Rent-A-Center, Inc. Reports Second Quarter 2004 Results; Diluted Earnings per Share of $0.62; Board Approves Increased Stock Repurchase Authorization
PLANO, Texas--(BUSINESS WIRE)--July 26, 2004--Rent-A-Center, Inc. (the "Company") (Nasdaq/NNM:RCII), the leading rent-to-own operator in the U.S., today announced quarterly revenues and net earnings for the period ended June 30, 2004.
The Company, the nation's largest rent-to-own operator, had total revenues for the quarter ended June 30, 2004, of $573.0 million, a $19.7 million increase from $553.3 million for the same period in the prior year. This increase of 3.6% in revenues was primarily driven by incremental revenues generated in new and acquired stores, offset by a decrease in same store sales of 2.3%.
Net earnings for the quarter ended June 30, 2004, were $51.2 million, or $0.62 per diluted share, representing an increase of 6.9% over $0.58 per diluted share, or net earnings of $52.3 million, when excluding the charges discussed below, reported for the same period in the prior year. The increase in earnings per diluted share is primarily the result of lower interest expense as well as a reduction in the number of the Company's outstanding shares, offset by a slight decrease in net earnings attributable to an increase in operating expenses related to new store openings as well as the recently closed and integrated acquisitions of Rainbow Rentals and Rent-Rite.
Net earnings for the six months ended June 30, 2004, were $103.4 million, or $1.25 per diluted share, representing an increase of 8.7% over $1.15 per diluted share, or net earnings of $103.3 million, when excluding the charges discussed below, for the same period in the prior year. Total revenues for the six months ended June 30, 2004, increased to $1,158.4 million from $1,119.7 million in 2003, representing an increase of 3.5%. Same store revenues for the six-month period ending June 30, 2004, decreased 2.2%.
Through the six-month period ended June 30, 2004, the Company generated cash flow from operations of approximately $199.7 million, an increase of over 30% for the same period of the prior year, while ending the quarter with $86.2 million of cash on hand. The Company also announced that its Board of Directors has increased the authorization for stock repurchases under the Company's common stock repurchase program to $200 million. Through the six month period ended June 30, 2004, the Company repurchased 2,621,400 shares for $77.3 million in cash under the program and has utilized a total of $104.2 million of the total amount authorized by its Board of Directors since the inception of the plan.
"We are pleased to be reporting diluted earnings per share of $0.62, the high side of our guidance for the quarter," commented Mark E. Speese, the Company's Chairman and Chief Executive Officer. "While we have seen an increase in total revenues, as expected, our net earnings are slightly below last year, reflecting the temporary impact of our two recent acquisitions, our new store initiatives, as well as the impact on our same store sales from, among other things, higher fuel and energy costs that burden our customer." Speese continued, "We continue to believe the recent acquisitions will add approximately $27 million to our operating profits in 2005 as our proven business model takes root in the acquired stores." Speese added, "Therefore, we intend to continue pursuing our long term strategic initiative of increasing our store base between 5% and 10% annually for the next several years, realizing the negative impact on our same store sales resulting from cannibalization as we strategically open stores near market areas served by existing stores in order to meet customer service objectives, gain incremental sales and increase market penetration."
During the second quarter of 2004, the Company opened 25 new locations and acquired 161 additional stores while consolidating 12 locations into existing stores. The Company also purchased accounts from 63 additional locations during the second quarter of 2004. Since June 30, 2004, the Company has opened four additional new stores while consolidating one location into an existing store.
During the second quarter of 2003, the Company recorded $27.7 million in pre-tax charges associated with its recapitalization. These charges reduced diluted earnings per share in the second quarter of 2003 by $0.19 to the reported diluted earnings per share of $0.39. Additionally, these charges reduced diluted earnings per share for the six month period ended June 30, 2003, by $0.19 to the reported diluted earnings per share of $0.95.
Rent-A-Center will host a conference call to discuss the second quarter financial results and other business updates on Tuesday morning, July 27, 2004, 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 2,849 company-owned stores nationwide and in Canada and Puerto Rico. The stores generally offer high-quality, durable goods such as home electronics, appliances, computers, and furniture and accessories to consumers 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 franchisor of 319 rent-to-own stores, 307 of which operate under the trade name of "ColorTyme," and the remaining 12 of which operate under the "Rent-A-Center" name.
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 effects of an anticipated non-cash finance charge of $4.2 million to be recorded in the third quarter of 2004 associated with the recent refinancing of the Company's senior debt, any repurchases of common stock the Company may make or the potential impact of store acquisitions that may be completed after July 27, 2004.
THIRD QUARTER 2004 GUIDANCE:
Revenues
-- The Company expects total revenues to be in the range of $585
million to $590 million.
-- Store rental and fee revenues are expected to be between $529
million and $534 million.
-- Total store revenues are expected to be in the range of $572
million to $577 million.
-- Same store sales are expected to be in the (1.5%) to (2.5%)
range.
-- The Company expects to open 20-25 new store locations.
Expenses
-- The Company expects depreciation of rental merchandise to be
between 21.5% and 21.9% of store rental and fee revenue and
cost of goods merchandise sales to be between 73% and 78% of
store merchandise sales.
-- Store salaries and other expenses are expected to be in the
range of 56.0% and 57.5% of total store revenue.
-- General and administrative expenses are expected to be between
3.2% and 3.4% of total revenue.
-- Net interest expense is expected to be approximately $9.0
million and amortization is expected to be approximately $3.0
million.
-- The effective tax rate is expected to be between approximately
37.5% and 38.0% of pre-tax income.
-- Diluted earnings per share are estimated to be in the range of
$0.58 to $0.60.
-- Diluted shares outstanding are estimated to be between 81.0
million and 82.0 million shares.
FISCAL 2004 GUIDANCE:
Revenues
-- The Company expects total revenues to be in the range of $2.36
billion and $2.38 billion.
-- Store rental and fee revenues are expected to be between $2.10
billion and $2.12 billion.
-- Total store revenues are expected to be in the range of $2.30
billion and $2.32 billion.
-- Same store sales are expected to be in the (1.0%) to (2.0%)
range.
-- The Company expects to open approximately 100 new store
locations.
Expenses
-- The Company expects depreciation of rental merchandise to be
between 21.5% and 21.9% of store rental and fee revenue and
cost of goods merchandise sales to be between 72% and 76% of
store merchandise sales.
-- Store salaries and other expenses are expected to be in the
range of 54.0% and 55.5% of total store revenue.
-- General and administrative expenses are expected to be between
3.1% and 3.3% of total revenue.
-- Net interest expense is expected to be between $35.0 million
and $40.0 million and amortization of intangibles is expected
to be approximately $11.0 million.
-- The effective tax rate is expected to be between approximately
37.5% and 38.0% of pre-tax income.
-- Diluted earnings per share are estimated to be in the range of
$2.62 to $2.70.
-- Diluted shares outstanding are estimated to be between 81.0
million and 83.0 million shares.
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 stores; the Company's ability to acquire additional rent-to-own stores on favorable terms; the Company's ability to enhance the performance of these acquired stores; the Company's ability to control store level costs; the results of the Company's litigation; the passage of legislation adversely affecting the rent-to-own industry; interest rates; the Company's ability to collect on its rental purchase agreements; changes in the Company's effective tax rate; changes in the Company's stock price and the number of shares of common stock that the Company may or may not repurchase; the Company's ability to enhance the performance of the acquired Rainbow and Rent-Rite stores; the ability to realize the cost savings anticipated; and the other risks detailed from time to time in the Company's SEC filings, including but not limited to, its annual report on Form 10-K/A for the year ended Dec. 31, 2003, and its quarterly report on Form 10-Q for the three month period ended March 31, 2004. 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.
Rent-A-Center, Inc. and Subsidiaries
STATEMENT OF EARNINGS HIGHLIGHTS
(In Thousands of Dollars, except per share data)
Three Months Ended June 30,
-----------------------------------
2004 2003 2003
----------- ----------- -----------
Before After
Finance Finance
Charges Charges
----------- ----------- -----------
Total Revenue $572,985 $553,260 $553,260
Operating Profit 90,223 97,238 97,238
Net Earnings 51,194 52,293 35,300 (1)
Diluted Earnings per Common
Share $0.62 $0.58 $0.39 (1)
EBITDA $105,215 $111,367 $111,367
Reconciliation to EBITDA:
Reported earnings before income
taxes 81,459 85,376 57,628
Add back:
Finance charge from
recapitalization -- -- 27,748
Interest expense, net 8,764 11,862 11,862
Depreciation of property
assets 11,834 10,833 10,833
Amortization of intangibles 3,158 3,296 3,296
----------- ----------- -----------
EBITDA $105,215 $111,367 $111,367
Six Months Ended June 30,
-----------------------------------
2004 2003 2003
----------- ----------- -----------
Before After
Finance Finance
Charges Charges
----------- ----------- -----------
Total Revenue $1,158,365 $1,119,666 $1,119,666
Operating Profit 182,882 193,529 193,529
Net Earnings 103,403 103,252 86,259 (1)
Diluted Earnings per Common
Share $1.25 $1.14 $0.95 (1)
EBITDA $211,611 $220,651 $220,651
Reconciliation to EBITDA:
Reported earnings before income
taxes 165,262 168,915 141,167
Add back:
Finance charge from
recapitalization -- -- 27,748
Interest expense, net 17,620 24,614 24,614
Depreciation of property
assets 23,083 20,953 20,953
Amortization of intangibles 5,646 6,169 6,169
----------- ----------- -----------
EBITDA $211,611 $220,651 $220,651
(1) Including the effects of $27.7 million in pre-tax financing costs
associated with refinancing the Company's capital structure. These
charges reduced diluted earnings per share in the second quarter
of 2003 by $0.19 from $0.58 per diluted share to $0.39, as well as
reducing diluted earnings per share for the six month period ended
June 30, 2003, to the reported $0.95 from $1.14 per diluted share.
Selected Balance Sheet Data: (in Thousands of June 30, June 30,
Dollars) 2004 2003
---------- ----------
Cash and cash equivalents $86,164 $248,250
Prepaid expenses and other assets 57,155 34,726
Rental merchandise, net
On rent 565,977 530,985
Held for rent 169,044 143,415
Total Assets 1,930,203 1,870,277
Senior debt 396,000 400,000
Subordinated notes payable 300,000 384,455
Total Liabilities 1,069,985 1,057,340
Stockholders' Equity 860,218 812,937
Rent-A-Center, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
(In Thousands of Dollars, except per share data) Three Months Ended
June 30,
-------------------
2004 2003
--------- ---------
Unaudited
Store Revenue
Rentals and Fees $520,593 $504,352
Merchandise Sales 34,599 32,528
Installment Sales 5,801 4,745
Other 967 812
--------- ---------
561,960 542,437
Franchise Revenue
Franchise Merchandise Sales 9,668 9,261
Royalty Income and Fees 1,357 1,562
--------- ---------
Total Revenue 572,985 553,260
Operating Expenses
Direct Store Expenses
Depreciation of Rental Merchandise 112,113 109,341
Cost of Merchandise Sold 25,350 24,235
Cost of Installment Sales 2,477 2,090
Salaries and Other Expenses 311,058 291,726
Franchise Operation Expenses
Cost of Franchise Merchandise Sales 9,214 8,946
--------- ---------
460,212 436,338
General and Administrative Expenses 19,392 16,388
Amortization of Intangibles 3,158 3,296
--------- ---------
Total Operating Expenses 482,762 456,022
--------- ---------
Operating Profit 90,223 97,238
Finance Charge from Recapitalization -- 27,748
Interest Income (1,488) (1,208)
Interest Expense 10,252 13,070
--------- ---------
Earnings before Income Taxes 81,459 57,628
Income Tax Expense 30,265 22,328
--------- ---------
NET EARNINGS 51,194 35,300
Preferred Dividends -- --
--------- ---------
Net earnings allocable to common stockholders $51,194 $35,300
========= =========
BASIC WEIGHTED AVERAGE SHARES 79,464 87,498
========= =========
BASIC EARNINGS PER COMMON SHARE $0.64 $0.40
========= =========
DILUTED WEIGHTED AVERAGE SHARES 81,980 90,768
========= =========
DILUTED EARNINGS PER COMMON SHARE $0.62 $0.39
========= =========
Rent-A-Center, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
(In Thousands of Dollars, except per share Six Months Ended
data) June 30,
----------------------
2004 2003
----------- ----------
Unaudited
Store Revenue
Rentals and Fees $1,024,883 $997,771
Merchandise Sales 94,022 85,192
Installment Sales 12,499 10,790
Other 2,047 1,527
----------- ----------
1,133,451 1,095,280
Franchise Revenue
Franchise Merchandise Sales 22,132 21,333
Royalty Income and Fees 2,782 3,053
----------- ----------
Total Revenue 1,158,365 1,119,666
Operating Expenses
Direct Store Expenses
Depreciation of Rental Merchandise 220,428 216,001
Cost of Merchandise Sold 64,961 60,783
Cost of Installment Sales 5,622 5,321
Salaries and Other Expenses 620,142 584,222
Franchise Operation Expenses
Cost of Franchise Merchandise Sales 21,106 20,497
----------- ----------
932,259 886,824
General and Administrative Expenses 37,578 33,144
Amortization of Intangibles 5,646 6,169
----------- ----------
Total Operating Expenses 975,483 926,137
----------- ----------
Operating Profit 182,882 193,529
Finance Charge from Recapitalization -- 27,748
Interest Income (2,991) (1,979)
Interest Expense 20,611 26,593
----------- ----------
Earnings before Income Taxes 165,262 141,167
Income Tax Expense 61,859 54,908
----------- ----------
NET EARNINGS 103,403 86,259
Preferred Dividends -- --
----------- ----------
Net earnings allocable to common stockholders $103,403 $86,259
=========== ==========
BASIC WEIGHTED AVERAGE SHARES 79,874 87,370
=========== ==========
BASIC EARNINGS PER COMMON SHARE $1.29 $0.99
=========== ==========
DILUTED WEIGHTED AVERAGE SHARES 82,433 90,303
=========== ==========
DILUTED EARNINGS PER COMMON SHARE $1.25 $0.95
=========== ==========
CONTACT: Rent-A-Center, Inc., Plano
David E. Carpenter, 972-801-1214
dcarpenter@racenter.com
SOURCE: Rent-A-Center, Inc.