UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
_____________________________
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date
of Report:
(Date of
earliest event reported)
April
25, 2005
____________________________
RENT-A-CENTER,
INC.
(Exact
name of registrant as specified in charter)
|
Delaware
(State
or other jurisdiction of incorporation or organization)
|
0-25370
(Commission
File Number)
|
45-0491516
(IRS
Employer Identification No.)
|
|
5700
Tennyson Parkway
Plano,
Texas 75024
(Address
of principal executive offices and zip code)
|
(972)
801-1100
(Registrant's
telephone
number,
including area code)
N/A
(Former
name or former address, if changed since last report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the Registrant under any of the following
provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425). |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12). |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)). |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)). |
Item
2.02 Results
of Operations and Financial Condition.
Attached
hereto as Exhibit 99.1 is the Registrant’s press release reflecting earnings
information for the quarter ended March 31, 2005.
The press
release contains information regarding EBITDA (earnings before interest, taxes,
depreciation and amortization), which is a non-GAAP financial measure as defined
in Item 10(e) of Regulation S-K. The press release also contains a
reconciliation of EBITDA to the Registrant’s reported earnings before income
taxes. Management of the Registrant believes that presentation of EBITDA is
useful to investors, as among other things, this information impacts certain
financial covenants under the Registrant’s senior credit facilities and the
indenture governing its 7 1/2 % Senior Subordinated Notes due 2010. While
management believes this non-GAAP financial measure is useful in evaluating the
Registrant, this information should be considered as supplemental in nature and
not as a substitute for or superior to the related financial information
prepared in accordance with GAAP. Further, the non-GAAP financial measure may
differ from similar measures presented by other companies.
Pursuant
to General Instruction B.2. of Form 8-K, all of the information contained in
this Form 8-K and the accompanying exhibit shall be deemed to be "furnished" and
not "filed" for purposes of Section 18 of the Securities Exchange Act of 1934,
as amended, and, therefore, shall not be incorporated by reference in any filing
under the Securities Act of 1933, as amended.
Item
9.01 Financial
Statements and Exhibits.
|
(c) |
Exhibits |
| Exhibit 99.1 | Press Release, dated April 25, 2005. |
2
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
| RENT-A-CENTER, INC. | ||
| |
|
|
| Date: April 25, 2005 | By: | /s/ Robert D. Davis |
|
Robert D. Davis | ||
| Senior Vice President - Finance, Chief Financial Officer and Treasurer | ||
3
EXHIBIT
INDEX
|
Exhibit
No. |
Description | |
|
99.1 |
Press
release, dated April 25, 2005 |
4
For
Immediate Release:
RENT-A-CENTER,
INC. REPORTS
FIRST
QUARTER 2005 RESULTS
Diluted
Earnings per Share of $0.56, Excluding Litigation Credit
Operating
Cash Flow Exceeds $87 Million for the Quarter
_________________________
Plano,
Texas, April 25, 2005 —
Rent-A-Center, Inc. (the “Company”) (NASDAQ/NNM:RCII), the nation’s largest
rent-to-own operator, today announced revenues and net earnings for the quarter
ended March 31, 2005.
The
Company reported total revenues for the quarter ended March 31, 2005 of $601.9
million, a $16.5 million increase from $585.4 million for the same period in the
prior year. This increase of 2.8% in revenues was primarily driven by
incremental revenues generated in new and acquired stores, offset by a decrease
in same store sales of 5.0%.
Net
earnings for the quarter ended March 31, 2005 were $42.7 million, or $0.56 per
diluted share, when excluding the litigation credit discussed below,
representing a decrease of 11.1% from the $0.63 per diluted share, or net
earnings of $52.2 million for the same period in the prior year. The decrease in
earnings per diluted share is attributable primarily to the decrease in same
store sales as well as an increase in operating expenses related to new store
openings and acquisitions, offset by a reduction in the number of the Company’s
outstanding shares.
“Our
revenue and earnings per diluted share were within our expectations for the
first quarter,” commented Mark E. Speese, the Company’s Chairman and Chief
Executive Officer. “We believe that higher energy costs and the overall
difficult retail environment continue to challenge our business, as evidenced by
our same store sales. However, we continue to control our expenses on a per
store basis as salaries and other expenses were approximately flat year over
year. We also generated over $87.0 million in operating cash flow, repaid $60.9
million of our senior secured debt, and continue to invest in our core business
and institute initiatives to improve execution at the store level,” Speese
added.
During
the first quarter of 2005, the Company opened 10 new store locations, acquired
three stores as well as accounts from 10 additional locations, while
consolidating 22 stores into existing locations and selling three stores. Since
March 31, 2005, the Company has opened six new stores and acquired two other
stores while consolidating five stores into existing locations. For the entire
year ending December 31, 2005, the Company intends to open between 70 and 80 new
store locations as well as pursue opportunistic acquisitions.
On April
12, 2005, the settlement of the Benjamin
Griego, et al. v. Rent-A-Center, Inc., et al/Arthur Carrillo, et al. v.
Rent-A-Center, Inc., et al litigation
pending in California received final approval from the court. Under the terms of
the settlement approved by the court, the Company agreed to pay the plaintiffs’
attorneys’ fees, as well as an aggregate of $37.5 million in cash, such amount
to be distributed to the class of eligible Company customers who entered into
rental-purchase agreements with the Company anytime from February 1, 1999
through October 31, 2004, with the Company being entitled to any undistributed
monies in the settlement fund up to an aggregate of $8.0 million, and any
additional undistributed funds being paid to non-profit organizations. As a
result of the response rate to the notice of the settlement mailed to class
members on February 7, 2005, the parties agreed that the Company could retain
the $8.0 million reversion, rather than deposit it as part of the settlement
fund. Accordingly, on April 22, 2005, the Company paid $29.5 million to fund the
settlement, as well as $9.0 million in attorneys’ fees, for a total of $38.5
million in cash. To record the retention of the $8.0 million reversion, the
Company recorded an $8.0 million pre-tax credit during the first quarter of
2005. This pre-tax credit increased diluted earnings per share in the first
quarter of 2005 by $0.07, from $0.56 per diluted earnings per share to the
reported diluted earnings per share of $0.63. As previously reported, the
Company recorded a pre-tax charge of $47.0 million in the third quarter of 2004
to account for the settlement, as well as attorneys' fees.
Rent-A-Center
will host a conference call to discuss the first quarter financial results on
Tuesday morning, April 26, 2005, at 10:45 a.m. EST. 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 2,866 company-owned
stores nationwide and in Canada 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 308
rent-to-own stores, 296 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 potential impact of any repurchases of common stock the Company
may make or the potential impact of acquisitions that may be completed after
April 25, 2005.
SECOND
QUARTER 2005 GUIDANCE:
Revenues
| · |
The
Company expects total revenues to be in the range of $576 million to $584
million. |
| · |
Store
rental and fee revenues are expected to be between $525 million and $530
million. |
| · |
Total
store revenues are expected to be in the range of $566 million to $574
million. |
| · |
Same
store sales are expected to be in the (3.0%) to (4.0%)
range. |
| · |
The
Company expects to open 10-15 new store
locations. |
Expenses
| · |
The
Company expects cost of rental and fees to be between 21.6% and 22.0% of
store rental and fee revenue and cost of goods merchandise sales to be
between 70% and 75% of store merchandise
sales. |
| · |
Store
salaries and other expenses are expected to be in the range of 57.5% to
59.0% of total store revenue. |
| · |
General
and administrative expenses are expected to be between 3.3% and 3.5% of
total revenue. |
| · |
Net
interest expense is expected to be approximately $10.0 million and
amortization of intangibles is expected to be approximately $2.1
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 $0.51 to
$0.55. |
| · |
Diluted
shares outstanding are estimated to be between 76.0 million and 77.0
million. |
FISCAL
2005 GUIDANCE:
Revenues
| · |
The
Company expects total revenues to be in the range of $2.37 billion and
$2.40 billion. |
| · |
Store
rental and fee revenues are expected to be between $2.120 billion and
$2.145 billion. |
| · |
Total
store revenues are expected to be in the range of $2.320 billion and
$2.350 billion. |
| · |
Same
store sales are expected to be in the (1.0%) to (3.0%)
range. |
| · |
The
Company expects to open 70 - 80 new store
locations. |
Expenses
| · |
The
Company expects cost of rental and fees to be between 21.6% and 22.0% of
store rental and fee revenue and cost of goods merchandise sales to be
between 70% and 75% 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 between 3.3% and 3.5% of
total revenue. |
| · |
Net
interest expense is expected to be between $38.0 million and $42.0 million
and amortization of intangibles is expected to be approximately $7.5
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 $2.20 to
$2.30. |
| · |
Diluted
shares outstanding are estimated to be between 76.0 million and 77.0
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 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 Company’s ability to realize benefits from our margin enhancement
initiatives; the Company’s ability to identify and successfully market products
and services that appeal to our customer demographic; the Company’s ability to
identify and successfully enter new lines of business offering products and
services that appeal to our customer demographic; 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; the Company’s ability to enter into new rental purchase
agreements; economic pressures affecting the disposable income available to our
targeted consumers, such as high fuel and utility costs; changes in the
Company’s effective tax rate; the Company’s ability to maintain an effective
system of internal controls; changes in the Company’s stock price and the number
of shares of common stock that the Company may or may not repurchase; 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 for the year ended December
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.
Contacts
for Rent-A-Center, Inc.:
|
David
E. Carpenter
Vice
President of Investor Relations
(972)
801-1214
dcarpenter@racenter.com |
Rent-A-Center,
Inc. and Subsidiaries
STATEMENT
OF EARNINGS HIGHLIGHTS
|
(In Thousands
of Dollars, except per share data) |
|||||||||||||
|
Three
Months Ended March 31, |
|||||||||||||
|
2005 |
2005 |
2004 |
|||||||||||
|
Before
Litigation Reversion |
After
Litigation
Reversion |
||||||||||||
|
Total
Revenue |
$ |
601,855 |
$ |
601,855 |
$ |
585,380 |
|||||||
|
Operating
Profit |
77,992 |
85,992 |
92,659 |
||||||||||
|
Net
Earnings |
42,685 |
47,669(1 |
) |
52,209 |
|||||||||
|
Diluted
Earnings per Common Share |
$ |
0.56 |
$ |
0.63(1 |
) |
$ |
0.63 |
||||||
|
EBITDA |
$ |
93,552 |
$ |
93,552 |
$ |
106,396 |
|||||||
|
Reconciliation
to EBITDA: |
|||||||||||||
|
Reported
earnings before income taxes |
68,526
|
76,526
|
83,803 |
||||||||||
|
Add
back: |
|||||||||||||
|
Litigation
Reversion |
-- |
(8,000 |
) |
-- |
|||||||||
|
Interest
expense, net |
9,466 |
9,466 |
8,856 |
||||||||||
|
Depreciation
of property assets |
13,263 |
13,263 |
11,249 |
||||||||||
|
Amortization
of intangibles |
2,297 |
2,297 |
2,488 |
||||||||||
|
EBITDA |
$ |
93,552 |
$ |
93,552 |
$ |
106,396 |
|||||||
| (1) |
Including
the effects of an $8.0 million pre-tax credit associated with the
litigation reversion. This pre-tax credit increased diluted earnings per
share in the first quarter of 2005 by $0.07, from $0.56 per diluted
earnings per share to the reported diluted earnings per share of
$0.63. |
|
Selected
Balance Sheet Data: (in
Thousands of Dollars) |
March
31, 2005 |
March
31, 2004 |
|||||
|
Cash
and cash equivalents |
$ |
75,246 |
$ |
273,391 |
|||
|
Prepaid
expenses and other assets |
37,138 |
42,444 |
|||||
|
Rental
merchandise, net |
|||||||
|
On
rent |
610,103 |
557,484 |
|||||
|
Held
for rent |
181,652 |
139,201 |
|||||
|
Total
Assets |
1,987,301 |
1,954,674 |
|||||
|
|
|||||||
|
Senior
debt |
347,375 |
397,000 |
|||||
|
Subordinated
notes payable |
300,000 |
300,000 |
|||||
|
Total
Liabilities |
1,140,472 |
1,110,307 |
|||||
|
Stockholders’
Equity |
846,829 |
844,367
|
|||||
Rent-A-Center,
Inc. and Subsidiaries
|
CONSOLIDATED
STATEMENTS OF EARNINGS |
|||||||
|
(In
Thousands of Dollars, except per share data) |
Three
Months Ended March 31, |
||||||
|
2005 |
2004 |
||||||
|
Unaudited |
|||||||
|
Store
Revenue |
|||||||
|
Rentals
and Fees |
$ |
518,622 |
$ |
504,290 |
|||
|
Merchandise
Sales |
62,770 |
59,423 |
|||||
|
Installment
Sales |
6,584 |
6,698 |
|||||
|
Other |
1,078 |
1,080 |
|||||
|
589,054 |
571,491 |
||||||
|
Franchise
Revenue |
|||||||
|
Franchise
Merchandise Sales |
11,672 |
12,464 |
|||||
|
Royalty
Income and Fees |
1,129 |
1,425 |
|||||
|
Total
Revenue |
601,855 |
585,380 |
|||||
|
Operating
Expenses |
|||||||
|
Direct
Store Expenses |
|||||||
|
Cost
of Rental and Fees |
112,468 |
108,543 |
|||||
|
Cost
of Merchandise Sold |
42,067 |
39,383 |
|||||
|
Cost
of Installment Sales |
2,863 |
3,145 |
|||||
|
Salaries
and Other Expenses |
334,041 |
309,084 |
|||||
|
Franchise
Operation Expenses |
|||||||
|
Cost
of Franchise Merchandise Sales |
10,912 |
11,892 |
|||||
|
502,351 |
472,047 |
||||||
|
General
and Administrative Expenses |
19,215 |
18,186 |
|||||
|
Amortization
of Intangibles |
2,297 |
2,488 |
|||||
|
Litigation
Reversion |
(8,000 |
) |
-- |
||||
|
Total
Operating Expenses |
515,863 |
492,721 |
|||||
|
Operating
Profit |
85,992 |
92,659 |
|||||
|
Interest
Income |
(1,402 |
) |
(1,503 |
) | |||
|
Interest
Expense |
10,868 |
10,359 |
|||||
|
Earnings
before Income Taxes |
76,526 |
83,803 |
|||||
|
Income
Tax Expense |
28,857 |
31,594 |
|||||
|
NET
EARNINGS |
47,669 |
52,209 |
|||||
|
Preferred
Dividends |
-- |
-- |
|||||
|
Net
earnings allocable to common stockholders |
$ |
47,669 |
$ |
52,209 |
|||
|
BASIC
WEIGHTED AVERAGE SHARES |
74,558 |
80,285 |
|||||
|
BASIC
EARNINGS PER COMMON SHARE |
$ |
0.64 |
$ |
0.65 |
|||
|
DILUTED
WEIGHTED AVERAGE SHARES |
76,072 |
82,887 |
|||||
|
DILUTED
EARNINGS PER COMMON SHARE |
$ |
0.63 |
$ |
0.63 |
|||