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)
July
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 June 30, 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 July 25, 2005.
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:
July 25, 2005 By: /s/
Robert D.
Davis
Robert
D. Davis
Senior
Vice President - Finance,
Chief Financial Officer and Treasurer
|
Exhibit
No.
|
Description
|
|
99.1
|
Press
release, dated July 25, 2005
|
For
Immediate Release:
RENT-A-CENTER,
INC. REPORTS
SECOND
QUARTER 2005 RESULTS
Diluted
Earnings per Share of $0.52, Excluding Tax Credit
_________________________
Plano,
Texas, July 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 June 30, 2005.
The
Company reported total revenues for the quarter ended June 30, 2005 of $580.6
million, a $7.6 million increase from $573.0 million for the same period
in the
prior year. This increase of 1.3% in revenues was primarily driven by
incremental revenues generated in new and acquired stores, offset by a decrease
in same store sales of 2.6%.
Net
earnings for the quarter ended June 30, 2005 were $39.6 million, or $0.52
per
diluted share, when excluding the benefit of the tax audit reserve credit
discussed below, representing a decrease of 16.1% from the $0.62 per diluted
share, or net earnings of $51.2 million, for the same period in the prior
year.
The decrease in earnings per diluted share is primarily attributable to the
decrease in same store sales as well as an increase in operating expenses,
primarily related to new store openings and acquisitions, offset by a reduction
in the number of the Company’s outstanding shares.
Total
revenues for the six months ended June 30, 2005 increased to $1.182 billion,
a
2.1% increase from $1.158 billion for the same period in the prior year.
Same
store revenues for the six month period ending June 30, 2005 decreased 4.0%.
Net
earnings for the six months ended June 30, 2005 were $82.3 million, or $1.08
per
diluted share, when excluding the litigation reversion credit and tax audit
reserve credit discussed below, a decrease of 13.6% over the $1.25 per diluted
share, or net earnings of $103.4 million, for
the
same period in the prior year.
“While
our revenue and earnings per diluted share were within our guidance for the
second quarter,” commented Mark E. Speese, the Company’s Chairman and Chief
Executive Officer, “our business environment remains challenged. We currently
have fewer agreements on rent relative to our prior expectations due to weaker
than expected demand in June and to date in the month of July. As such,
including a softer outlook for the balance of this year, we are lowering
our
guidance for the remainder of 2005. We believe a key challenge centers around
higher energy costs impacting both our customers and our operations, but
also
believe that product evolution, particularly in low end consumer electronics,
is
placing additional pressure on our business,” Speese continued. “We continue to
evaluate new product offerings that we believe will provide additional revenue
streams to leverage our mature store base,” Speese stated.
During
the second quarter of 2005, the Company opened 12 new store locations, acquired
34 stores, including 27 stores from a ColorTyme franchisee offering an array
of
financial services in addition to traditional rent-to-own products, as well
as
accounts from 10 additional locations, while consolidating 17 stores into
existing locations and selling one store. Since June 30, 2005, the Company
has
opened 5 new stores and acquired one other store while consolidating 6 stores
into existing locations. For the entire year ending December 31, 2005, the
Company intends to open between 60 and 70 new store locations as well as
pursue
opportunistic acquisitions.
During
the second quarter of 2005, the Company recorded a $2.0 million tax audit
reserve credit associated with the examination and favorable resolution of
the
Company’s 1998 and 1999 federal tax returns. The tax audit reserve credit
increased diluted earnings per share in the second quarter of 2005 by $0.03,
from $0.52 per diluted earnings per share to the reported diluted earnings
per
share of $0.55.
In
addition, during 2005, the Company recorded an $8.0 million pre-tax credit
in
the first quarter associated with the settlement of the Griego/Carrillo
litigation. This pre-tax litigation reversion credit increased diluted earnings
per share for the six month period ended June 30, 2005 by $0.07. The litigation
reversion credit, combined with the $2.0 million tax audit reserve credit
in the
second quarter, increased diluted earnings per share for the six month period
ended June 30, 2005 by $0.10 to the reported diluted earnings per share of
$1.18.
Rent-A-Center
will host a conference call to discuss the second quarter financial results
on
Tuesday morning, July 26, 2005, at 10:45 a.m. EST. For a live web cast 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 2,892 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 281
rent-to-own stores, 269 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
July 25, 2005.
THIRD
QUARTER 2005 GUIDANCE:
Revenues
| · |
The
Company expects total revenues to be in the range of $572 million
to $580
million.
|
| · |
Store
rental and fee revenues are expected to be between $517 million and
$522
million.
|
| · |
Total
store revenues are expected to be in the range of $560 million to
$568
million.
|
| · |
Same
store sales are expected to be in the (1.0%) to (2.0%)
range.
|
| · |
The
Company expects to open 15-20 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 75% and 80% of store merchandise
sales.
|
| · |
Store
salaries and other expenses are expected to be in the range of 59.5%
to
61.0% of total store revenue.
|
| · |
General
and administrative expenses are expected to be between 3.4% and 3.6%
of
total revenue.
|
| · |
Net
interest expense is expected to be approximately $10.2 million,
depreciation of property assets to be approximately $13.5 million
and
amortization of intangibles is expected to be approximately $2.2
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 $0.38 to
$0.42.
|
| · |
Diluted
shares outstanding are estimated to be between 75.7 million and 76.7
million.
|
FISCAL
2005 GUIDANCE:
Revenues
| · |
The
Company expects total revenues to be in the range of $2.34 billion
and
$2.36 billion.
|
| · |
Store
rental and fee revenues are expected to be between $2.085 billion
and
$2.100 billion.
|
| · |
Total
store revenues are expected to be in the range of $2.290 billion
and
$2.310 billion.
|
| · |
Same
store sales are expected to be in the (2.0%) to (4.0%)
range.
|
| · |
The
Company expects to open 60 - 70 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 72% and 75% of store merchandise
sales.
|
| · |
Store
salaries and other expenses are expected to be in the range of 58.0%
to
59.5% 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
million,
depreciation of property assets is expected to be between $50.0 million
and $55.0 million and amortization of intangibles is expected to
be
approximately $8.0 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 $1.90 to
$2.00.
|
| · |
Diluted
shares outstanding are estimated to be between 75.7 million and 76.7
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 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
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; 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 and its quarterly report on Form
10-Q
for the quarter ended March 31, 2005. 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 June 30,
|
||||||||||
|
2005
|
2005
|
2004
|
||||||||
|
Before
Tax Audit Reserve Credit
|
After
Tax Audit Reserve Credit
|
|||||||||
|
Total
Revenue
|
$
|
580,578
|
$
|
580,578
|
$
|
572,985
|
||||
|
Operating
Profit
|
72,988
|
72,988
|
90,223
|
|||||||
|
Net
Earnings
|
39,620
|
41,742
(1
|
)
|
51,194
|
||||||
|
Diluted
Earnings per Common Share
|
$
|
0.52
|
$
|
0.55
(1
|
)
|
$
|
0.62
|
|||
|
EBITDA
|
$
|
88,414
|
$
|
88,414
|
$
|
105,215
|
||||
|
Reconciliation
to EBITDA:
|
||||||||||
|
Reported
earnings before income taxes
|
63,553
|
63,553
|
81,459
|
|||||||
|
Add
back:
|
||||||||||
|
Interest
expense, net
|
9,435
|
9,435
|
8,764
|
|||||||
|
Depreciation
of property assets
|
13,271
|
13,271
|
11,834
|
|||||||
|
Amortization
of intangibles
|
2,155
|
2,155
|
3,158
|
|||||||
|
EBITDA
|
$
|
88,414
|
$
|
88,414
|
$
|
105,215
|
||||
|
Six
Months Ended June 30,
|
|||||||||||||
|
2005
|
2005
|
2004
|
|||||||||||
|
Before
Tax
Audit
Reserve and Litigation Credits
|
After
Tax
Audit
Reserve and Litigation Credits
|
||||||||||||
|
Total
Revenue
|
$
|
1,182,387
|
$
|
1,182,387
|
$
|
1,158,365
|
|||||||
|
Operating
Profit
|
150,980
|
158,980
|
182,882
|
||||||||||
|
Net
Earnings
|
82,305
|
89,411
(2
|
)
|
103,403
|
|||||||||
|
Diluted
Earnings per Common Share
|
$
|
1.08
|
$
|
1.18
(2
|
)
|
$
|
1.25
|
||||||
|
EBITDA
|
$
|
181,966
|
$
|
181,966
|
$
|
211,611
|
|||||||
|
Reconciliation
to EBITDA:
|
|||||||||||||
|
Reported
earnings before income taxes
|
132,079
|
140,079
|
165,262
|
||||||||||
|
Add
back:
|
|||||||||||||
|
Litigation
Reversion
|
--
|
(8,000
|
)
|
--
|
|||||||||
|
Interest
expense, net
|
18,901
|
18,901
|
17,620
|
||||||||||
|
Depreciation
of property assets
|
26,534
|
26,534
|
23,083
|
||||||||||
|
Amortization
of intangibles
|
4,452
|
4,452
|
5,646
|
||||||||||
|
EBITDA
|
$
|
181,966
|
$
|
181,966
|
$
|
211,611
|
|||||||
| (1) |
Including
the effects of a $2.0 million tax audit reserve credit associated
with the
examination and favorable resolution of the Company’s 1998 and 1999
federal tax returns. This credit increased diluted earnings per
share in
the second quarter by $0.03, from $0.52 per diluted earnings
per share to
the reported diluted earnings per share of
$0.55.
|
| (2) |
Including
the effects of an $8.0 million pre-tax credit in the first quarter
associated with the settlement of the Griego/Carrillo litigation
reversion. This pre-tax credit increased diluted earnings per
share for
the six month period ended June 30, 2005 by $0.07. The litigation
reversion credit, combined with the $2.0 million tax audit reserve
credit
in the second quarter, increased diluted earnings per share for
the six
month period ended June 30, 2005 by $0.10 to the reported diluted
earnings
per share of $1.18.
|
|
Selected
Balance Sheet Data: (in Thousands of
Dollars)
|
June
30, 2005
|
June
30, 2004
|
|||||
|
Cash
and cash equivalents
|
$
|
25,119
|
$
|
86,164
|
|||
|
Prepaid
expenses and other assets
|
52,566
|
57,155
|
|||||
|
Rental
merchandise, net
|
|||||||
|
On
rent
|
574,080
|
565,977
|
|||||
|
Held
for rent
|
197,639
|
169,044
|
|||||
|
Total
Assets
|
1,930,793
|
1,930,203
|
|||||
|
Senior
debt
|
364,500
|
396,000
|
|||||
|
Subordinated
notes payable
|
300,000
|
300,000
|
|||||
|
Total
Liabilities
|
1,041,531
|
1,069,985
|
|||||
|
Stockholders’
Equity
|
889,262
|
860,218
|
|||||
Rent-A-Center,
Inc. and Subsidiaries
|
CONSOLIDATED
STATEMENTS OF EARNINGS
|
|
(In
Thousands of Dollars, except per share data)
|
Three
Months Ended June 30,
|
||||||
|
2005
|
2004
|
||||||
|
Unaudited
|
|||||||
|
Store
Revenue
|
|||||||
|
Rentals
and Fees
|
$
|
526,639
|
$
|
520,593
|
|||
|
Merchandise
Sales
|
37,498
|
34,599
|
|||||
|
Installment
Sales
|
6,618
|
5,801
|
|||||
|
Other
|
997
|
967
|
|||||
|
571,752
|
561,960
|
||||||
|
Franchise
Revenue
|
|||||||
|
Franchise
Merchandise Sales
|
7,443
|
9,668
|
|||||
|
Royalty
Income and Fees
|
1,383
|
1,357
|
|||||
|
Total
Revenue
|
580,578
|
572,985
|
|||||
|
Operating
Expenses
|
|||||||
|
Direct
Store Expenses
|
|||||||
|
Cost
of Rental and Fees
|
114,068
|
112,743
|
|||||
|
Cost
of Merchandise Sold
|
28,225
|
24,720
|
|||||
|
Cost
of Installment Sales
|
2,750
|
2,477
|
|||||
|
Salaries
and Other Expenses
|
332,939
|
311,058
|
|||||
|
Franchise
Operation Expenses
|
|||||||
|
Cost
of Franchise Merchandise Sales
|
7,163
|
9,214
|
|||||
|
485,145
|
460,212
|
||||||
|
General
and Administrative Expenses
|
20,290
|
19,392
|
|||||
|
Amortization
of Intangibles
|
2,155
|
3,158
|
|||||
|
Total
Operating Expenses
|
507,590
|
482,762
|
|||||
|
Operating
Profit
|
72,988
|
90,223
|
|||||
|
Interest
Income
|
(1,351
|
)
|
(1,488
|
)
|
|||
|
Interest
Expense
|
10,786
|
10,252
|
|||||
|
Earnings
before Income Taxes
|
63,553
|
81,459
|
|||||
|
Income
Tax Expense
|
21,811
|
30,265
|
|||||
|
NET
EARNINGS
|
41,742
|
51,194
|
|||||
|
Preferred
Dividends
|
--
|
--
|
|||||
|
Net
earnings allocable to common stockholders
|
$
|
41,742
|
$
|
51,194
|
|||
|
BASIC
WEIGHTED AVERAGE SHARES
|
74,747
|
79,464
|
|||||
|
BASIC
EARNINGS PER COMMON SHARE
|
$
|
0.56
|
$
|
0.64
|
|||
|
DILUTED
WEIGHTED AVERAGE SHARES
|
76,001
|
81,980
|
|||||
|
DILUTED
EARNINGS PER COMMON SHARE
|
$
|
0.55
|
$
|
0.62
|
|||
Rent-A-Center,
Inc. and Subsidiaries
|
CONSOLIDATED
STATEMENTS OF EARNINGS
|
|
(In
Thousands of Dollars, except per share data)
|
Six
Months Ended June 30,
|
||||||
|
2005
|
2004
|
||||||
|
Unaudited
|
|||||||
|
Store
Revenue
|
|||||||
|
Rentals
and Fees
|
$
|
1,045,261
|
$
|
1,024,883
|
|||
|
Merchandise
Sales
|
100,268
|
94,022
|
|||||
|
Installment
Sales
|
13,202
|
12,499
|
|||||
|
Other
|
2,075
|
2,047
|
|||||
|
1,160,806
|
1,133,451
|
||||||
|
Franchise
Revenue
|
|||||||
|
Franchise
Merchandise Sales
|
18,787
|
22,132
|
|||||
|
Royalty
Income and Fees
|
2,794
|
2,782
|
|||||
|
Total
Revenue
|
1,182,387
|
1,158,365
|
|||||
|
Operating
Expenses
|
|||||||
|
Direct
Store Expenses
|
|||||||
|
Cost
of rental and fees
|
226,536
|
221,286
|
|||||
|
Cost
of Merchandise Sold
|
70,292
|
64,103
|
|||||
|
Cost
of Installment Sales
|
5,613
|
5,622
|
|||||
|
Salaries
and Other Expenses
|
666,980
|
620,142
|
|||||
|
Franchise
Operation Expenses
|
|||||||
|
Cost
of Franchise Merchandise Sales
|
18,029
|
21,106
|
|||||
|
987,450
|
932,259
|
||||||
|
General
and Administrative Expenses
|
39,505
|
37,578
|
|||||
|
Amortization
of Intangibles
|
4,452
|
5,646
|
|||||
|
Litigation
Reversion
|
(8,000
|
)
|
--
|
||||
|
Total
Operating Expenses
|
1,023,407
|
975,483
|
|||||
|
Operating
Profit
|
158,980
|
182,882
|
|||||
|
Interest
Income
|
(2,753
|
)
|
(2,991
|
)
|
|||
|
Interest
Expense
|
21,654
|
20,611
|
|||||
|
Earnings
before Income Taxes
|
140,079
|
165,262
|
|||||
|
Income
Tax Expense
|
50,668
|
61,859
|
|||||
|
NET
EARNINGS
|
89,411
|
103,403
|
|||||
|
Preferred
Dividends
|
--
|
--
|
|||||
|
Net
earnings allocable to common stockholders
|
$
|
89,411
|
$
|
103,403
|
|||
|
BASIC
WEIGHTED AVERAGE SHARES
|
74,653
|
79,874
|
|||||
|
BASIC
EARNINGS PER COMMON SHARE
|
$
|
1.20
|
$
|
1.29
|
|||
|
DILUTED
WEIGHTED AVERAGE SHARES
|
76,036
|
82,433
|
|||||
|
DILUTED
EARNINGS PER COMMON SHARE
|
$
|
1.18
|
$
|
1.25
|
|||