Rent-A-Center, Inc. Reports Third Quarter 2010 Results
Repurchased 1.9 Million Shares of Common Stock and Reduced Debt by $26.3 Million
Announces Cash Dividend of $0.06 for the 4th Quarter
PLANO, Texas, Oct 25, 2010 (BUSINESS WIRE) --
Rent-A-Center, Inc. (the "Company") (NASDAQ/NGS:RCII), the nation's largest rent-to-own operator, today announced revenues and earnings for the quarter ended September 30, 2010.
Third Quarter 2010 Results
Total revenues for the quarter ended September 30, 2010, were $664.6 million, a decrease of $6.7 million from total revenues of $671.3 million for the same period in the prior year. This decrease in revenues was attributable to the November 2009 divestiture of dPi Teleconnect, LLC, the Company's subsidiary engaged in the prepaid telecommunications and energy business, which had contributed approximately $14.6 million in merchandise sales for the quarter ended September 30, 2009. Same store sales for the quarter ended September 30, 2010 increased 0.3%.
For the quarter ended September 30, 2010, net earnings increased approximately 10% to $40.5 million from $36.8 million for the same period in the prior year, and net earnings per diluted share also increased approximately 13% to $0.62 from $0.55 in the prior year period.
"We had a very strong quarter as both our revenues and earnings exceeded our expectations," said Mark E. Speese, the Company's Chairman and Chief Executive Officer. "Customer demand remained strong in the quarter with total deliveries outperforming the comparable period in 2009," Speese stated. "We also continued to return value to our stockholders with the repurchase of 1.9 million shares of our common stock, and the declaration of our second consecutive quarterly dividend. We will continue to invest in future profitable growth as evidenced by the rapid expansion of our RAC Acceptance kiosks - partnering with retailers and offering the rent-to-own transaction to consumers who do not qualify for in-store financing. In addition, we are excited to announce our international entry into Mexico with the recent opening of our first rent-to-own store in Reynosa," Speese concluded.
Nine Months Ended September 30, 2010 Results
Total revenues for the nine months ended September 30, 2010, were $2.055 billion, a decrease of $24.0 million from total revenues of $2.079 billion for the same period in the prior year. As described above, this decrease in revenues was attributable to the November 2009 divestiture of dPi Teleconnect, LLC, which had contributed approximately $42.6 million in merchandise sales for the nine months ended September 30, 2009. Same store sales for the nine months ended September 30, 2010 declined 0.1%.
Net earnings and net earnings per diluted share for the nine months ended September 30, 2010 were $139.8 million and $2.11, respectively, as compared to $124.2 million and $1.86, respectively, for the same period in the prior year. Net earnings and net earnings per diluted share for the nine months ended September 30, 2009 included $4.9 million in pre-tax litigation credits, or approximately $0.04 per share, related to the Hilda Perez matter as discussed below.
Net earnings per diluted share for the nine months ended September 30, 2010 increased approximately 16% to $2.11, as compared to adjusted net earnings per diluted share of $1.82, when excluding the pre-tax litigation credit above, for the nine months ended September 30, 2009.
Through the nine month period ended September 30, 2010, the Company generated cash flow from operations of approximately $192.7 million, while ending the quarter with approximately $80.8 million of cash on hand. The Company utilized its cash from operations to reduce its outstanding indebtedness by approximately $115.1 million in 2010, or approximately 16% from year end 2009, and repurchased 2,181,502 shares of its common stock for approximately $45.9 million in cash under its common stock repurchase program. To date, the Company has repurchased a total of 22,066,352 shares and has utilized approximately $512.5 million of the $600.0 million authorized by its Board of Directors since the inception of the plan.
Other Announcements
The Company today announced that its Board of Directors has declared a $0.06 per share cash dividend for the fourth quarter of 2010 to be paid to the Company's common stockholders. The dividend will be paid on November 23, 2010, to common stockholders of record as of the close of business on November 5, 2010. Any future dividends will be subject to approval by the Board of Directors.
The Company also today announced that in connection with its analysis of available growth initiatives, it is exploring strategic alternatives with respect to its financial services business, which may or may not include a sale or divesture of such business. The Company does not intend to disclose developments with respect to the strategic alternatives for its financial services business unless and until a final decision is made and further disclosure is required. The Company does not anticipate these strategic alternatives to result in a material adverse change to its financial condition or results of operations.
2009 Significant Item
Hilda Perez Matter. In connection with the court approved settlement of the Hilda Perez v. Rent-A-Center, Inc. matter in New Jersey, the Company previously recorded a pre-tax credit in the amount of $3.0 million in the first quarter of 2009 and a pre-tax credit in the amount of $1.9 million in the second quarter of 2009 to account for cash payments to the Company representing undistributed monies in the settlement fund to which the Company is entitled pursuant to the terms of the settlement, as well as a refund of costs to administer the settlement previously paid by the Company which were not expended during the administration of the settlement. Through the nine month period ended September 30, 2009, the total pre-tax credit of approximately $4.9 million increased net earnings per diluted share by approximately $0.04.
Rent-A-Center, Inc. will host a conference call to discuss the third quarter results, guidance and other operational matters on Tuesday morning, October 26, 2010, at 10:45 a.m. EDT. 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 approximately 3,000 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 approximately 200 rent-to-own stores operating under the trade name of "ColorTyme."
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, future dividends, changes in outstanding indebtedness, or the potential impact of acquisitions or dispositions that may be completed after October 25, 2010.
FOURTH QUARTER 2010 GUIDANCE:
Revenues
- The Company expects total revenues to be in the range of $666 million to $681 million.
- Store rental and fee revenues are expected to be between $576 million and $588 million.
- Total store revenues are expected to be in the range of $658 million to $673 million.
- Same store sales are expected to be in the range of flat to 1.0%.
- The Company expects to open approximately 10 domestic rent-to-own store locations.
- The Company expects to add approximately 70 domestic RAC Acceptance kiosks.
- The Company expects to open approximately 5 rent-to-own locations in Mexico.
Expenses
- The Company expects cost of rental and fees to be between 22.0% and 22.4% of store rental and fee revenue and cost of merchandise sold to be between 75% and 79% 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 approximately 4.8% of total revenue.
- Net interest expense is expected to be approximately $6 million, and depreciation of property assets is expected to be approximately $16 million.
- The effective tax rate is expected to be approximately 37.4% of pre-tax income.
- Diluted earnings per share are estimated to be in the range of $0.64 to $0.70.
- Diluted shares outstanding are estimated to be between 64.6 million and 65.4 million.
FISCAL 2011 GUIDANCE:
Revenues
- The Company expects total revenues to be in the range of $2.806 billion and $2.866 billion.
- Store rental and fee revenues are expected to be between $2.368 billion and $2.418 billion.
- Total store revenues are expected to be in the range of $2.773 billion and $2.833 billion.
- Same store sales are expected to be in the range of 1.0% to 2.0%.
- The Company expects to add approximately 25 domestic rent-to-own store locations.
- The Company expects to add 100 to 150 domestic RAC Acceptance kiosks.
- The Company expects to open 25 to 75 rent-to-own locations in Mexico.
- The Company expects to open 10 to 20 rent-to-own locations in Canada.
Expenses
- The Company expects cost of rental and fees to be between 22.3% and 22.9% of store rental and fee revenue and cost of merchandise sold to be between 70% and 74% of store merchandise sales.
- Store salaries and other expenses are expected to be in the range of 56.7% to 58.2% of total store revenue.
- General and administrative expenses are expected to be approximately 4.9% of total revenue.
- Net interest expense is expected to be approximately $25 million, and depreciation of property assets is expected to be in the range of $66 million to $71 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 $2.85 to $3.05.
- Diluted shares outstanding are estimated to be between 65.0 million and 66.0 million.
|
Store Activity |
||||||||||
| Domestic | International | |||||||||
| RAC Financial | RAC | Get It Now/ | ||||||||
| RTO | Services | Acceptance | Home Choice | Canada | ||||||
| Nine Months Ended September 30, 2010 | ||||||||||
| Stores at beginning of period | 2,950 | 353 | 82 | 39 | 18 | |||||
| New store openings | 18 | 48 | 83 | 2 | -- | |||||
| Acquired stores remaining open | 2 | -- | -- | -- | -- | |||||
| Closed stores | ||||||||||
| Merged with existing stores | 18 | -- | -- | -- | -- | |||||
| Sold or closed with no surviving store | 10 | 75 | 14 | -- | -- | |||||
| Stores at end of period | 2,942 | 326 | 151 | 41 | 18 | |||||
| Acquired stores closed and accounts | 13 | -- | -- | -- | -- | |||||
| merged with existing stores | ||||||||||
| Domestic | International | |||||||||
| RAC Financial | RAC | Get It Now/ | ||||||||
| RTO | Services | Acceptance | Home Choice | Canada | ||||||
| Three Months Ended September 30, 2010 | ||||||||||
| Stores at beginning of period | 2,941 | 296 | 104 | 39 | 18 | |||||
| New store openings | 8 | 30 | 48 | 2 | -- | |||||
| Acquired stores remaining open | 1 | -- | -- | -- | -- | |||||
| Closed stores | ||||||||||
| Merged with existing stores | 2 | -- | -- | -- | -- | |||||
| Sold or closed with no surviving store | 6 | -- | 1 | -- | -- | |||||
| Stores at end of period | 2,942 | 326 | 151 | 41 | 18 | |||||
| Acquired stores closed and accounts | 6 | -- | -- | -- | -- | |||||
| merged with existing stores | ||||||||||
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 or customer accounts on favorable terms; the Company's ability to control costs and increase profitability; the Company's ability to identify and successfully enter new lines of business offering products and services that appeal to its customer demographic; the Company's ability to enhance the performance of acquired stores; the Company's ability to retain the revenue associated with acquired customer accounts; the Company's ability to identify and successfully market products and services that appeal to its customer demographic; the Company's ability to enter into new and collect on its rental purchase agreements; the passage of legislation adversely affecting the rent-to-own or financial services industries; the Company's failure to comply with statutes or regulations governing the rent-to-own or financial services industries; interest rates; increases in the unemployment rate; economic pressures, such as high fuel and utility costs, affecting the disposable income available to the Company's targeted consumers; changes in the Company's stock price and the number of shares of common stock that it may or may not repurchase; future dividends; changes in estimates relating to self-insurance liabilities and income tax and litigation 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; the resolution of material litigation; our ability and the results therefrom to successfully manage the strategic alternatives process with respect to our financial services business; and the other risks detailed from time to time in the Company'sSEC reports, including but not limited to, its annual report on Form 10-K for the year ended December 31, 2009, and its quarterly reports on Form 10-Q for the quarters ended March 31, 2010 and June 30, 2010.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 September 30, | |||||||||||
| 2010 | 2009 | |||||||||||
| (GAAP | (GAAP | |||||||||||
| Earnings) | Earnings) | |||||||||||
| Total Revenue | $ | 664,580 | $ | 671,251 | ||||||||
| Operating Profit | 69,393 | 64,367 | ||||||||||
| Net Earnings | 40,497 | 36,840 | ||||||||||
| Diluted Earnings per Common Share | $ | 0.62 | $ | 0.55 | ||||||||
| Adjusted EBITDA | $ | 85,551 | $ | 81,006 | ||||||||
| Reconciliation to Adjusted EBITDA: | ||||||||||||
| Earnings Before Income Taxes | $ | 63,590 | $ | 59,654 | ||||||||
| Add back: | ||||||||||||
| Interest Expense, net | 5,803 | 4,713 | ||||||||||
| Depreciation of Property Assets | 15,629 | 16,054 | ||||||||||
| Amortization and Write-down of Intangibles | 529 | 585 | ||||||||||
| Adjusted EBITDA | $ | 85,551 | $ | 81,006 | ||||||||
| (In thousands of dollars, except per share data) | Nine Months Ended September 30, | |||||||||||
| 2010 | 2009 | 2009 | ||||||||||
| Before | After | |||||||||||
| Significant Items | Significant Items | |||||||||||
| (GAAP | (Non-GAAP | (GAAP | ||||||||||
| Earnings) | Earnings) | Earnings) | ||||||||||
| Total Revenue | $ | 2,054,542 | $ | 2,079,043 | $ | 2,079,043 | ||||||
| Operating Profit | 240,927 | 216,873 | 221,742 |
(1) |
||||||||
| Net Earnings | 139,788 | 121,140 | 124,161 |
(1) |
||||||||
| Diluted Earnings per Common Share | $ | 2.11 | $ | 1.82 | $ | 1.86 |
(1) |
|||||
| Adjusted EBITDA | $ | 291,199 | $ | 269,488 | $ | 269,488 | ||||||
| Reconciliation to Adjusted EBITDA: | ||||||||||||
| Earnings Before Income Taxes | $ | 223,314 | $ | 195,419 | $ | 200,288 | ||||||
| Add back: | ||||||||||||
| Litigation Expense (Credit) | -- | -- | (4,869 | ) | ||||||||
| Interest Expense, net | 17,613 | 21,454 | 21,454 | |||||||||
| Depreciation of Property Assets | 47,152 | 50,187 | 50,187 | |||||||||
| Amortization and Write-down of Intangibles | 3,120 | 2,428 | 2,428 | |||||||||
| Adjusted EBITDA | $ | 291,199 | $ | 269,488 | $ | 269,488 | ||||||
(1) Includes the effects of $4.9 million pre-tax litigation credits in the first quarter and second quarter of 2009 related to the Hilda Perez matter. The litigation credits increased diluted earnings per share by approximately $0.04 for the nine months ended September 30, 2009.
| SELECTED BALANCE SHEET HIGHLIGHTS | |||||||
| Selected Balance Sheet Data: (in Thousands of Dollars) | September 30, | ||||||
| 2010 | 2009 | ||||||
| Cash and Cash Equivalents | $ | 80,775 | $ | 39,905 | |||
| Receivables | 67,625 | 59,943 | |||||
| Prepaid Expenses and Other Assets | 47,836 | 54,472 | |||||
| Rental Merchandise, net | |||||||
| On Rent | 544,308 | 547,418 | |||||
| Held for Rent | 172,784 | 175,743 | |||||
| Total Assets | $ | 2,400,215 | $ | 2,356,301 | |||
| Senior Debt | $ | 596,084 | $ | 659,080 | |||
| Total Liabilities | 1,047,301 | 1,147,044 | |||||
| Stockholders' Equity | $ | 1,352,914 | $ | 1,209,257 | |||
| Rent-A-Center, Inc. and Subsidiaries | |||||||||
| CONSOLIDATED STATEMENTS OF EARNINGS | |||||||||
| (In thousands of dollars, except per share data) | Three Months Ended September 30, | ||||||||
| 2010 | 2009 | ||||||||
| Unaudited | |||||||||
| Store Revenue | |||||||||
| Rentals and Fees | $ | 576,019 | $ | 576,124 | |||||
| Merchandise Sales | 44,352 | 59,085 | |||||||
| Installment Sales | 15,599 | 12,983 | |||||||
| Other | 20,413 | 15,236 | |||||||
| 656,383 | 663,428 | ||||||||
| Franchise Revenue | |||||||||
| Franchise Merchandise Sales | 6,975 | 6,663 | |||||||
| Royalty Income and Fees | 1,222 | 1,160 | |||||||
| Total Revenue | 664,580 | 671,251 | |||||||
| Operating Expenses | |||||||||
| Direct Store Expenses | |||||||||
| Cost of Rentals and Fees | 127,573 | 130,183 | |||||||
| Cost of Merchandise Sold | 34,807 | 42,940 | |||||||
| Cost of Installment Sales | 5,507 | 4,511 | |||||||
| Salaries and Other Expenses | 389,295 | 389,573 | |||||||
| Franchise Cost of Merchandise Sold | 6,680 | 6,378 | |||||||
| 563,862 | 573,585 | ||||||||
| General and Administrative Expenses | 30,796 | 32,714 | |||||||
| Amortization and Write-Down of Intangibles | 529 | 585 | |||||||
| Total Operating Expenses | 595,187 | 606,884 | |||||||
| Operating Profit | 69,393 | 64,367 | |||||||
| Interest Expense | 6,085 | 4,866 | |||||||
| Interest Income | (282 | ) | (153 | ) | |||||
| Earnings before Income Taxes | 63,590 | 59,654 | |||||||
| Income Tax Expense | 23,093 | 22,814 | |||||||
| NET EARNINGS | $ | 40,497 | $ | 36,840 | |||||
| BASIC WEIGHTED AVERAGE SHARES | 65,094 | 66,077 | |||||||
| BASIC EARNINGS PER COMMON SHARE | $ | 0.62 | $ | 0.56 | |||||
| DILUTED WEIGHTED AVERAGE SHARES | 65,746 | 66,693 | |||||||
| DILUTED EARNINGS PER COMMON SHARE | $ | 0.62 | $ | 0.55 | |||||
| Rent-A-Center, Inc. and Subsidiaries | |||||||||
| CONSOLIDATED STATEMENTS OF EARNINGS | |||||||||
| (In thousands of dollars, except per share data) | Nine Months Ended September 30, | ||||||||
| 2010 | 2009 | ||||||||
| Unaudited | |||||||||
| Store Revenue | |||||||||
| Rentals and Fees | $ | 1,746,390 | $ | 1,763,199 | |||||
| Merchandise Sales | 176,780 | 211,826 | |||||||
| Installment Sales | 45,239 | 37,699 | |||||||
| Other | 60,272 | 41,818 | |||||||
| 2,028,681 | 2,054,542 | ||||||||
| Franchise Revenue | |||||||||
| Franchise Merchandise Sales | 22,155 | 20,872 | |||||||
| Royalty Income and Fees | 3,706 | 3,629 | |||||||
| Total Revenue | 2,054,542 | 2,079,043 | |||||||
| Operating Expenses | |||||||||
| Direct Store Expenses | |||||||||
| Cost of Rentals and Fees | 387,505 | 398,278 | |||||||
| Cost of Merchandise Sold | 129,221 | 150,704 | |||||||
| Cost of Installment Sales | 15,936 | 13,201 | |||||||
| Salaries and Other Expenses | 1,161,887 | 1,175,991 | |||||||
| Franchise Cost of Merchandise Sold | 21,202 | 19,987 | |||||||
| 1,715,751 | 1,758,161 | ||||||||
| General and Administrative Expenses | 94,744 | 101,581 | |||||||
| Amortization and Write-Down of Intangibles | 3,120 | 2,428 | |||||||
| Litigation Expense (Credit) | -- | (4,869 | ) | ||||||
| Total Operating Expenses | 1,813,615 | 1,857,301 | |||||||
| Operating Profit | 240,927 | 221,742 | |||||||
| Interest Expense | 18,219 | 22,143 | |||||||
| Interest Income | (606 | ) | (689 | ) | |||||
| Earnings before Income Taxes | 223,314 | 200,288 | |||||||
| Income Tax Expense | 83,526 | 76,127 | |||||||
| NET EARNINGS | $ | 139,788 | $ | 124,161 | |||||
| BASIC WEIGHTED AVERAGE SHARES | 65,579 | 66,034 | |||||||
| BASIC EARNINGS PER COMMON SHARE | $ | 2.13 | $ | 1.88 | |||||
| DILUTED WEIGHTED AVERAGE SHARES | 66,345 | 66,612 | |||||||
| DILUTED EARNINGS PER COMMON SHARE | $ | 2.11 | $ | 1.86 | |||||
SOURCE: Rent-A-Center, Inc.
Rent-A-Center, Inc.
David E. Carpenter, 972-801-1214
Vice President of Investor Relations
david.carpenter@rentacenter.com