Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - RENT A CENTER INC DE | d81624e8vk.htm |
Exhibit 99.1
For Immediate Release:
RENT-A-CENTER, INC. REPORTS
FIRST QUARTER 2011 RESULTS
FIRST QUARTER 2011 RESULTS
Total Revenues Increased 3.3%
Diluted Earnings per Share of $0.69 in the 1st Quarter, Including Charges of $0.10 per
Diluted Share Related to the Financial Services Business and Litigation
Diluted Share Related to the Financial Services Business and Litigation
Confirms Guidance for 2011 Fiscal Year
Plano, Texas, April 25, 2011 — 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 March 31,
2011.
First Quarter 2011 Results
Total revenues for the quarter ended March 31, 2011, were $742.2 million, an increase of $23.8
million from total revenues of $718.4 million for the same period in the prior year. This 3.3%
increase in total revenues was primarily due to an increase in revenue driven by the RAC Acceptance
business, in particular the acquisition of The Rental Store completed in the fourth quarter of
2010, offset by a reduction in revenue due to the discontinuation of the financial services
business. Same store sales for the quarter ended March 31, 2011 were 0.1%.
Net earnings and net earnings per diluted share for the three months ended March 31, 2011 were
$44.2 million and $0.69, respectively, as compared to $51.5 million and $0.77, respectively, for
the same period in the prior year.
Net earnings and net earnings per diluted share for the three months ended March 31, 2011 were
impacted by the following significant items, as discussed below:
| • | 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 prospective settlement of wage and hour claims in California. |
Collectively, these items reduced net earnings per diluted share by approximately $0.10 in the
first quarter of 2011.
When excluding the items above, adjusted net earnings per diluted share for the three months ended
March 31, 2011 were $0.79, as compared to net earnings per diluted share for the three months ended
March 31, 2010 of $0.77.
“Our first quarter was negatively impacted by February results that ended poorly; however, the
business has bounced back nicely in March and April,” said Mark E. Speese, the Company’s Chairman
and Chief Executive Officer. “Our core rent-to-own portfolio ended the first quarter near our
original forecast and, as such, we are confirming our existing guidance for 2011,” Speese
continued. “As for our growth initiatives, we are very pleased to report that our RAC Acceptance
and Mexico businesses exceeded both their revenue and store operating income goals in the quarter.
RAC Acceptance added 109 kiosks in the quarter, nine more than anticipated. In fact, we are
raising our forecast for the year to add 325 to 375 kiosks, an increase of 50 kiosks, and should
end the year with approximately 725 kiosks,” Speese concluded.
Through the three month period ended March 31, 2011, the Company generated cash flow from
operations of approximately $147.9 million, while ending the quarter with $145.0 million of cash on
hand. During the three month period ended March 31, 2011, the Company repurchased 868,765 shares
of its common stock for approximately $28.5 million in cash under its common stock repurchase
program. To date, the Company has repurchased a total of 24,339,110 shares and has utilized
approximately $579.7 million of the $800.0 million authorized by its Board of Directors since the
inception of the plan. In addition, during the three month period ended March 31, 2011, the
Company reduced its outstanding indebtedness by approximately $42.5 million.
2011 Significant Items
Financial Services Charge. During the fourth quarter of 2010, the Company recorded a pre-tax
impairment charge of approximately $18.9 million related to the discontinuation of the financial
services business. The charge with respect to discontinuing the operations of all 331 store
locations related primarily to fixed asset disposals, goodwill impairment, loan write-downs, and
other miscellaneous items. During the first quarter of 2011, the Company recorded an additional
pre-tax impairment charge of $7.3 million related primarily to loan write-downs, fixed asset
disposals (store reconstruction), and other miscellaneous items. For the three month period ended
March 31, 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. In April 2011, we reached an agreement in
principle to settle for approximately $2.7 million multiple putative class actions pending in
California which allege various claims, including violations of California wage and hour laws. The
terms of the prospective settlement are subject to the parties entering into a definitive
settlement agreement and obtaining court approval. While we believe the terms of this prospective
settlement are fair, there can be no assurance that the settlement, if completed, will be approved
by the court in its present form. To account for the prospective settlement amount of
approximately $2.7 million and related costs (including payroll taxes), the Company recorded a $2.8
million pre-tax litigation expense during the first quarter of 2011. For the three month period
ended March 31, 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 first quarter results, guidance and
other operational matters on Tuesday morning, April 26, 2011, 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 3,020
company-owned stores nationwide and in Canada, Mexico 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 210
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 April 25, 2011.
SECOND QUARTER 2011 GUIDANCE:
Revenues
| • | The Company expects total revenues to be in the range of $694 million to $709 million. |
| • | Store rental and fee revenues are expected to be between $619 million and $629 million. |
| • | Total store revenues are expected to be in the range of $687 million to $702 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 open 125 to 150 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 22.5% and 22.9% of store rental and fee revenues and cost of merchandise sold to be between 73.0% and 77.0% of store merchandise sales. |
| • | Store salaries and other expenses are expected to be in the range of 56.3% to 57.8% of total store revenues. |
| • | General and administrative expenses are expected to be approximately 4.5% of total revenues. |
| • | Net interest expense is expected to be approximately $8.5 million and depreciation of property assets is expected to be approximately $16 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 $0.68 to $0.74. |
| • | Diluted shares outstanding are estimated to be between 64.0 million and 65.0 million. |
FISCAL 2011 GUIDANCE:
Revenues
| • | The Company expects total revenues to be in the range of $2.868 billion and $2.928 billion. |
| • | Store rental and fee revenues are expected to be between $2.477 billion and $2.527 billion. |
| • | Total store revenues are expected to be in the range of $2.835 billion and $2.895 billion. |
| • | Same store sales are expected to be in the range of 1.5% to 2.5%. |
| • | The Company expects to open approximately 25 domestic rent-to-own store locations. |
| • | The Company expects to open 325 to 375 domestic RAC Acceptance kiosks. |
| • | The Company expects to open 40 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 22.8% and 23.4% of store rental and fee revenues and cost of merchandise sold to be between 74.5% and 78.5% of store merchandise sales. |
| • | Store salaries and other expenses are expected to be in the range of 55.5% to 57.0% of total store revenues. |
| • | General and administrative expenses are expected to be approximately 4.5% of total revenues. |
| • | Net interest expense is expected to be approximately $33 million and depreciation of property assets is expected to be in the range of $61 million to $66 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 $2.90 to $3.10. |
| • | Diluted shares outstanding are estimated to be between 64.0 million and 65.0 million. |
·
Store Activity
| Domestic | ||||||||||||||||||||
| RAC | Get It Now/ | International | ||||||||||||||||||
| RTO | Acceptance | Home Choice | Canada | Mexico | ||||||||||||||||
Three Months Ended March 31, 2011 |
||||||||||||||||||||
Stores at beginning of period |
2,943 | 384 | 42 | 18 | 5 | |||||||||||||||
New store openings |
8 | 109 | — | — | 5 | |||||||||||||||
Closed stores |
||||||||||||||||||||
Merged with existing stores |
2 | 6 | — | — | — | |||||||||||||||
Sold or closed with no surviving store |
— | 2 | 1 | — | — | |||||||||||||||
Stores at end of period |
2,949 | 485 | 41 | 18 | 10 | |||||||||||||||
Acquired stores closed and accounts |
2 | — | — | — | — | |||||||||||||||
merged with existing stores |
||||||||||||||||||||
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 industry; 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 costs,
affecting the disposable income available to the Company’s targeted consumers; conditions affecting
consumer spending and the impact, depth, and duration of current economic conditions; 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;
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, 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
Vice President of Investor Relations
(972) 801-1214
david.carpenter@rentacenter.com
Rent-A-Center, Inc. and Subsidiaries
STATEMENT OF EARNINGS HIGHLIGHTS
| Three Months Ended March 31, | ||||||||||||
| 2011 | 2011 | 2010 | ||||||||||
| Before | After | |||||||||||
| Significant Items | Significant Items | |||||||||||
| (Non-GAAP | (GAAP | (GAAP | ||||||||||
| (In thousands of dollars, except per share data) | Earnings) | Earnings) | Earnings) | |||||||||
Total Revenue |
$ | 742,178 | $ | 742,178 | $ | 718,419 | ||||||
Operating Profit |
90,539 | 80,419 | (1)(2) | 88,703 | ||||||||
Net Earnings |
50,551 | 44,230 | (1)(2) | 51,461 | ||||||||
Diluted Earnings per Common Share |
$ | 0.79 | $ | 0.69 | (1)(2) | $ | 0.77 | |||||
Adjusted EBITDA |
$ | 107,075 | $ | 107,075 | $ | 105,475 | ||||||
Reconciliation to Adjusted EBITDA: |
||||||||||||
Earnings Before Income Taxes |
$ | 80,933 | $ | 70,813 | $ | 82,788 | ||||||
Add back: |
||||||||||||
Litigation Settlement |
— | 2,800 | — | |||||||||
Impairment Charge |
— | 7,320 | — | |||||||||
Interest Expense, net |
9,606 | 9,606 | 5,915 | |||||||||
Depreciation of Property Assets |
15,678 | 15,678 | 15,721 | |||||||||
Amortization and Write-down of Intangibles |
858 | 858 | 1,051 | |||||||||
Adjusted EBITDA |
$ | 107,075 | $ | 107,075 | $ | 105,475 | ||||||
| (1) | 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 three month period ended March 31, 2011. | |
| (2) | Includes the effects of a $2.8 million pre-tax litigation expense in the first quarter of 2011 related to the prospective settlement of wage and hour claims in California. The expense reduced net earnings per diluted share by approximately $0.03 for the three month period ended March 31, 2011. |
SELECTED BALANCE SHEET HIGHLIGHTS
| March 31, | ||||||||
| (In thousands of dollars) | 2011 | 2010 | ||||||
Cash and Cash Equivalents |
$ | 145,000 | $ | 84,498 | ||||
Receivables, net |
47,228 | 59,601 | ||||||
Prepaid Expenses and Other Assets |
56,942 | 49,388 | ||||||
Rental Merchandise, net |
||||||||
On Rent |
675,013 | 586,855 | ||||||
Held for Rent |
180,512 | 181,984 | ||||||
Total Assets |
$ | 2,679,254 | $ | 2,439,868 | ||||
Senior Debt |
$ | 358,584 | $ | 636,296 | ||||
Senior Notes |
300,000 | — | ||||||
Total Liabilities |
1,284,510 | 1,137,262 | ||||||
Stockholders’ Equity |
$ | 1,394,744 | $ | 1,302,606 | ||||
Rent-A-Center, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
| Three Months Ended March 31, | ||||||||
| 2011 | 2010 | |||||||
| (In thousands of dollars, except per share data) | Unaudited | |||||||
Store Revenue |
||||||||
Rentals and Fees |
$ | 610,428 | $ | 583,848 | ||||
Merchandise Sales |
99,266 | 89,397 | ||||||
Installment Sales |
16,687 | 15,137 | ||||||
Other |
5,339 | 20,336 | ||||||
| 731,720 | 708,718 | |||||||
Franchise Revenue |
||||||||
Franchise Merchandise Sales |
9,146 | 8,425 | ||||||
Royalty Income and Fees |
1,312 | 1,276 | ||||||
Total Revenue |
742,178 | 718,419 | ||||||
Operating Expenses |
||||||||
Direct Store Expenses |
||||||||
Cost of Rentals and Fees |
135,649 | 130,114 | ||||||
Cost of Merchandise Sold |
68,579 | 61,811 | ||||||
Cost of Installment Sales |
6,048 | 5,426 | ||||||
Salaries and Other Expenses |
397,198 | 391,471 | ||||||
Franchise Cost of Merchandise Sold |
8,754 | 8,068 | ||||||
| 616,228 | 596,890 | |||||||
General and Administrative Expenses |
34,553 | 31,775 | ||||||
Amortization and Write-down of Intangibles |
858 | 1,051 | ||||||
Litigation settlement |
2,800 | — | ||||||
Impairment Charge |
7,320 | — | ||||||
Total Operating Expenses |
661,759 | 629,716 | ||||||
Operating Profit |
80,419 | 88,703 | ||||||
Interest Expense |
9,760 | 6,083 | ||||||
Interest Income |
(154 | ) | (168 | ) | ||||
Earnings before Income Taxes |
70,813 | 82,788 | ||||||
Income Tax Expense |
26,583 | 31,327 | ||||||
NET EARNINGS |
$ | 44,230 | $ | 51,461 | ||||
BASIC WEIGHTED AVERAGE SHARES |
63,353 | 65,699 | ||||||
BASIC EARNINGS PER COMMON SHARE |
$ | 0.70 | $ | 0.78 | ||||
DILUTED WEIGHTED AVERAGE SHARES |
64,292 | 66,517 | ||||||
DILUTED EARNINGS PER COMMON SHARE |
$ | 0.69 | $ | 0.77 | ||||