | 1,081 | $ | 1,263 | ||||||||
Accounts payable |
2,720 | 3,827 | ||||||||||
Accrued income taxes |
— | 306 | ||||||||||
Accrued compensation and related costs |
1,772 | 2,082 | ||||||||||
Other liabilities and accrued expenses |
2,414 | 2,062 | ||||||||||
Deferred income taxes |
6,946 | 3,976 | ||||||||||
Total current liabilities |
14,933 | 13,516 | ||||||||||
Long-term debt |
5,500 | 9,440 | ||||||||||
Total liabilities |
20,433 | 22,956 | ||||||||||
Commitments and contingencies |
||||||||||||
Shareholders’ equity |
||||||||||||
Serial preferred stock, no par value; 2,000,000 shares authorized
none issued |
— | — | ||||||||||
Common stock, no par value; 10,000,000 shares authorized,
6,392,610 issued, 5,929,319 outstanding at September 30, 2002 and 5,925,735 |
||||||||||||
outstanding at December 31, 2001 |
11,039 | 11,039 | ||||||||||
Additional paid-in capital |
4 | — | ||||||||||
Retained earnings |
29,372 | 28,033 | ||||||||||
Treasury stock, at cost, 463,291 shares at September 30, 2002
and 466,875 shares at December 31, 2001 |
(1,892 | ) | (1,907 | ) | ||||||||
Total shareholders’ equity |
38,523 | 37,165 | ||||||||||
Total liabilities and shareholders’ equity |
$ | 58,956 | $ | 60,121 | ||||||||
See accompanying notes to financial statements.
3
RAINBOW RENTALS, INC.
STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
| (unaudited) | (unaudited) | ||||||||||||||||||
| For the three months ended | For the nine months ended | ||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||
| 2002 | 2001 | 2002 | 2001 | ||||||||||||||||
Revenues |
|||||||||||||||||||
Rental revenue |
$ | 22,945 | $ | 21,395 | $ | 69,554 | $ | 66,072 | |||||||||||
Fees |
700 | 663 | 2,052 | 2,046 | |||||||||||||||
Merchandise sales |
725 | 596 | 2,572 | 2,414 | |||||||||||||||
Total revenues |
24,370 | 22,654 | 74,178 | 70,532 | |||||||||||||||
Operating expenses |
|||||||||||||||||||
Merchandise costs |
8,362 | 8,036 | 25,572 | 24,466 | |||||||||||||||
Store expenses |
|||||||||||||||||||
Salaries and related |
6,080 | 5,328 | 17,909 | 16,560 | |||||||||||||||
Occupancy |
2,557 | 2,029 | 7,119 | 6,341 | |||||||||||||||
Advertising |
1,323 | 1,285 | 4,634 | 4,329 | |||||||||||||||
Other |
3,323 | 3,126 | 10,093 | 9,889 | |||||||||||||||
Total store expenses |
13,283 | 11,768 | 39,755 | 37,119 | |||||||||||||||
Total merchandise costs and store expenses |
21,645 | 19,804 | 65,327 | 61,585 | |||||||||||||||
General and administrative expenses |
1,962 | 1,821 | 5,794 | 5,450 | |||||||||||||||
Amortization of goodwill and noncompete agreements |
45 | 168 | 130 | 516 | |||||||||||||||
Total operating expenses |
23,652 | 21,793 | 71,251 | 67,551 | |||||||||||||||
Operating income |
718 | 861 | 2,927 | 2,981 | |||||||||||||||
Interest expense |
135 | 141 | 487 | 555 | |||||||||||||||
Other expense, net |
57 | 58 | 227 | 170 | |||||||||||||||
Income before income taxes |
526 | 662 | 2,213 | 2,256 | |||||||||||||||
Income taxes |
191 | 268 | 874 | 913 | |||||||||||||||
Net income |
$ | 335 | $ | 394 | $ | 1,339 | $ | 1,343 | |||||||||||
Earnings
per common share: |
|||||||||||||||||||
Basic |
$ | 0.06 | $ | 0.07 | $ | 0.23 | $ | 0.23 | |||||||||||
Diluted |
$ | 0.06 | $ | 0.07 | $ | 0.23 | $ | 0.23 | |||||||||||
Weighted
average common shares outstanding: |
|||||||||||||||||||
Basic |
5,929,319 | 5,925,735 | 5,927,564 | 5,925,735 | |||||||||||||||
Diluted |
5,932,648 | 5,946,905 | 5,944,081 | 5,938,340 | |||||||||||||||
Pro
forma net income data: |
|||||||||||||||||||
Net income as reported |
$ | 335 | $ | 394 | $ | 1,339 | $ | 1,343 | |||||||||||
Pro forma adjustment for goodwill amortization, net of tax |
— | 75 | — | 234 | |||||||||||||||
Pro forma net income |
$ | 335 | $ | 469 | $ | 1,339 | $ | 1,577 | |||||||||||
Pro
forma earnings per common share: |
|||||||||||||||||||
Basic |
$ | 0.06 | $ | 0.08 | $ | 0.23 | $ | 0.27 | |||||||||||
Diluted |
$ | 0.06 | $ | 0.08 | $ | 0.23 | $ | 0.27 | |||||||||||
See accompanying notes to financial statements.
4
RAINBOW RENTALS, INC.
STATEMENTS OF SHAREHOLDERS’ EQUITY
(Dollars in thousands)
| Common Stock | Total | ||||||||||||||||||||||||
| Additional | Retained | Treasury | Shareholders’ | ||||||||||||||||||||||
| Shares | Cost | Paid-in Capital | Earnings | Stock | Equity | ||||||||||||||||||||
Balance at December 31, 2000 |
5,925,735 | $ | 11,039 | $ | — | $ | 26,859 | $ | (1,907 | ) | $ | 35,991 | |||||||||||||
Net income |
— | — | — | 1,174 | — | 1,174 | |||||||||||||||||||
Balance at December 31, 2001 |
5,925,735 | 11,039 | — | 28,033 | (1,907 | ) | 37,165 | ||||||||||||||||||
Exercise of stock options (unaudited) |
3,584 | — | 4 | — | 15 | 19 | |||||||||||||||||||
Net income (unaudited) |
— | — | — | 1,339 | — | 1,339 | |||||||||||||||||||