Rent-A-Center, Inc. Reports Second Quarter 2009 Results
Second Quarter 2009 Results
Total revenues for the quarter ended
Net earnings and net earnings per diluted share for the quarter ended
When excluding the item above, adjusted net earnings per diluted share
for the quarter ended
“We are pleased that our customer traffic in the quarter exceeded our
expectations,” commented
Six Months Ended
Total revenues for the six months ended
Net earnings and net earnings per diluted share for the six months ended
Net earnings and net earnings per diluted share for the six months ended
When excluding the items above, adjusted net earnings per diluted share
for the six months ended
Through the six month period ended
Operations Highlights
During the three and six month periods ended
| Three Months Ended | Six Months Ended | |||
| June 30, 2009 | June 30, 2009 | |||
| Company-Owned Stores | ||||
| Stores at beginning of period | 3,038 | 3,037 | ||
| New store openings | 8 | 18 | ||
| Acquired stores remaining open | - | - | ||
| Closed stores | ||||
| Merged with existing stores | 24 | 32 | ||
| Sold or closed with no surviving store | 1 | 2 | ||
| Stores at end of period | 3,021 | 3,021 | ||
|
Acquired stores closed and accounts merged with existing stores |
5 | 12 | ||
| Financial Services | ||||
| Stores at beginning of period | 351 | 351 | ||
| New store openings | 2 | 2 | ||
| Acquired stores remaining open | - | - | ||
| Closed stores | ||||
| Merged with existing stores | 3 | 3 | ||
| Sold or closed with no surviving store | - | - | ||
| Stores at end of period | 350 | 350 | ||
|
Acquired stores closed and accounts merged with existing stores |
1 | 1 |
Since
Significant Items
Litigation Credit Related to the Hilda Perez Matter. In
Restructuring Plan Expenses. During the first quarter of
2008, the Company recorded a pre-tax restructuring expense of
approximately
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, reduction in outstanding
indebtedness, or the potential impact of acquisitions or dispositions
that may be completed after
THIRD QUARTER 2009 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
$573 million and $585 million . -
Total store revenues are expected to be in the range of
$657 million to$672 million . - Same store sales are expected to be in the range of down 4% to down 6%.
- The Company expects to open 10 to 15 new company-owned store locations.
Expenses
- The Company expects cost of rental and fees to be between 22.4% and 22.8% of store rental and fee revenue and cost of merchandise sold to be between 71.0% and 75.0% of store merchandise sales.
- Store salaries and other expenses are expected to be in the range of 58.4% to 59.9% of total store revenue.
- General and administrative expenses are expected to be approximately 5% of total revenue.
-
Net interest expense is expected to be approximately
$5 million and depreciation of property assets is expected to be approximately$17 million . - The effective tax rate is expected to be approximately 38% of pre-tax income.
-
Diluted earnings per share are estimated to be in the range of
$0.46 to$0.52 . - Diluted shares outstanding are estimated to be between 66.3 million and 67.1 million.
FISCAL 2009 GUIDANCE:
Revenues
-
The Company expects total revenues to be in the range of
$2.750 billion and$2.780 billion . -
Store rental and fee revenues are expected to be between
$2.340 billion and $2.370 billion . -
Total store revenues are expected to be in the range of
$2.710 billion and$2.740 billion . - Same store sales are expected to be in the range of down 2% to down 4%.
- The Company expects to open 30 to 40 new company-owned store locations.
Expenses
- The Company expects cost of rental and fees to be between 22.4% and 22.8% of store rental and fee revenue and cost of merchandise sold to be between 71.0% and 75.0% of store merchandise sales.
- Store salaries and other expenses are expected to be in the range of 57.0% to 58.5% of total store revenue.
- General and administrative expenses are expected to be approximately 5% of total revenue.
-
Net interest expense is expected to be approximately
$28 million and depreciation of property assets is expected to be between$65 million and $70 million . - The effective tax rate is expected to be approximately 38% of pre-tax income.
-
Diluted earnings per share are estimated to be in the range of
$2.32 to$2.42 . - Diluted shares outstanding are estimated to be between 66.3 million and 67.1 million.
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 successfully add financial services locations
within its existing rent-to-own stores; the Company’s ability to
identify and successfully enter new lines of business offering products
and services that appeal to its customer demographic, including its
financial services products; 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 Company’s ability
to enter into new and collect on its short-term loans; 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; 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 any material litigation; and the other
risks detailed from time to time in the Company’s
| Rent-A-Center, Inc. and Subsidiaries | |||||||||||||||||||||||
| STATEMENT OF EARNINGS HIGHLIGHTS | |||||||||||||||||||||||
| (In Thousands of Dollars, except per share data) | Three Months Ended June 30, | ||||||||||||||||||||||
| 2009 | 2009 | 2008 | |||||||||||||||||||||
| Before Significant Items (Non-GAAP Earnings) | After Significant Items (GAAP Earnings) |
(GAAP Earnings) |
|||||||||||||||||||||
| Total Revenue | $ | 679,609 | $ | 679,609 | $ | 719,031 | |||||||||||||||||
| Operating Profit | 73,414 | 75,283 |
(1) |
74,434 |
(2) |
||||||||||||||||||
| Net Earnings | 40,795 | 41,945 |
(1) |
37,741 | |||||||||||||||||||
| Diluted Earnings per Common Share | $ | 0.61 | $ | 0.63 |
(1) |
$ | 0.56 | ||||||||||||||||
| Adjusted EBITDA | $ | 91,477 | $ | 91,477 | $ | 96,271 | |||||||||||||||||
| Reconciliation to Adjusted EBITDA: | |||||||||||||||||||||||
| Earnings Before Income Taxes | $ | 65,636 | $ | 67,505 | $ | 59,984 | |||||||||||||||||
| Add back: | |||||||||||||||||||||||
| Restructuring Expense (Credit) |
— |
|
— | (15) | |||||||||||||||||||
| Litigation Expense (Credit) | — | (1,869) | — | ||||||||||||||||||||
| Interest Expense, net | 7,778 | 7,778 | 14,450 | ||||||||||||||||||||
| Depreciation of Property Assets | 16,557 | 16,557 | 18,190 | ||||||||||||||||||||
| Amortization and Write-down of Intangibles | 1,506 | 1,506 | 3,662 | ||||||||||||||||||||
| Adjusted EBITDA | $ | 91,477 | $ | 91,477 | $ | 96,271 | |||||||||||||||||
| (In Thousands of Dollars, except per share data) | Six Months Ended June 30, | ||||||||||||||||||||||
| 2009 | 2009 | 2008 | 2008 | ||||||||||||||||||||
| Before Significant Items (Non-GAAP Earnings) | After Significant Items (GAAP Earnings) | Before Significant Items (Non-GAAP Earnings) | After Significant Items (GAAP Earnings) | ||||||||||||||||||||
| Total Revenue | $ | 1,407,792 | $ | 1,407,792 | $ | 1,475,667 | $ 1,475,667 | ||||||||||||||||
| Operating Profit | 152,506 | 157,375 |
(3) |
154,859 | 151,974 |
(4) |
|||||||||||||||||
| Net Earnings | 84,310 | 87,321 |
(3) |
75,902 | 74,099 |
(4) |
|||||||||||||||||
| Diluted Earnings per Common Share | $ | 1.27 | $ | 1.31 |
(3) |
$ | 1.13 | $ 1.10 |
(4) |
||||||||||||||
| Adjusted EBITDA | $ | 188,482 | $ | 188,482 | $ | 199,829 | $ 199,829 | ||||||||||||||||
| Reconciliation to Adjusted EBITDA: | |||||||||||||||||||||||
| Earnings Before Income Taxes | $ | 135,765 | $ | 140,634 | $ | 121,346 | $ 118,461 | ||||||||||||||||
| Add back: | |||||||||||||||||||||||
| Restructuring Expense (Credit) | — | — | — | 2,885 | |||||||||||||||||||
| Litigation Expense (Credit) | — | (4,869) | — | — | |||||||||||||||||||
| Interest Expense, net | 16,741 | 16,741 | 33,513 | 33,513 | |||||||||||||||||||
| Depreciation of Property Assets | 34,133 | 34,133 | 36,378 | 36,378 | |||||||||||||||||||
| Amortization and Write-down of Intangibles | 1,843 | 1,843 | 8,592 | 8,592 | |||||||||||||||||||
| Adjusted EBITDA | $ | 188,482 | $ | 188,482 | $ | 199,829 | $ 199,829 | ||||||||||||||||
|
(1) Includes the effects of a $1.9 million pre-tax litigation credit in the second quarter of 2009 related to the Hilda Perez matter. The litigation credit increased diluted earnings per share by approximately $0.02 in the second quarter of 2009. |
|||||||||||||||||||||||
| (2) Includes a $0.015 million pre-tax restructuring credit in the second quarter of 2008 related to the December 3, 2007 announced restructuring plan. The restructuring credit had no impact on the diluted earnings per share in the second quarter of 2008. | |||||||||||||||||||||||
| (3) 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 six months ended June 30, 2009. | |||||||||||||||||||||||
| (4) Includes the effects of $2.9 million pre-tax restructuring expenses in the first quarter and second quarter of 2008 as part of the December 3, 2007 announced restructuring plan. The restructuring expenses reduced diluted earnings per share by approximately $0.03 for the six months ended June 30, 2008. | |||||||||||||||||||||||
|
SELECTED BALANCE SHEET HIGHLIGHTS |
||||||
| Selected Balance Sheet Data: (in Thousands of Dollars) | June 30, 2009 | June 30, 2008 | ||||
| Cash and Cash Equivalents | $ | 95,595 | $ | 75,100 | ||
| Accounts Receivable | 56,660 | 46,033 | ||||
| Prepaid Expenses and Other Assets | 52,252 | 54,411 | ||||
| Rental Merchandise, net | ||||||
| On Rent | 571,902 | 676,607 | ||||
| Held for Rent | 179,857 | 204,472 | ||||
| Total Assets | 2,427,744 | 2,538,780 | ||||
| Senior Debt | 700,769 | 788,011 | ||||
| Subordinated Notes Payable | 75,375 | 270,375 | ||||
| Total Liabilities | 1,256,763 | 1,517,374 | ||||
| Stockholders’ Equity | 1,170,981 | 1,021,406 | ||||
|
Rent-A-Center, Inc. and Subsidiaries |
|||||||||||
| CONSOLIDATED STATEMENTS OF EARNINGS | |||||||||||
| (In Thousands of Dollars, except per share data) | Three Months Ended June 30, | ||||||||||
| 2009 | 2008 | ||||||||||
| Unaudited | |||||||||||
| Store Revenue | |||||||||||
| Rentals and Fees |
$ |
589,468 |
$ | 634,618 | |||||||
| Merchandise Sales |
56,959 |
55,703 | |||||||||
| Installment Sales | 12,290 | 9,246 | |||||||||
| Other | 13,443 | 10,589 | |||||||||
| 672,160 | 710,156 | ||||||||||
| Franchise Revenue | |||||||||||
| Franchise Merchandise Sales | 6,251 | 7,650 | |||||||||
| Royalty Income and Fees | 1,198 | 1,225 | |||||||||
| Total Revenue | 679,609 | 719,031 | |||||||||
| Operating Expenses | |||||||||||
| Direct Store Expenses | |||||||||||
| Cost of Rentals and Fees | 132,956 | 145,511 | |||||||||
| Cost of Merchandise Sold | 41,997 | 45,167 | |||||||||
| Cost of Installment Sales | 4,259 | 3,790 | |||||||||
| Salaries and Other Expenses | 384,910 | 406,572 | |||||||||
| Franchise Cost of Merchandise Sold | 5,975 | 7,234 | |||||||||
| 570,097 | 608,274 | ||||||||||
| General and Administrative Expenses | 34,592 | 32,676 | |||||||||
| Amortization and Write-down of Intangibles | 1,506 | 3,662 | |||||||||
| Litigation Expense (Credit) | (1,869 | ) | — | ||||||||
| Restructuring Expense (Credit) | — | (15 | ) | ||||||||
| Total Operating Expenses | 604,326 | 644,597 | |||||||||
| Operating Profit | 75,283 | 74,434 | |||||||||
| Interest Expense | 8,045 | 16,739 | |||||||||
| Interest Income | (267 | ) | (2,289 | ) | |||||||
| Earnings before Income Taxes | 67,505 | 59,984 | |||||||||
| Income Tax Expense | 25,560 | 22,243 | |||||||||
| NET EARNINGS | 41,945 | 37,741 | |||||||||
| BASIC WEIGHTED AVERAGE SHARES | 66,028 | 66,684 | |||||||||
| BASIC EARNINGS PER COMMON SHARE |
$ |
0.64 |
$ | 0.57 | |||||||
| DILUTED WEIGHTED AVERAGE SHARES | 66,647 | 67,360 | |||||||||
| DILUTED EARNINGS PER COMMON SHARE |
$ |
0.63 |
$ | 0.56 | |||||||
|
Rent-A-Center, Inc. and Subsidiaries |
||||||||
| CONSOLIDATED STATEMENTS OF EARNINGS | ||||||||
| (In Thousands of Dollars, except per share data) | Six Months Ended June 30, | |||||||
| 2009 | 2008 | |||||||
| Unaudited | ||||||||
| Store Revenue | ||||||||
| Rentals and Fees | $ | 1,187,075 | $ | 1,275,304 | ||||
| Merchandise Sales | 152,741 | 141,042 | ||||||
| Installment Sales | 24,716 | 19,131 | ||||||
| Other | 26,582 | 20,208 | ||||||
| 1,391,114 | 1,455,685 | |||||||
| Franchise Revenue | ||||||||
| Franchise Merchandise Sales | 14,209 | 17,417 | ||||||
| Royalty Income and Fees | 2,469 | 2,565 | ||||||
| Total Revenue | 1,407,792 | 1,475,667 | ||||||
| Operating Expenses | ||||||||
| Direct Store Expenses | ||||||||
| Cost of Rentals and Fees | 268,095 | 291,673 | ||||||
| Cost of Merchandise Sold | 107,764 | 108,492 | ||||||
| Cost of Installment Sales | 8,690 | 7,810 | ||||||
| Salaries and Other Expenses | 786,418 | 823,986 | ||||||
| Franchise Cost of Merchandise Sold | 13,609 | 16,630 | ||||||
| 1,184,576 | 1,248,591 | |||||||
| General and Administrative Expenses | 68,867 | 63,625 | ||||||
| Amortization and Write-down of Intangibles | 1,843 | 8,592 | ||||||
| Litigation Expense (Credit) | (4,869 | ) | — | |||||
| Restructuring Expense (Credit) | — | 2,885 | ||||||
| Total Operating Expenses | 1,250,417 | 1,323,693 | ||||||
| Operating Profit | 157,375 | 151,974 | ||||||
| Interest Expense | 17,277 | 37,666 | ||||||
| Interest Income | (536 | ) | (4,153 | ) | ||||
| Earnings before Income Taxes | 140,634 | 118,461 | ||||||
| Income Tax Expense | 53,313 | 44,362 | ||||||
| NET EARNINGS | 87,321 | 74,099 | ||||||
| BASIC WEIGHTED AVERAGE SHARES | 66,012 | 66,697 | ||||||
| BASIC EARNINGS PER COMMON SHARE | $ | 1.32 | $ | 1.11 | ||||
| DILUTED WEIGHTED AVERAGE SHARES | 66,571 | 67,267 | ||||||
| DILUTED EARNINGS PER COMMON SHARE | $ | 1.31 | $ | 1.10 | ||||
Source:
Rent-A-Center, Inc.
David E. Carpenter, 972-801-1214
Vice
President of Investor Relations
david.carpenter@rentacenter.com