Rent-A-Center, Inc. Reports Record First Quarter 2002 Results
The Company, the nation's largest rent-to-own operator, had total revenues for the quarter ended March 31, 2002 of $498.6 million, a $58.9 million increase from $439.7 million for the same period in the prior year. This increase of 13.4% was largely a result of better than expected same store sales growth of 7.7% and incremental revenues generated in new and acquired stores, as well as an increase in the amount of merchandise sales.
Net earnings for the quarter ended March 31, 2002 were $43.6 million, or $1.20 per diluted share, representing an increase of 74.3% over the net earnings of $25.0 million, or $0.69 per diluted share, reported for the same period in the prior year. After adjusting reported results for the first quarter of 2001 to exclude the effects of goodwill amortization, net earnings and diluted earnings per common share increased $12.4 million and $0.34, respectively, for an increase in diluted earnings per common share of 39.5%, on a comparable basis. The increase in net earnings and earnings per diluted share are primarily attributable to the Company's increase in revenues, operational improvements in existing stores and a renewed focus on cost control.
"The outstanding results for the first quarter of 2002 are a tribute to the hard work and dedication of every employee in the organization," commented Mark E. Speese, the Company's Chairman and Chief Executive Officer. "Since my return seven months ago, everyone has embraced the renewed focus on profitability and expense management while continuing to capitalize on the strong demand for our products and services, and we are now witnessing the results," Mr. Speese added. "Due to the strong trends in demand, as well as the effectiveness of our business model," continued Mr. Speese, "we are pleased to announce increased earnings expectations of between $4.30 and $4.40 per diluted share for 2002 and a long term earnings growth rate of approximately 15% a year beginning in 2003."
During the first quarter of 2002, the Company opened six new locations and acquired three additional stores while consolidating three locations into existing stores and selling a further three locations. The Company also purchased accounts from 19 additional locations during the first quarter of 2002. Since March 31, 2002, the Company has opened six additional new stores, acquired three stores and has purchased accounts from 11 additional locations. For the entire year ending December 31, 2002, the Company intends to add approximately 5% to 10% to its store base by opening between 60 and 80 new store locations as well as continuing to pursue opportunistic acquisitions. The Company expects to accelerate the number of new store openings each year beginning in 2003 to between 100 and 120 new store locations.
The Company intends to fund the new store growth initiatives with internally generated cash flows. At December 31, 2001, the Company had approximately $108.0 million of cash on hand. During the first quarter ended March 31, 2002, the Company generated cash flows from operations of $96.3 million and, after repurchasing $34.7 million of common stock from the Company's former Chairman in January of 2002, ended the first quarter with $167.3 million of cash on hand. Mr. Mitchell E. Fadel, the Company's President, stated, "Our strong cash flow in the first quarter gives us a high level of confidence in our ability to further reduce our leverage, as well as achieve our new store growth targets with our own capital."
Rent-A-Center, headquartered in Plano, Texas currently operates 2,293 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 337 rent-to-own stores, 325 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 March 31, 2002.
SECOND QUARTER 2002 GUIDANCE:
Revenues
-- The Company expects total revenues to be in the range of $478.5 million
to $488.5 million.
-- Store rental and fee revenues are expected to be between $445 million
and $450 million.
-- Total store revenues are expected to be in the range of $466 million to
$475 million.
-- Same store sales increases are expected to be in the 3.5% to 5.5%
range.
-- The Company expects to open 10-15 new store locations.
Expenses
-- The Company expects depreciation of rental merchandise to be between
20.7% and 20.8% of store rental and fee revenue and cost of goods on
merchandise sales to be between 75% and 85% of store merchandise sales.
-- Store salaries and other expenses are expected to be in the range of
55.6% to 56.6% of total store revenue.
-- General and administrative expenses are expected to be between 3.0% and
3.3% of total revenue.
-- Interest expense is expected to be approximately $14.5 million and
amortization of intangibles is expected to be approximately
$0.75 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 $1.06 to
$1.10.
-- Diluted shares outstanding are estimated to be between 36.8 million and
37.5 million.
FISCAL 2002 GUIDANCE:
Revenues
-- The Company expects total revenues to be in the range of $1.94 billion
and $1.99 billion.
-- Store rental and fee revenues are expected to be between $1.78 billion
and $1.81 billion.
-- Total store revenues are expected to be in the range of $1.88 billion
and $1.92 billion.
-- Same store sales increases are expected to be in the 4% to 6% range.
-- The Company expects to open approximately 60 to 80 new store locations.
Expenses
-- The Company expects depreciation of rental merchandise to be between
20.6% and 20.8% of store rental and fee revenue and cost of goods on
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
55.0% to 56.5% of total store revenue.
-- General and administrative expenses are expected to be between 3.0% and
3.2% of total revenue.
-- Interest expense is expected to be between $57.5 million and
$60.0 million and amortization of intangibles is expected to be
approximately $3.0 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 $4.30 to
$4.40.
-- Diluted shares outstanding are estimated to be between 37.3 million and
38.3 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 and implement its margin
enhancement initiatives; the Company's ability to realize benefits from its
margin enhancement 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, including but not limited to, its
annual report on Form 10-K for the year ended December 31, 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.
Rent-A-Center, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF EARNINGS HIGHLIGHTS
(In Thousands of Dollars, Three Months Ended March 31,
except per share data) 2002 2001
Unaudited
Total Revenues $498,610 $439,702
Operating Profit 88,296 62,485
Net Earnings 43,563 24,998
Diluted Earnings Per Common Share 1.20 0.69
EBITDA $98,482 $78,558
DILUTED EARNINGS PER COMMON SHARE
BEFORE GOODWILL AMORTIZATION
(In Thousands of Dollars, Three Months Ended March 31,
except per share data) 2002 2001
Unaudited
Net Earnings $43,563 $24,998
Goodwill Amortization Net of Tax Effects --- 6,160
Adjusted Net Earnings $43,563 $31,158
Diluted Weighted Average Shares Outstanding 36,321 36,375
Diluted Earnings Per Common Share Before
Goodwill Amortization $1.20 $0.86
Selected Balance Sheet Data:
(in Thousands of Dollars) March 31, 2002 March 31, 2001
Cash and cash equivalents $167,264 $27,541
Prepaid expenses and other assets 27,228 37,330
Rental merchandise, net
On rent 544,471 515,395
Held for rent 112,073 110,869
Total Assets 1,671,765 1,511,577
Senior debt 428,000 528,135
Subordinated notes payable 274,525 175,000
Total Liabilities 957,630 885,119
Stockholders' Equity 419,461 342,570
Rent-A-Center, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF EARNINGS
(In Thousands of Dollars, Three months ended March 31,
except per share data) 2002 2001
Revenues Unaudited
Store
Rentals and fees $443,705 $393,123
Merchandise sales 39,605 30,759
Other 614 1,330
483,924 425,212
Franchise
Merchandise sales 13,253 13,027
Royalty income and fees 1,433 1,463
Total revenues 498,610 439,702
Operating expenses
Direct store expenses
Depreciation of rental merchandise 92,223 80,812
Cost of merchandise sold 26,982 21,555
Salaries and other expenses 262,619 242,219
Franchise cost of merchandise sold 12,653 12,494
394,477 357,080
General and administrative expenses 15,117 12,869
Amortization of intangibles 720 7,268
Total operating expenses 410,314 377,217
Operating profit 88,296 62,485
Interest expense 15,798 16,510
Interest income (723) (361)
Earnings before income taxes 73,221 46,336
Income tax expense 29,658 21,338
NET EARNINGS 43,563 24,998
Preferred dividends 4,992 4,325
Net earnings allocable to common stockholders $38,571 $20,673
Basic weighted average shares outstanding 24,515 24,959
Basic earnings per common share $1.57 $0.83
Diluted weighted average shares outstanding 36,321 36,375
Diluted earnings per common share $1.20 $0.69
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