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)
October
30, 2006
RENT-A-CENTER,
INC.
(Exact
name of registrant as specified in charter)
|
Delaware
|
0-25370
|
45-0491516
|
|
(State
or other jurisdiction of
|
(Commission
File Number)
|
(IRS
Employer Identification No.)
|
|
incorporation
or organization)
|
||
|
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 September 30, 2006.
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 October 30, 2006.
|
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: October 30, 2006 | 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 October 30, 2006
|
4
For
Immediate Release:
RENT-A-CENTER,
INC. REPORTS
THIRD
QUARTER 2006 RESULTS
Same
Store Sales Increase 3.6%
Reported
Diluted Earnings per Share of $0.36, or $0.51 Excluding Non-recurring Items
_________________
Plano,
Texas, October 30, 2006—
Rent-A-Center, Inc. (the “Company”) (NASDAQ/NGS:RCII), the nation’s largest
rent-to-own operator, today announced revenues and net earnings for the quarter
ended September 30, 2006.
Third
Quarter 2006 Results
The
Company reported total revenues for the quarter ended September 30, 2006 of
$587.2 million, a $13.7 million increase from $573.5 million for the same period
in the prior year. This increase of 2.4% in revenues was primarily driven by
a
3.6% increase in same store sales plus an increase in incremental revenues
generated in new and acquired stores, offset by the revenue lost from stores
that were closed or sold during the previous twelve months.
Reported
net earnings for the quarter ended September 30, 2006 were $25.2 million, or
$0.36 per diluted share, when including the $0.02 per share effect of
refinancing expenses and the $0.13 per share for litigation expenses discussed
below. This represents an increase of $0.21 per diluted share from the $0.15
per
diluted share, or reported net earnings of $11.3 million for the same period
in
the prior year, when including the $0.20 per share effect of restructuring
expenses and the impact of the hurricanes discussed below.
Net
earnings for the quarter ended September 30, 2006 were $36.4 million, or $0.51
per diluted share, when excluding the expenses for refinancing and litigation
discussed below. This represents an increase of 45.7% from the $0.35 per diluted
share, or net earnings of $26.0 million for the same period in the prior year,
when excluding the expenses for restructuring and the impact of the hurricanes
discussed below. The increase in net earnings per diluted share is primarily
attributable to the increase in same store sales, the reduction in operating
costs due to a lower store count as well as a reduction in the number of the
Company’s outstanding shares.
“We
continue to execute on our business model as exemplified by our third
consecutive positive same store sales quarter,” commented Mark E. Speese, the
Company’s Chairman and Chief Executive Officer. “Our same store sales increased
3.6% for the quarter, which is primarily related to changes in our promotional
activities as well as an increase in the number of units on rent,” Speese
continued. “We were able to deliver on our expectations this quarter and believe
we are well positioned in our core business as we approach the closing and
integration of the Rent-Way acquisition,” Speese stated.
Nine
Months Ended September 30, 2006 Results
Total
reported revenues for the nine months ended September 30, 2006 increased to
$1.778 billion, a 1.2% increase from $1.756 billion for the same period in
the
prior year. Same store revenues for the nine month period ending September
30,
2006 increased 2.1%.
Reported
net earnings for the nine months ended September 30, 2006 were $105.4 million,
or $1.49 per diluted share, when including the $0.02 per share effect of
refinancing expenses and $0.14 per share for litigation expenses discussed
below. This represents an increase of 11.2% from the $1.34 per diluted share,
or
reported net earnings of $100.7 million for the same period in the prior year,
when including the $0.12 per share effect of restructuring expenses and the
$0.08 per share impact of the hurricane expenses, as well as the $0.03 per
share
benefit for the federal tax audit reserve credit and the $0.07 per share benefit
for the litigation reversion credit discussed below.
Net
earnings for the nine months ended September 30, 2006 were $116.6 million,
or
$1.65 per diluted share, when excluding the expenses for refinancing and
litigation discussed below. This represents an increase of 14.6% from the $1.44
per diluted share, or net earnings of $108.3 million for the same period in
the
prior year, when excluding the restructuring expenses, the impact of the
hurricanes as well as the credits for the federal tax audit reserve and
litigation reversion discussed below.
Through
the nine month period ended September 30, 2006, the Company generated cash
flow
from operations of approximately $131.3 million, while ending the quarter with
$53.7 million of cash on hand.
During
the nine month period ended September 30, 2006, the Company repurchased 202,800
shares of its common stock for $4.7 million in cash under its common stock
repurchase program and has utilized a total of $360.8 million of the $400.0
million authorized by its Board of Directors since the inception of the plan.
In
addition, during the nine month period ended September 30, 2006, the Company
has
reduced its outstanding indebtedness by approximately $65.6
million.
Operations
Highlights
During
the third quarter of 2006, the Company opened 9 new rent-to-own store locations,
acquired 10 stores as well as accounts from 15 additional locations and
consolidated 17 stores into existing locations, for a net addition of two stores
and an ending balance of 2,751 stores. During the third quarter of 2006, the
Company added financial services to 25 existing rent-to-own store locations,
closed one location and ended the quarter with a total of 101 stores providing
these services.
Through
the nine month period ended September 30, 2006, the Company opened 28 new
rent-to-own store locations, acquired 28 stores as well as accounts from 35
additional locations, consolidated 50 stores into existing locations, and sold
15 stores, for a net reduction of nine stores. Through the nine month period
ending September 30, 2006, the Company added financial services to 63 existing
rent-to-own store locations, consolidated one store with financial services
into
an existing location and closed one location, for a net addition of 61 stores
providing these services.
Since
September 30, 2006, the Company has opened two new rent-to-own store locations.
The Company has added financial services to 22 existing rent-to-own store
locations since September 30, 2006.
2006
Non-recurring Items
2006
Senior Credit Facility Refinancing Expense.
During
the third quarter of 2006, the Company recorded a pre-tax expense of
approximately $2.2 million to write off the remaining unamortized balance of
financing costs from our previous credit agreement. This refinancing expense
reduced diluted earnings per share by approximately $0.02 in both the third
quarter of 2006 and for the nine month period ended September 30,
2006.
2
2006 Litigation Expense
Burdusis/French/Corso.
As
previously announced on August 10, 2006, the Company has reached a prospective
settlement with the plaintiffs to resolve the Jeremy
Burdusis, et al. v. Rent-A-Center, Inc., et al./Israel French, et al. v.
Rent-A-Center, Inc.
and
Kris
Corso, et al. v. Rent-A-Center, Inc.
coordinated matters pending in state court in Los Angeles, California. These
matters allege violations by the Company of certain wage and hour laws of
California. Under the terms contemplated, the Company anticipates it will pay
an
aggregate of $4.95 million in cash, including plaintiff’s attorneys’ fees, to be
distributed to an agreed-upon class of Company employees from August 1998
through the date of preliminary court approval of the settlement. In connection
with the prospective settlement, the Company is not admitting liability for
its
wage and hour practices in California. A hearing on a motion for preliminary
approval of the settlement is currently scheduled for November 9, 2006. The
Company recorded a pre-tax expense of $4.95 million in the third quarter of
2006
to account for the aforementioned settlement amount and attorneys’ fees. The
litigation expense with respect to the Burdusis/French/Corso
prospective settlement reduced diluted earnings per share by approximately
$0.04
in the third quarter of 2006 and by approximately $0.05 for the nine month
period ended September 30, 2006.
California
Attorney General. The
Company also announced today that it has reached a prospective settlement with
the California Attorney General to resolve the inquiry received in the second
quarter of 2004 regarding the Company’s business practices in California with
respect to its cash prices and its membership program. Under the terms
contemplated, the Company expects to create a restitution fund in the amount
of
approximately $9.6 million in cash, to be distributed to certain groups of
customers (1) who entered into rental-purchase agreements and acquired ownership
of property under those rental-purchase agreements between November 1, 2004
and
the date of approval of the settlement, (2) who entered into rental-purchase
agreements after November 1, 2004 that are still ongoing after the date of
approval of the settlement, or (3) who purchased new memberships in the
Rent-A-Center Preferred Customer Club between November 1, 2004 and the date
of
the approval of the settlement. Restitution checks will contain a restrictive
endorsement releasing the Company from claims that arise from or relate to
the
cash price set forth in the rental purchase agreement and the customer’s
purchase of the Preferred Customer Club. The Company also expects to enter
into
an injunction (i) limiting the cash price, total of payments and purchase option
price in future rental purchase agreements to the specified limits on prices
set
forth in the recent amendment to the Karnette Rental-Purchase Act, which
amendment became effective as of September 22, 2006, and (ii) governing certain
business practices with respect to the Company’s club program. In addition, the
Company anticipates causing the reserve amount in the Griego settlement fund
to
be paid to the Attorney General. Finally, the Company expects to agree to a
civil penalty in the amount of $750,000. Under the terms of the prospective
settlement, any unclaimed restitution funds at the conclusion of the restitution
period will be paid to the Attorney General, and made available for a limited
period of time to resolve any similar claims filed against the Company by its
customers. In connection with the prospective settlement, the Company is not
admitting liability for its past business practices in California. To account
for the aforementioned costs, as well as the Company's attorneys' fees, the
Company recorded a pre-tax charge of $10.4 million in the third quarter of
2006.
The litigation expense with respect to the California Attorney General
prospective settlement reduced diluted earnings per share by approximately
$0.09
in both the third quarter of 2006 and for the nine month period ended September
30, 2006.
The
terms
of the prospective settlements of the Burdusis/French/Corso
and
California Attorney General matters are subject to the applicable parties
entering into definitive settlement agreements and obtaining court approval.
While the Company believes that the terms of these prospective settlements
are
fair, there can be no assurance that the settlements, if completed, will be
approved by the applicable court in their present form.
3
2005
Non-recurring Items
2005
Store Consolidation Plan Expense.
During
the third quarter of 2005, the Company recorded a pre-tax restructuring expense
of approximately $13.0 million as part of the store consolidation plan announced
on September 6, 2005. This restructuring expense reduced diluted earnings per
share by approximately $0.12 in both the third quarter of 2005 and for the
nine
month period ended September 30, 2005.
2005
Hurricane Related Expense.
During
the third quarter of 2005, the Company also recorded a pre-tax expense of
approximately $7.7 million related to the damage caused by Hurricanes Katrina
and Rita. This expense reduced diluted earnings per share by approximately
$0.08
in both the third quarter of 2005 and for the nine month period ended September
30, 2005.
2005
Federal Tax Audit Reserve Credit. 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 for the nine month period ended September
30, 2005 by approximately $0.03.
2005
Litigation Reversion Credit. During
the first quarter of 2005, the Company recorded an $8.0 million pre-tax credit
associated with the settlement of the Griego/Carrillo litigation. This pre-tax
litigation reversion credit increased diluted earnings per share for the nine
month period ended September 30, 2005 by approximately $0.07.
-
- -
Rent-A-Center
will host a conference call to discuss the third quarter results on Tuesday
morning, October 31, 2006, 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 2,753 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 280
rent-to-own stores operating under the trade name of "ColorTyme."
4
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, a non-cash charge in the fourth quarter to write off the remaining
unamortized balance of financing costs from our current credit agreement in
connection with the anticipated refinancing related to the potential acquisition
of Rent-Way, Inc., or the potential impact of acquisitions, including the
potential acquisition of Rent-Way, Inc., or dispositions that may be completed
after October 30, 2006.
FOURTH
QUARTER 2006 GUIDANCE (DOES NOT INCLUDE POTENTIAL RENT-WAY, INC.
ACQUISITION):
Revenues
| · |
The
Company expects total revenues to be in the range of $586 million
to $594
million.
|
| · |
Store
rental and fee revenues are expected to be between $526 million and
$532
million.
|
| · |
Total
store revenues are expected to be in the range of $574 million to
$582
million.
|
| · |
Same
store sales are expected to be in the flat to 1.0%
range.
|
| · |
The
Company expects to open 5-10 new rent-to-own store
locations.
|
| · |
The
Company expects to add financial services to 45-55 rent-to-own store
locations.
|
Expenses
| · |
The
Company expects cost of rental and fees to be between 21.7% and 22.1%
of
store rental and fee revenue and cost of merchandise sold to be between
73% and 78% of store merchandise
sales.
|
| · |
Store
salaries and other expenses are expected to be in the range of 58.5%
to
60.0% of total store revenue.
|
| · |
General
and administrative expenses are expected to be between 3.6% and 3.8%
of
total revenue.
|
| · |
Net
interest expense is expected to be approximately $12.0 million,
depreciation of property assets to be approximately $13.5 million
and
amortization of intangibles is expected to be approximately $1.0
million.
|
| · |
The
effective tax rate is expected to be approximately 36.5% of pre-tax
income.
|
| · |
Diluted
earnings per share are estimated to be in the range of $0.46 to
$0.50.
|
| · |
Diluted
shares outstanding are estimated to be between 70.7 million and 71.7
million.
|
FISCAL
2007 GUIDANCE (DOES NOT INCLUDE POTENTIAL RENT-WAY, INC.
ACQUISITION):
Revenues
| · |
The
Company expects total revenues to be in the range of $2.420 billion
and
$2.450 billion.
|
| · |
Store
rental and fee revenues are expected to be between $2.134 billion
and
$2.159 billion.
|
| · |
Total
store revenues are expected to be in the range of $2.379 billion
and
$2.409 billion.
|
| · |
Same
store sales are expected to be in the 1.0% to 2.0%
range.
|
| · |
The
Company expects to open 25-35 new store
locations.
|
| · |
The
Company expects to add financial services to 200-250 rent-to-own
store
locations.
|
Expenses
| · |
The
Company expects cost of rental and fees to be between 21.7% and 22.1%
of
store rental and fee revenue and cost of merchandise sold to be between
70% 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 3.6% and 3.8%
of
total revenue.
|
| · |
Net
interest expense is expected to be between $44.0 million and $48.0
million, depreciation of property assets is expected to be between
$54.0
million and $58.0 million and amortization of intangibles is expected
to
be approximately $2.0 million.
|
| · |
The
effective tax rate is expected to be approximately 36.5% of pre-tax
income.
|
| · |
Diluted
earnings per share are estimated to be in the range of $2.24 to
$2.32.
|
| · |
Diluted
shares outstanding are estimated to be between 71.5 million and 73.0
million.
|
5
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 Company’s 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
the Company’s customer demographic; the Company’s ability to identify and
successfully enter into new lines of business offering products and services
that appeal to the Company’s customer demographic, including the Company’s
financial services products; the results of the Company’s litigation; the
passage of legislation adversely affecting the rent-to-own or financial services
industries; interest rates; the Company’s ability to enter into new and collect
on the Company’s rental purchase agreements; the Company’s ability to enter into
new and collect on the Company’s short term loans; economic pressures affecting
the disposable income available to the Company’s targeted consumers, such as
high fuel and utility costs; changes in estimates with respect to self insurance
liabilities and income tax 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; changes in the Company’s stock price
and the number of shares of
common stock that we may or may not repurchase; changes in our debt ratings;
the
negotiation of and entry into definitive settlement documentation with respect
to the prospective settlements; one or more parties filing an objection to
the
prospective settlements; the courts could refuse to approve the prospective
settlements or could require changes to the prospective settlements that are
unacceptable to the Company or the plaintiffs; the approval of the proposed
merger with Rent-Way, Inc. by the shareholders of Rent-Way; the ability of
the
Company to successfully integrate the Rent-Way stores into the Company's
operating system; the Company's ability to enhance the performance of the
acquired Rent-Way stores; the ability of the parties to close the Rent-Way
acquisition in the time period currently anticipated; the satisfaction of the
closing conditions to the Rent-Way acquisition; the Company’s ability to realize
the cost savings anticipated in connection with the Rent-Way acquisition; the
Company’s ability to obtain acceptable financing of the proposed Rent-Way
acquisition; and other risks detailed from time to time in the Company’s SEC
reports, including but not limited to, the Company’s annual report on Form 10-K
for the year ended December 31, 2005 and its quarterly reports on Form 10-Q
for
the quarter ended March 31, 2006 and June 30, 2006. 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.
Contact
for Rent-A-Center, Inc.:
|
David
E. Carpenter
Vice
President of Investor Relations
(972)
801-1214
dcarpenter@racenter.com
|
6
Rent-A-Center,
Inc. and Subsidiaries
STATEMENT
OF EARNINGS HIGHLIGHTS
|
(In
Thousands of Dollars, except per share data)
|
|||||||||||||
|
Three
Months Ended September 30,
|
|||||||||||||
|
2006
|
2006
|
2005
|
2005
|
||||||||||
|
Before
Legal
Settlement
& Refinancing
Charges
|
After
Legal
Settlement
&
Refinancing
Charges
|
Before
Restructuring
and
Hurricanes
Expense
|
After
Restructuring
and
Hurricanes
Expense
|
||||||||||
|
Total
Revenue
|
$
|
587,184
|
$
|
587,184
|
$
|
573,507
|
$
|
573,507
|
|||||
|
Operating
Profit
|
67,171
|
51,871
|
51,750
|
30,980
|
|||||||||
|
Net
Earnings
|
36,380
|
25,241
|
(1,2,3)
|
25,985
|
11,277(4
|
)
|
|||||||
|
Diluted
Earnings per Common Share
|
$
|
0.51
|
$
|
0.36
|
(1,2,3)
|
$
|
0.35
|
$
|
0.15(4
|
)
|
|||
|
Adjusted
EBITDA
|
$
|
81,666
|
$
|
81,666
|
$
|
67,493
|
$
|
67,493
|
|||||
|
Reconciliation
to Adjusted EBITDA:
|
|||||||||||||
|
Earnings
before income taxes
|
55,184
|
37,719
|
41,279
|
20,509
|
|||||||||
|
Add
back:
|
|||||||||||||
|
Restructuring
expense
|
--
|
--
|
--
|
13,028
|
|||||||||
|
Hurricanes
expense
|
--
|
--
|
--
|
4,075
|
|||||||||
|
Litigation
settlement
|
--
|
15,300
|
--
|
--
|
|||||||||
|
Finance
charges from refinancing
|
--
|
2,165
|
--
|
--
|
|||||||||
|
Interest
expense, net
|
11,987
|
11,987
|
10,471
|
10,471
|
|||||||||
|
Depreciation
of property assets
|
13,486
|
13,486
|
13,484
|
13,484
|
|||||||||
|
Amortization
of intangibles
|
1,009
|
1,009
|
2,259
|
5,926(6
|
)
|
||||||||
|
Adjusted
EBITDA
|
$
|
81,666
|
$
|
81,666
|
$
|
67,493
|
$
|
67,493
|
|||||
|
Nine
Months Ended September 30,
|
|||||||||||||
|
2006
|
2006
|
2005
|
2005
|
||||||||||
|
Before
Legal
Settlement
&
Refinancing
Charges
|
After
Legal
Settlement
&
Refinancing
Charges
|
Before
Restructuring
and
Hurricanes
Expense
&
Tax
Audit
Reserve
and
Litigation
Credits
|
After
Restructuring
and
Hurricanes
Expense
&
Tax Audit
Reserve
and
Litigation
Credits
|
||||||||||
|
Total
Revenue
|
$
|
1,777,782
|
$
|
1,777,782
|
$
|
1,755,894
|
$
|
1,755,894
|
|||||
|
Operating
Profit
|
217,848
|
202,548
|
202,730
|
189,960
|
|||||||||
|
Net
Earnings
|
116,551
|
105,412
|
(1,2,3)
|
108,290
|
100,688(4,5
|
)
|
|||||||
|
Diluted
Earnings per Common Share
|
$
|
1.65
|
$
|
1.49
|
(1,2,3)
|
$
|
1.44
|
$
|
1.34(4,5
|
)
|
|||
|
Adjusted
EBITDA
|
$
|
261,172
|
$
|
261,172
|
$
|
249,459
|
$
|
249,459
|
|||||
|
Reconciliation
to Adjusted EBITDA:
|
|||||||||||||
|
Earnings
before income taxes
|
182,396
|
164,931
|
173,358
|
160,588
|
|||||||||
|
Add
back:
|
|||||||||||||
|
Restructuring
expense
|
--
|
--
|
--
|
13,028
|
|||||||||
|
Hurricanes
expense impact
|
--
|
--
|
--
|
4,075
|
|||||||||
|
Litigation
credit & settlement
|
--
|
15,300
|
--
|
(8,000
|
)
|
||||||||
|
Finance
charges from refinancing
|
--
|
2,165
|
--
|
--
|
|||||||||
|
Interest
expense, net
|
35,452
|
35,452
|
29,372
|
29,372
|
|||||||||
|
Depreciation
of property assets
|
40,479
|
40,479
|
40,018
|
40,018
|
|||||||||
|
Amortization
of intangibles
|
2,845
|
2,845
|
6,711
|
10,378(6
|
)
|
||||||||
|
Adjusted
EBITDA
|
$
|
261,172
|
$
|
261,172
|
$
|
249,459
|
$
|
249,459
|
|||||
| (1) |
Including
the effects of a $2.2 million pre-tax expense in the third quarter
of 2006
for the refinancing of the Company’s senior credit facility. This
refinancing expense reduced diluted earnings per share by approximately
$0.02 in both the third quarter of 2006 and for the nine month period
ended September 30, 2006.
|
| (2) |
Including
the effects of a $4.95 million pre-tax expense in the third quarter
of
2006 associated with the settlement of the Burdusis/French/Corso
litigation. The expense reduced diluted earnings per share by
approximately $0.04 in the third quarter of 2006 and by approximately
$0.05 for the nine month period ended September 30,
2006.
|
| (3) |
Including
the effects of a $10.4 million pre-tax expense in the third quarter
of
2006 associated with the settlement with the California Attorney
General.
The expense reduced diluted earnings per share by approximately $0.09
in
both the third quarter of 2006 and the nine month period ended September
20, 2006.
|
| (4) |
Including
the effects of a $13.0 million pre-tax restructuring expense as part
of
the store consolidation plan announced September 6, 2005 and $7.7
million
in pre-tax expenses related to the damage caused by Hurricanes Katrina
and
Rita. The expenses reduced diluted earnings per share in both the
third
quarter of 2005 and the nine month period ended September 30, 2005,
by
$0.12 for the restructuring expense and by $0.08 for the hurricanes
expense.
|
| (5) |
Including
the effects of an $8.0 million pre-tax credit in the first quarter
of 2005
associated with the settlement of the Griego/Carrillo litigation
reversion, and 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 in the second quarter of 2005. These credits
increased
diluted earnings per share for the nine month period ended September
30,
2005 by $0.10.
|
| (6) |
Includes
$3.667 million of goodwill impairment related to Hurricanes Katrina
and
Rita.
|
7
|
Selected
Balance Sheet Data: (in
Thousands of Dollars)
|
September
30, 2006
|
September
30, 2005
|
|||||
|
Cash
and cash equivalents
|
$
|
53,706
|
$
|
52,790
|
|||
|
Prepaid
expenses and other assets
|
47,303
|
42,067
|
|||||
|
Rental
merchandise, net
|
|||||||
|
On
rent
|
638,091
|
572,224
|
|||||
|
Held
for rent
|
195,086
|
178,825
|
|||||
|
Total
Assets
|
2,064,725
|
1,939,384
|
|||||
|
Senior
debt
|
358,468
|
406,625
|
|||||
|
Subordinated
notes payable
|
300,000
|
300,000
|
|||||
|
Total
Liabilities
|
1,117,145
|
1,117,385
|
|||||
|
Stockholders’
Equity
|
947,580
|
821,999
|
|||||
8
Rent-A-Center, Inc. and Subsidiaries
CONSOLIDATED
STATEMENTS OF EARNINGS
|
(In
Thousands of Dollars, except per share data)
|
Three
Months Ended September 30,
|
||||||
|
2006
|
2005
|
||||||
|
Unaudited
|
|||||||
|
Store
Revenue
|
|||||||
|
Rentals
and Fees
|
$
|
532,260
|
$
|
516,433
|
|||
|
Merchandise
Sales
|
36,343
|
39,212
|
|||||
|
Installment
Sales
|
6,798
|
6,372
|
|||||
|
Other
|
3,723
|
2,938
|
|||||
|
579,124
|
564,955
|
||||||
|
Franchise
Revenue
|
|||||||
|
Merchandise
Sales
|
6,779
|
7,245
|
|||||
|
Royalty
Income and Fees
|
1,281
|
1,307
|
|||||
|
Total
Revenue
|
587,184
|
573,507
|
|||||
|
Operating
Expenses
|
|||||||
|
Direct
Store Expenses
|
|||||||
|
Cost
of Rentals and Fees
|
117,018
|
112,174
|
|||||
|
Cost
of Merchandise Sold
|
28,422
|
30,314
|
|||||
|
Cost
of Installment Sales
|
2,856
|
2,556
|
|||||
|
Salaries
and Other Expenses
|
340,379
|
350,389
|
|||||
|
Franchise
Cost of Merchandise Sold
|
6,523
|
6,964
|
|||||
|
495,198
|
502,397
|
||||||
|
General
and Administrative Expenses
|
23,806
|
21,176
|
|||||
|
Amortization
of Intangibles
|
1,009
|
5,926
|
|||||
|
Litigation
Settlement/(Reversion)
|
15,300
|
--
|
|||||
|
Restructuring
Charge
|
--
|
13,028
|
|||||
|
Total
Operating Expenses
|
535,313
|
542,527
|
|||||
|
Operating
Profit
|
51,871
|
30,980
|
|||||
|
Finance
Charges from Refinancing
|
2,165
|
--
|
|||||
|
Interest
Income
|
(1,335
|
)
|
(1,331
|
)
|
|||
|
Interest
Expense
|
13,322
|
11,802
|
|||||
|
Earnings
before Income Taxes
|
37,719
|
20,509
|
|||||
|
Income
Tax Expense
|
12,478
|
9,232
|
|||||
|
NET
EARNINGS
|
25,241
|
11,277
|
|||||
|
BASIC
WEIGHTED AVERAGE SHARES
|
69,808
|
72,826
|
|||||
|
BASIC
EARNINGS PER COMMON SHARE
|
$
|
0.36
|
$
|
0.15
|
|||
|
DILUTED
WEIGHTED AVERAGE SHARES
|
70,853
|
73,713
|
|||||
|
DILUTED
EARNINGS PER COMMON SHARE
|
$
|
0.36
|
$
|
0.15
|
|||
9
Rent-A-Center,
Inc. and Subsidiaries
CONSOLIDATED
STATEMENTS OF EARNINGS
|
(In
Thousands of Dollars, except per share data)
|
Nine
Months Ended September 30,
|
||||||
|
2006
|
2005
|
||||||
|
Unaudited
|
|||||||
|
Store
Revenue
|
|||||||
|
Rentals
and Fees
|
$
|
1,579,719
|
$
|
1,561,694
|
|||
|
Merchandise
Sales
|
138,934
|
139,480
|
|||||
|
Installment
Sales
|
18,377
|
19,574
|
|||||
|
Other
|
10,263
|
5,013
|
|||||
|
1,747,293
|
1,725,761
|
||||||
|
Franchise
Revenue
|
|||||||
|
Merchandise
Sales
|
26,752
|
26,032
|
|||||
|
Royalty
Income and Fees
|
3,737
|
4,101
|
|||||
|
Total
Revenue
|
1,777,782
|
1,755,894
|
|||||
|
Operating
Expenses
|
|||||||
|
Direct
Store Expenses
|
|||||||
|
Cost
of Rentals and Fees
|
344,518
|
338,710
|
|||||
|
Cost
of Merchandise Sold
|
100,955
|
100,606
|
|||||
|
Cost
of Installment Sales
|
7,677
|
8,169
|
|||||
|
Salaries
and Other Expenses
|
1,012,263
|
1,017,369
|
|||||
|
Franchise
Cost of Merchandise Sold
|
25,659
|
24,993
|
|||||
|
1,491,072
|
1,489,847
|
||||||
|
General
and Administrative Expenses
|
66,017
|
60,681
|
|||||
|
Amortization
of Intangibles
|
2,845
|
10,378
|
|||||
|
Litigation
Settlement/(Reversion)
|
15,300
|
(8,000
|
)
|
||||
|
Restructuring
Charge
|
--
|
13,028
|
|||||
|
Total
Operating Expenses
|
1,575,234
|
1,565,934
|
|||||
|
Operating
Profit
|
202,548
|
189,960
|
|||||
|
Finance
Charges from Refinancing
|
2,165
|
--
|
|||||
|
Interest
Income
|
(4,194
|
)
|
(4,084
|
)
|
|||
|
Interest
Expense
|
39,646
|
33,456
|
|||||
|
Earnings
before Income Taxes
|
164,931
|
160,588
|
|||||
|
Income
Tax Expense
|
59,519
|
59,900
|
|||||
|
NET
EARNINGS
|
105,412
|
100,688
|
|||||
|
BASIC
WEIGHTED AVERAGE SHARES
|
69,536
|
74,044
|
|||||
|
BASIC
EARNINGS PER COMMON SHARE
|
$
|
1.52
|
$
|
1.36
|
|||
|
DILUTED
WEIGHTED AVERAGE SHARES
|
70,581
|
75,262
|
|||||
|
DILUTED
EARNINGS PER COMMON SHARE
|
$
|
1.49
|
$
|
1.34
|
|||
10