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8-K - FORM 8-K - RENT A CENTER INC DEd77137e8vk.htm
Exhibit 99.1
For Immediate Release:
RENT-A-CENTER, INC. REPORTS
THIRD QUARTER 2010 RESULTS
Diluted Earnings per Share Increased 13% to $0.62 in the 3rd Quarter
Repurchased 1.9 million Shares of Common Stock and Reduced Debt by $26.3 million
Announces Cash Dividend of $0.06 for the 4th Quarter
 
Plano, Texas, October 25, 2010 — 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 September 30, 2010.
Third Quarter 2010 Results
Total revenues for the quarter ended September 30, 2010, were $664.6 million, a decrease of $6.7 million from total revenues of $671.3 million for the same period in the prior year. This decrease in revenues was attributable to the November 2009 divestiture of dPi Teleconnect, LLC, the Company’s subsidiary engaged in the prepaid telecommunications and energy business, which had contributed approximately $14.6 million in merchandise sales for the quarter ended September 30, 2009. Same store sales for the quarter ended September 30, 2010 increased 0.3%.
For the quarter ended September 30, 2010, net earnings increased approximately 10% to $40.5 million from $36.8 million for the same period in the prior year, and net earnings per diluted share also increased approximately 13% to $0.62 from $0.55 in the prior year period.
“We had a very strong quarter as both our revenues and earnings exceeded our expectations,” said Mark E. Speese, the Company’s Chairman and Chief Executive Officer. “Customer demand remained strong in the quarter with total deliveries outperforming the comparable period in 2009,” Speese stated. “We also continued to return value to our stockholders with the repurchase of 1.9 million shares of our common stock, and the declaration of our second consecutive quarterly dividend. We will continue to invest in future profitable growth as evidenced by the rapid expansion of our RAC Acceptance kiosks — partnering with retailers and offering the rent-to-own transaction to consumers who do not qualify for in-store financing. In addition, we are excited to announce our international entry into Mexico with the recent opening of our first rent-to-own store in Reynosa,” Speese concluded.
Nine Months Ended September 30, 2010 Results
Total revenues for the nine months ended September 30, 2010, were $2.055 billion, a decrease of $24.0 million from total revenues of $2.079 billion for the same period in the prior year. As described above, this decrease in revenues was attributable to the November 2009 divestiture of dPi Teleconnect, LLC, which had contributed approximately $42.6 million in merchandise sales for the nine months ended September 30, 2009. Same store sales for the nine months ended September 30, 2010 declined 0.1%.
Net earnings and net earnings per diluted share for the nine months ended September 30, 2010 were $139.8 million and $2.11, respectively, as compared to $124.2 million and $1.86, respectively, for the same period in the prior year. Net earnings and net earnings per diluted share for the nine months ended September 30, 2009 included $4.9 million in pre-tax litigation credits, or approximately $0.04 per share, related to the Hilda Perez matter as discussed below.
Net earnings per diluted share for the nine months ended September 30, 2010 increased approximately 16% to $2.11, as compared to adjusted net earnings per diluted share of $1.82, when excluding the pre-tax litigation credit above, for the nine months ended September 30, 2009.

 


 

Through the nine month period ended September 30, 2010, the Company generated cash flow from operations of approximately $192.7 million, while ending the quarter with approximately $80.8 million of cash on hand. The Company utilized its cash from operations to reduce its outstanding indebtedness by approximately $115.1 million in 2010, or approximately 16% from year end 2009, and repurchased 2,181,502 shares of its common stock for approximately $45.9 million in cash under its common stock repurchase program. To date, the Company has repurchased a total of 22,066,352 shares and has utilized approximately $512.5 million of the $600.0 million authorized by its Board of Directors since the inception of the plan.
Other Announcements
The Company today announced that its Board of Directors has declared a $0.06 per share cash dividend for the fourth quarter of 2010 to be paid to the Company’s common stockholders. The dividend will be paid on November 23, 2010, to common stockholders of record as of the close of business on November 5, 2010. Any future dividends will be subject to approval by the Board of Directors.
The Company also today announced that in connection with its analysis of available growth initiatives, it is exploring strategic alternatives with respect to its financial services business, which may or may not include a sale or divesture of such business. The Company does not intend to disclose developments with respect to the strategic alternatives for its financial services business unless and until a final decision is made and further disclosure is required. The Company does not anticipate these strategic alternatives to result in a material adverse change to its financial condition or results of operations.
2009 Significant Item
Hilda Perez Matter. In connection with the court approved settlement of the Hilda Perez v. Rent-A-Center, Inc. matter in New Jersey, the Company previously recorded a pre-tax credit in the amount of $3.0 million in the first quarter of 2009 and a pre-tax credit in the amount of $1.9 million in the second quarter of 2009 to account for cash payments to the Company representing undistributed monies in the settlement fund to which the Company is entitled pursuant to the terms of the settlement, as well as a refund of costs to administer the settlement previously paid by the Company which were not expended during the administration of the settlement. Through the nine month period ended September 30, 2009, the total pre-tax credit of approximately $4.9 million increased net earnings per diluted share by approximately $0.04.
- - -

 


 

Rent-A-Center, Inc. will host a conference call to discuss the third quarter results, guidance and other operational matters on Tuesday morning, October 26, 2010, 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 3,000 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 200 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, future dividends, changes in outstanding indebtedness, or the potential impact of acquisitions or dispositions that may be completed after October 25, 2010.
FOURTH QUARTER 2010 GUIDANCE:
Revenues
  The Company expects total revenues to be in the range of $666 million to $681 million.
  Store rental and fee revenues are expected to be between $576 million and $588 million.
  Total store revenues are expected to be in the range of $658 million to $673 million.
  Same store sales are expected to be in the range of flat to 1.0%.
  The Company expects to open approximately 10 domestic rent-to-own store locations.
  The Company expects to add approximately 70 domestic RAC Acceptance kiosks.
  The Company expects to open approximately 5 rent-to-own locations in Mexico.
Expenses
  The Company expects cost of rental and fees to be between 22.0% and 22.4% 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 58.0% to 59.5% of total store revenue.
  General and administrative expenses are expected to be approximately 4.8% of total revenue.
  Net interest expense is expected to be approximately $6 million and depreciation of property assets is expected to be approximately $16 million.
  The effective tax rate is expected to be approximately 37.4% of pre-tax income.
  Diluted earnings per share are estimated to be in the range of $0.64 to $0.70.
  Diluted shares outstanding are estimated to be between 64.6 million and 65.4 million.
FISCAL 2011 GUIDANCE:
Revenues
  The Company expects total revenues to be in the range of $2.806 billion and $2.866 billion.
  Store rental and fee revenues are expected to be between $2.368 billion and $2.418 billion.
  Total store revenues are expected to be in the range of $2.773 billion and $2.833 billion.
  Same store sales are expected to be in the range of 1.0% to 2.0%.
  The Company expects to add approximately 25 domestic rent-to-own store locations.
  The Company expects to add 100 to 150 domestic RAC Acceptance kiosks.
  The Company expects to open 25 to 75 rent-to-own locations in Mexico.
  The Company expects to open 10 to 20 rent-to-own locations in Canada.
Expenses
  The Company expects cost of rental and fees to be between 22.3% and 22.9% of store rental and fee revenue and cost of merchandise sold to be between 70% and 74% of store merchandise sales.
  Store salaries and other expenses are expected to be in the range of 56.7% to 58.2% of total store revenue.
  General and administrative expenses are expected to be approximately 4.9% of total revenue.
  Net interest expense is expected to be approximately $25 million and depreciation of property assets is expected to be in the range of $66 million to $71 million.
  The effective tax rate is expected to be in the range of 37.5% to 38.0% of pre-tax income.
  Diluted earnings per share are estimated to be in the range of $2.85 to $3.05.
  Diluted shares outstanding are estimated to be between 65.0 million and 66.0 million.

 


 

Store Activity
                                         
    Domestic     International  
            RAC Financial     RAC     Get It Now/        
    RTO     Services     Acceptance     Home Choice     Canada  
Nine Months Ended September 30, 2010
                                       
 
                                       
Stores at beginning of period
    2,950       353       82       39       18  
New store openings
    18       48       83       2        
Acquired stores remaining open
    2                          
Closed stores
                                       
Merged with existing stores
    18                          
Sold or closed with no surviving store
    10       75       14              
 
                             
Stores at end of period
    2,942       326       151       41       18  
 
                                       
Acquired stores closed and accounts merged with existing stores
    13                          
                                         
    Domestic     International  
            RAC Financial     RAC     Get It Now/        
    RTO     Services     Acceptance     Home Choice     Canada  
Three Months Ended September 30, 2010
                                       
 
                                       
Stores at beginning of period
    2,941       296       104       39       18  
New store openings
    8       30       48       2        
Acquired stores remaining open
    1                          
Closed stores
                                       
Merged with existing stores
    2                          
Sold or closed with no surviving store
    6             1              
 
                             
Stores at end of period
    2,942       326       151       41       18  
 
                                       
Acquired stores closed and accounts merged with existing stores
    6                          

 


 

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 control costs and increase profitability; the Company’s ability to identify and successfully enter new lines of business offering products and services that appeal to its customer demographic; 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 purchase agreements; the passage of legislation adversely affecting the rent-to-own or financial services industries; the Company’s failure to comply with statutes or regulations governing the rent-to-own or financial services industries; interest rates; increases in the unemployment rate; 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; future dividends; 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 material litigation; our ability and the results therefrom to successfully manage the strategic alternatives process with respect to our financial services business; 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, 2009, and its quarterly reports on Form 10-Q for the quarters ended March 31, 2010 and June 30, 2010. 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.
Contact for Rent-A-Center, Inc.:
David E. Carpenter
Vice President of Investor Relations
(972) 801-1214
david.carpenter@rentacenter.com

 


 

Rent-A-Center, Inc. and Subsidiaries
STATEMENT OF EARNINGS HIGHLIGHTS
                 
(In thousands of dollars, except per share data)   Three Months Ended September 30,  
    2010     2009  
             
    (GAAP     (GAAP  
    Earnings)     Earnings)  
                 
 
               
Total Revenue
  $ 664,580     $ 671,251  
Operating Profit
    69,393       64,367  
Net Earnings
    40,497       36,840  
Diluted Earnings per Common Share
  $ 0.62     $ 0.55  
Adjusted EBITDA
  $ 85,551     $ 81,006  
 
               
Reconciliation to Adjusted EBITDA:
               
 
               
Earnings Before Income Taxes
  $ 63,590     $ 59,654  
Add back:
               
Interest Expense, net
    5,803       4,713  
Depreciation of Property Assets
    15,629       16,054  
Amortization and Write-down of Intangibles
    529       585  
 
           
 
               
Adjusted EBITDA
  $ 85,551     $ 81,006  
                         
(In thousands of dollars, except per share data)   Nine Months Ended September 30,  
                   
    2010     2009     2009  
                     
            Before     After  
            Significant Items     Significant Items  
    (GAAP     (Non-GAAP     (GAAP  
    Earnings)     Earnings)     Earnings)  
                         
 
                       
Total Revenue
  $ 2,054,542     $ 2,079,043     $ 2,079,043  
Operating Profit
    240,927       216,873       221,742 (1)
Net Earnings
    139,788       121,140       124,161 (1)
Diluted Earnings per Common Share
  $ 2.11     $ 1.82     $ 1.86 (1)
Adjusted EBITDA
  $ 291,199     $ 269,488     $ 269,488  
 
                       
Reconciliation to Adjusted EBITDA:
                       
 
                       
Earnings Before Income Taxes
  $ 223,314     $ 195,419     $ 200,288  
Add back:
                       
Litigation Expense (Credit)
                (4,869 )
Interest Expense, net
    17,613       21,454       21,454  
Depreciation of Property Assets
    47,152       50,187       50,187  
Amortization and Write-down of Intangibles
    3,120       2,428       2,428  
 
                 
 
                       
Adjusted EBITDA
  $ 291,199     $ 269,488     $ 269,488  
 
(1)   Includes the effects of $4.9 million pre-tax litigation credits in the first quarter and second quarter of 2009 related to the Hilda Perez matter. The litigation credits increased diluted earnings per share by approximately $0.04 for the nine months ended September 30, 2009.

 


 

SELECTED BALANCE SHEET HIGHLIGHTS
                 
Selected Balance Sheet Data: (in Thousands of Dollars)   September 30,
    2010   2009
                 
 
               
Cash and Cash Equivalents
  $ 80,775     $ 39,905  
Receivables
    67,625       59,943  
Prepaid Expenses and Other Assets
    47,836       54,472  
Rental Merchandise, net
               
On Rent
    544,308       547,418  
Held for Rent
    172,784       175,743  
Total Assets
  $ 2,400,215     $ 2,356,301  
 
               
Senior Debt
  $ 596,084     $ 659,080  
Total Liabilities
    1,047,301       1,147,044  
Stockholders’ Equity
  $ 1,352,914     $ 1,209,257  

 


 

Rent-A-Center, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
                 
(In thousands of dollars, except per share data)   Three Months Ended September 30,  
    2010     2009  
    Unaudited  
Store Revenue
               
Rentals and Fees
  $ 576,019     $ 576,124  
Merchandise Sales
    44,352       59,085  
Installment Sales
    15,599       12,983  
Other
    20,413       15,236  
 
           
 
               
 
    656,383       663,428  
Franchise Revenue
               
Franchise Merchandise Sales
    6,975       6,663  
Royalty Income and Fees
    1,222       1,160  
 
           
 
               
Total Revenue
    664,580       671,251  
 
               
Operating Expenses
               
Direct Store Expenses
               
Cost of Rentals and Fees
    127,573       130,183  
Cost of Merchandise Sold
    34,807       42,940  
Cost of Installment Sales
    5,507       4,511  
Salaries and Other Expenses
    389,295       389,573  
Franchise Cost of Merchandise Sold
    6,680       6,378  
 
           
 
               
 
    563,862       573,585  
 
               
General and Administrative Expenses
    30,796       32,714  
Amortization and Write-Down of Intangibles
    529       585  
 
           
 
               
Total Operating Expenses
    595,187       606,884  
 
           
 
               
Operating Profit
    69,393       64,367  
 
               
Interest Expense
    6,085       4,866  
Interest Income
    (282 )     (153 )
 
           
 
               
Earnings before Income Taxes
    63,590       59,654  
 
               
Income Tax Expense
    23,093       22,814  
 
           
 
               
NET EARNINGS
  $ 40,497     $ 36,840  
 
               
BASIC WEIGHTED AVERAGE SHARES
    65,094       66,077  
 
           
 
               
BASIC EARNINGS PER COMMON SHARE
  $ 0.62     $ 0.56  
 
           
 
               
DILUTED WEIGHTED AVERAGE SHARES
    65,746       66,693  
 
           
 
               
DILUTED EARNINGS PER COMMON SHARE
  $ 0.62     $ 0.55  
 
           

 


 

Rent-A-Center, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
                 
(In thousands of dollars, except per share data)   Nine Months Ended September 30,  
    2010     2009  
    Unaudited  
Store Revenue
               
Rentals and Fees
  $ 1,746,390     $ 1,763,199  
Merchandise Sales
    176,780       211,826  
Installment Sales
    45,239       37,699  
Other
    60,272       41,818  
 
           
 
    2,028,681       2,054,542  
 
               
Franchise Revenue
               
Franchise Merchandise Sales
    22,155       20,872  
Royalty Income and Fees
    3,706       3,629  
 
           
 
               
Total Revenue
    2,054,542       2,079,043  
 
               
Operating Expenses
               
Direct Store Expenses
               
Cost of Rentals and Fees
    387,505       398,278  
Cost of Merchandise Sold
    129,221       150,704  
Cost of Installment Sales
    15,936       13,201  
Salaries and Other Expenses
    1,161,887       1,175,991  
Franchise Cost of Merchandise Sold
    21,202       19,987  
 
           
 
               
 
    1,715,751       1,758,161  
 
               
General and Administrative Expenses
    94,744       101,581  
Amortization and Write-Down of Intangibles
    3,120       2,428  
Litigation Expense (Credit)
          (4,869 )
 
           
 
               
Total Operating Expenses
    1,813,615       1,857,301  
 
           
 
               
Operating Profit
    240,927       221,742  
 
               
Interest Expense
    18,219       22,143  
Interest Income
    (606 )     (689 )
 
           
 
               
Earnings before Income Taxes
    223,314       200,288  
 
               
Income Tax Expense
    83,526       76,127  
 
           
 
               
NET EARNINGS
  $ 139,788     $ 124,161  
 
               
BASIC WEIGHTED AVERAGE SHARES
    65,579       66,034  
 
           
 
               
BASIC EARNINGS PER COMMON SHARE
  $ 2.13     $ 1.88  
 
           
 
               
DILUTED WEIGHTED AVERAGE SHARES
    66,345       66,612  
 
           
 
               
DILUTED EARNINGS PER COMMON SHARE
  $ 2.11     $ 1.86