Rent-A-Center, Inc. Reports Second Quarter 2002 Results
Total Revenues Increase 11.7%; Same Store Sales Increase 6.6%; Diluted Earnings Per Share Rise 34.1%
Rent-A-Center, Inc. (Nasdaq: RCII) (the "Company"), the leading rent-to-own operator in the U.S., today announced revenues and net earnings for the quarter ended June 30, 2002.The Company, the nation's largest rent-to-own operator, had total revenues for the quarter ended June 30, 2002 of $494.7 million, a $51.9 million increase from $442.8 million for the same period in the prior year. This increase of 11.7% in revenues was primarily driven by growth in same store revenues, as well as incremental revenues generated in new and acquired stores. Same store revenues (revenues earned in stores operated for the entirety of both periods) during the second quarter of 2002 increased 6.6% above the comparable quarter of 2001.
Net earnings for the quarter ended June 30, 2002, when excluding the charges discussed below, were $44.9 million, or $1.22 per diluted share. This represented an increase of 62.9% over net earnings of $27.5 million, or $0.74 per diluted share, reported for the same period in the prior year. After adjusting reported results for the second quarter of 2001 to exclude the effects of goodwill amortization, net earnings and diluted earnings per common share increased $11.1 million and $0.31, respectively, for an increase in diluted earnings per common share of 34.1%, 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 continued focus on cost control.
Net earnings for the six months ended June 30, 2002, were $88.4 million, or $2.42 per diluted share, when excluding the charges discussed below, representing an increase of 68.3% over net earnings of $52.5 million, or $1.43 per diluted share for the same period in the prior year. After adjusting reported results for the six-month period ending June 30, 2001 to exclude the effects of goodwill amortization, net earnings and diluted earnings per common share increased $23.5 million and $0.66, respectively, for an increase in diluted earnings per common share of 37.5%, on a comparable basis. Total revenues for the six months ended June 30, 2002 increased to $993.3 million from $882.5 million in 2001, representing an increase of 12.6%. Same store revenues for the six-month period ending June 30, 2002 increased 6.7%.
"We are pleased to report another quarter of outstanding results," commented Mark E. Speese, the Company's Chairman and Chief Executive Officer. "Our continued ability to meet, and in many cases, exceed our stated objectives in terms of revenue and earnings growth," Speese continued, "further validates our business model and speaks to the opportunities inherent in the industry for continued growth. Needless to say, we expect to be at the forefront of that growth."
During the second quarter of 2002, the Company strengthened its balance sheet with the prepayment of $128 million of term debt. Associated with the prepayment was a write-off of financing fees of approximately $2.9 million. The Company also recorded a charge of $2.0 million during the second quarter relating to the settlement of its class action gender discrimination lawsuits, which is included in general and administrative expenses on the quarterly income statement. These charges reduced diluted earnings per share in the quarter by $0.08 to the reported diluted earnings per share of $1.14.
In addition, during the second quarter of 2002, the Company opened 16 new locations and acquired 38 additional stores while consolidating three locations into existing stores. The Company also purchased accounts from 40 additional locations during the second quarter of 2002. Since June 30, 2002, the Company has opened four additional new stores, consolidated one store with an existing location and has purchased accounts from four 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 strong recurring cash flows have enabled the Company to fund its growth internally. Through the six-month period ending June 30, 2002, the Company had cash flow from operations of approximately $172.9 million and, after funding its growth and reducing debt by $128 million, ended the quarter with $93.8 million of cash on hand. "This performance clearly demonstrates our ability to grow our store base and reduce our outstanding debt simultaneously," commented Speese.
Rent-A-Center will host a conference call to discuss the second quarter financial results on Tuesday morning July 30, 2002 at 10:45 a.m. EDT. For a live webcast of the call, visit http://www.rentacenter.com/coinfo_calendar.asp . The webcast will be archived for a period of two weeks.
Rent-A-Center, Inc., headquartered in Plano, Texas, currently operates 2,338 rent-to-own stores in 50 states, Washington, D.C. and Puerto Rico, offering high-quality, durable goods such as consumer electronics, appliances, computers, furniture and accessories to consumers under flexible rental purchase arrangements 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 franchiser of 327 rent-to-own stores, 315 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, the prepayment of debt and other changes in our capital structure that may be completed after June 30, 2002.
THIRD QUARTER 2002 GUIDANCE:
Revenues
-- The Company expects total revenues to be in the range of $488 million
to $494 million.
-- Store rental and fee revenues are expected to be between $452 million
and $456 million.
-- Total store revenues are expected to be in the range of $475 million
to $480 million.
-- Same store sales increases are expected to be in the 4% to 6% range.
-- The Company expects to open 15-20 new store locations.
Expenses
-- The Company expects depreciation of rental merchandise to be between
20.7% and 20.9% of store rental and fee revenue and cost of goods
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
55.8% and 56.8% 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 $13.5 million and
amortization is expected to be approximately $0.9 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 36.9 million
and 37.3 million.
FISCAL 2002 GUIDANCE:
Revenues
-- The Company expects total revenues to be in the range of $1.98 billion
and $2.00 billion.
-- Store rental and fee revenues are expected to be between
$1.808 billion and $1.823 billion.
-- Total store revenues are expected to be in the range of $1.921 billion
and $1.936 billion.
-- Same store sales increases are expected to be in the 4% to 6% range.
-- The Company expects to open a total of 60-80 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
merchandise sales to be between 72% and 77% of store merchandise
sales.
-- Store salaries and other expenses are expected to be in the range of
54.6% and 55.8% 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 $56.0 million and
$60.0 million and amortization of intangibles is expected to be
approximately $3.5 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
$4.57 to $4.65, or $4.65 to $4.73 when excluding the $0.08 in charges
recorded in the second quarter of 2002.
-- Diluted shares outstanding are estimated to be between 36.7 million
and 37.1 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 and its
quarterly report on Form 10-Q for the three month period ending March 31, 2002.
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
STATEMENT OF EARNINGS HIGHLIGHTS
(In Thousands of Dollars, except per share data)
Three Months Ended June 30,
2002 2002 2001
Before Non- After Non-Recurring
Recurring Charges Charges
Unaudited
Total Revenue $494,660 $494,660 $442,759
Operating Profit 90,240 88,240 (A) 66,640
Net Earnings 44,864 41,943 (A) 27,545
Diluted Earnings Per
Common Share $ 1.22 $ 1.14 (A) $ 0.74
EBITDA $100,574 $ 98,574 (A) $ 83,543
Six Months Ended June 30,
2002 2002 2001
Before Non- After Non-Recurring
Recurring Charges Charges
Unaudited
Total Revenue $993,270 $993,270 $882,461
Operating Profit 178,536 176,536 (A) 129,125
Net Earnings 88,427 85,506 (A) 52,543
Diluted Earnings Per
Common Share $ 2.42 $ 2.34 (A) $ 1.43
EBITDA $199,056 $197,056 (A) $162,101
(A) Including the effects of a pre-tax legal charge of $2.0 million
associated with the settlement of class action gender discrimination
lawsuits and $2.9 million associated with the early retirement of
debt. These charges reduced diluted earnings per share by $0.08 from
$1.22 per diluted share to $1.14.
Rent-A-Center, Inc. and Subsidiaries
Diluted Earnings Per Common Share before Goodwill Amortization
(In Thousands of Dollars, except per share data)
Three Months Ended June 30,
2002 2002 2001
Before Non- After Non-Recurring
Recurring Charges Charges
Unaudited
Net Earnings $ 44,864 $ 41,943 (A) $ 27,545
Goodwill Amortization
Net of Tax Effects --- --- 6,197
Adjusted Net Earnings $ 44,864 $ 41,943 (A) $ 33,742
Diluted Weighted Average
Shares Outstanding 36,715 36,715 37,195
Diluted Earnings Per
Common Share Before
Goodwill Amortization $ 1.22 $ 1.14 (A) $ 0.91
Six Months Ended June 30,
2002 2002 2001
Before Non- After Non-
Recurring Charges Recurring Charges
Unaudited
Net Earnings $ 88,427 $ 85,506 (A) $ 52,543
Goodwill Amortization Net
of Tax Effects --- --- 12,359
Adjusted Net Earnings $ 88,427 $ 85,506 (A) $ 64,902
Diluted Weighted Average
Shares Outstanding 36,518 36,518 36,785
Diluted Earnings Per
Common Share Before
Goodwill Amortization $ 2.42 $ 2.34 (A) $ 1.76
(A) Including the effects of a pre-tax legal charge of $2.0 million
associated with the settlement of class action gender discrimination
lawsuits and $2.9 million associated with the early retirement of
debt. These charges reduced diluted earnings per share by $0.08 from
$1.22 per diluted share to $1.14.
Selected Balance Sheet Data: (in Thousands of Dollars)
June 30, 2002 Dec. 31, 2001
Cash and cash equivalents $ 93,824 $107,958
Prepaid expenses and other assets 31,335 29,846
Rental merchandise, net
On rent 517,500 531,627
Held for rent 131,705 122,074
Total Assets 1,604,597 1,619,920
Senior debt 300,000 428,000
Subordinated notes payable 274,543 274,506
Total Liabilities 830,342 922,632
Stockholders' Equity and Redeemable
Preferred Stock 774,255 697,288
Rent-A-Center, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
(In Thousands of Dollars, except per share data)
Three Months Ended June 30,
2002 2001
Unaudited
Store Revenue
Rentals and Fees $456,149 $409,023
Merchandise Sales 23,994 20,112
Other 567 908
480,710 430,043
Franchise Revenue
Franchise Merchandise Sales 12,486 11,232
Royalty Income and Fees 1,464 1,484
Total Revenue 494,660 442,759
Operating Expenses
Direct Store Expenses
Depreciation of Rental Merchandise 94,354 84,276
Cost of Merchandise Sold 17,497 15,445
Salaries and Other Expenses 264,478 244,365
Franchise Operation Expenses
Cost of Franchise Merchandise Sales 11,884 10,703
388,213 354,789
General and Administrative Expenses 17,285 13,934
Amortization of Intangibles 922 7,396
Total Operating Expenses 406,420 376,119
Operating Profit 88,240 66,640
Non-Recurring Finance Charge 2,909 ---
Interest Income (705) (227)
Interest Expense 15,557 15,868
Earnings Before Income Taxes 70,479 50,999
Income Tax Expense 28,536 23,454
NET EARNINGS 41,943 27,545
Preferred Dividends 3,898 5,053
Net earnings allocable to common stockholders $ 38,045 $ 22,492
BASIC WEIGHTED AVERAGE SHARES 25,708 25,672
BASIC EARNINGS PER COMMON SHARE $ 1.48 $ 0.88
DILUTED WEIGHTED AVERAGE SHARES 36,715 37,195
DILUTED EARNINGS PER COMMON SHARE $ 1.14 $ 0.74
Rent-A-Center, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
(In Thousands of Dollars, except per share data)
Six Months Ended June 30,
2002 2001
Unaudited
Store Revenue
Rentals and Fees $899,854 $802,146
Merchandise Sales 63,599 50,871
Other 1,181 2,238
964,634 855,255
Franchise Revenue
Franchise Merchandise Sales 25,739 24,259
Royalty Income and Fees 2,897 2,947
Total Revenue 993,270 882,461
Operating Expenses
Direct Store Expenses
Depreciation of Rental Merchandise 186,577 165,088
Cost of Merchandise Sold 44,479 37,000
Salaries and Other Expenses 527,097 486,584
Franchise Operation Expenses
Cost of Franchise Merchandise Sales 24,537 23,197
782,690 711,869
General and Administrative Expenses 32,402 26,803
Amortization of Intangibles 1,642 14,664
Total Operating Expenses 816,734 753,336
Operating Profit 176,536 129,125
Non-Recurring Finance Charge 2,909 ---
Interest Income (1,428) (588)
Interest Expense 31,355 32,378
Earnings Before Income Taxes 143,700 97,335
Income Tax Expense 58,194 44,792
NET EARNINGS 85,506 52,543
Preferred Dividends 8,890 9,378
Net earnings allocable to common stockholders $ 76,616 $ 43,165
BASIC WEIGHTED AVERAGE SHARES 25,111 25,303
BASIC EARNINGS PER COMMON SHARE $ 3.05 $ 1.71
DILUTED WEIGHTED AVERAGE SHARES 36,518 36,785
DILUTED EARNINGS PER COMMON SHARE $ 2.34 $ 1.43
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SOURCE Rent-A-Center, Inc.
CONTACT: David E. Carpenter, Director of Investor Relations,
+1-972-801-1214, or dcarpenter@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/coinfo_calendar.asp
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