Rent-A-Center, Inc. Reports Fourth Quarter and Year End 2001 Results
Total revenues for the quarter ended December 31, 2001 were $479.0 million as compared to $411.9 million for the same quarter of the prior year, an increase of 16.3%. Net earnings rose to $26.0 million in the fourth quarter of 2001 from $23.6 million during the fourth quarter of 2000, an increase of 10.2%. Diluted earnings per share for the quarter ended December 31, 2001 totaled $0.70 as compared to $0.67 for the same quarter of the prior year, representing a 4.5% increase. The Company's quarterly growth in revenues and net earnings was primarily driven by strong growth in same store revenues and the initial success of the Company's efforts to control expenses and improve store operating margins. Same store revenues (revenues earned in stores operated for the entirety of both periods) during the fourth quarter of 2001 increased 9.7% above the comparable quarter of 2000.
"We are very pleased with our results during the fourth quarter, especially given where we began in early October," commented Mark E. Speese, the Company's Chairman and Chief Executive Officer. "We were able to make significant improvements relatively quickly which are evidenced by our improved operating results in the fourth quarter allowing us to report earnings per share on the high side of our revised guidance range." Speese added, "Our demand continues to be strong, and we believe our ability to capitalize on this demand while controlling costs will lead to margin enhancement in the coming year."
Excluding the one-time gain in 2000 and the one-time charge in 2001 as discussed below, net earnings for the twelve months ended December 31, 2001 were $97.5 million compared with $91.2 million for the twelve months ended December 31, 2000, representing an increase of 6.9%. Diluted earnings per share, excluding the one-time charge in 2001, rose to $2.63 for the twelve months ended December 31, 2001 compared with earnings of $2.62 per diluted share for the twelve months ended December 31, 2000, when excluding the one- time gain. Total revenues for the twelve months ended December 31, 2001 increased to $1.809 billion from $1.602 billion in 2000, representing an increase of 12.9%. Same store revenues for the twelve-month period ended December 31, 2001 increased 8.0%.
During 2000, the Company received a reimbursement of $22.4 million from the settlement fund related to three class action lawsuits in the State of New Jersey which it settled in December 1998. Accordingly, the Company recorded a one-time gain during the second quarter of 2000 of $22.4 million to reflect this settlement. The after-tax effect of the reimbursement in the results for the twelve months ended December 31, 2000 increases the Company's net earnings per diluted share by $0.34.
During the third quarter of 2001, the Company recorded a one-time, non- recurring pre-tax charge of $16.0 million as a result of the agreement in principal for the settlement of Margaret Bunch, et al v. Rent-A-Center, Inc., a lawsuit pending in federal court in Kansas City, Missouri, asserting various claims of gender discrimination and other gender based claims on behalf of a nationwide class. The settlement is subject to court approval. The after-tax effect of the charge in the results for the twelve months ended December 31, 2001 decreases the Company's net earnings per diluted share by $0.24.
In the fourth quarter of 2001, the Company opened 15 new locations and acquired an additional four stores. The Company has opened four new stores during the first quarter of 2002 and intends to open 60 to 80 new stores during 2002, as well as pursue opportunistic acquisitions. The Company believes this growth can be funded with internally generated cash flow. During the year ended December 31, 2001, the Company generated $175.7 million in cash flow from operations. This enabled the Company to reduce total debt outstanding by $38.1 million, fund the growth of an additional 123 stores and repurchase $25 million in common stock outstanding. The Company ended the year with approximately $108 million of cash on hand.
"We have experienced strong cash flow all year long, but particularly in the fourth quarter of 2001, whereby we generated $58.9 million in operating cash flow," stated Speese. "The renewed profit focus and expense control initiatives we have implemented over the last few months give us further comfort in our guidance," continued Speese, "and as we continue to realize the benefit of these initiatives, we believe it could lead to further upside on earnings."
Rent-A-Center will host a conference call to discuss the fourth quarter financial results and other business updates on Tuesday morning, February 12, 2002, at 10:45 a.m. EST. For a live webcast of the call, visit http://www.rentacenter.com/CompanyInfo/CompanyInfo.html . The webcast will be archived for a period of two weeks.
Rent-A-Center, headquartered in Plano, Texas currently operates 2,281 company-owned rent-to-own stores in 50 states, Washington D.C. and Puerto Rico. The stores offer high-quality, durable goods such as home electronics, appliances, computers, and furniture and accessories to consumers under flexible rental purchase agreements that 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 341 rent-to-own stores, 329 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 store acquisitions that may be completed after December 31, 2001.
FIRST QUARTER 2002 GUIDANCE:
Revenues
-- The Company expects total revenues to be in the range of $475 million
to $483 million.
-- Store rental and fee revenues are expected to be between $431 million
and $438 million.
-- Total store revenues are expected to be in the range of $461 million to
$468 million.
-- Same store sales increases are expected to be in the 4.0% to 6.0%
range.
-- The Company expects to open 5 to 10 new store locations.
Expenses
-- The Company expects depreciation of rental merchandise to be between
20.8% and 21.0% of store rental and fee revenue and cost of goods
merchandise sales to be between 65.0% and 75.0% of store merchandise
sales.
-- Store salaries and other expenses are expected to be in the range of
57.5% to 58.5% of total store revenue.
-- General and administrative expenses are expected to be between 3.1% and
3.4% of total revenue.
-- Interest expense is expected to be approximately $15.0 million and
amortization of intangibles is expected to be approximately
$0.5 million.
-- The effective tax rate is expected to be approximately 40.5% of pre-tax
income.
-- Diluted earnings per share are estimated to be in the range of $0.90 to
$0.93.
-- Diluted shares outstanding are estimated to be between 36.0 million and
36.7 million.
FISCAL 2002 GUIDANCE:
Revenues
-- The Company expects total revenues to be in the range of $1.90 billion
and $1.95 billion.
-- Store rental and fee revenues are expected to be between $1.76 billion
and $1.79 billion.
-- Total store revenues are expected to be in the range of $1.85 billion
and $1.89 billion.
-- Same store sales increases are expected to be in the 3% to 5% range.
-- The Company expects to open approximately 60 to 80 new store locations.
Expenses
-- The Company expects depreciation of rental merchandise to be between
20.7% and 21.0% of store rental and fee revenue and cost of goods
merchandise sales to be between 75.0% and 85.0% of store merchandise
sales.
-- Store salaries and other expenses are expected to be in the range of
57.5% to 58.5% of total store revenue.
-- General and administrative expenses are expected to be between 3.0% and
3.4% of total revenue.
-- Interest expense is expected to be approximately $60.0 million and
amortization of intangibles is expected to be approximately
$2.0 million.
-- The effective tax rate is expected to be approximately 40.5% of pre-tax
income.
-- Diluted earnings per share are estimated to be in the range of $3.60 to
$3.70.
-- Diluted shares outstanding are estimated to be between 36.8 million and
37.8 million.
This press release and the guidance above contains 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," "could," "expect," "intend," "estimate," "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 and implement its expense control initiatives; the
Company's ability to realize benefits from its expense control initiatives; 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 effectively
hedge interest rates on its outstanding debt; changes in the Company's effective
tax rate; and the other risks detailed from time to time in the Company's SEC
filings, included but not limited to, its annual report on Form 10-K for the
year ended December 31, 2000, its quarterly report on Form 10-Q/A for the
quarter ended March 31, 2001, its quarterly report on Form 10-Q for the quarter
ended June 30, 2001 and its quarterly report on Form 10-Q for the quarter ended
September 30, 2001. 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:
Rent-A-Center, Inc. and Subsidiaries
STATEMENT OF EARNINGS HIGHLIGHTS
(In thousands of Dollars, except for per share data)
Three Months Ended December 31,
2001 2000
(Unaudited)
Total Revenues $478,993 $411,875
Operating Profit 59,089 60,557
Net Earnings 26,020 23,616
Diluted Earnings Per Common Share 0.70 0.67
EBITDA $76,685 $76,245
Twelve Months Ended December 31,
2001 2001 2000 2000
(In thousands
of Dollars, Before Non- After Non- Before Non- After Non-
except per Recurring Recurring Recurring Recurring
share data) Charge Charge Gain Gain
Total Revenues $ 1,808,528 $ 1,808,528 $ 1,601,614 $ 1,601,614
Operating Profit 236,586 220,586 (A) 244,630 267,013 (B)
Net Earnings 97,497 88,537 (A) 91,166 103,027 (B)
Diluted Earnings
Per Common Share 2.63 2.39 (A) 2.62 2.96 (B)
EBITDA $304,690 $288,690 (A) $306,077 $328,460 (B)
(A) Including the effects of a pre-tax, non-recurring legal charge of
$16.0 million associated with the settlement in principle of an
asserted class action lawsuit pending in federal court in the state
of Missouri.
(B) Including the effects of a pre-tax, non-recurring legal reversion of
$22.4 million associated with the 1999 settlement of three class
action lawsuits in the State of New Jersey.
DILUTED EARNINGS PER COMMON SHARE
BEFORE GOODWILL AMORTIZATION
3 Months Ended 12 Months Ended 12 Months Ended
December 31, December 31, December 31,
2001 2001 2001
(in thousands of Dollars, Before Non- After Non-
except per share data) Recurring Recurring
Charge Charge
Net Earnings $26,020 $97,497 $88,537 (A)
Goodwill Amortization
Net of Tax Effects 6,167 24,892 24,892
Adjusted Net Earnings $32,187 $122,389 $113,429 (A)
Diluted Weighted Average
Shares Outstanding 36,965 37,079 37,079
Diluted Earnings Per Share
Before Goodwill
Amortization $0.87 $3.30 $3.06 (A)
(A) Including the effects of a pre-tax, non-recurring legal charge of
$16.0 million associated with the settlement in principle of an
asserted class action lawsuit pending in federal court in the state
of Missouri.
Selected Balance Sheet Data: December 31, 2001 December 31, 2000
(in Thousands of Dollars)
Cash and cash equivalents $ 107,958 $ 36,495
Prepaid expenses and other assets 29,846 31,805
Rental merchandise, net
On rent 531,627 477,095
Held for rent 122,074 110,137
Total Assets 1,606,686 1,486,910
Senior debt 428,000 566,051
Subordinated notes payable, net 274,506 175,000
Total Liabilities 886,568 896,307
Preferred Stock 291,910 281,232
Stockholders' Equity 428,208 309,371
Rent-A-Center, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands of Dollars, expect per share data)
Three Months Ended December 31,
2001 2000
Store Revenues
Rentals and Fees $ 437,464 $376,715
Merchandise Sales 22,293 17,260
Other 598 1,102
460,355 395,077
Franchise Revenues
Franchise Merchandise Sales 17,238 15,414
Royalty Income and Fees 1,400 1,384
Total Revenues 478,993 411,875
Operating Expenses
Direct Store Expenses
Depreciation of Rental Merchandise 91,911 76,753
Cost of Merchandise Sold 18,363 13,588
Salaries and Other Expenses 270,826 227,193
Franchise Operation Expenses
Cost of Franchise Merchandise Sales 16,430 14,675
397,530 332,209
General and Administrative Expenses 14,582 11,904
Amortization of Intangibles 7,792 7,205
Total Operating Expenses 419,904 351,318
Operating Profit 59,089 60,557
Interest Expense 13,659 18,040
Interest Income (224) (612)
Earnings Before Income Taxes 45,654 43,129
Income Tax Expense 19,634 19,513
NET EARNINGS 26,020 23,616
Preferred Dividends 3,321 2,656
NET EARNINGS ALLOCABLE TO COMMON STOCKHOLDERS $22,699 $20,960
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 26,087 24,688
BASIC EARNINGS PER COMMON SHARE $ 0.87 $ 0.85
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 36,965 35,352
DILUTED EARNINGS PER COMMON SHARE $ 0.70 $ 0.67
Rent-A-Center, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands of Dollars, expect per share data)
Year Ended December 31,
2001 2000
Store Revenues
Rentals and Fees $1,650,851 $1,459,664
Merchandise Sales 94,733 81,166
Other 3,476 3,018
1,749,060 1,543,848
Franchise Revenues
Franchise Merchandise Sales 53,584 51,769
Royalty Income and Fees 5,884 5,997
Total Revenues 1,808,528 1,601,614
Operating Expenses
Direct Store Expenses
Depreciation of Rental Merchandise 343,197 299,298
Cost of Merchandise Sold 72,539 65,332
Salaries and Other Expenses 1,019,402 866,234
Franchise Operation Expenses
Cost of Franchise Merchandise Sales 51,251 49,724
1,486,389 1,280,588
General and Administrative Expenses 55,359 48,093
Amortization of Intangibles 30,194 28,303
Non-Recurring Legal Items 16,000 (22,383)
Total Operating Expenses 1,587,942 1,334,601
Operating Profit 220,586 267,013
Interest Expense 60,874 74,324
Interest Income (1,094) (1,706)
Earnings Before Income Taxes 160,806 194,395
Income Tax Expense 72,269 91,368
NET EARNINGS 88,537 103,027
Preferred Dividends 15,408 10,420
NET EARNINGS ALLOCABLE TO COMMON STOCKHOLDERS $73,129 $92,607
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 25,846 24,407
BASIC EARNINGS PER COMMON SHARE $ 2.83 $ 3.79
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 37,079 34,812
DILUTED EARNINGS PER COMMON SHARE $ 2.39 $ 2.96
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SOURCE Rent-A-Center, Inc.
CONTACT: Peter J. Bates, Vice President - Finance, Director of Investor
Relations, +1-972-801-1205, or pbates@racenter.com , or Robert D. Davis, Chief
Financial Officer, +1-972-801-1204, or rdavis@racenter.com , or Mitchell E.
Fadel, President, +1-972-801-1114, or mfadel@racenter.com , or Mark E. Speese,
Chairman and CEO, +1-972-801-1199, or mspeese@racenter.com , all of Rent-A-
Center, Inc.
URL: http://www.rentacenter.com/CompanyInfo/CompanyInfo.html