Rent-A-Center Concludes Review of Strategic and Financial Alternatives, Announces New 2018 Guidance Based on Materially Improved Financial Performance and Provides Business Updates
The Board, in consultation with its financial and legal advisors, conducted a comprehensive review of strategic and financial alternatives, including a possible sale of the Company, and unanimously determined that the continued execution of Rent-A-Center’s previously announced strategic plan is in the best interest of the Company and its stockholders. Through its robust review process, the Board focused on evaluating opportunities to maximize stockholder value. The Board, which includes a representative of Rent-A-Center’s largest stockholder, explored a range of potential transactions before determining that the continued execution of the Company's strategic plan, which the Company has been successfully pursuing since the appointment of Mitchell E. Fadel as its Chief Executive Officer at the beginning of the year, provides the best opportunity to enhance long-term stockholder value. The Board was prepared to pursue a sale of the Company if it concluded that such a transaction would both maximize stockholder value and provide certainty of closing. While the Company actively explored a possible sale, the Board unanimously determined that it did not receive any acquisition proposals meeting either of its objectives for a sale of the Company.
“Our Board conducted a thorough review of alternatives for our business,
and unanimously determined that the execution of our strategic plan
remains the best opportunity to deliver value to our stockholders
compared to the alternatives available to us,” said
“While today’s announcement represents the conclusion of our formal
strategic and financial alternatives review process, we will continue to
regularly review opportunities to drive value on behalf of our
stockholders,” said
In connection with the Board’s determination to continue executing the
Company’s strategic plan, the results of which are exceeding
management’s expectations,
Q2 Guidance
-
Consolidated Revenues of
$640 to $660 million -
Core U.S. Revenues of
$450 to $460 million -
Acceptance NOW Revenues of
$170 to $180 million
-
Core U.S. Revenues of
-
Adjusted EBITDA in the range of
$40 to $50 million -
Non-GAAP diluted earnings per share in the range of
$0.20 to $0.30 cents -
Free Cash Flow of
$30 to $40 million
2018 Guidance
-
Consolidated Revenues of
$2.640 to $2.690 billion -
Core U.S. Revenues of
$1.835 to $1.865 billion -
Acceptance NOW Revenues of
$730 to $750 million
-
Core U.S. Revenues of
-
Adjusted EBITDA in the range of
$160 to $180 million -
Non-GAAP diluted earnings per share in the range of
$0.65 to $0.90 cents -
Free Cash Flow of
$210 to $230 million (compared to at least$130 million announced in February and at least$170 million announced in April) -
Net Debt of
$405 to $425 million at year end(1) - Consolidated leverage ratio of 2.3 to 2.7 at year end(2)
(1) Net debt equals total debt less cash over
(2)
Consolidated leverage ratio is net debt divided by adjusted EBITDA
Operational performance continues to exceed the Company’s internal
expectations in both the Core and ANow businesses primarily driven by
strong portfolio performance. Monthly Core same store sales have
continued to improve sequentially during the second quarter. Positive
Core customer growth was generated in April and May for the first time
in several years and customer retention is significantly higher than
historical averages driven by pricing changes, the 180 day same as cash
offering, and enhanced marketing efforts. The value proposition changes
recently implemented in most of the Company’s ANow locations have
resulted in double digit increases in demand, and
Core U.S.
- April Same Store Sales: 3.3 percent
- May Same Store Sales: 3.6 percent
ANow
- April Same Store Sales: 2.3 percent
- May Same Store Sales: 2.5 percent
Guidance Policy
The Company
provides selected guidance and will only provide updates if there is a
material change versus the original guidance.
Non-GAAP Reconciliation
This press release refers to the
non-GAAP measures EBITDA (earnings before interest, taxes, depreciation
and amortization), Net Debt (total debt less cash over
In light of the updated financial guidance and financial and operational results information reported by the Company today, the Board determined it was appropriate at this time to suspend its current trading blackout period applicable to the Company’s directors, executive officers, divisional vice presidents, senior vice presidents, vice presidents, and certain other designated home office co-workers.
About
A rent-to-own industry leader,
Forward-Looking Statements
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,” ”believe,” or “confident,” 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; factors affecting the disposable
income available to the Company's current and potential customers;
changes in the unemployment rate; uncertainties concerning the
completion of the Company’s review of its strategic and financial
alternatives; difficulties encountered in improving the financial and
operational performance of the Company's business segments; the
Company’s ability to refinance its senior credit facility expiring in
early 2019 on favorable terms, if at all; risks associated with pricing
changes and strategies being deployed in the Company's businesses; the
Company's ability to realize additional benefits from its initiatives
regarding cost-savings and other EBITDA enhancements, efficiencies and
working capital improvements; the Company's ability to execute its
franchise strategy; failure to manage the Company's store labor and
other store expenses; the Company’s ability to successfully execute its
strategic initiatives; disruptions caused by the operation of the
Company's store information management system; the Company's transition
to more-readily scalable, “cloud-based” solutions; the Company's ability
to develop and successfully implement digital or E-commerce
capabilities, including mobile applications and enhancements to its
unmanned platform for its Acceptance NOW segment; disruptions in the
Company's supply chain; limitations of, or disruptions in, the Company's
distribution network, and the impact, effects and results of the changes
the Company has made and is making to its distribution methods; rapid
inflation or deflation in the prices of the Company's products; the
Company's ability to execute and the effectiveness of a store
consolidation, including the Company's ability to retain the revenue
from customer accounts merged into another store location as a result of
a store consolidation; the Company's available cash flow; 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; the Company's ability to control costs and
increase profitability; the Company's ability to retain the revenue
associated with acquired customer accounts and enhance the performance
of acquired stores; 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;
information technology and data security costs; the impact of any
breaches in data security or other disturbances to the Company's
information technology and other networks and the Company's ability to
protect the integrity and security of individually identifiable data of
its customers and employees; changes in the Company's stock price, the
number of shares of common stock that it may or may not repurchase, and
the Company’s dividend policy and any changes thereto, 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, 2017 and its
Quarterly Report on Form 10-Q for the quarter ended
View source version on businesswire.com: https://www.businesswire.com/news/home/20180610005075/en/
Source:
Investors:
Rent-A-Center, Inc.
Maureen Short,
972-801-1899
Interim Chief Financial Officer
maureen.short@rentacenter.com
or
Media:
Joele
Frank, Wilkinson Brimmer Katcher
James Golden / Matthew Gross /
Aura Reinhard, 212-355-4449