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| 8-K - 8-K - RENT A CENTER INC DE | a2013q4rciipressrelease.htm |
Exhibit 99.1
For Immediate Release:
RENT-A-CENTER, INC. REPORTS
FOURTH QUARTER AND YEAR END 2013 RESULTS
Total Revenues Increased 1.5% for Quarter and 0.7% for Year
Revenue Increased for Year Over 46% in Acceptance Now and Over 45% in International
Diluted Earnings per Share of $0.25 for Quarter and $2.32 for Year
______________________________________________
Plano, Texas, January 27, 2014 — 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 and year ended December 31, 2013.
Fourth Quarter 2013 Results
Total revenues for the quarter ended December 31, 2013, were $769.6 million, an increase of $11.2 million from total revenues of $758.4 million for the same period in the prior year. This 1.5% increase in total revenues was primarily due to an increase of approximately $38.9 million in the Acceptance Now segment and approximately $4.3 million in the International segment, partially offset by a decrease of approximately $28.7 million in the Core U.S. segment. For the quarter ended December 31, 2013, same store sales declined 1.1% as compared to the same period in the prior year, primarily attributable to a 5.5% decrease in the Core U.S. segment, partially offset by increases of 26.4% and 25.7% in the Acceptance Now and International segments, respectively.
“We continue to face meaningful headwinds in our domestic U.S. rent-to-own business, including a customer under severe economic pressure and an intensified promotional environment. These conditions significantly impacted our Core U.S. segment customer agreement growth in December, which was the most challenging in years. While our Acceptance Now segment grew quarterly revenue over 41% year-over-year, this business also faced similar challenges and did not meet our revenue target. As a result, revenue and earnings for the fourth quarter and year ended December 31, 2013 are well below expectations,” said Mark E. Speese, the Company’s Chairman and Chief Executive Officer.
Net earnings and net earnings per diluted share for the quarter ended December 31, 2013, were $13.1 million and $0.25, respectively, as compared to $47.2 million and $0.80, respectively, for the same period in the prior year. These results include dilution related to the Company's international growth initiatives of approximately $0.09 per share for the quarter ended December 31, 2013, and approximately $0.07 per share for the same period in the prior year. The $0.55 year-over-year decline in net earnings per diluted share for the quarter ended December 31, 2013 is largely attributable to a reduction in gross profit in the Core U.S. segment and an overall increase in operating expenses.
“In addition to the extremely disappointing gross profit miss in the Core U.S. segment, several unexpected operating expenses negatively impacted the fourth quarter,” said Robert D. Davis, the Company’s current Chief Financial Officer and Chief Executive Officer-Designate. “Some examples of these expenses include claims paid under our self-funded health insurance program, an adjustment to on-rent merchandise reserves, and severance payable to former executives of the Company,” Mr. Davis continued.
Year Ended December 31, 2013 Results
Total revenues for the year ended December 31, 2013, were $3,104.2 million, an increase of $21.5 million from total revenues of $3,082.6 million in the prior year. This 0.7% increase in total revenues was primarily due to increases of approximately $158.8 million in the Acceptance Now segment and approximately $18.2 million in the International segment, substantially offset by a decrease of approximately $147.9 million in the Core U.S. segment. For the year ended December 31, 2013, same store sales decreased 2.0% as compared to the prior year, primarily attributable to a 6.4% decrease in the Core U.S. segment, partially offset by increases of 30.1% and 40.6% in the Acceptance Now and International segments, respectively.
Net earnings and net earnings per diluted share for the year ended December 31, 2013, were $128.2 million and $2.32, respectively, as compared to $181.7 million and $3.06, respectively, in the prior year. These results include dilution related to the Company's international growth initiatives of approximately $0.32 per share for the year ended December 31, 2013, and $0.33 per share in the prior year.
For the year ended December 31, 2013, the Company generated cash flow from operations of approximately $134.3 million, while ending the year with approximately $42.3 million of cash on hand. For the year ended December 31, 2013, the Company repurchased 5,874,374 shares for approximately $217.4 million in cash under its common stock repurchase program, which included $200 million under an accelerated stock buyback commenced in May 2013 and settled in October 2013. To date, the Company has repurchased a total of 36,994,653 shares and has utilized approximately $994.8 million of the $1.25 billion authorized by its Board of Directors since the inception of the plan. Also, the Company announced on December 12, 2013, that its Board of Directors approved a 10% increase in its quarterly cash dividend from $0.21 per share to $0.23 per share, beginning with the dividend for the first quarter of 2014. The Company paid its 15th consecutive quarterly cash dividend on January 23, 2014.
“Obviously, we are deeply disappointed in the conclusion of 2013 and recognize the challenges we face to improve the results in our Core U.S. segment in 2014 and beyond. We continue to believe strongly in the long-term potential of our growth initiatives and in our ability to improve execution in the core business,” Mr. Speese said.
“Our initial 2014 revenue and earnings guidance incorporates the year-end position of our portfolios, our expectations that the macroeconomic trends will continue throughout 2014, and the investments we plan to make in strategic initiatives and to improve execution in the Core U.S. segment. We believe a renewed and intense focus on our customer is critical to radically improving performance in the Core U.S. segment. As such, we have made several significant management changes within our organizational structure to reestablish the focus of our operational execution in the Core U.S. segment,” Mr. Davis stated.
2014 Guidance
• | 4.5% to 7.5% total revenue growth. |
◦ | Approximately $695 million contribution from Acceptance Now. |
• | Approximately 3.0% to 5.5% same store sales growth. |
• | EBITDA in the range of $325 to $345 million. |
• | Annual effective tax rate of approximately 38.2%. |
• | Diluted earnings per share in the range of $2.30 to $2.50, including approximately $0.25 per share dilution related to Mexico. |
• | Capital expenditures of approximately $100 million. |
• | The Company expects to open approximately 100 domestic Acceptance Now kiosks. |
• | The Company expects to open approximately 30 rent-to-own store locations in Mexico. |
• | The 2014 guidance does not include the potential impact of any repurchases of common stock the Company may make, changes in future dividends, material changes in outstanding indebtedness, or the potential impact of acquisitions or dispositions that may be completed or occur after January 27, 2014. |
Rent-A-Center, Inc. will host a conference call to discuss the fourth quarter results, guidance and other operational matters on Tuesday morning, January 28, 2014, at 10:45 a.m. ET. 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, is the largest rent-to-own operator in North America, focused on improving the quality of life for its customers by providing them the opportunity to obtain ownership of high-quality, durable goods such as consumer electronics, appliances, computers, furniture and accessories, under flexible rental purchase agreements with no long-term obligation. The Company owns and operates approximately 3,205 stores in the United States, Canada, Mexico and Puerto Rico, and approximately 1,325 Acceptance Now kiosk locations in the United States and Puerto Rico. Rent-A-Center Franchising International, Inc., (previously ColorTyme, Inc.), a wholly owned subsidiary of the Company, is a national franchiser of approximately 180 rent-to-own stores operating under the trade name of "Rent-A-Center" or "ColorTyme." For additional information about the Company, please visit www.rentacenter.com.
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. The Company believes that the expectations reflected in such forward-looking statements are accurate. However, there can be no assurance that such expectations will occur. The Company's actual future performance could differ materially from such statements. Factors that could cause or contribute to such differences include, but are not limited to: the general strength of the economy and other economic conditions affecting consumer preferences and spending; economic pressures, such as high fuel costs, affecting the disposable income available to the Company's current and potential customers; changes in the unemployment rate; difficulties encountered in improving the financial performance of the Core U.S. segment or in executing the Company's growth initiatives; the Company's ability to develop and successfully implement virtual or electronic commerce capabilities; the Company's ability to identify and successfully market products and services that appeal to its customer demographic; consumer preferences and perceptions of the Company's brand; uncertainties regarding the ability to open new locations; the Company's ability to acquire additional stores or customer accounts on favorable terms; the Company's ability to control costs and increase profitability; 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 enter into new and collect on its rental or lease purchase agreements; the passage of legislation adversely affecting the rent-to-own industry; the Company's compliance with applicable statutes or regulations governing its transactions; changes in interest rates; adverse changes in the economic conditions of the industries, countries or markets that the Company serves; the Company’s available cash flow; information technology and data security costs; our ability to protect the integrity and security of individually identifiable data of our customers and employee; the impact of any breaches in data security or other disturbances to our information technology and other networks; changes in the Company's stock price, the number of shares of common stock that it may or may not repurchase, and future dividends, if any; changes in estimates relating to self-insurance liabilities and income tax and litigation reserves; changes in the Company's effective tax rate; fluctuations in foreign currency exchange rates; the Company's ability to maintain an effective system of internal controls; the resolution of the Company's 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, 2012 and its quarterly reports on Form 10-Q for the quarters ended March 31, 2013, June 30, 2013, and September 30, 2013. 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 - UNAUDITED
(In thousands of dollars, except per share data) | Three Months Ended December 31, | ||||||||
2013 | 2012 | ||||||||
Revised | |||||||||
Total Revenues | $ | 769,611 | $ | 758,380 | |||||
Operating Profit | 34,382 | 78,943 | |||||||
Net Earnings | 13,064 | 47,209 | |||||||
Diluted Earnings per Common Share | $ | 0.25 | $ | 0.80 | |||||
Adjusted EBITDA | $ | 63,014 | $ | 98,186 | |||||
Reconciliation to Adjusted EBITDA: | |||||||||
Earnings Before Income Taxes | $ | 23,683 | $ | 72,666 | |||||
Add back: | |||||||||
Interest Expense, net | 10,699 | 6,277 | |||||||
Depreciation of Property Assets | 19,797 | 18,617 | |||||||
Amortization and Write-down of Intangibles | 8,835 | 626 | |||||||
Adjusted EBITDA | $ | 63,014 | $ | 98,186 | |||||
(In thousands of dollars, except per share data) | Year Ended December 31, | ||||||||
2013 | 2012 | ||||||||
Revised | |||||||||
Total Revenues | $ | 3,104,183 | $ | 3,082,646 | |||||
Operating Profit | 246,169 | 315,671 | |||||||
Net Earnings | 128,238 | 181,703 | |||||||
Diluted Earnings per Common Share | $ | 2.32 | $ | 3.06 | |||||
Adjusted EBITDA | $ | 334,149 | $ | 394,921 | |||||
Reconciliation to Adjusted EBITDA: | |||||||||
Earnings Before Income Taxes | $ | 207,356 | $ | 284,448 | |||||
Add back: | |||||||||
Interest Expense, net | 38,813 | 31,223 | |||||||
Depreciation of Property Assets | 76,451 | 73,361 | |||||||
Amortization and Write-down of Intangibles | 11,529 | 5,889 | |||||||
Adjusted EBITDA | $ | 334,149 | $ | 394,921 | |||||
SELECTED BALANCE SHEET HIGHLIGHTS - UNAUDITED
December 31, | |||||||||
2013 | 2012 | ||||||||
(In thousands of dollars) | Revised | ||||||||
Cash and Cash Equivalents | $ | 42,274 | $ | 61,087 | |||||
Receivables, net | 58,686 | 52,819 | |||||||
Prepaid Expenses and Other Assets | 78,471 | 71,963 | |||||||
Rental Merchandise, net | |||||||||
On Rent | 914,618 | 807,397 | |||||||
Held for Rent | 210,450 | 200,122 | |||||||
Total Assets | $ | 3,018,553 | $ | 2,859,817 | |||||
Senior Debt | $ | 366,275 | $ | 387,500 | |||||
Senior Notes | 550,000 | 300,000 | |||||||
Total Liabilities | 1,675,002 | 1,395,759 | |||||||
Stockholders' Equity | $ | 1,343,551 | $ | 1,464,058 | |||||
Note: During the fourth quarter of 2013, the Company revised its 2012 balance sheet and its statements of earnings for the three- and twelve-month periods ended December 31, 2012, to correct immaterial errors from prior years that resulted in an overstatement of on rent merchandise and understatements of held for rent merchandise and receivables. The correction resulted in a decrease in on rent merchandise of $14.5 million and increases in held for rent merchandise of $1.2 million and receivables of $4.0 million at December 31, 2012, respectively. The above corrections resulted in decreases to net income of $0.3 million and $1.8 million for the three- and twelve-month periods ended December 31, 2012, respectively. The statements of earnings for the three-month periods ended March 31, 2013, June 30, 2013, and September 30, 2013, will be revised in future filings to decrease net earnings by $0.3 million, $0.1 million and $0.5 million, respectively.
Rent-A-Center, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
(In thousands, except per share data) | Revised | Revised | |||||||||||||
Revenues | |||||||||||||||
Store | |||||||||||||||
Rentals and fees | $ | 684,510 | $ | 665,054 | $ | 2,698,395 | $ | 2,654,081 | |||||||
Merchandise sales | 51,582 | 57,742 | 278,753 | 300,077 | |||||||||||
Installment sales | 20,567 | 19,131 | 72,705 | 68,356 | |||||||||||
Other | 3,889 | 4,111 | 18,133 | 16,391 | |||||||||||
Franchise | |||||||||||||||
Merchandise sales | 7,919 | 11,095 | 30,991 | 38,427 | |||||||||||
Royalty income and fees | 1,144 | 1,247 | 5,206 | 5,314 | |||||||||||
769,611 | 758,380 | 3,104,183 | 3,082,646 | ||||||||||||
Cost of revenues | |||||||||||||||
Store | |||||||||||||||
Cost of rentals and fees | 175,395 | 164,136 | 683,221 | 646,090 | |||||||||||
Cost of merchandise sold | 40,303 | 49,181 | 216,206 | 241,219 | |||||||||||
Cost of installment sales | 7,630 | 7,170 | 25,771 | 24,572 | |||||||||||
Franchise cost of merchandise sold | 7,467 | 10,707 | 29,539 | 36,848 | |||||||||||
230,795 | 231,194 | 954,737 | 948,729 | ||||||||||||
Gross profit | 538,816 | 527,186 | 2,149,446 | 2,133,917 | |||||||||||
Operating expenses | |||||||||||||||
Salaries and other expenses | 451,402 | 412,679 | 1,733,324 | 1,663,857 | |||||||||||
General and administrative expenses | 44,197 | 34,938 | 158,424 | 148,500 | |||||||||||
Amortization and write-down of intangibles | 8,835 | 626 | 11,529 | 5,889 | |||||||||||
504,434 | 448,243 | 1,903,277 | 1,818,246 | ||||||||||||
Operating profit | 34,382 | 78,943 | 246,169 | 315,671 | |||||||||||
Interest expense | 10,855 | 6,649 | 39,628 | 32,065 | |||||||||||
Interest income | (156 | ) | (372 | ) | (815 | ) | (842 | ) | |||||||
Earnings before income taxes | 23,683 | 72,666 | 207,356 | 284,448 | |||||||||||
Income tax expense | 10,619 | 25,457 | 79,118 | 102,745 | |||||||||||
NET EARNINGS | $ | 13,064 | $ | 47,209 | $ | 128,238 | $ | 181,703 | |||||||
Basic weighted average shares | 52,946 | 58,356 | 54,804 | 58,913 | |||||||||||
Basic earnings per common share | $ | 0.25 | $ | 0.81 | $ | 2.34 | $ | 3.08 | |||||||
Diluted weighted average shares | 53,247 | 58,793 | 55,162 | 59,405 | |||||||||||
Diluted earnings per common share | $ | 0.25 | $ | 0.80 | $ | 2.32 | $ | 3.06 | |||||||
Rent-A-Center, Inc. and Subsidiaries
SEGMENT INFORMATION HIGHLIGHTS - UNAUDITED
(In thousands of dollars) | Three Months Ended December 31, 2013 | ||||||||||||||||||
Core U.S. | Acceptance Now | International | Franchising | Total | |||||||||||||||
Revenue | $ | 609,912 | $ | 133,589 | $ | 17,047 | $ | 9,063 | $ | 769,611 | |||||||||
Gross profit | 444,180 | 80,781 | 12,259 | 1,596 | 538,816 | ||||||||||||||
Operating profit | 26,928 | 14,813 | (7,568 | ) | 209 | 34,382 | |||||||||||||
Depreciation of property assets | 16,533 | 1,462 | 1,783 | 19 | 19,797 | ||||||||||||||
Amortization and write-down of intangibles | 7,625 | 142 | 1,068 | — | 8,835 | ||||||||||||||
Capital expenditures | 27,282 | 4,055 | 3,269 | — | 34,606 | ||||||||||||||
(In thousands of dollars) | Three Months Ended December 31, 2012 | ||||||||||||||||||
Core U.S. | Acceptance Now | International | Franchising | Total | |||||||||||||||
Revenue | $ | 638,650 | $ | 94,657 | $ | 12,731 | $ | 12,342 | $ | 758,380 | |||||||||
Gross profit | 459,762 | 57,083 | 8,706 | 1,635 | 527,186 | ||||||||||||||
Operating profit | 74,769 | 10,264 | (6,864 | ) | 774 | 78,943 | |||||||||||||
Depreciation of property assets | 16,104 | 1,011 | 1,482 | 20 | 18,617 | ||||||||||||||
Amortization and write-down of intangibles | 497 | 129 | — | — | 626 | ||||||||||||||
Capital expenditures | 25,591 | 1,693 | 2,066 | — | 29,350 | ||||||||||||||
(In thousands of dollars) | Year Ended December 31, 2013 | ||||||||||||||||||
Core U.S. | Acceptance Now | International | Franchising | Total | |||||||||||||||
Revenue | $ | 2,507,498 | $ | 502,043 | $ | 58,445 | $ | 36,197 | $ | 3,104,183 | |||||||||
Gross profit | 1,810,160 | 290,741 | 41,887 | 6,658 | 2,149,446 | ||||||||||||||
Operating profit | 205,928 | 66,625 | (28,237 | ) | 1,853 | 246,169 | |||||||||||||
Depreciation of property assets | 64,852 | 5,036 | 6,484 | 79 | 76,451 | ||||||||||||||
Amortization and write-down of intangibles | 9,892 | 569 | 1,068 | — | 11,529 | ||||||||||||||
Capital expenditures | 84,819 | 11,076 | 12,472 | — | 108,367 | ||||||||||||||
Rental merchandise, net | |||||||||||||||||||
On rent | 609,332 | 284,421 | 20,865 | — | 914,618 | ||||||||||||||
Held for rent | 194,734 | 3,837 | 11,879 | — | 210,450 | ||||||||||||||
Total assets | 2,561,688 | 375,920 | 79,257 | 1,688 | 3,018,553 | ||||||||||||||
(In thousands of dollars) | Year Ended December 31, 2012 | ||||||||||||||||||
Core U.S. | Acceptance Now | International | Franchising | Total | |||||||||||||||
Revenue | $ | 2,655,411 | $ | 343,283 | $ | 40,211 | $ | 43,741 | $ | 3,082,646 | |||||||||
Gross profit | 1,904,586 | 194,607 | 27,831 | 6,893 | 2,133,917 | ||||||||||||||
Operating profit | 318,784 | 25,261 | (30,700 | ) | 2,326 | 315,671 | |||||||||||||
Depreciation of property assets | 63,793 | 3,631 | 5,848 | 89 | 73,361 | ||||||||||||||
Amortization and write-down of intangibles | 2,103 | 2,819 | 967 | — | 5,889 | ||||||||||||||
Capital expenditures | 84,680 | 5,275 | 12,498 | — | 102,453 | ||||||||||||||
Rental merchandise, net | |||||||||||||||||||
On rent | 589,181 | 204,640 | 13,576 | — | 807,397 | ||||||||||||||
Held for rent | 190,703 | 3,007 | 6,412 | — | 200,122 | ||||||||||||||
Total assets | 2,504,954 | 286,774 | 65,378 | 2,711 | 2,859,817 | ||||||||||||||
Rent-A-Center, Inc. and Subsidiaries
LOCATION ACTIVITY - UNAUDITED
Three Months Ended December 31, 2013 | ||||||||||||||
Core U.S. | Acceptance Now | International | Franchising | Total | ||||||||||
Locations at beginning of period | 2,974 | 1,254 | 168 | 213 | 4,609 | |||||||||
New location openings | 22 | 91 | 1 | 31 | 145 | |||||||||
Acquired locations remaining open | 35 | — | — | — | 35 | |||||||||
Closed locations | ||||||||||||||
Merged with existing locations | 7 | 13 | — | — | 20 | |||||||||
Sold or closed with no surviving location | 32 | 7 | — | 65 | 104 | |||||||||
Locations at end of period | 2,992 | 1,325 | 169 | 179 | 4,665 | |||||||||
Acquired locations closed and accounts merged with existing locations | 20 | — | — | — | 20 | |||||||||
Three Months Ended December 31, 2012 | ||||||||||||||
Core U.S. | Acceptance Now | International | Franchising | Total | ||||||||||
Locations at beginning of period | 2,983 | 882 | 114 | 220 | 4,199 | |||||||||
New location openings | 12 | 103 | 9 | 7 | 131 | |||||||||
Acquired locations remaining open | 4 | — | — | — | 4 | |||||||||
Closed locations | ||||||||||||||
Merged with existing locations | 9 | 19 | — | — | 28 | |||||||||
Sold or closed with no surviving location | — | — | 15 | 3 | 18 | |||||||||
Locations at end of period | 2,990 | 966 | 108 | 224 | 4,288 | |||||||||
Acquired locations closed and accounts merged with existing locations | 6 | — | — | — | 6 | |||||||||
Year Ended December 31, 2013 | ||||||||||||||
Core U.S. | Acceptance Now | International | Franchising | Total | ||||||||||
Locations at beginning of period | 2,990 | 966 | 108 | 224 | 4,288 | |||||||||
New location openings | 37 | 411 | 63 | 40 | 551 | |||||||||
Acquired locations remaining open | 47 | — | — | — | 47 | |||||||||
Closed locations | ||||||||||||||
Merged with existing locations | 47 | 44 | 2 | — | 93 | |||||||||
Sold or closed with no surviving location | 35 | 8 | — | 85 | 128 | |||||||||
Locations at end of period | 2,992 | 1,325 | 169 | 179 | 4,665 | |||||||||
Acquired locations closed and accounts merged with existing locations | 38 | — | — | — | 38 | |||||||||
Year Ended December 31, 2012 | ||||||||||||||
Core U.S. | Acceptance Now | International | Franchising | Total | ||||||||||
Locations at beginning of period | 2,994 | 750 | 80 | 216 | 4,040 | |||||||||
New location openings | 35 | 325 | 45 | 18 | 423 | |||||||||
Acquired locations remaining open | 6 | — | — | — | 6 | |||||||||
Closed locations | ||||||||||||||
Merged with existing locations | 40 | 95 | 1 | — | 136 | |||||||||
Sold or closed with no surviving location | 5 | 14 | 16 | 10 | 45 | |||||||||
Locations at end of period | 2,990 | 966 | 108 | 224 | 4,288 | |||||||||
Acquired locations closed and accounts merged with existing locations | 31 | — | — | — | 31 | |||||||||