(Mark One) | ||
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) | |
OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
For the fiscal year ended December 31, |
2008 | ||
or | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) | |
OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | ||
(State or other jurisdiction of incorporation or organization) | 45-0491516 (I.R.S. Employer | |
Identification No.) |
Title of Each Class | Name of Exchange on Which Registered | |
Common Stock, par value $0.01 per share | The Nasdaq Global Select Market, Inc. |
Large accelerated filer þ | Non-accelerated filer o | Smaller reporting company o |
Aggregate market value of the 58,202,180 shares of Common Stock held by non-affiliates of the registrant at the closing sales price as reported on The Nasdaq Global Select Market, Inc. on June 30, 2008 | $ | 1,197,218,843 | ||
Number of shares of Common Stock outstanding as of the close of business on February 20, 2009: | 65,986,784 |
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Item 1. | Business. |
• | convenient payment options — in-store or over the phone; | |
• | no long-term obligations; | |
• | right to terminate without penalty; | |
• | no requirement of a credit history; | |
• | set-up and delivery included at no additional charge; | |
• | product maintenance; | |
• | lifetime reinstatement; and | |
• | flexible options to obtain ownership — 90 days same as cash, early purchase options, or payment through the term of the agreement. |
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2008 | 2007 | 2006 | ||||||||||
Stores at beginning of period | 3,081 | 3,406 | 2,760 | |||||||||
New store openings | 26 | 27 | 40 | |||||||||
Acquired stores remaining open | 5 | 14 | 646 | |||||||||
Closed stores(1) | ||||||||||||
Merged with existing stores | 45 | 363 | 25 | |||||||||
Sold or closed with no surviving store | 30 | 3 | 15 | |||||||||
Stores at end of period | 3,037 | 3,081 | 3,406 | |||||||||
Acquired stores closed and accounts merged with existing stores | 38 | 36 | 164 | |||||||||
Total approximate purchase price of acquisitions | $15.7 million | $20.1 million | $657.4 million |
(1) | Substantially all of the merged, sold or closed stores in 2008 and 2007 relate to our store consolidation plans discussed below and in more detail in Note F, Restructuring, in the Notes to the Consolidated Financial Statements on page 59. |
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Number of Stores | ||||||||||||
Company | With Financial | |||||||||||
Location | Owned | Services | Franchised | |||||||||
Alabama | 60 | — | 5 | |||||||||
Alaska | 6 | 5 | 4 | |||||||||
Arizona | 58 | 6 | — | |||||||||
Arkansas | 39 | — | 1 | |||||||||
California | 139 | — | 5 | |||||||||
Colorado | 44 | 13 | 1 | |||||||||
Connecticut | 40 | — | 1 | |||||||||
Delaware | 20 | — | — | |||||||||
District of Columbia | 4 | — | — | |||||||||
Florida | 188 | — | 20 | |||||||||
Georgia | 88 | — | 12 | |||||||||
Hawaii | 11 | 7 | 5 | |||||||||
Idaho | 11 | 6 | 3 | |||||||||
Illinois | 110 | † | — | 8 | ||||||||
Indiana | 101 | — | 4 | |||||||||
Iowa | 27 | 11 | — | |||||||||
Kansas | 34 | 13 | 8 | |||||||||
Kentucky | 67 | 20 | 3 | |||||||||
Louisiana | 45 | — | 5 | |||||||||
Maine | 28 | — | 9 | |||||||||
Maryland | 65 | — | 11 | |||||||||
Massachusetts | 69 | — | 1 | |||||||||
Michigan | 104 | — | 9 | |||||||||
Minnesota | 4 | * | — | — | ||||||||
Mississippi | 35 | — | 1 | |||||||||
Missouri | 65 | 16 | — | |||||||||
Montana | 9 | 5 | — | |||||||||
Nebraska | 14 | 1 | — | |||||||||
Nevada | 23 | 4 | — | |||||||||
New Hampshire | 20 | — | 1 | |||||||||
New Jersey | 44 | — | — | |||||||||
New Mexico | 26 | 10 | 9 | |||||||||
New York | 178 | — | 3 | |||||||||
North Carolina | 133 | — | 15 | |||||||||
North Dakota | 3 | — | — | |||||||||
Ohio | 183 | 51 | 4 | |||||||||
Oklahoma | 44 | — | 6 | |||||||||
Oregon | 27 | — | 4 | |||||||||
Pennsylvania | 152 | — | 3 | |||||||||
Puerto Rico | 43 | — | — | |||||||||
Rhode Island | 16 | — | 2 | |||||||||
South Carolina | 67 | — | 6 | |||||||||
South Dakota | 4 | — | — | |||||||||
Tennessee | 91 | 37 | 4 | |||||||||
Texas | 292 | 113 | 35 | |||||||||
Utah | 16 | 8 | — | |||||||||
Vermont | 9 | — | — | |||||||||
Virginia | 70 | — | 11 | |||||||||
Washington | 44 | 25 | 3 | |||||||||
West Virginia | 33 | — | — | |||||||||
Wisconsin | 21 | * | — | — | ||||||||
Wyoming | 5 | — | — | |||||||||
Canada | 8 | — | — | |||||||||
TOTAL | 3,037 | 351 | 222 |
* | Retail installment stores | |
† | Includes six retail installment stores |
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• | enhancing the operations, revenue and profitability | |
• | ||
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• | use consumer focused advertising, including direct mail, television, radio and print media, | |
• | focus on the customer experience, both in our store locations, as well as on our website; | |
• | focus on improving the operations in our existing financial services store locations; | |
• | respond to competitive pressures on a market by market basis with specifically tailored action plans; | |
• | acquire customer accounts; | |
• | expand the offering of product lines to appeal to more customers to increase the number of | |
• | evaluate other growth strategies, including the entry into additional lines of business offering products and services designed to appeal to our customer demographic; | |
• | employ strict store-level cost control; | |
• | analyze and evaluate store operations against key performance indicators; and | |
• | use a revenue and profit based incentive pay plan. |
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2005 | 2004 | 2003 | |||||||||||
Stores at beginning of period | 2,875 | 2,648 | 2,407 | ||||||||||
New store openings | 67 | 94 | 101 | ||||||||||
Acquired stores remaining open | 44 | 191 | 160 | ||||||||||
Closed stores(1) | |||||||||||||
Merged with existing stores | 170 | 48 | 20 | ||||||||||
Sold or closed with no surviving store | 56 | 10 | — | ||||||||||
Stores at end of period | 2,760 | 2,875 | 2,648 | ||||||||||
Acquired stores closed and accounts merged with existing stores | 39 | 111 | 220 | ||||||||||
Total approximate purchase price of acquisitions | $ | 38.3 million | $ | 195.2 million(2 | ) | $ | 126.1 million |
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Since 2002, co-workers at our headquarters facility in Plano, Texas have worked to fight hunger through the North Texas Food Bank. On a national basis, we have committed $500,000 over four years in the fight to end hunger. | ||
• | Each spring, we raise funds for Big Brothers Big Sisters of America. With a donation of $1 or more, customers, co-workers and the community sign their name on a paper spring egg to hang in our stores. Since 2003, we have donated more than $1.4 million. | |
• | In 2004, we established the Make A Difference Scholarship which provides $50,000 annually to customers, their children and our co-workers’ children who are pursuing an undergraduate degree at the college or university of their choice. | |
• | Since 2005, we have teamed up with Boys & Girls Clubs to furnish special “RAC” Rooms to the centers that need them most. Each year, we create 20 new RAC Rooms around the country. Clubs choose the merchandise they need, including furniture, televisions, electronics and computers. | |
• | We pledged $800,000 over four years in grants to Junior Achievement offices in communities across the U.S. as part of our commitment to promoting financial literacy in our communities. Our | |
• | Random Acts of Caring brings unexpected gifts to people and organizations that serve others. Examples include furnishing rooms in three fire stations in New York and donating $5,000 to the FDNY Foundation, and providing Summit Academy, a school for children with special learning needs in Warren, Ohio, with six computers and two HDTV’s. |
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Number of Stores | Number of Stores | |||||||||||||||||||||||||
Company | With Financial | Company | With Financial | |||||||||||||||||||||||
Location | Owned | Services | Franchised | Location | Owned | Services | Franchised | |||||||||||||||||||
Alabama | 60 | — | 5 | Nebraska | 9 | — | — | |||||||||||||||||||
Alaska | 6 | — | 1 | Nevada | 22 | 3 | 4 | |||||||||||||||||||
Arizona | 56 | — | 7 | New Hampshire | 14 | — | 2 | |||||||||||||||||||
Arkansas | 35 | — | 1 | New Jersey | 43 | — | 4 | |||||||||||||||||||
California | 150 | — | 5 | New Mexico | 17 | — | 10 | |||||||||||||||||||
Colorado | 39 | — | 1 | New York | 128 | — | 13 | |||||||||||||||||||
Connecticut | 37 | — | 3 | North Carolina | 111 | — | 11 | |||||||||||||||||||
Delaware | 18 | — | — | North Dakota | 2 | — | — | |||||||||||||||||||
District of Columbia | 4 | — | — | Ohio | 175 | — | 6 | |||||||||||||||||||
Florida | 173 | — | 19 | Oklahoma | 42 | — | 14 | |||||||||||||||||||
Georgia | 106 | — | 14 | Oregon | 31 | 5 | 3 | |||||||||||||||||||
Hawaii | 12 | — | 4 | Pennsylvania | 126 | — | 3 | |||||||||||||||||||
Idaho | 11 | 7 | 2 | Puerto Rico | 30 | — | — | |||||||||||||||||||
Illinois | 110 | — | 8 | Rhode Island | 17 | — | 1 | |||||||||||||||||||
Indiana | 102 | — | 7 | South Carolina | 43 | — | 7 | |||||||||||||||||||
Iowa | 24 | — | — | South Dakota | 5 | — | — | |||||||||||||||||||
Kansas | 31 | — | 17 | Tennessee | 94 | — | 1 | |||||||||||||||||||
Kentucky | 44 | — | 1 | Texas | 261 | — | 59 | |||||||||||||||||||
Louisiana | 29 | — | 6 | Utah | 15 | 4 | — | |||||||||||||||||||
Maine | 25 | — | 9 | Vermont | 7 | — | — | |||||||||||||||||||
Maryland | 63 | — | 9 | Virginia | 54 | — | 10 | |||||||||||||||||||
Massachusetts | 60 | — | 2 | Washington | 46 | 16 | 2 | |||||||||||||||||||
Michigan | 107 | — | 17 | West Virginia | 22 | — | — | |||||||||||||||||||
Minnesota | 4 | — | — | Wisconsin | 21 | * | — | — | ||||||||||||||||||
Mississippi | 28 | — | 2 | Wyoming | 5 | — | — | |||||||||||||||||||
Missouri | 70 | — | 6 | Alberta, Canada | 7 | † | — | — | ||||||||||||||||||
Montana | 9 | 5 | — | TOTAL | 2,760 | 40 | 296 |
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Item 1A. | Risk Factors. |
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• | quarterly variations in our results of operations, which may be impacted by, among other things, changes in same store sales, when and how many | |
• | quarterly variations in our competitors’ results of operations; | |
• | changes in earnings estimates or buy/sell recommendations by financial analysts; and | |
• | the stock price performance of comparable | |
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Item 1B. | Unresolved Staff Comments. |
Item 2. | Properties. |
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Item 3. | Legal Proceedings. |
Shafer/Johnson Matter | $ | 1.8 | ||
California Attorney General Settlement | 9.4 | |||
Other Litigation | 0.1 | |||
Total Accrual | $ | 11.3 | ||
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Item 4. | Submission of Matters to a Vote of Security Holders. |
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Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
2005 | High | Low | ||||||
Fourth Quarter | $ | 20.360 | $ | 14.900 | ||||
Third Quarter | 24.360 | 17.910 | ||||||
Second Quarter | 27.750 | 22.360 | ||||||
First Quarter | 27.890 | 24.080 |
2004 | High | Low | ||||||
Fourth Quarter | $ | 26.890 | $ | 22.000 | ||||
Third Quarter | 31.600 | 24.700 | ||||||
Second Quarter | 33.930 | 27.630 | ||||||
First Quarter | 33.342 | 27.030 |
2008 | High | Low | ||||||
Fourth Quarter | $ | 22.68 | $ | 9.97 | ||||
Third Quarter | 26.00 | 18.60 | ||||||
Second Quarter | 23.20 | 17.07 | ||||||
First Quarter | 20.22 | 11.67 |
2007 | High | Low | ||||||
Fourth Quarter | $ | 18.59 | $ | 13.17 | ||||
Third Quarter | 27.06 | 16.85 | ||||||
Second Quarter | 29.01 | 25.90 | ||||||
First Quarter | 31.09 | 26.32 |
Maximum Dollar | ||||||||||||||||
Value of Shares | ||||||||||||||||
Total Number of | that May Yet Be | |||||||||||||||
Shares Purchased as | Purchased Under | |||||||||||||||
Total Number | Average Price | Part of Publicly | the Plans or | |||||||||||||
of Shares | Paid per Share | Announced Plans or | Programs | |||||||||||||
Period | Purchased | (including fees) | Programs | (including fees) | ||||||||||||
October 1 through October 31 | 0 | $ | 0.0000 | 0 | $ | 78,358,403 | ||||||||||
November 1 through November 30 | 1,816,100 | $ | 18.9807 | 1,816,100 | $ | 43,887,581 | ||||||||||
December 1 through December 31 | 0 | $ | 0.0000 | 0 | $ | 43,887,581 | ||||||||||
Total | 1,816,100 | $ | 18.9807 | 1,816,100 | $ | 43,887,581 | ||||||||||
Maximum Dollar | ||||||||||||||||
Total Number of | Value that May Yet | |||||||||||||||
Shares Purchased | Be Purchased | |||||||||||||||
Total Number | Average Price | as Part of Publicly | Under the Plans | |||||||||||||
of Shares | Paid per Share | Announced Plans | or Programs | |||||||||||||
Period | Purchased | (Including Fees) | or Programs | (Including Fees) | ||||||||||||
October 1 through October 31 | 150,000 | $ | 14.0456 | 150,000 | $ | 50,422,839 | ||||||||||
November 1 through November 30 | 651,800 | $ | 12.5574 | 651,800 | $ | 42,237,933 | ||||||||||
December 1 through December 31 | ||||||||||||||||
Total | 801,800 | $ | 12.8358 | 801,800 | $ | 42,237,933 |
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Item 6. | Selected Financial |
Year Ended December 31, | ||||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||||
Consolidated Statements of Earnings | ||||||||||||||||||||||
Revenues | ||||||||||||||||||||||
Store | ||||||||||||||||||||||
Rentals and fees | $ | 2,084,757 | $ | 2,071,866 | $ | 1,998,952 | $ | 1,828,534 | $ | 1,650,851 | ||||||||||||
Merchandise sales | 177,292 | 166,594 | 152,984 | 115,478 | 94,733 | |||||||||||||||||
Installment sales | 26,139 | 24,304 | 22,203 | 6,137 | — | |||||||||||||||||
Other | 7,903 | 3,568 | 3,083 | 2,589 | 3,476 | |||||||||||||||||
Franchise | ||||||||||||||||||||||
Merchandise sales | 37,794 | 41,398 | 45,057 | 51,514 | 53,584 | |||||||||||||||||
Royalty income and fees | 5,222 | 5,525 | 5,871 | 5,792 | 5,884 | |||||||||||||||||
Total revenue | 2,339,107 | 2,313,255 | 2,228,150 | 2,010,044 | 1,808,528 | |||||||||||||||||
Operating expenses | ||||||||||||||||||||||
Direct store expenses | ||||||||||||||||||||||
Cost of rentals and fees | 452,583 | 450,035 | 432,696 | 383,400 | 343,197 | |||||||||||||||||
Cost of merchandise sold | 129,624 | 119,098 | 112,283 | 84,628 | 72,539 | |||||||||||||||||
Cost of installment sales | 10,889 | 10,512 | 10,639 | 3,776 | — | |||||||||||||||||
Salaries and other expenses | 1,358,760 | (1) | 1,277,926 | 1,180,115 | 1,070,265 | 1,019,402 | ||||||||||||||||
Franchise cost of merchandise sold | 36,319 | 39,472 | 43,248 | 49,185 | 51,251 | |||||||||||||||||
1,988,175 | 1,897,043 | 1,778,981 | 1,591,254 | 1,486,389 | ||||||||||||||||||
General and administrative expenses | 82,290 | 75,481 | 66,635 | 63,296 | 55,359 | |||||||||||||||||
Amortization of intangibles | 11,705 | (2) | 10,780 | 12,512 | 5,045 | 30,194 | ||||||||||||||||
Class action litigation settlement (reversion) | (8,000 | )(3) | 47,000 | (6) | — | — | 52,000 | (8) | ||||||||||||||
Restructuring charge | 15,166 | (4) | — | — | — | — | ||||||||||||||||
Total operating expenses | 2,089,336 | 2,030,304 | 1,858,128 | 1,659,595 | 1,623,942 | |||||||||||||||||
Operating profit | 249,771 | 282,951 | 370,022 | 350,449 | 184,586 | |||||||||||||||||
Income from sale of charged off accounts | — | (7,924 | )(7) | — | — | — | ||||||||||||||||
Finance charges from refinancing | — | 4,173 | 35,260 | — | — | |||||||||||||||||
Interest expense, net | 40,703 | 35,323 | 43,932 | 62,006 | 59,780 | |||||||||||||||||
Earnings before income taxes | 209,068 | 251,379 | 290,830 | 288,443 | 124,806 | |||||||||||||||||
Income tax expense | 73,330 | (5) | 95,524 | 109,334 | 116,270 | 58,589 | ||||||||||||||||
�� | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Consolidated Statements of Earnings | ||||||||||||||||||||
Revenues | ||||||||||||||||||||
Store | ||||||||||||||||||||
Rentals and fees | $ | 2,505,268 | $ | 2,594,061 | $ | 2,174,239 | (7) | $ | 2,084,757 | $ | 2,071,866 | |||||||||
Merchandise sales | 256,731 | 208,989 | 175,954 | 177,292 | 166,594 | |||||||||||||||
Installment sales | 41,193 | 34,576 | 26,877 | 26,139 | 24,304 | |||||||||||||||
Other | 42,759 | 25,482 | 15,607 | 7,903 | 3,568 | |||||||||||||||
Franchise | ||||||||||||||||||||
Merchandise sales | 33,283 | 34,229 | 36,377 | 37,794 | 41,398 | |||||||||||||||
Royalty income and fees | 4,938 | 8,784 | (4) | 4,854 | 5,222 | 5,525 | ||||||||||||||
Total revenue | 2,884,172 | 2,906,121 | 2,433,908 | 2,339,107 | 2,313,255 | |||||||||||||||
Operating expenses | ||||||||||||||||||||
Direct store expenses | ||||||||||||||||||||
Cost of rentals and fees | 572,900 | 574,013 | 476,462 | (7) | 452,583 | 450,035 | ||||||||||||||
Cost of merchandise sold | 194,595 | 156,503 | 131,428 | 129,624 | 119,098 | |||||||||||||||
Cost of installment sales | 16,620 | 13,270 | 11,346 | 10,889 | 10,512 | |||||||||||||||
Salaries and other expenses | 1,651,805 | 1,684,965 | 1,385,437 | (8) | 1,358,760 | (11) | 1,277,926 | |||||||||||||
Franchise cost of merchandise sold | 31,705 | 32,733 | 34,862 | 36,319 | 39,472 | |||||||||||||||
2,467,625 | 2,461,484 | 2,039,535 | 1,988,175 | 1,897,043 | ||||||||||||||||
General and administrative expenses | 125,632 | 123,703 | 93,556 | 82,290 | 75,481 | |||||||||||||||
Amortization and write-down of intangibles | 16,637 | 15,734 | 5,573 | 11,705 | (12) | 10,780 | ||||||||||||||
Litigation expense (credit) | (4,607 | )(1) | 62,250 | (5) | 73,300 | (9) | (8,000 | )(13) | 47,000 | (16) | ||||||||||
Restructuring charge | 4,497 | (2) | 38,713 | (6) | — | 15,166 | (14) | — | ||||||||||||
Total operating expenses | 2,609,784 | 2,701,884 | 2,211,964 | 2,089,336 | 2,030,304 | |||||||||||||||
Operating profit | 274,388 | 204,237 | 221,944 | 249,771 | 282,951 | |||||||||||||||
Income from sale of charged off accounts | — | — | — | — | (7,924 | )(17) | ||||||||||||||
Finance charges from refinancing | — | — | 4,803 | (10) | — | 4,173 | ||||||||||||||
Gain on extinguishment of debt | (4,335 | )(3) | — | — | — | — | ||||||||||||||
Interest expense, net | 57,381 | 87,951 | 53,003 | 40,703 | 35,323 | |||||||||||||||
Earnings before income taxes | 221,342 | 116,286 | 164,138 | 209,068 | 251,379 | |||||||||||||||
Income tax expense | 81,718 | 40,018 | 61,046 | 73,330 | (15) | 95,524 | ||||||||||||||
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Item 6. Selected Financial Data — Continued | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
NET EARNINGS | $ | 139,624 | $ | 76,268 | $ | 103,092 | $ | 135,738 | $ | 155,855 | ||||||||||
Basic earnings per common share | $ | 2.10 | $ | 1.11 | $ | 1.48 | $ | 1.86 | $ | 1.99 | ||||||||||
Diluted earnings per common share | $ | 2.08 | $ | 1.10 | $ | 1.46 | $ | 1.83 | $ | 1.94 | ||||||||||
Consolidated Balance Sheet Data | ||||||||||||||||||||
Rental merchandise, net | $ | 819,054 | $ | 937,970 | $ | 1,056,233 | (18) | $ | 750,680 | $ | 759,111 | |||||||||
Intangible assets, net | 1,266,953 | 1,269,094 | 1,281,597 | 929,326 | 922,404 | |||||||||||||||
Total assets | 2,496,702 | 2,626,943 | 2,740,956 | (18) | 1,948,664 | 1,967,788 | ||||||||||||||
Total debt | 947,087 | 1,259,335 | 1,293,278 | 724,050 | 708,250 | |||||||||||||||
Total liabilities(19) | 1,417,500 | 1,679,852 | 1,797,997 | (18) | 1,125,232 | 1,173,517 | ||||||||||||||
Stockholders’ equity | 1,079,202 | 947,091 | 942,959 | (18) | 823,432 | 794,271 | ||||||||||||||
Operating Data (Unaudited) | ||||||||||||||||||||
Stores open at end of period | 3,037 | 3,081 | 3,406 | 2,760 | 2,875 | |||||||||||||||
Comparable store revenue growth (decrease)(20) | 2.3 | % | 2.1 | % | 1.9 | % | (2.3 | )% | (3.6 | )% | ||||||||||
Weighted average number of stores | 3,056 | 3,376 | 2,848 | 2,844 | 2,788 | |||||||||||||||
Franchise stores open at end of period | 222 | 227 | 282 | 296 | 313 |
Year Ended December 31, | |||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | |||||||||||||||||
(In thousands, except per share data) | |||||||||||||||||||||
NET EARNINGS | 135,738 | 155,855 | 181,496 | 172,173 | 66,217 | ||||||||||||||||
Preferred dividends | — | — | — | 10,212 | 15,408 | ||||||||||||||||
Net earnings allocable to common stockholders | $ | 135,738 | $ | 155,855 | $ | 181,496 | $ | 161,961 | $ | 50,809 | |||||||||||
Basic earnings per common share | $ | 1.86 | $ | 1.99 | $ | 2.16 | $ | 2.20 | $ | 0.79 | |||||||||||
Diluted earnings per common share | $ | 1.83 | $ | 1.94 | $ | 2.08 | $ | 1.89 | $ | 0.71 | |||||||||||
Consolidated Balance Sheet Data | |||||||||||||||||||||
Rental merchandise, net | $ | 750,680 | $ | 759,111 | $ | 680,700 | $ | 631,724 | $ | 653,701 | |||||||||||
Intangible assets, net | 929,326 | 922,404 | 797,434 | 743,852 | 711,096 | ||||||||||||||||
Total assets | 1,948,664 | 1,967,788 | 1,831,302 | 1,626,652 | 1,630,315 | ||||||||||||||||
Total debt | 724,050 | 708,250 | 698,000 | 521,330 | 702,506 | ||||||||||||||||
Total liabilities(9) | 1,125,232 | 1,173,517 | 1,036,472 | 784,252 | 1,224,937 | ||||||||||||||||
Stockholders’ equity | 823,432 | 794,271 | 794,830 | 842,400 | 405,378 | ||||||||||||||||
Operating Data | |||||||||||||||||||||
Stores open at end of period | 2,760 | 2,875 | 2,648 | 2,407 | 2,281 | ||||||||||||||||
Comparable store revenue growth (decrease)(10) | (2.3 | )% | (3.6 | )% | 3.0 | % | 6.0 | % | 8.0 | % | |||||||||||
Weighted average number of stores | 2,844 | 2,788 | 2,560 | 2,325 | 2,235 | ||||||||||||||||
Franchise stores open at end of period | 296 | 313 | 329 | 318 | 342 |
Includes the effects of a $4.6 million in pre-tax litigation credits recorded in the fourth quarter of 2008 related to thePerezmatter and theShafer/Johnsonmatter | ||
Includes the effects of a $4.5 million pre-tax restructuring expense as part of the store consolidation plan and other restructuring items announced December 3, 2007. | ||
(3) | Includes the effects of a $4.3 million pre-tax gain on the extinguishment of debt recorded in the fourth quarter of 2008. | |
(4) | Includes the effects of a $3.9 million pre-tax benefit recorded in the third quarter of 2007 as a result of the receipt of accelerated royalty payments from franchisees in consideration of the termination of their franchise agreements. | |
(5) | Includes the effects of a $51.3 million pre-tax litigation expense recorded in the first quarter of 2007 related to thePerezmatter and the effects of an $11.0 million pre-tax litigation expense recorded in the fourth quarter of 2007 related to theShafer/Johnsonmatter. | |
(6) | Includes the effects of a $38.7 million pre-tax restructuring expense recorded in the fourth quarter of 2007 related to the store consolidation plan and other restructuring items announced December 3, 2007. | |
(7) | Includes the effects of adopting SAB 108,Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements(“SAB 108”), of approximately $3.1 million decrease in pre-tax revenue and $738,000 decrease in pre-tax depreciation expense related to adjustments for deferred revenue. | |
(8) | Includes the effects of adopting SFAS 123R,Share-Based Payment(“SFAS 123R”), of approximately $7.8 million of pre-tax expense related to stock options and restricted stock units granted. | |
(9) | Includes the effects of a $4.95 million pre-tax expense in the third quarter of 2006 associated with the settlement of theBurdusis/French/Corsolitigation, the effects of a $10.35 million pre-tax expense in the third quarter of 2006 associated with the settlement with the California Attorney General and the effects of a $58.0 million pre-tax expense in the fourth quarter of 2006 associated with the litigation reserve with respect to thePerezcase. | |
(10) | Includes the effects of a $2.2 million pre-tax expense in the third quarter of 2006 and the effects of a $2.6 million pre-tax expense in the fourth quarter of 2006 for the refinancing of our senior credit facilities. | |
(11) | Includes the effects of $5.2 million in charges recorded in the third and fourth quarters of 2005 as a result of Hurricanes Katrina, Rita and Wilma. These charges were primarily related to the disposal of inventory and fixed assets. | |
Includes the effects of $3.7 million in goodwill impairment charges recorded in the third quarter of 2005 as result of Hurricane Katrina. | ||
Includes the effect of a pre-tax legal reversion of $8.0 million recorded in the first quarter of 2005 associated with the settlement of a class action lawsuit in the state of California. |
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Includes the effects of a $15.2 million pre-tax restructuring expense as part of the store consolidation plan announced September 6, 2005. | ||
Includes the effects of a $2.0 million tax audit reserve credit associated with the examination and favorable resolution of our 1998 and 1999 federal tax returns and a $3.3 million state tax reserve credit due to a change in estimate related to potential loss exposures. | ||
Includes the effects of a pre-tax legal settlement charge of $47.0 million recorded in the third quarter of 2004 associated with the settlement of a class action lawsuit in the state of California. | ||
Includes the effects of $7.9 million in pre-tax income associated with the 2004 sale of previously charged off accounts. | ||
Includes the effects of adopting SAB 108 of a | ||
In accordance with the adoption of SFAS No. 150,Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity(“SFAS 150”), total liabilities also includes redeemable convertible voting preferred |
stock for the years ended December 31, 2002 through December 31, 2005. | ||
Comparable store revenue growth for each period presented includes revenues only of stores open throughout the full period and the comparable prior period. |
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Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
• | convenient payment options — in-store or over the phone; | |
• | no long-term obligations; | |
• | right to terminate without penalty; | |
• | no requirement of a credit history; | |
• | set-up and delivery included at no additional charge; | |
• | product maintenance; | |
• | lifetime reinstatement; and | |
• | flexible options to obtain ownership — 90 days same as cash, early purchase options, or payment through the term of the agreement. |
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• | uncertainties regarding | |
• | our ability to acquire additional | |
• | our ability to | |
• | our ability to | |
successfully add financial services locations within our | ||
• | our ability to identify and successfully enter | |
• | our ability to enhance the | |
• | our ability to retain the | |
• | ||
• | our ability to enter into new and collect on our rental purchase agreements; | |
• | our ability to enter into new and collect on our short term loans; | |
• | the passage of legislation adversely affecting the rent-to-own or financial services industries; | |
• | our 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 our targeted | |
• | changes in our stock price and | |
• | changes in estimates relating to self-insurance liabilities and income tax and litigation reserves; | |
• | changes in our effective tax rate; | |
• | our ability to maintain an effective system of internal controls; |
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• | 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 other risks detailed from time to time in our SEC reports. |
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Year Ended December 31, | ||||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
Shafer/Johnson Matter | $ | 1.8 | $ | 11.0 | ||||
California Attorney General Settlement | 9.4 | 9.6 | ||||||
Other Litigation | 0.1 | 1.1 | ||||||
Legal Fees and Expenses | — | 0.2 | ||||||
Total Accrual | $ | 11.3 | $ | 21.9 | ||||
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• | the procedural status of the matter; | |
• | our views and the views of our counsel as to the probability of a loss in the matter; | |
• | the relative strength of the parties’ arguments with respect to liability and damages in the matter; | |
• | settlement discussions, if any, between the parties; | |
• | how we intend to defend ourselves in the matter; and | |
• | our experience. |
• | judgments or finding of liability against us in the matter by a trial court; | |
• | the granting of, or declining to grant, a motion for class certification in the matter; | |
• | definitive decisions by appellate courts in the requisite jurisdiction interpreting or otherwise providing guidance as to applicable law; | |
• | favorable or unfavorable decisions as the matter progresses; | |
• | settlements agreed to in principle by the parties in the matter, subject to court approval; and | |
• | final settlement of the matter. |
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Year Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||
2005 | 2004 | 2003 | 2005 | 2004 | 2003 | ||||||||||||||||||||
(Company-owned stores only) | (Franchise operations only) | ||||||||||||||||||||||||
Revenues | |||||||||||||||||||||||||
Rentals and fees | 90.8 | % | 91.4 | % | 91.8 | % | — | % | — | % | — | % | |||||||||||||
Merchandise Sales | 8.9 | 8.4 | 8.0 | 87.9 | 88.2 | 88.5 | |||||||||||||||||||
Other/ Royalty income and fees | 0.3 | 0.2 | 0.2 | 12.1 | 11.8 | 11.5 | |||||||||||||||||||
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||||
Operating Expenses | |||||||||||||||||||||||||
Direct store expenses | |||||||||||||||||||||||||
Cost of rentals and fees | 19.7 | % | 19.9 | % | 19.9 | % | — | % | — | % | — | % | |||||||||||||
Cost of merchandise sold | 6.1 | 5.7 | 5.6 | 84.4 | 84.1 | 84.9 | |||||||||||||||||||
Salaries and other expenses | 59.2 | 56.4 | 54.2 | — | — | — | |||||||||||||||||||
85.0 | 82.0 | 79.7 | 84.4 | 84.1 | 84.9 | ||||||||||||||||||||
General and administrative expenses | 3.5 | 3.2 | 3.1 | 6.6 | 6.3 | 4.1 | |||||||||||||||||||
Amortization of intangibles | 0.5 | 0.5 | 0.1 | 0.7 | 0.6 | 0.6 | |||||||||||||||||||
Class action litigation (reversion) | (0.3 | ) | — | — | — | — | — | ||||||||||||||||||
Restructuring charge | 0.7 | 2.1 | — | — | — | — | |||||||||||||||||||
Total operating expenses | 89.4 | 87.8 | 82.9 | 91.7 | 91.0 | 89.6 | |||||||||||||||||||
Operating profit | 10.6 | 12.2 | 17.1 | 8.3 | 9.0 | 10.4 | |||||||||||||||||||
Interest, net and other income | 1.8 | 1.4 | 3.7 | (1.0 | ) | (0.9 | ) | (1.1 | ) | ||||||||||||||||
Earnings before income taxes | 8.8 | % | 10.8 | % | 13.4 | % | 9.3 | % | 9.9 | % | 11.5 | % | |||||||||||||
Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||
2008 | 2007 | 2006 | 2008 | 2007 | 2006 | |||||||||||||||||||
(Company-owned stores only) | (Franchise operations only) | |||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Rentals and fees | 88.0 | % | 90.6 | % | 90.9 | % | — | % | — | % | — | % | ||||||||||||
Merchandise sales | 10.5 | 8.5 | 8.5 | 87.1 | 79.6 | 88.2 | ||||||||||||||||||
Other/Royalty income and fees | 1.5 | 0.9 | 0.6 | 12.9 | 20.4 | 11.8 | ||||||||||||||||||
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||
Operating Expenses | ||||||||||||||||||||||||
Direct store expenses | ||||||||||||||||||||||||
Cost of rentals and fees | 20.1 | % | 20.0 | % | 19.9 | % | — | % | — | % | — | % | ||||||||||||
Cost of merchandise sold | 7.5 | 5.9 | 6.0 | 83.0 | 76.1 | 84.6 | ||||||||||||||||||
Salaries and other expenses | 58.0 | 58.9 | 57.9 | — | — | — | ||||||||||||||||||
85.6 | 84.8 | 83.8 | 83.0 | 76.1 | 84.6 | |||||||||||||||||||
General and administrative expenses | 4.3 | 4.3 | 3.9 | 10.3 | 7.8 | 9.1 | ||||||||||||||||||
Amortization and write-down of intangibles | 0.6 | 0.5 | 0.2 | — | — | 0.4 | ||||||||||||||||||
Litigation expense (credit) | (0.2 | ) | 2.2 | 3.1 | — | — | — | |||||||||||||||||
Restructuring charge | 0.2 | 1.4 | — | — | — | — | ||||||||||||||||||
Total operating expenses | 90.5 | 93.2 | 91.0 | 93.3 | 83.9 | 94.1 | ||||||||||||||||||
Operating profit | 9.5 | 6.8 | 9.0 | 6.7 | 16.1 | 5.9 | ||||||||||||||||||
Interest, net and other income | 1.9 | 3.1 | 2.4 | (1.6 | ) | (1.6 | ) | (1.4 | ) | |||||||||||||||
Earnings before income taxes | 7.6 | % | 3.7 | % | 6.6 | % | 8.3 | % | 17.7 | % | 7.3 | % | ||||||||||||
• | Generated $384.7 million in operating cash flow. | |
• | Reduced outstanding indebebtedness, including our subordinated notes and senior term loans, by $312.2 million. | |
• | Repurchased 951,800 shares of our common stock for an aggregate of $13.4 million. | |
• | Increased same store revenues by 2.3%. |
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Estimated | |||||||||||||
Expense Recognized | Remaining Charges | ||||||||||||
Closing Plan Estimate | During 2005 | for 2006 | |||||||||||
(In thousands) | |||||||||||||
Lease obligations | $ | 8,661 - $13,047 | $ | 9,261 | $ | 0 - $3,786 | |||||||
Fixed asset disposals | 2,630 - 4,211 | 3,333 | 0 - 878 | ||||||||||
Net proceeds from stores sold | — | (2,250 | ) | — | |||||||||
Other costs(1) | 830 - 7,875 | 4,822 | 0 - 3,053 | ||||||||||
Total | $ | 12,121 - $25,133 | $ | 15,166 | $ | 0 - $7,717 | |||||||
Cash | |||||||||||||||||
(Payments) | |||||||||||||||||
September 30, 2005 | Charges to | Receipts or Asset | December 31, 2005 | ||||||||||||||
Balance | Expense | Write-Offs | Balance | ||||||||||||||
(In thousands) | |||||||||||||||||
Lease obligations | $ | 5,341 | $ | 2,759 | $ | (2,736 | ) | $ | 5,364 | ||||||||
Fixed asset disposals | — | 1,544 | (1,544 | ) | — | ||||||||||||
Net proceeds from stores sold | — | (2,250 | ) | 2,250 | — | ||||||||||||
Other costs(1) | 658 | 86 | (653 | ) | 91 | ||||||||||||
Total | $ | 5,999 | $ | 2,139 | $ | (2,683 | ) | $ | 5,455 | ||||||||
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1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | ||||||||||||||
(In thousands, except per share data) | |||||||||||||||||
Year ended December 31, 2005 | |||||||||||||||||
Revenues | $ | 601,809 | $ | 580,578 | $ | 573,507 | $ | 583,213 | |||||||||
Operating profit | 85,992 | 72,988 | 30,980 | (2) | 59,811 | ||||||||||||
Net earnings | 47,669 | (1) | 41,742 | 11,277 | 35,050 | (3) | |||||||||||
Basic earnings per common share | $ | 0.64 | $ | 0.56 | $ | 0.15 | $ | 0.50 | |||||||||
Diluted earnings per common share | $ | 0.63 | $ | 0.55 | $ | 0.15 | $ | 0.50 | |||||||||
Year ended December 31, 2004 | |||||||||||||||||
Revenues | $ | 585,380 | $ | 572,985 | $ | 569,607 | $ | 585,283 | |||||||||
Operating profit | 92,659 | 90,223 | 24,344 | (4) | 75,725 | ||||||||||||
Net earnings | 52,209 | 51,194 | 5,573 | 46,879 | |||||||||||||
Basic earnings per common share | $ | 0.65 | $ | 0.64 | $ | 0.07 | $ | 0.63 | |||||||||
Diluted earnings per common share | $ | 0.63 | $ | 0.62 | $ | 0.07 | $ | 0.61 | |||||||||
Year ended December 31, 2003 | |||||||||||||||||
Revenues | $ | 566,406 | $ | 553,260 | $ | 549,825 | $ | 558,659 | |||||||||
Operating profit | 96,291 | 97,238 | 87,502 | 88,991 | |||||||||||||
Net earnings | 50,959 | 35,300 | 43,738 | 51,499 | |||||||||||||
Basic earnings per common share | $ | 0.58 | $ | 0.40 | $ | 0.54 | $ | 0.64 | |||||||||
Diluted earnings per common share | $ | 0.57 | $ | 0.39 | $ | 0.52 | $ | 0.62 |
1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Year ended December 31, 2008 | ||||||||||||||||
Revenues | $ | 756,636 | $ | 719,031 | $ | 708,755 | $ | 699,750 | ||||||||
Operating profit | 77,540 | 74,434 | 58,549 | 63,865 | ||||||||||||
Net earnings | 36,358 | 37,741 | 29,379 | 36,146 | ||||||||||||
Basic earnings per common share | $ | 0.55 | $ | 0.57 | $ | 0.44 | $ | 0.54 | ||||||||
Diluted earnings per common share | $ | 0.54 | $ | 0.56 | $ | 0.44 | $ | 0.54 | ||||||||
Year ended December 31, 2007 | ||||||||||||||||
Revenues | $ | 755,299 | $ | 724,158 | $ | 709,701 | $ | 716,963 | ||||||||
Operating profit | 46,155 | 87,024 | 60,575 | 10,483 | ||||||||||||
Net earnings(loss) | 15,103 | 41,251 | 25,275 | (5,361 | ) | |||||||||||
Basic earnings(loss) per common share | $ | 0.21 | $ | 0.59 | $ | 0.37 | $ | (0.08 | ) | |||||||
Diluted earnings(loss) per common share | $ | 0.21 | $ | 0.58 | $ | 0.37 | $ | (0.08 | ) | |||||||
Year ended December 31, 2006 | ||||||||||||||||
Revenues | $ | 606,975 | $ | 583,623 | $ | 587,184 | $ | 656,126 | ||||||||
Operating profit | 75,484 | 75,193 | 51,871 | 19,396 | ||||||||||||
Net earnings(loss) | 40,328 | 39,843 | 25,241 | (2,320 | ) | |||||||||||
Basic earnings(loss) per common share | $ | 0.58 | $ | 0.57 | $ | 0.36 | $ | (0.03 | ) | |||||||
Diluted earnings(loss) per common share | $ | 0.57 | $ | 0.56 | $ | 0.36 | $ | (0.03 | ) |
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1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | ||||||||||||||
(As a percentage of revenues) | |||||||||||||||||
Year ended December 31, 2005 | |||||||||||||||||
Revenues | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||
Operating profit | 14.3 | 12.6 | 5.4 | (2) | 10.3 | ||||||||||||
Net earnings | 7.9 | (1) | 7.2 | 2.0 | 6.0 | (3) | |||||||||||
Year ended December 31, 2004 | |||||||||||||||||
Revenues | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||
Operating profit | 15.8 | 15.7 | 4.3 | (4) | 12.9 | ||||||||||||
Net earnings | 8.9 | 8.9 | 1.0 | 8.0 | |||||||||||||
Year ended December 31, 2003 | |||||||||||||||||
Revenues | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||
Operating profit | 17.0 | 17.6 | 15.9 | 15.9 | |||||||||||||
Net earnings | 9.0 | 6.4 | 8.0 | 9.2 |
1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |||||||||||||
(As a percentage of revenues) | ||||||||||||||||
Year ended December 31, 2008 | ||||||||||||||||
Revenues | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Operating profit | 10.2 | 10.4 | 8.3 | 9.1 | ||||||||||||
Net earnings | 4.8 | 5.2 | 4.1 | 5.2 | ||||||||||||
Year ended December 31, 2007 | ||||||||||||||||
Revenues | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Operating profit | 6.1 | 12.0 | 8.5 | 1.5 | ||||||||||||
Net earnings(loss) | 2.0 | 5.7 | 3.6 | (0.7 | ) | |||||||||||
Year ended December 31, 2006 | ||||||||||||||||
Revenues | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Operating profit | 12.4 | 12.9 | 8.8 | 3.0 | ||||||||||||
Net earnings(loss) | 6.6 | 6.8 | 4.3 | (0.4 | ) |
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2005 | 2004 | 2003 | |||||||||||
Stores at beginning of period | 2,875 | 2,648 | 2,407 | ||||||||||
New store openings | 67 | 94 | 101 | ||||||||||
Acquired stores remaining open | 44 | 191 | 160 | ||||||||||
Closed stores | |||||||||||||
Merged with existing stores | 170 | 48 | 20 | ||||||||||
Sold or closed with no surviving store | 56 | 10 | — | ||||||||||
Stores at end of period | 2,760 | 2,875 | 2,648 | ||||||||||
Acquired stores closed and accounts merged with existing stores | 39 | 111 | 220 | ||||||||||
Total approximate purchase price of acquisitions | $ | 38.3 million | $ | 195.2 million(1 | ) | $ | 126.1 million |
2008 | 2007 | 2006 | ||||||||||
Stores at beginning of period | 3,081 | 3,406 | 2,760 | |||||||||
New store openings | 26 | 27 | 40 | |||||||||
Acquired stores remaining open | 5 | 14 | 646 | |||||||||
Closed stores(1) | ||||||||||||
Merged with existing stores | 45 | 363 | 25 | |||||||||
Sold or closed with no surviving store | 30 | 3 | 15 | |||||||||
Stores at end of period | 3,037 | 3,081 | 3,406 | |||||||||
Acquired stores closed and accounts merged with existing stores | 38 | 36 | 164 | |||||||||
Total purchase price of acquisitions | $15.7 million | $20.1 million | $657.4 million |
(1) | Substantially all of |
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Year Ending December 31, | (In thousands) | |||
2009 | $ | 21,756 | ||
2010 | 91,756 | |||
2011 | 274,728 | |||
2012 | 320,907 | |||
$ | 709,147 | |||
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Year Ending December 31, | ||||
(In thousands) | ||||
2006 | $ | 3,500 | ||
2007 | 3,500 | |||
2008 | 3,500 | |||
2009 | 168,000 | |||
2010 | 166,250 | |||
Thereafter | — | |||
$ | 344,750 | |||
• | incur additional debt in excess of $150.0 million at any one time outstanding; | |
• | repurchase our capital stock and 71/2% notes and pay cash dividends in the event the pro forma senior leverage ratio is greater than 2.50x; | |
• | incur liens or other encumbrances; | |
• | merge, consolidate or sell substantially all our property or business; | |
• | sell assets, other than inventory, in the ordinary course of business; | |
• | make investments or acquisitions unless we meet financial tests and other requirements; | |
• | make capital expenditures; or | |
• | enter into an unrelated line of business. |
Required Ratio | Actual Ratio | |||||||||
Maximum consolidated leverage ratio | No greater than | 3.25:1 | 2.43:1 | |||||||
Minimum fixed charge coverage ratio | No less than | 1.35:1 | 1.86:1 |
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• | incur additional debt; | |
• | sell assets or our subsidiaries; | |
• | grant liens to third parties; | |
• | pay cash dividends or repurchase stock (subject to a restricted payments basket for which | |
• | engage in a merger or sell substantially all of our assets. |
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Payments Due by Period | ||||||||||||||||||||
Contractual Cash Obligations | Total | 2006 | 2007-2008 | 2009-2010 | Thereafter | |||||||||||||||
(In thousands) | ||||||||||||||||||||
Senior Credit Facilities (including current portion) | $ | 424,050 | (1) | $ | 7,800 | $ | 7,000 | $ | 409,250 | $ | 0 | |||||||||
71/2% Senior Subordinated Notes(2) | 401,250 | 22,500 | 45,000 | 333,750 | 0 | |||||||||||||||
Operating Leases | 466,435 | 149,976 | 220,515 | 93,234 | 2,710 | |||||||||||||||
Total | $ | 1,291,735 | $ | 180,276 | $ | 272,515 | $ | 836,234 | $ | 2,710 |
Payments Due by Period | ||||||||||||||||||||
Contractual Cash Obligations | Total | 2009 | 2010-2011 | 2012-2013 | Thereafter | |||||||||||||||
(In thousands) | ||||||||||||||||||||
Senior Debt (including current portion) | $ | 721,712 | (1) | $ | 34,321 | $ | 366,484 | $ | 320,907 | $ | — | |||||||||
71/2% Senior Subordinated Notes(2) | 250,730 | 16,903 | 233,827 | — | — | |||||||||||||||
Operating Leases | 493,201 | 172,947 | 227,500 | 86,864 | 5,890 | |||||||||||||||
Capital Leases | 9,520 | 5,039 | 4,179 | 302 | — | |||||||||||||||
Total(3) | $ | 1,475,163 | $ | 229,210 | $ | 831,990 | $ | 408,073 | $ | 5,890 | ||||||||||
(1) | Includes amounts due under the Intrust line of credit. Amount referenced does not include | |
(2) | Includes interest payments of | |
(3) | As of December 31, 2008, we have $2.1 million in uncertain tax positions, net of federal benefit. Because of the uncertainty of the amounts to be ultimately paid as well as the timing of such payments, these liabilities are not reflected in the contractual obligations table. |
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Item 7A. |
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Item 8. | Financial Statements and Supplementary Data. |
Page | |||||
Rent-A-Center, Inc. and Subsidiaries | |||||
Consolidated Financial Statements | |||||
45 | |||||
46 | |||||
47 | |||||
48 | |||||
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Year Ended December 31, | ||||||||||||||||
2005 | 2004 | 2003 | ||||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Revenues | ||||||||||||||||
Store | ||||||||||||||||
Rentals and fees | $ | 2,084,757 | $ | 2,071,866 | $ | 1,998,952 | ||||||||||
Merchandise sales | 177,292 | 166,594 | 152,984 | |||||||||||||
Installment sales | 26,139 | 24,304 | 22,203 | |||||||||||||
Other | 7,903 | 3,568 | 3,083 | |||||||||||||
Franchise | ||||||||||||||||
Merchandise sales | 37,794 | 41,398 | 45,057 | |||||||||||||
Royalty income and fees | 5,222 | 5,525 | 5,871 | |||||||||||||
2,339,107 | 2,313,255 | 2,228,150 | ||||||||||||||
Operating expenses | ||||||||||||||||
Direct store expenses | ||||||||||||||||
Cost of rentals and fees | 452,583 | 450,035 | 432,696 | |||||||||||||
Cost of merchandise sold | 129,624 | 119,098 | 112,283 | |||||||||||||
Cost of installment sales | 10,889 | 10,512 | 10,639 | |||||||||||||
Salaries and other expenses | 1,358,760 | 1,277,926 | 1,180,115 | |||||||||||||
Franchise cost of merchandise sold | 36,319 | 39,472 | 43,248 | |||||||||||||
1,988,175 | 1,897,043 | 1,778,981 | ||||||||||||||
General and administrative expenses | 82,290 | 75,481 | 66,635 | |||||||||||||
Amortization of intangibles | 11,705 | 10,780 | 12,512 | |||||||||||||
Class action litigation settlement (reversion) | (8,000 | ) | 47,000 | — | ||||||||||||
Restructuring charge | 15,166 | — | — | |||||||||||||
Total operating expenses | 2,089,336 | 2,030,304 | 1,858,128 | |||||||||||||
Operating profit | 249,771 | 282,951 | 370,022 | |||||||||||||
Income from sale of charged off accounts | — | (7,924 | ) | — | ||||||||||||
Finance charges from refinancing | — | 4,173 | 35,260 | |||||||||||||
Interest expense | 46,195 | 40,960 | 48,577 | |||||||||||||
Interest income | (5,492 | ) | (5,637 | ) | (4,645 | ) | ||||||||||
Earnings before income taxes | 209,068 | 251,379 | 290,830 | |||||||||||||
Income tax expense | 73,330 | 95,524 | 109,334 | |||||||||||||
NET EARNINGS | 135,738 | 155,855 | 181,496 | |||||||||||||
Preferred dividends | — | — | — | |||||||||||||
Net earnings allocable to common stockholders | $ | 135,738 | $ | 155,855 | $ | 181,496 | ||||||||||
Basic earnings per common share | $ | 1.86 | $ | 1.99 | $ | 2.16 | ||||||||||
Diluted earnings per common share | $ | 1.83 | $ | 1.94 | $ | 2.08 | ||||||||||
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In thousands, except per share data) | ||||||||||||
Revenues | ||||||||||||
Store | ||||||||||||
Rentals and fees | $ | 2,505,268 | $ | 2,594,061 | $ | 2,174,239 | ||||||
Merchandise sales | 256,731 | 208,989 | 175,954 | |||||||||
Installment sales | 41,193 | 34,576 | 26,877 | |||||||||
Other | 42,759 | 25,482 | 15,607 | |||||||||
Franchise | ||||||||||||
Merchandise sales | 33,283 | 34,229 | 36,377 | |||||||||
Royalty income and fees | 4,938 | 8,784 | 4,854 | |||||||||
2,884,172 | 2,906,121 | 2,433,908 | ||||||||||
Operating expenses | ||||||||||||
Direct store expenses | ||||||||||||
Cost of rentals and fees | 572,900 | 574,013 | 476,462 | |||||||||
Cost of merchandise sold | 194,595 | 156,503 | 131,428 | |||||||||
Cost of installment sales | 16,620 | 13,270 | 11,346 | |||||||||
Salaries and other expenses | 1,651,805 | 1,684,965 | 1,385,437 | |||||||||
Franchise cost of merchandise sold | 31,705 | 32,733 | 34,862 | |||||||||
2,467,625 | 2,461,484 | 2,039,535 | ||||||||||
General and administrative expenses | 125,632 | 123,703 | 93,556 | |||||||||
Amortization and write-down of intangibles | 16,637 | 15,734 | 5,573 | |||||||||
Litigation expense (credit) | (4,607 | ) | 62,250 | 73,300 | ||||||||
Restructuring charge | 4,497 | 38,713 | — | |||||||||
Total operating expenses | 2,609,784 | 2,701,884 | 2,211,964 | |||||||||
Operating profit | 274,388 | 204,237 | 221,944 | |||||||||
Finance charges from refinancing | — | — | 4,803 | |||||||||
Gain on extinguishment of debt | (4,335 | ) | — | — | ||||||||
Interest expense | 66,241 | 94,778 | 58,559 | |||||||||
Interest income | (8,860 | ) | (6,827 | ) | (5,556 | ) | ||||||
Earnings before income taxes | 221,342 | 116,286 | 164,138 | |||||||||
Income tax expense | 81,718 | 40,018 | 61,046 | |||||||||
NET EARNINGS | $ | 139,624 | $ | 76,268 | $ | 103,092 | ||||||
Basic earnings per common share | $ | 2.10 | $ | 1.11 | $ | 1.48 | ||||||
Diluted earnings per common share | $ | 2.08 | $ | 1.10 | $ | 1.46 | ||||||
45
47
December 31, | |||||||||
2005 | 2004 | ||||||||
(In thousands, except share | |||||||||
data) | |||||||||
ASSETS | |||||||||
Cash and cash equivalents | $ | 57,627 | $ | 58,825 | |||||
Accounts receivable, net | 20,403 | 16,269 | |||||||
Prepaid expenses and other assets | 38,524 | 65,050 | |||||||
Rental merchandise, net | |||||||||
On rent | 588,978 | 596,447 | |||||||
Held for rent | 161,702 | 162,664 | |||||||
Merchandise held for installment sale | 2,200 | 1,311 | |||||||
Property assets, net | 149,904 | 144,818 | |||||||
Goodwill, net | 925,960 | 913,415 | |||||||
Other intangible assets, net | 3,366 | 8,989 | |||||||
$ | 1,948,664 | $ | 1,967,788 | ||||||
LIABILITIES | |||||||||
Accounts payable — trade | $ | 88,147 | $ | 94,399 | |||||
Accrued liabilities | 191,831 | �� | 207,835 | ||||||
Deferred income taxes | 121,204 | 163,031 | |||||||
Senior debt | 424,050 | 408,250 | |||||||
Subordinated notes payable, net of discount | 300,000 | 300,000 | |||||||
Redeemable convertible voting preferred stock | — | 2 | |||||||
1,125,232 | 1,173,517 | ||||||||
COMMITMENTS AND CONTINGENCIES | |||||||||
STOCKHOLDERS’ EQUITY | |||||||||
Common stock, $.01 par value; 250,000,000 shares authorized; 102,988,126 and 102,297,937 shares issued in 2005 and 2004, respectively | 1,030 | 1,023 | |||||||
Additional paid-in capital | 630,308 | 618,486 | |||||||
Retained earnings | 901,493 | 765,785 | |||||||
Treasury stock, 33,801,099 and 27,900,399 shares at cost in 2005 and 2004, respectively | (709,399 | ) | (591,023 | ) | |||||
823,432 | 794,271 | ||||||||
$ | 1,948,664 | $ | 1,967,788 | ||||||
December 31, | ||||||||
2008 | 2007 | |||||||
(In thousands, except share and par value data) | ||||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 87,382 | $ | 97,375 | ||||
Receivables, net of allowance for doubtful accounts of $7,256 in 2008 and $4,945 in 2007 | 51,766 | 41,629 | ||||||
Prepaid expenses and other assets | 59,217 | 56,384 | ||||||
Rental merchandise, net | ||||||||
On rent | 634,946 | 735,672 | ||||||
Held for rent | 184,108 | 202,298 | ||||||
Merchandise held for installment sale | 3,433 | 2,334 | ||||||
Property assets, net | 208,897 | 222,157 | ||||||
Goodwill, net | 1,265,249 | 1,255,163 | ||||||
Other intangible assets, net | 1,704 | 13,931 | ||||||
$ | 2,496,702 | $ | 2,626,943 | |||||
LIABILITIES | ||||||||
Accounts payable — trade | $ | 93,496 | $ | 100,419 | ||||
Accrued liabilities | 289,701 | 310,420 | ||||||
Deferred income taxes | 87,216 | 9,678 | ||||||
Senior debt | 721,712 | 959,335 | ||||||
Subordinated notes payable | 225,375 | 300,000 | ||||||
1,417,500 | 1,679,852 | |||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
STOCKHOLDERS’ EQUITY | ||||||||
Common stock, $.01 par value; 250,000,000 shares authorized; 104,769,382 and 104,540,127 shares issued in 2008 and 2007, respectively | 1,047 | 1,045 | ||||||
Additional paid-in capital | 681,067 | 674,032 | ||||||
Retained earnings | 1,208,009 | 1,069,553 | ||||||
Treasury stock, 38,787,849 and 37,836,049 shares at cost in 2008 and 2007, respectively | (810,921 | ) | (797,539 | ) | ||||
1,079,202 | 947,091 | |||||||
$ | 2,496,702 | $ | 2,626,943 | |||||
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48
Accumulated | |||||||||||||||||||||||||||||||
Common Stock | Additional | Comprehensive | |||||||||||||||||||||||||||||
Paid-In | Retained | Treasury | Income | ||||||||||||||||||||||||||||
Shares | Amount | Capital | Earnings | Stock | (Loss) | Total | |||||||||||||||||||||||||
Balance at January 1, 2003 | 98,845 | $ | 395 | $ | 532,675 | $ | 428,621 | $ | (115,565 | ) | $ | (3,726 | ) | $ | 842,400 | ||||||||||||||||
Net earnings | — | — | — | 181,496 | — | — | 181,496 | ||||||||||||||||||||||||
Other comprehensive income: | |||||||||||||||||||||||||||||||
Gains on interest rate swaps, net of tax of $3,986 | — | — | — | — | — | 6,504 | 6,504 | ||||||||||||||||||||||||
Reclassification adjustment for gains included in net earnings, net of tax of $1,702 | — | — | — | — | — | (2,778 | ) | (2,778 | ) | ||||||||||||||||||||||
Other comprehensive income | 3,726 | 3,726 | |||||||||||||||||||||||||||||
Comprehensive income | 185,222 | ||||||||||||||||||||||||||||||
Purchase of treasury stock (9,528 shares) | — | — | — | — | (273,175 | ) | — | (273,175 | ) | ||||||||||||||||||||||
Issuance of stock options for services | — | — | 28 | — | — | — | 28 | ||||||||||||||||||||||||
Effect of 5-for-2 stock split | — | 605 | (451 | ) | (154 | ) | — | — | — | ||||||||||||||||||||||
Exercise of stock options | 2,303 | 12 | 29,771 | — | — | — | 29,783 | ||||||||||||||||||||||||
Tax benefits related to exercise of stock options | — | — | 10,605 | — | — | — | 10,605 | ||||||||||||||||||||||||
Other | — | — | — | (33 | ) | — | — | (33 | ) | ||||||||||||||||||||||
Balance at December 31, 2003 | 101,148 | 1,012 | 572,628 | 609,930 | (388,740 | ) | — | 794,830 | |||||||||||||||||||||||
Net earnings | — | — | — | 155,855 | — | — | 155,855 | ||||||||||||||||||||||||
Purchase of treasury stock (7,690 shares) | — | — | — | — | (210,520 | ) | — | (210,520 | ) | ||||||||||||||||||||||
Issuance of treasury shares for acquisition (815 shares) | — | — | 15,617 | — | 8,237 | — | 23,854 | ||||||||||||||||||||||||
Conversion of stock options for acquisition | — | — | 6,123 | — | — | — | 6,123 | ||||||||||||||||||||||||
Exercise of stock options | 1,150 | 11 | 16,604 | — | — | — | 16,615 | ||||||||||||||||||||||||
Tax benefits related to exercise of stock options | — | — | 7,514 | — | — | — | 7,514 | ||||||||||||||||||||||||
Balance at December 31, 2004 | 102,298 | 1,023 | 618,486 | 765,785 | (591,023 | ) | — | 794,271 | |||||||||||||||||||||||
Net earnings | — | — | — | 135,738 | — | — | 135,738 | ||||||||||||||||||||||||
Purchase of treasury stock (5,901 shares) | — | — | (146 | ) | — | (118,376 | ) | — | (118,522 | ) | |||||||||||||||||||||
Conversion of preferred stock to common | — | — | 2 | — | — | — | 2 | ||||||||||||||||||||||||
Exercise of stock options | 690 | 7 | 9,512 | — | — | — | 9,519 | ||||||||||||||||||||||||
Tax benefits related to exercise of stock options | — | — | 2,469 | — | — | — | 2,469 | ||||||||||||||||||||||||
Other | — | — | (15 | ) | (30 | ) | — | — | (45 | ) | |||||||||||||||||||||
Balance at December 31, 2005 | 102,988 | $ | 1,030 | $ | 630,308 | $ | 901,493 | $ | (709,399 | ) | $ | — | $ | 823,432 | |||||||||||||||||
Additional | ||||||||||||||||||||||||
Common Stock | Paid-In | Retained | Treasury | |||||||||||||||||||||
Shares | Amount | Capital | Earnings | Stock | Total | |||||||||||||||||||
Balance at January 1, 2006 | 102,988 | $ | 1,030 | $ | 630,308 | $ | 890,467 | $ | (709,399 | ) | $ | 812,406 | ||||||||||||
Net earnings | — | — | — | 103,092 | — | 103,092 | ||||||||||||||||||
Purchase of treasury stock (203 shares) | — | — | (5 | ) | — | (4,691 | ) | (4,696 | ) | |||||||||||||||
Exercise of stock options | 1,204 | 12 | 20,091 | — | — | 20,103 | ||||||||||||||||||
Tax benefits related to exercise of stock options | — | — | 4,291 | — | — | 4,291 | ||||||||||||||||||
Stock-based compensation | — | — | 7,792 | — | — | 7,792 | ||||||||||||||||||
Other | — | — | (37 | ) | 8 | — | (29 | ) | ||||||||||||||||
Balance at December 31, 2006 | 104,192 | 1,042 | 662,440 | 993,567 | (714,090 | ) | 942,959 | |||||||||||||||||
Net earnings | — | — | — | 76,268 | — | 76,268 | ||||||||||||||||||
Purchase of treasury stock (3,832 shares) | — | — | (99 | ) | — | (83,449 | ) | (83,548 | ) | |||||||||||||||
Exercise of stock options | 348 | 3 | 5,928 | — | — | 5,931 | ||||||||||||||||||
Tax benefits related to exercise of stock options | — | — | 943 | — | — | 943 | ||||||||||||||||||
Stock-based compensation | — | — | 5,050 | — | — | 5,050 | ||||||||||||||||||
Other | — | — | (230 | ) | (282 | ) | — | (512 | ) | |||||||||||||||
Balance at December 31, 2007 | 104,540 | 1,045 | 674,032 | 1,069,553 | (797,539 | ) | 947,091 | |||||||||||||||||
Net earnings | — | — | — | 139,624 | — | 139,624 | ||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | 386 | — | 386 | ||||||||||||||||||
Comprehensive income | 140,010 | |||||||||||||||||||||||
Purchase of treasury stock (952 shares) | — | — | (24 | ) | — | (13,382 | ) | (13,406 | ) | |||||||||||||||
Exercise of stock options | 229 | 2 | 3,167 | — | — | 3,169 | ||||||||||||||||||
Tax benefits related to exercise of stock options | — | — | 560 | — | — | 560 | ||||||||||||||||||
Stock-based compensation | — | — | 3,341 | — | — | 3,341 | ||||||||||||||||||
Other | — | — | (9 | ) | (1,554 | ) | — | (1,563 | ) | |||||||||||||||
Balance at December 31, 2008 | 104,769 | $ | 1,047 | $ | 681,067 | $ | 1,208,009 | $ | (810,921 | ) | $ | 1,079,202 | ||||||||||||
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Year Ended December 31, | |||||||||||||||
2005 | 2004 | 2003 | |||||||||||||
(In thousands) | |||||||||||||||
Cash flows from operating activities | |||||||||||||||
Net earnings | $ | 135,738 | $ | 155,855 | $ | 181,496 | |||||||||
Adjustments to reconcile net earnings to net cash provided by operating activities | |||||||||||||||
Depreciation of rental merchandise | 444,682 | 446,578 | 432,696 | ||||||||||||
Depreciation of property assets | 53,382 | 48,566 | 43,384 | ||||||||||||
Amortization of intangibles | 16,236 | 10,780 | 12,512 | ||||||||||||
Amortization of financing fees | 1,600 | 690 | 844 | ||||||||||||
Deferred income taxes | (41,827 | ) | 30,113 | 46,776 | |||||||||||
Financing charges from recapitalization | — | 4,173 | 23,329 | ||||||||||||
Changes in operating assets and liabilities, net of effects of acquisitions | |||||||||||||||
Rental merchandise | (427,907 | ) | (456,316 | ) | (424,397 | ) | |||||||||
Accounts receivable | (4,134 | ) | (1,320 | ) | (9,027 | ) | |||||||||
Prepaid expenses and other assets | 30,106 | (12,286 | ) | (8,752 | ) | ||||||||||
Accounts payable — trade | (6,252 | ) | 21,691 | 18,647 | |||||||||||
Accrued liabilities and other | (13,727 | ) | 82,506 | 24,904 | |||||||||||
Net cash provided by operating activities | 187,897 | 331,030 | 342,412 | ||||||||||||
Cash flows from investing activities | |||||||||||||||
Purchase of property assets | (60,230 | ) | (72,096 | ) | (55,987 | ) | |||||||||
Proceeds from sale of property assets | 2,513 | 4,824 | 809 | ||||||||||||
Acquisitions of businesses | (38,321 | ) | (165,219 | ) | (126,119 | ) | |||||||||
Net cash used in investing activities | (96,038 | ) | (232,491 | ) | (181,297 | ) | |||||||||
Cash flows from financing activities | |||||||||||||||
Purchase of treasury stock | (118,376 | ) | (210,520 | ) | (273,175 | ) | |||||||||
Exercise of stock options | 9,519 | 16,615 | 29,783 | ||||||||||||
Issuance of subordinated notes | — | — | 300,000 | ||||||||||||
Payment of refinancing fees | — | — | (17,049 | ) | |||||||||||
Proceeds from debt | 257,285 | 442,940 | 400,000 | ||||||||||||
Repurchase of senior subordinated notes, including premium | — | — | (290,956 | ) | |||||||||||
Repayments of debt | (241,485 | ) | (432,690 | ) | (251,500 | ) | |||||||||
Net cash used in financing activities | (93,057 | ) | (183,655 | ) | (102,897 | ) | |||||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (1,198 | ) | (85,116 | ) | 58,218 | ||||||||||
Cash and cash equivalents at beginning of year | 58,825 | 143,941 | 85,723 | ||||||||||||
Cash and cash equivalents at end of year | $ | 57,627 | $ | 58,825 | $ | 143,941 | |||||||||
Supplemental cash flow information | |||||||||||||||
Cash paid during the year for: | |||||||||||||||
Interest | $ | 43,933 | $ | 38,789 | $ | 56,401 | |||||||||
Income taxes | $ | 97,190 | $ | 75,712 | $ | 68,805 |
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In thousands) | ||||||||||||
Cash flows from operating activities | ||||||||||||
Net earnings | $ | 139,624 | $ | 76,268 | $ | 103,092 | ||||||
Adjustments to reconcile net earnings to net cash provided by operating activities | ||||||||||||
Depreciation of rental merchandise | 561,414 | 561,880 | 465,902 | |||||||||
Bad debt expense | 14,455 | 10,828 | 6,981 | |||||||||
Stock-based compensation expense | 3,341 | 5,050 | 7,792 | |||||||||
Depreciation of property assets | 72,683 | 71,279 | 55,651 | |||||||||
Loss on sale or disposal of property assets | 375 | 20,345 | — | |||||||||
Amortization of intangibles | 12,589 | 15,734 | 5,573 | |||||||||
Amortization of financing fees | 1,703 | 1,824 | 1,606 | |||||||||
Deferred income taxes | 77,538 | 11,213 | (7,121 | ) | ||||||||
Financing charges from refinancing | — | — | 4,803 | |||||||||
Gain on extinguishment of debt | (4,335 | ) | — | — | ||||||||
Restructuring charge | 4,497 | 38,713 | — | |||||||||
Changes in operating assets and liabilities, net of effects of acquisitions | ||||||||||||
Rental merchandise | (438,964 | ) | (445,920 | ) | (551,968 | ) | ||||||
Accounts receivable | (24,572 | ) | (17,390 | ) | (7,325 | ) | ||||||
Prepaid expenses and other assets | (7,056 | ) | (6,194 | ) | (12,853 | ) | ||||||
Tax benefit related to stock option exercises | (560 | ) | (943 | ) | (4,291 | ) | ||||||
Accounts payable — trade | (6,924 | ) | (18,021 | ) | 30,293 | |||||||
Accrued liabilities | (21,086 | ) | (84,286 | ) | 89,225 | |||||||
Net cash provided by operating activities | 384,722 | 240,380 | 187,360 | |||||||||
Cash flows from investing activities | ||||||||||||
Purchase of property assets | (61,931 | ) | (101,961 | ) | (84,409 | ) | ||||||
Proceeds from sale of property assets | 6,144 | 4,500 | 1,375 | |||||||||
Acquisitions of businesses, net of cash acquired | (15,700 | ) | (20,112 | ) | (657,378 | ) | ||||||
Net cash used in investing activities | (71,487 | ) | (117,573 | ) | (740,412 | ) | ||||||
Cash flows from financing activities | ||||||||||||
Purchase of treasury stock | (13,382 | ) | (83,449 | ) | (4,691 | ) | ||||||
Exercise of stock options | 3,169 | 5,931 | 20,103 | |||||||||
Tax benefit related to stock option exercises | 560 | 943 | 4,291 | |||||||||
Payments on capital leases | (5,662 | ) | (7,258 | ) | (1,162 | ) | ||||||
Proceeds from debt | 213,050 | 785,555 | 1,378,243 | |||||||||
Repayments of debt | (446,338 | ) | (819,498 | ) | (809,015 | ) | ||||||
Repurchase of subordinated notes | (74,625 | ) | — | — | ||||||||
Net cash provided by (used) in financing activities | (323,228 | ) | (117,776 | ) | 587,769 | |||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (9,993 | ) | 5,031 | 34,717 | ||||||||
Cash and cash equivalents at beginning of year | 97,375 | 92,344 | 57,627 | |||||||||
Cash and cash equivalents at end of year | $ | 87,382 | $ | 97,375 | $ | 92,344 | ||||||
Supplemental cash flow information | ||||||||||||
Cash paid during the year for: | ||||||||||||
Interest | $ | 70,688 | $ | 89,372 | $ | 50,871 | ||||||
Income taxes (excludes $34,656 of income taxes refunded in 2008) | $ | 20,954 | $ | 19,759 | $ | 57,873 |
48
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51
Cash |
49
52
50
53
51
Year Ended December 31, | |||||||||||||
2005 | 2004 | 2003 | |||||||||||
(In thousands, except per share data) | |||||||||||||
Net earnings allocable to common stockholders | |||||||||||||
As reported | $ | 135,738 | $ | 155,855 | $ | 181,496 | |||||||
Deduct: Total stock-based employee compensation under fair value based method for all awards, net of related tax benefit | 9,152 | 9,868 | 15,687 | ||||||||||
Pro forma | $ | 126,586 | $ | 145,987 | $ | 165,809 | |||||||
Basic earnings per common share | |||||||||||||
As reported | $ | 1.86 | $ | 1.99 | $ | 2.16 | |||||||
Pro forma | $ | 1.73 | $ | 1.87 | $ | 1.97 | |||||||
Diluted earnings per common share | |||||||||||||
As reported | $ | 1.83 | $ | 1.94 | $ | 2.08 | |||||||
Pro forma | $ | 1.71 | $ | 1.82 | $ | 1.90 |
52
54
53
55
Note B — | Receivables and Allowance for Doubtful Accounts |
At December 31, | |||||||||
2005 | 2004 | ||||||||
(In thousands) | |||||||||
Installment sales receivable | $ | 18,356 | $ | 16,919 | |||||
Financial service loans receivable | 2,757 | — | |||||||
Trade receivables | 2,607 | 1,956 | |||||||
Total | 23,720 | 18,875 | |||||||
Less allowance for doubtful accounts | (3,317 | ) | (2,606 | ) | |||||
Net receivables | $ | 20,403 | $ | 16,269 | |||||
December 31, | ||||||||
2008 | 2007 | |||||||
(In thousands) | ||||||||
Installment sales receivable | $ | 29,561 | $ | 24,677 | ||||
Financial services loans receivable | 19,327 | 12,285 | ||||||
Trade and notes receivables | 10,134 | 9,612 | ||||||
Total | 59,022 | 46,574 | ||||||
Less allowance for doubtful accounts | (7,256 | ) | (4,945 | ) | ||||
Net receivables | $ | 51,766 | $ | 41,629 | ||||
At December 31, | |||||||||||||
2005 | 2004 | 2003 | |||||||||||
(In thousands) | |||||||||||||
Beginning balance | $ | 2,606 | $ | 1,918 | $ | 1,420 | |||||||
Bad debt expense | 1,581 | 1,101 | 753 | ||||||||||
Addition from acquisition | 114 | — | — | ||||||||||
Accounts written off | (1,271 | ) | (744 | ) | (312 | ) | |||||||
Recoveries | 287 | 331 | 57 | ||||||||||
Ending balance | $ | 3,317 | $ | 2,606 | $ | 1,918 | |||||||
December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In thousands) | ||||||||||||
Beginning balance | $ | 4,945 | $ | 4,026 | $ | 3,317 | ||||||
Bad debt expense | 14,455 | 10,828 | 6,981 | |||||||||
Accounts written off | (17,843 | ) | (20,496 | ) | (9,321 | ) | ||||||
Recoveries | 5,699 | 10,587 | 3,049 | |||||||||
Ending balance | $ | 7,256 | $ | 4,945 | $ | 4,026 | ||||||
54
56
December 31, | ||||||||||
2005 | 2004 | |||||||||
(In thousands) | ||||||||||
On rent | ||||||||||
Cost | $ | 984,301 | $ | 999,265 | ||||||
Less accumulated depreciation | 395,323 | 402,818 | ||||||||
Net book value, on rent | $ | 588,978 | $ | 596,447 | ||||||
Held for rent | ||||||||||
Cost | $ | 210,865 | $ | 208,339 | ||||||
Less accumulated depreciation | 49,163 | 45,675 | ||||||||
Net book value, held for rent | $ | 161,702 | $ | 162,664 | ||||||
December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
(In thousands) | ||||||||||||
Begining merchandise value | $ | 760,422 | $ | 682,367 | $ | 631,724 | ||||||
Inventory additions through acquisitions | 9,233 | 68,317 | 58,942 | |||||||||
Purchases | 655,553 | 654,261 | 612,276 | |||||||||
Depreciation of rental merchandise | (444,682 | ) | (446,578 | ) | (432,696 | ) | ||||||
Cost of good sold | (140,513 | ) | (129,610 | ) | (122,922 | ) | ||||||
Skips and stolens | (56,341 | ) | (54,797 | ) | (50,216 | ) | ||||||
Other inventory deletions(1) | (30,792 | ) | (13,538 | ) | (14,741 | ) | ||||||
Ending merchandise value | $ | 752,880 | $ | 760,422 | $ | 682,367 | ||||||
Note C — | Merchandise Inventory |
December 31, | ||||||||
2008 | 2007 | |||||||
(In thousands) | ||||||||
On rent | ||||||||
Cost | $ | 1,165,084 | $ | 1,296,230 | ||||
Less accumulated depreciation | (530,138 | ) | (560,558 | ) | ||||
Net book value, on rent | $ | 634,946 | $ | 735,672 | ||||
Held for rent | ||||||||
Cost | $ | 260,649 | $ | 276,321 | ||||
Less accumulated depreciation | (76,541 | ) | (74,023 | ) | ||||
Net book value, held for rent | $ | 184,108 | $ | 202,298 | ||||
December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In thousands) | ||||||||||||
Beginning merchandise value | $ | 940,304 | $ | 1,058,587 | $ | 752,880 | ||||||
Inventory additions through acquisitions | 4,890 | 5,544 | 213,010 | |||||||||
Purchases | 730,006 | 747,251 | 759,222 | |||||||||
Depreciation of rental merchandise | (561,414 | ) | (561,880 | ) | (465,902 | ) | ||||||
Cost of goods sold | (175,835 | ) | (169,773 | ) | (142,774 | ) | ||||||
Skips and stolens | (71,780 | ) | (79,818 | ) | (59,585 | ) | ||||||
Effects of adopting SAB 108(1) | — | — | 6,368 | |||||||||
Other inventory deletions(2) | (43,684 | ) | (59,607 | ) | (4,632 | ) | ||||||
Ending merchandise value | $ | 822,487 | $ | 940,304 | $ | 1,058,587 | ||||||
(1) | Represents adjustment to accumulated depreciation due to adopting SAB 108 in recording deferred and accrued revenue. | |
(2) | Other inventory deletions include loss/damage waiver claims and unrepairable and missing merchandise, as well as acquisition |
55
December 31, | ||||||||
2005 | 2004 | |||||||
(In thousands) | ||||||||
Furniture and equipment | $ | 149,998 | $ | 175,735 | ||||
Transportation equipment | 13,713 | 21,984 | ||||||
Building and leasehold improvements | 145,133 | 147,418 | ||||||
Land and land improvements | 4,248 | — | ||||||
Construction in progress | 11,118 | 1,988 | ||||||
324,210 | 347,125 | |||||||
Less accumulated depreciation | 174,306 | 202,307 | ||||||
$ | 149,904 | $ | 144,818 | |||||
57
Note D — | Property Assets |
December 31, | ||||||||
2008 | 2007 | |||||||
(In thousands) | ||||||||
Furniture and equipment | $ | 223,488 | $ | 208,492 | ||||
Transportation equipment | 34,738 | 43,025 | ||||||
Building and leasehold improvements | 224,098 | 207,367 | ||||||
Land and land improvements | 5,193 | 5,193 | ||||||
Construction in progress | 10,178 | 4,019 | ||||||
497,695 | 468,096 | |||||||
Less accumulated depreciation | (288,798 | ) | (245,939 | ) | ||||
$ | 208,897 | $ | 222,157 | |||||
Note E — | Intangible Assets and Acquisitions |
December 31, 2005 | December 31, 2004 | |||||||||||||||||||||||||
Avg. | Gross | Avg. | Gross | |||||||||||||||||||||||
Life | Carrying | Accumulated | Life | Carrying | Accumulated | |||||||||||||||||||||
(years) | Amount | Amortization | (years) | Amount | Amortization | |||||||||||||||||||||
Amortizable intangible assets Franchise network | 10 | $ | 3,000 | $ | 2,850 | 10 | $ | 3,000 | $ | 2,550 | ||||||||||||||||
Non-compete agreements | 3 | 6,040 | 4,423 | 3 | 5,902 | 3,197 | ||||||||||||||||||||
Customer relationships | 1.5 | 32,934 | 31,335 | 1.5 | 30,644 | 24,810 | ||||||||||||||||||||
Total | 41,974 | 38,608 | 39,546 | 30,557 | ||||||||||||||||||||||
Intangible assets not subject to amortization | ||||||||||||||||||||||||||
Goodwill | 1,025,112 | 99,152 | 1,012,577 | 99,162 | ||||||||||||||||||||||
Total intangibles | $ | 1,067,086 | $ | 137,760 | $ | 1,052,123 | $ | 129,719 | ||||||||||||||||||
Aggregate Amortization Expense | |||||
Year ended December 31, 2005(1) | $ | 16,236 | |||
Year ended December 31, 2004 | $ | 10,780 | |||
Year ended December 31, 2003 | $ | 12,512 |
December 31, | December 31, | |||||||||||||||||||
2008 | 2007 | |||||||||||||||||||
Avg. | Gross | Gross | ||||||||||||||||||
Life | Carrying | Accumulated | Carrying | Accumulated | ||||||||||||||||
(years) | Amount | Amortization | Amount | Amortization | ||||||||||||||||
Amortizable intangible assets Non-compete agreements | 3 | $ | 6,281 | $ | 5,957 | $ | 7,017 | $ | 5,845 | |||||||||||
Customer relationships | 2 | 62,110 | 60,950 | 61,073 | 49,748 | |||||||||||||||
Other intangibles | 3 | 3,264 | 3,044 | 3,264 | 1,830 | |||||||||||||||
Total | 71,655 | 69,951 | 71,354 | 57,423 | ||||||||||||||||
Intangible assets not subject to amortization | ||||||||||||||||||||
Goodwill | 1,364,401 | 99,152 | 1,354,315 | 99,152 | ||||||||||||||||
Total intangibles | $ | 1,436,056 | $ | 169,103 | $ | 1,425,669 | $ | 156,575 | ||||||||||||
Aggregate Amortization Expense | ||||
Year ended December 31, 2008 | $ | 12,589 | ||
Year ended December 31, 2007 | $ | 15,734 | ||
Year ended December 31, 2006 | $ | 5,573 |
56
Estimated | ||||
Amortization Expense | ||||
(In thousands) | ||||
2006 | $ | 3,167 | ||
2007 | 191 | |||
2008 | 8 | |||
2009 | — | |||
Total | $ | 3,366 | ||
Estimated | ||||||||
Amortization Expense | ||||||||
(In thousands) | ||||||||
2009 | $ | 1,322 | ||||||
2010 | 348 | |||||||
2011 | 34 | |||||||
2012 | — | |||||||
2013 | — | |||||||
Total | $ | 1,704 | ||||||
2005 | 2004 | |||||||||
(In thousands) | ||||||||||
Balance as of January 1, | $ | 913,415 | $ | 788,059 | ||||||
Additions from acquisitions | 25,947 | 112,209 | ||||||||
Goodwill impairment(1) | (8,198 | ) | — | |||||||
Post purchase price allocation adjustments | (5,204 | ) | 13,147 | |||||||
Balance as of December 31, | $ | 925,960 | $ | 913,415 | ||||||
2008 | 2007 | |||||||
(In thousands) | ||||||||
Balance as of January 1, | $ | 1,255,163 | $ | 1,253,715 | ||||
Additions from acquisitions | 9,692 | 13,310 | ||||||
Write-down of goodwill related to stores sold | (4,048 | ) | — | |||||
Post purchase price allocation adjustments | 4,442 | (11,862 | ) | |||||
Balance as of December 31, | $ | 1,265,249 | $ | 1,255,163 | ||||
57
58
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(Dollar amounts in thousands) | ||||||||||||
Number of stores acquired remaining open | 5 | 12 | 646 | |||||||||
Number of stores acquired that were merged with existing stores | 38 | 36 | 164 | |||||||||
Number of transactions | 20 | 19 | 37 | |||||||||
Total purchase price | $ | 15,700 | $ | 20,112 | $ | 657,378 | ||||||
Amounts allocated to: | ||||||||||||
Goodwill | $ | 9,692 | $ | 13,310 | $ | 331,286 | ||||||
Non-compete agreements | 2 | 10 | 369 | |||||||||
Customer relationships | 1,091 | 1,210 | 26,433 | |||||||||
Other intangible assets | — | — | 3,264 | |||||||||
Property and other assets | 25 | 38 | 57,175 | |||||||||
Rental merchandise | 4,890 | 5,544 | 213,010 | |||||||||
Deferred income taxes | — | — | 106,022 | |||||||||
Liabilities assumed | — | — | (46,164 | ) | ||||||||
Restructuring accruals | — | — | (34,017 | ) |
Year Ended December 31, | |||||||||||||
2005 | 2004 | 2003 | |||||||||||
(Dollar amounts in thousands) | |||||||||||||
Number of stores acquired remaining open | 44 | 191 | 160 | ||||||||||
Number of stores acquired that were merged with existing stores | 39 | 111 | 220 | ||||||||||
Number of transactions | 38 | 48 | 39 | ||||||||||
Total purchase price | $ | 38,321 | $ | 195,196 | (1) | $ | 126,119 | ||||||
Amounts allocated to: | |||||||||||||
Goodwill | $ | 25,947 | $ | 112,209 | $ | 48,445 | |||||||
Non-compete agreements | 33 | 389 | 4,515 | ||||||||||
Customer relationships | 2,282 | 9,991 | 9,938 | ||||||||||
Property assets | 751 | 4,203 | 4,166 | ||||||||||
Rental merchandise | 9,233 | 68,317 | 58,942 | ||||||||||
Other assets | 75 | 87 | 113 |
Balance at December 31, 2006 | $ | 34,017 | ||
Adjustment to accrual | (1,863 | ) | ||
Cash activity | (23,937 | ) | ||
Balance at December 31, 2007 | 8,217 | |||
Adjustment to accrual | 286 | |||
Cash activity(1) | (6,673 | ) | ||
Balance at December 31, 2008 | $ | 1,830 | ||
(1) | Primarily related to lease terminations. |
58
59
Fair Values | ||||
�� | ||||
(In thousands) | ||||
Inventory | $ | 50,100 | ||
Property assets | 4,300 | |||
Customer relationships | 7,900 | |||
Non-compete agreement | 4,300 | |||
Goodwill | 33,800 | |||
Total assets acquired | $ | 100,400 | ||
Fair Values | ||||
(In thousands) | ||||
Rental merchandise | $ | 18,644 | ||
Property assets | 1,262 | |||
Customer relationships | 3,180 | |||
Non-compete agreements | 242 | |||
Goodwill | 36,568 | |||
Total assets acquired | $ | 59,896 | ||
Fair Values | ||||
(In thousands) | ||||
Rental merchandise | $ | 41,337 | ||
Property assets | 2,864 | |||
Customer relationships | 4,553 | |||
Non-compete agreements | 100 | |||
Goodwill | 60,192 | |||
Total assets acquired | $ | 109,046 | ||
60
Note F — | Restructuring |
Expense Recognized | Estimated Remaining | ||||||||||||
Closing Plan Estimate | During 2005 | Charges for 2006 | |||||||||||
(In thousands) | |||||||||||||
Lease obligations | $ 8,661 - $13,047 | $ | 9,261 | $ | 0 - $3,786 | ||||||||
Fixed asset disposals | 2,630 - 4,211 | 3,333 | 0 - 878 | ||||||||||
Net proceeds from stores sold | — | (2,250 | ) | — | |||||||||
Other costs(1) | 830 - 7,875 | 4,822 | 0 - 3,053 | ||||||||||
Total | $12,121 - $25,133 | $ | 15,166 | $ | 0 - $7,717 | ||||||||
Estimated Remaining | ||||||||||||
Closing Plan Estimate | Charges | |||||||||||
As of December 31, | Expenses Recognized | As of December 31, | ||||||||||
2007 | Through 2008 | 2008 | ||||||||||
(In thousands) | ||||||||||||
Lease obligations | $ | 26,061 - $29,223 | $ | 25,680 | $ | 381 - $3,543 | ||||||
Fixed asset disposals | 11,006 - 11,516 | 11,476 | 0 - 40 | |||||||||
Other costs | 2,468 - 6,704 | 6,054 | 0 - 650 | |||||||||
Total | $ | 39,535 - $47,443 | $ | 43,210 | $ | 381 - $4,233 | ||||||
Cash (Payments) | |||||||||||||||||
September 30, | Charges to | Receipts or Asset | December 31, | ||||||||||||||
2005 Balance | Expense | Write-Offs | 2005 Balance | ||||||||||||||
(In thousands) | |||||||||||||||||
Lease obligations | $ | 5,341 | $ | 2,759 | $ | (2,736 | ) | $ | 5,364 | ||||||||
Fixed asset disposals | — | 1,544 | (1,544 | ) | — | ||||||||||||
Net proceeds from stores sold | — | (2,250 | ) | 2,250 | |||||||||||||
Other costs(1) | 658 | 86 | (653 | ) | 91 | ||||||||||||
Total | $ | 5,999 | $ | 2,139 | $ | (2,683 | ) | $ | 5,455 | ||||||||
Balance at | Cash (Payments) | Balance at | ||||||||||||||
December 31, | Charges to | Receipts or | December 31, | |||||||||||||
2007 | Expense | Asset Write-Offs | 2008 | |||||||||||||
(In thousands) | ||||||||||||||||
Lease obligations | $ | 23,152 | $ | 441 | $ | (16,236 | ) | $ | 7,357 | |||||||
Fixed asset disposals | — | 470 | (470 | ) | — | |||||||||||
Other costs | — | 3,586 | (3,586 | ) | — | |||||||||||
Total | $ | 23,152 | $ | 4,497 | $ | (20,292 | ) | $ | 7,357 | |||||||
59
61
Note G — | Senior Debt |
62
2005 | 2004 | ||||||||||||||||||||||||||||
Facility | Maximum | Amount | Amount | Maximum | Amount | Amount | |||||||||||||||||||||||
Maturity | Facility | Outstanding | Available | Facility | Outstanding | Available | |||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||
Senior Credit Facility: | |||||||||||||||||||||||||||||
Term Loan “B” | 2010 | $ | 350,000 | $ | 344,750 | $ | — | $ | 350,000 | $ | 348,250 | $ | — | ||||||||||||||||
Revolver(1) | 2009 | 250,000 | 75,000 | 67,534 | 250,000 | 60,000 | 84,435 | ||||||||||||||||||||||
600,000 | 419,750 | 67,534 | 600,000 | 408,250 | 84,435 | ||||||||||||||||||||||||
Other Indebtedness: | |||||||||||||||||||||||||||||
Line of credit | 10,000 | 4,300 | 5,700 | 10,000 | — | 10,000 | |||||||||||||||||||||||
Total Debt Facilities | $ | 610,000 | $ | 424,050 | $ | 73,234 | $ | 610,000 | $ | 408,250 | $ | 94,435 | |||||||||||||||||
2008 | 2007 | |||||||||||||||||||||||||||
Facility | Maximum | Amount | Amount | Maximum | Amount | Amount | ||||||||||||||||||||||
Maturity | Facility | Outstanding | Available | Facility | Outstanding | Available | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Senior Credit Facilities: | ||||||||||||||||||||||||||||
Tranche A Term Loans | 2011 | $ | 197,500 | $ | 175,000 | $ | — | $ | 197,500 | $ | 185,000 | $ | — | |||||||||||||||
Tranche B Term Loans | 2012 | 725,000 | 534,147 | — | 725,000 | 665,915 | — | |||||||||||||||||||||
Revolving Facility(1) | 2011 | 400,000 | — | 269,415 | 400,000 | 108,000 | 159,854 | |||||||||||||||||||||
1,322,500 | 709,147 | 269,415 | 1,322,500 | 958,915 | 159,854 | |||||||||||||||||||||||
Other Indebtedness: | ||||||||||||||||||||||||||||
Line of credit | 20,000 | 12,565 | 7,435 | 20,000 | 420 | 19,580 | ||||||||||||||||||||||
Total | $ | 1,342,500 | $ | 721,712 | $ | 276,850 | $ | 1,342,500 | $ | 959,335 | $ | 179,434 | ||||||||||||||||
(1) | At December 31, |
60
• | incur additional debt | |
• | repurchase | |
• | incur liens or other encumbrances; | |
• | merge, consolidate or sell substantially all | |
• | sell assets, other than inventory, in the ordinary course of business; | |
• | make investments or acquisitions unless |
63
• | make capital expenditures; or | |
• | enter into an unrelated line of business. |
Required Ratio | Actual Ratio | |||||||||||
Maximum consolidated leverage ratio | No greater than | |||||||||||
Minimum fixed charge coverage ratio | No less than |
61
Year Ending December 31, | ||||
(In thousands) | ||||
2006 | $ | 3,500 | ||
2007 | 3,500 | |||
2008 | 3,500 | |||
2009 | 168,000 | |||
2010 | 166,250 | |||
Thereafter | — | |||
$ | 344,750 | |||
Year Ending December 31, | ||||
(In thousands) | ||||
2009 | $ | 34,321 | ||
2010 | 91,756 | |||
2011 | 274,728 | |||
2012 | 320,907 | |||
$ | 721,712 | |||
Note H — | Subordinated Notes Payable |
64
• | incur additional debt; | |
• | sell assets or | |
• | grant liens to third parties; | |
• | pay cash dividends or repurchase stock (subject to a restricted payments basket for which | |
• | engage in a merger or sell substantially all of |
62
December 31, | ||||||||
2005 | 2004 | |||||||
(In thousands) | ||||||||
Taxes other than income | $ | 27,967 | $ | 27,190 | ||||
Accrued insurance costs | 97,326 | 87,647 | ||||||
Accrued compensation | 28,882 | 23,653 | ||||||
Accrued restructuring costs | 5,455 | — | ||||||
Accrued interest payable | 5,224 | 4,605 | ||||||
Accrued litigation costs | 4,476 | 48,975 | ||||||
Accrued other | 22,501 | 15,765 | ||||||
$ | 191,831 | $ | 207,835 | |||||
65
Year Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Tax at statutory rate | 35.0 | % | 35.0% | 35.0% | ||||||||
State income taxes, net of federal benefit (expense) | (0.3 | )%(1) | 2.5% | 2.3% | ||||||||
Effect of foreign operations, net of foreign tax credits | 0.1 | % | 0.1% | 0.1% | ||||||||
Other, net | 0.3 | % | 0.4% | 0.2% | ||||||||
Total | 35.1 | % | 38.0% | 37.6% | ||||||||
66
Note I — | Accrued Liabilities |
December 31, | ||||||||
2008 | 2007 | |||||||
(In thousands) | ||||||||
Accrued insurance costs | $ | 126,006 | $ | 117,708 | ||||
Accrued litigation costs | 11,274 | 21,915 | ||||||
Accrued compensation | 44,734 | 38,975 | ||||||
Deferred revenue | 29,394 | 33,915 | ||||||
Taxes other than income | 20,379 | 28,418 | ||||||
Accrued store close plan related to Rent-Way | 1,830 | 4,125 | ||||||
Accrued capital lease obligations | 8,214 | 13,435 | ||||||
Accrued interest payable | 4,340 | 10,760 | ||||||
Accrued restructuring costs | 7,357 | 23,152 | ||||||
Accrued other | 36,173 | 18,017 | ||||||
$ | 289,701 | $ | 310,420 | |||||
Note J — | Income Taxes |
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Tax at statutory rate | 35.0 | % | 35.0 | % | 35.0 | % | ||||||
State income taxes, net of federal benefit (expense) | 2.0 | % | (1.7 | )% | 1.2 | % | ||||||
Effect of foreign operations, net of foreign tax credits | — | 0.5 | % | (0.1 | )% | |||||||
Other, net | (0.1 | )% | 0.6 | % | 1.0 | % | ||||||
Total | 36.9 | % | 34.4 | % | 37.1 | % | ||||||
Year Ended December 31, | ||||||||||||||
2005 | 2004 | 2003 | ||||||||||||
(In thousands) | ||||||||||||||
Current expense | ||||||||||||||
Federal | $ | 108,667 | $ | 60,996 | $ | 53,615 | ||||||||
State | 5,073 | 1,844 | 9,382 | |||||||||||
Foreign | 1,417 | 2,571 | 2,232 | |||||||||||
Total current | 115,157 | 65,411 | 65,229 | |||||||||||
Deferred expense | ||||||||||||||
Federal | (35,728 | ) | 22,307 | 43,349 | ||||||||||
State | (6,099 | ) | 7,806 | 756 | ||||||||||
Total deferred | (41,827 | ) | 30,113 | 44,105 | ||||||||||
Total | $ | 73,330 | $ | 95,524 | $ | 109,334 | ||||||||
December 31, | |||||||||
2005 | 2004 | ||||||||
(In thousands) | |||||||||
Deferred tax assets | |||||||||
State net operating loss carryforwards | $ | 2,101 | $ | 2,101 | |||||
Accrued expenses | 8,058 | 12,968 | |||||||
Property assets | 14,693 | 15,479 | |||||||
Foreign tax credit carryforwards | 827 | 1,501 | |||||||
25,679 | 32,049 | ||||||||
Valuation allowance | (827 | ) | (1,501 | ) | |||||
Deferred tax liabilities | |||||||||
Rental merchandise | (130,019 | ) | (191,960 | ) | |||||
Intangible assets | (16,037 | ) | (1,619 | ) | |||||
(146,056 | ) | (193,579 | ) | ||||||
Net deferred taxes | $ | (121,204 | ) | $ | (163,031 | ) | |||
Year Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(In thousands) | ||||||||||||
Current expense | ||||||||||||
Federal | $ | 399 | $ | 6,179 | $ | 63,808 | ||||||
State | 2,574 | 14,437 | 1,024 | |||||||||
Foreign | 1,192 | 1,145 | 752 | |||||||||
Total current | 4,165 | 21,761 | 65,584 | |||||||||
Deferred expense | ||||||||||||
Federal | 73,015 | 35,808 | (8,455 | ) | ||||||||
State | 4,538 | (17,551 | ) | 3,917 | ||||||||
Total deferred | 77,553 | 18,257 | (4,538 | ) | ||||||||
Total | $ | 81,718 | $ | 40,018 | $ | 61,046 | ||||||
63
67
Year Ended December 31, | ||||||||
2008 | 2007 | |||||||
(In thousands) | ||||||||
Deferred tax assets | ||||||||
Federal net operating loss carryforwards | $ | 47,656 | $ | 57,124 | ||||
State net operating loss carryforwards | 30,225 | 26,353 | ||||||
Accrued liabilities | 39,240 | 43,743 | ||||||
Property assets | 20,462 | 24,211 | ||||||
Other assets including credits | 1,174 | 14,448 | ||||||
Foreign tax credit carryforwards | 2,325 | 395 | ||||||
141,082 | 166,274 | |||||||
Valuation allowance | (10,232 | ) | (9,320 | ) | ||||
Deferred tax liabilities | ||||||||
Rental merchandise | (188,152 | ) | (166,008 | ) | ||||
Intangible assets | (29,914 | ) | (624 | ) | ||||
(218,066 | ) | (166,632 | ) | |||||
Net deferred taxes | $ | (87,216 | ) | $ | (9,678 | ) | ||
64
(In thousands) | ||||
Balance at January 1, 2007 | $ | 7,064 | ||
Additions based on tax positions related to current year | — | |||
Additions for tax positions of prior years | 784 | |||
Reductions for tax positions of prior years | (217 | ) | ||
Settlements | — | |||
Balance at January 1, 2008 | 7,631 | |||
Additions based on tax positions related to current year | — | |||
Additions for tax positions of prior years | 701 | |||
Reductions for tax positions of prior years | (817 | ) | ||
Settlements | (5,458 | ) | ||
Balance at December 31, 2008 | $ | 2,057 | ||
Note K — | Commitments and Contingencies |
Year Ending December 31, | ||||
(In thousands) | ||||
2006 | $ | 149,976 | ||
2007 | 123,725 | |||
2008 | 96,790 | |||
2009 | 64,299 | |||
2010 | 28,935 | |||
Thereafter | 2,710 | |||
$ | 466,435 | |||
Year Ending December 31, | Operating Leases | Capital Leases | ||||||
(In thousands) | (In thousands) | |||||||
2009 | $ | 172,947 | $ | 5,039 | ||||
2010 | 134,168 | 3,067 | ||||||
2011 | 93,332 | 1,112 | ||||||
2012 | 59,484 | 302 | ||||||
2013 | 27,380 | — | ||||||
Thereafter | 5,890 | — | ||||||
493,201 | 9,520 | |||||||
Less amount representing interest obligations under capital lease | — | (1,306 | ) | |||||
$ | 493,201 | $ | 8,214 | |||||
65
Year Ended December 31, | ||||||||
2008 | 2007 | |||||||
(In thousands) | ||||||||
Equipment under capital lease | $ | 25,261 | $ | 32,386 | ||||
Less accumulated amortization | (17,074 | ) | (18,900 | ) | ||||
Equipment under capital lease, net | $ | 8,187 | $ | 13,486 | ||||
Year Ended December 31, | ||||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
Shafer/Johnson Matter | $ | 1.8 | $ | 11.0 | ||||
California Attorney General Settlement | 9.4 | 9.6 | ||||||
Other Litigation | 0.1 | 1.1 | ||||||
Legal Fees and Expenses | — | 0.2 | ||||||
Total Accrual | $ | 11.3 | $ | 21.9 | ||||
68
69
66
70
71
72
Note L — | Stock-Based Compensation |
67
Weighted | Weighted | |||||||||||||||
Average | Average | Aggregate | ||||||||||||||
Equity Awards | Exercise | Remaining | Intrinsic | |||||||||||||
Outstanding | Price | Contractual Life | Value | |||||||||||||
(In thousands) | ||||||||||||||||
Balance outstanding at January 1, 2008 | 4,883,871 | $ | 21.49 | 6.56 years | $ | 5,024 | ||||||||||
Granted | 756,995 | 15.03 | ||||||||||||||
Exercised | (229,605 | ) | 13.82 | $ | 1,659 | |||||||||||
Forfeited | (597,539 | ) | 23.97 | |||||||||||||
Balance outstanding at December 31, 2008 | 4,813,722 | $ | 20.73 | 6.01 years | $ | 9,204 | ||||||||||
Exercisable at December 31, 2008 | 3,252,534 | $ | 20.02 | 4.81 years | $ | 8,095 |
At December 31, | ||||||||||||||||||||||||
2005 | 2004 | 2003 | ||||||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||
Exercise | Exercise | Exercise | ||||||||||||||||||||||
Shares | Price | Shares | Price | Shares | Price | |||||||||||||||||||
Outstanding at beginning of year | 5,231,538 | $ | 17.62 | 6,206,897 | $ | 15.78 | 8,627,690 | $ | 14.13 | |||||||||||||||
Granted | 1,001,000 | 23.80 | 838,500 | 29.30 | 1,335,438 | 23.31 | ||||||||||||||||||
Exercised | (690,608 | ) | 13.78 | (1,144,295 | ) | 14.51 | (2,302,494 | ) | 12.94 | |||||||||||||||
Forfeited | (522,953 | ) | 24.13 | (669,564 | ) | 20.55 | (1,453,737 | ) | 17.37 | |||||||||||||||
Outstanding at end of year | 5,018,977 | $ | 18.70 | 5,231,538 | $ | 17.62 | 6,206,897 | $ | 15.78 | |||||||||||||||
Options exercisable at end of year | 3,406,505 | $ | 16.16 | 2,612,207 | $ | 13.98 | 1,922,152 | $ | 11.88 | |||||||||||||||
Options Outstanding | ||||||||||||
Weighted Average | ||||||||||||
Number | Remaining | Weighted Average | ||||||||||
Range of Exercise Prices | Outstanding | Contractual Life | Exercise Price | |||||||||
$2.68 to $7.40 | 75,103 | 2.35 years | $ | 6.39 | ||||||||
$7.41 to $11.40 | 1,461,292 | 5.22 years | $ | 10.05 | ||||||||
$11.41 to $13.55 | 475,730 | 5.05 years | $ | 13.19 | ||||||||
$13.56 to $19.62 | 538,033 | 7.48 years | $ | 18.78 | ||||||||
$19.63 to $26.20 | 1,189,393 | 7.23 years | $ | 21.54 | ||||||||
$26.21 to $32.76 | 1,178,490 | 8.44 years | $ | 28.29 | ||||||||
$32.77 to $33.34 | 100,936 | 8.25 years | $ | 33.34 | ||||||||
5,018,977 | ||||||||||||
Employee options: | ||
Risk free interest rate (1.62% to 3.17%) | Weighted average 2.43% | |
Expected dividend yield | — | |
Expected life | 4.20 years | |
Expected volatility (33.85% to 53.58%) | Weighted average 42.08% | |
Employee stock options granted | 732,995 | |
Weighted average grant date fair value | $4.66 | |
Non-employee director options: | ||
Risk free interest rate | 3.54% | |
Expected dividend yield | — | |
Expected life | 6.90 years | |
Expected volatility | 41.26% | |
Non-employee director stock options granted | 24,000 | |
Weighted average grant date fair value | $7.02 |
68
73
Options Exercisable | ||||||||
Number | Weighted Average | |||||||
Range of Exercise Prices | Exercisable | Exercise Price | ||||||
$2.68 to $7.40 | 75,103 | $ | 6.38 | |||||
$7.41 to $11.40 | 1,461,292 | $ | 10.05 | |||||
$11.41 to $13.55 | 393,223 | $ | 13.12 | |||||
$13.56 to $19.62 | 336,906 | $ | 18.56 | |||||
$19.63 to $26.20 | 605,273 | $ | 21.36 | |||||
$26.21 to $32.76 | 477,522 | $ | 28.57 | |||||
$32.77 to $33.34 | 57,186 | $ | 33.34 | |||||
3,406,505 | ||||||||
Employee options: | ||
Risk free interest rate (4.66% to 4.80%) | Weighted average 4.73% | |
Expected dividend yield | — | |
Expected life | 4.20 years | |
Expected volatility (30.36% to 37.90%) | Weighted average 32.79% | |
Employee stock options granted | 1,581,040 | |
Weighted average grant date fair value | $5.17 | |
Non-employee director options: | ||
Risk free interest rate | 4.66% | |
Expected dividend yield | — | |
Expected life | 7.44 years | |
Expected volatility | 47.32% | |
Non-employee director stock options granted | 34,000 | |
Weighted average grant date fair value | $16.79 |
Employee options: | ||
Risk free interest rate (4.36% to 4.41%) | Weighted average 4.39% | |
Expected dividend yield | — | |
Expected life | 4.20 years | |
Expected volatility (24.14% to 52.55%) | Weighted average 33.12% | |
Employee stock options granted | 985,485 | |
Weighted average grant date fair value | $5.61 | |
Executive option: | ||
Risk free interest rate | 4.73% | |
Expected dividend yield | — | |
Expected life | 6.13 years | |
Expected volatility | 49.98% | |
Executive stock options granted | 70,000 | |
Non-employee director options: | ||
Risk free interest rate | 4.38% | |
Expected dividend yield | — | |
Expected life | 6.00 years | |
Expected volatility | 33.12% | |
Non-employee director stock options granted | 34,000 | |
Weighted average grant date fair value | $9.73 |
69
Note M — | Deferred Compensation Plan |
Note N — | Employee Benefit Plan |
Note O — | Fair Value of Financial Instruments |
74
Note P — | Stock Repurchase Plan |
70
Note Q — | Earnings Per Common Share |
Net Earnings | Shares | Per Share | ||||||||||
(In thousands, except per share data) | ||||||||||||
Year ended December 31, 2005 | ||||||||||||
Basic earnings per common share | $ | 135,738 | 73,018 | $ | 1.86 | |||||||
Effect of dilutive stock options | — | 1,090 | ||||||||||
Diluted earnings per common share | $ | 135,738 | 74,108 | $ | 1.83 | |||||||
Year ended December 31, 2004 | ||||||||||||
Basic earnings per common share | $ | 155,855 | 78,150 | $ | 1.99 | |||||||
Effect of dilutive stock options | — | 2,097 | ||||||||||
Diluted earnings per common share | $ | 155,855 | 80,247 | $ | 1.94 | |||||||
Year ended December 31, 2003 | ||||||||||||
Basic earnings per common share | $ | 181,496 | 84,139 | $ | 2.16 | |||||||
Effect of dilutive stock options | — | 3,069 | ||||||||||
Diluted earnings per common share | $ | 181,496 | 87,208 | $ | 2.08 | |||||||
Weighted Average | ||||||||||||
Net Earnings | Shares | Per Share | ||||||||||
(In thousands, except per share data) | ||||||||||||
Year ended December 31, 2008 | ||||||||||||
Basic earnings per common share | $ | 139,624 | 66,606 | $ | 2.10 | |||||||
Effect of dilutive stock options | — | 585 | ||||||||||
Diluted earnings per common share | $ | 139,624 | 67,191 | $ | 2.08 | |||||||
Year ended December 31, 2007 | ||||||||||||
Basic earnings per common share | $ | 76,268 | 68,706 | $ | 1.11 | |||||||
Effect of dilutive stock options | — | 769 | ||||||||||
Diluted earnings per common share | $ | 76,268 | 69,475 | $ | 1.10 | |||||||
Year ended December 31, 2006 | ||||||||||||
Basic earnings per common share | $ | 103,092 | 69,676 | $ | 1.48 | |||||||
Effect of dilutive stock options | — | 1,057 | ||||||||||
Diluted earnings per common share | $ | 103,092 | 70,733 | $ | 1.46 | |||||||
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Note R — | Unaudited Quarterly Data |
1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Year ended December 31, 2005 | ||||||||||||||||
Revenues | $ | 601,809 | $ | 580,578 | $ | 573,507 | $ | 583,213 | ||||||||
Gross profit | 433,545 | 428,372 | 421,499 | 426,276 | ||||||||||||
Operating profit | 85,992 | 72,988 | 30,980 | (2) | 59,811 | |||||||||||
Net earnings | 47,669 | (1) | 41,742 | 11,277 | 35,050 | (3) | ||||||||||
Basic earnings per common share | $ | 0.64 | $ | 0.56 | $ | 0.15 | $ | 0.50 | ||||||||
Diluted earnings per common share | $ | 0.63 | $ | 0.55 | $ | 0.15 | $ | 0.50 | ||||||||
Year ended December 31, 2004 | ||||||||||||||||
Revenues | $ | 585,380 | $ | 572,985 | $ | 569,607 | $ | 585,283 | ||||||||
Gross profit | 422,417 | 423,831 | 419,282 | 428,608 | ||||||||||||
Operating profit | 92,659 | 90,223 | 24,344 | (4) | 75,725 | |||||||||||
Net earnings | 52,209 | 51,194 | 5,573 | 46,879 | ||||||||||||
Basic earnings per common share | $ | 0.65 | $ | 0.64 | $ | 0.07 | $ | 0.63 | ||||||||
Diluted earnings per common share | $ | 0.63 | $ | 0.62 | $ | 0.07 | $ | 0.61 | ||||||||
Year ended December 31, 2003 | ||||||||||||||||
Revenues | $ | 566,406 | $ | 553,260 | $ | 549,825 | $ | 558,659 | ||||||||
Gross profit | 408,416 | 408,648 | 403,729 | 408,491 | ||||||||||||
Operating profit | 96,291 | 97,238 | 87,502 | 88,991 | ||||||||||||
Net earnings | 50,959 | 35,300 | 43,738 | 51,499 | ||||||||||||
Basic earnings per common share | $ | 0.58 | $ | 0.40 | $ | 0.54 | $ | 0.64 | ||||||||
Diluted earnings per common share | $ | 0.57 | $ | 0.39 | $ | 0.52 | $ | 0.62 |
1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Year ended December 31, 2008 | ||||||||||||||||
Revenues | $ | 756,636 | $ | 719,031 | $ | 708,755 | $ | 699,750 | ||||||||
Gross profit | 533,733 | 517,329 | 510,022 | 507,268 | ||||||||||||
Operating profit | 77,540 | 74,434 | 58,549 | 63,865 | ||||||||||||
Net earnings | 36,358 | 37,741 | 29,379 | 36,146 | ||||||||||||
Basic earnings per common share | $ | 0.55 | $ | 0.57 | $ | 0.44 | $ | 0.54 | ||||||||
Diluted earnings per common share | $ | 0.54 | $ | 0.56 | $ | 0.44 | $ | 0.54 | ||||||||
Year ended December 31, 2007 | ||||||||||||||||
Revenues | $ | 755,299 | $ | 724,158 | $ | 709,701 | $ | 716,963 | ||||||||
Gross profit | 553,168 | 538,491 | 518,523 | 519,420 | ||||||||||||
Operating profit | 46,155 | 87,024 | 60,575 | 10,483 | ||||||||||||
Net earnings(loss) | 15,103 | 41,251 | 25,275 | (5,361 | ) | |||||||||||
Basic earnings(loss) per common share | $ | 0.21 | $ | 0.59 | $ | 0.37 | $ | (0.08 | ) | |||||||
Diluted earnings(loss) per common share | $ | 0.21 | $ | 0.58 | $ | 0.37 | $ | (0.08 | ) | |||||||
Year ended December 31, 2006 | ||||||||||||||||
Revenues | $ | 606,975 | $ | 583,623 | $ | 587,184 | $ | 656,126 | ||||||||
Gross profit | 436,099 | 430,509 | 432,365 | 480,837 | ||||||||||||
Operating profit | 75,484 | 75,193 | 51,871 | 19,396 | ||||||||||||
Net earnings(loss) | 40,328 | 39,843 | 25,241 | (2,320 | ) | |||||||||||
Basic earnings(loss) per common share | $ | 0.58 | $ | 0.57 | $ | 0.36 | $ | (0.03 | ) | |||||||
Diluted earnings(loss) per common share | $ | 0.57 | $ | 0.56 | $ | 0.36 | $ | (0.03 | ) |
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Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. |
Item 9A. | Controls and Procedures. |
Item |
Item | Directors, Executive |
Item 11. | Executive Compensation.(*) |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.(*) |
Item 13. | Certain Relationships and Related |
Item 14. | Principal Accountant Fees and Services.(*) |
* | The information required by Items 10, 11, 12, 13 and 14 is or will be set forth in the definitive proxy statement relating to the |
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Item 15. | Exhibits and Financial Statement Schedules. |
74
78
By: | /s/Robert D. Davis |
Signature | Title | Date | ||||
/s/ Mark E. Speese Mark E. Speese | Chairman of the Board and Chief Executive Officer (Principal Executive Officer) | February 27, 2009 | ||||
/s/ Mitchell E. Fadel Mitchell E. Fadel | President, Chief Operating Officer and Director | February 27, 2009 | ||||
/s/ Robert D. Davis Robert D. Davis | Executive Vice President — Finance, Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer) | February 27, 2009 | ||||
/s/ Michael J. Gade Michael J. Gade | Director | February 27, 2009 | ||||
/s/ Jeffery M. Jackson Jeffery M. Jackson | Director | February 27, 2009 | ||||
/s/ Kerney Laday Kerney Laday | Director | February 27, 2009 | ||||
/s/ J. V. Lentell J. V. Lentell | Director | February 27, 2009 | ||||
/s/ Leonard H. Roberts Leonard H. Roberts | Director | February 27, 2009 | ||||
/s/ Paula Stern Paula Stern | Director | February 27, 2009 |
75
Exhibit No. | Description | |||
3 | .1 | Certificate of Incorporation of Rent-A-Center, Inc., as amended (Incorporated herein by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K dated as of December 31, 2002.) | ||
3 | .2 | Certificate of Amendment to the Certificate of Incorporation of Rent-A-Center, Inc., dated May 19, 2004 (Incorporated herein by reference to Exhibit 3.2 to the registrant’s Quarterly Report onForm 10-Q for the quarter ended June 30, 2004.) | ||
3 | .3 | Amended and Restated Bylaws of Rent-A-Center, Inc. (Incorporated herein by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K dated as of December 11, 2008.) | ||
4 | .1 | Form of Certificate evidencing Common Stock (Incorporated herein by reference to Exhibit 4.1 to the registrant’s Registration Statement on Form S-4/A filed on January 13, 1999.) | ||
4 | .2 | Indenture, dated as of May 6, 2003, by and among Rent-A-Center, Inc., as Issuer, Rent-A-Center East, Inc., ColorTyme, Inc., Rent-A-Center West, Inc., Get It Now, LLC, Rent-A-Center Texas, L.P. and Rent-A-Center Texas, L.L.C., as Guarantors, and The Bank of New York, as Trustee (Incorporated herein by reference to Exhibit 4.9 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003.) | ||
4 | .3 | First Supplemental Indenture, dated as of December 4, 2003, between Rent-A-Center, Inc., as Issuer, the Guarantors named therein, as Guarantors, and The Bank of New York, as Trustee (Incorporated herein by reference to Exhibit 4.6 to the registrant’s Annual Report on Form 10-K/A for the year ended December 31, 2003.) | ||
4 | .4 | Second Supplemental Indenture, dated as of April 26, 2004, between Rent-A-Center, Inc., as Issuer, the Guarantors named therein, as Guarantors, and The Bank of New York, as Trustee (Incorporated herein by reference to Exhibit 4.7 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.) | ||
4 | .5 | Third Supplemental Indenture, dated as of May 7, 2004, between Rent-A-Center, Inc., as Issuer, the Guarantors named therein, as Guarantors, and The Bank of New York, as Trustee (Incorporated herein by reference to Exhibit 4.8 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004.) | ||
4 | .6 | Fourth Supplemental Indenture, dated as of May 14, 2004, between Rent-A-Center, Inc., as Issuer, the Guarantors named therein, as Guarantors, and The Bank of New York, as Trustee (Incorporated herein by reference to Exhibit 4.9 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004.) | ||
4 | .7 | Fifth Supplemental Indenture, dated as of June 30, 2005, between Rent-A-Center, Inc., as Issuer, the Guarantors named therein, as Guarantors, and The Bank of New York, as Trustee (Incorporated herein by reference to Exhibit 4.10 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.) | ||
4 | .8 | Sixth Supplemental Indenture, dated as of April 17, 2006, between Rent-A-Center, Inc., as Issuer, the Guarantors named therein, as Guarantors, and The Bank of New York, as Trustee (Incorporated herein by reference to Exhibit 4.10 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.) | ||
4 | .9 | Seventh Supplemental Indenture, dated as of October 17, 2006, between Rent-A-Center, Inc., as Issuer, the Guarantors named therein, as Guarantors, and The Bank of New York, as Trustee (Incorporated herein by reference to Exhibit 4.11 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.) | ||
4 | .10 | Eighth Supplemental Indenture, dated as of November 15, 2006, between Rent-A-Center, Inc., as Issuer, the Guarantors named therein, as Guarantors, and The Bank of New York, as Trustee (Incorporated herein by reference to Exhibit 4.12 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2006.) | ||
10 | .1† | Amended and Restated Rent-A-Center, Inc. Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.) |
76
Exhibit No. | Description | |||
10 | .2 | Amended and Restated Guarantee and Collateral Agreement, dated as of May 28, 2003, as amended and restated as of July 14, 2004, made by Rent-A-Center, Inc. and certain of its Subsidiaries in favor of JPMorgan Chase Bank, as Administrative Agent (Incorporated herein by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K dated July 15, 2004.) | ||
10 | .3 | Franchisee Financing Agreement, dated April 30, 2002, but effective as of June 28, 2002, by and between Texas Capital Bank, National Association, ColorTyme, Inc. and Rent-A-Center, Inc. (Incorporated herein by reference to Exhibit 10.14 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.) | ||
10 | .4 | Supplemental Letter Agreement to Franchisee Financing Agreement, dated May 26, 2003, by and between Texas Capital Bank, National Association, ColorTyme, Inc. and Rent-A-Center, Inc. (Incorporated herein by reference to Exhibit 10.23 to the registrant’s Registration Statement on Form S-4 filed July 11, 2003.) | ||
10 | .5 | First Amendment to Franchisee Financing Agreement, dated August 30, 2005, by and among Texas Capital Bank, National Association, ColorTyme, Inc. and Rent-A-Center East, Inc. (Incorporated herein by reference to Exhibit 10.7 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005.) | ||
10 | .6 | Amended and Restated Franchise Financing Agreement, dated October 1, 2003, by and among Wells Fargo Foothill, Inc., ColorTyme, Inc. and Rent-A-Center East, Inc. (Incorporated herein by reference to Exhibit 10.22 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.) | ||
10 | .7 | First Amendment to Amended and Restated Franchisee Financing Agreement, dated December 15, 2003, by and among Wells Fargo Foothill, Inc., ColorTyme, Inc. and Rent-A-Center East, Inc. (Incorporated herein by reference to Exhibit 10.23 to the registrant’s Annual Report on Form 10-K/A for the year ended December 31, 2003.) | ||
10 | .8 | Second Amendment to Amended and Restated Franchisee Financing Agreement, dated as of March 1, 2004, by and among Wells Fargo Foothill, Inc., ColorTyme, Inc. and Rent-A-Center East, Inc. (Incorporated herein by reference to Exhibit 10.24 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.) | ||
10 | .9 | Third Amendment to Amended and Restated Franchisee Financing Agreement, dated as of September 29, 2006, by and among Wells Fargo Foothill, Inc., ColorTyme, Inc. and Rent-A-Center East, Inc. (Incorporated herein by reference to Exhibit 10.10 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.) | ||
10 | .10 | Fourth Amendment to Amended and Restated Franchisee Financing Agreement, dated as of December 19, 2006, by and among Wells Fargo Foothill, Inc., ColorTyme, Inc. and Rent-A-Center East, Inc. (Incorporated herein by reference to Exhibit 10.10 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2006.) | ||
10 | .11† | Form of Stock Option Agreement issuable to Directors pursuant to the Amended and Restated Rent-A-Center, Inc. Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.20 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2004.) | ||
10 | .12† | Form of Stock Option Agreement issuable to management pursuant to the Amended and Restated Rent-A-Center, Inc. Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.21 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2004.) | ||
10 | .13†* | Summary of Director Compensation | ||
10 | .14† | Form of Stock Compensation Agreement issuable to management pursuant to the Amended and Restated Rent-A-Center, Inc. Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.15 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006.) | ||
10 | .15† | Form of Long-Term Incentive Cash Award issuable to management pursuant to the Amended and Restated Rent-A-Center, Inc. Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.16 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006.) |
77
Exhibit No. | Description | |||
10 | .16† | Form of Loyalty and Confidentiality Agreement entered into with management (Incorporated herein by reference to Exhibit 10.17 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006.) | ||
10 | .17† | Rent-A-Center, Inc. 2006 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.17 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.) | ||
10 | .18† | Form of Stock Option Agreement issuable to management pursuant to the Rent-A-Center, Inc. 2006 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.18 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.) | ||
10 | .19† | Form of Stock Compensation Agreement issuable to management pursuant to the Rent-A-Center, Inc. 2006 Equity Incentive Plan (Incorporated herein by reference to Exhibit 10.19 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2006.) | ||
10 | .20† | Form of Long-Term Incentive Cash Award issuable to management pursuant to the Rent-A-Center, Inc. 2006 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.20 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2006.) | ||
10 | .21† | Rent-A-Center, Inc. 2006 Equity Incentive Plan and Amendment (Incorporated herein by reference to Exhibit 4.5 to the registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on January 4, 2007) | ||
10 | .22† | Form of Stock Option Agreement issuable to management pursuant to the Rent-A-Center, Inc. 2006 Equity Incentive Plan (Incorporated herein by reference to Exhibit 10.22 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2006.) | ||
10 | .23† | Form of Stock Compensation Agreement issuable to management pursuant to the Rent-A-Center, Inc. 2006 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.23 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2006.) | ||
10 | .24† | Form of Stock Option Agreement issuable to Directors pursuant to the Rent-A-Center, Inc. 2006 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.24 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2006.) | ||
10 | .25†* | Form of Deferred Stock Unit Award Agreement issuable to Directors pursuant to the Rent-A-Center, Inc. 2006 Long-Term Incentive Plan | ||
10 | .26† | Form of Executive Transition Agreement entered into with management (Incorporated herein by reference to Exhibit 10.21 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.) | ||
10 | .27† | Employment Agreement, dated October 2, 2006, between Rent-A-Center, Inc. and Mark E. Speese (Incorporated herein by reference to Exhibit 10.22 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.) | ||
10 | .28† | Non-Qualified Stock Option Agreement, dated October 2, 2006, between Rent-A-Center, Inc. and Mark E. Speese (Incorporated herein by reference to Exhibit 10.23 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.) | ||
10 | .29† | Rent-A-Center, Inc. Non-Qualified Deferred Compensation Plan (Incorporated herein by reference to Exhibit 10.28 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007.) | ||
10 | .30†* | Rent-A-Center, Inc. 401-K Plan | ||
10 | .31 | Third Amended and Restated Credit Agreement, dated as of November 15, 2006, among Rent-A-Center, Inc., the several banks and other financial institutions or entities from time to time parties thereto, Union Bank of California, N.A., as documentation agent, Lehman Commercial Paper Inc., as syndication agent, and JPMorgan Chase Bank, N.A., as administrative agent (Incorporated herein by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K dated November 15, 2006.) | ||
21 | .1* | Subsidiaries of Rent-A-Center, Inc. | ||
23 | .1* | Consent of Grant Thornton LLP |
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Exhibit No. | Description | |||||||
31 | .1* | Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 implementing Section 302 of the Sarbanes-Oxley Act of 2002 by Mark E. Speese | ||||||
.2* | ||||||||
32 | .1* | Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Mark E. Speese | ||||||
32 | .2* | Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Robert D. Davis | ||||||
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Exhibit No. | Description | |||
2 | .1 | Agreement and Plan of Merger, dated as of April 27, 2004, by and between Rent-A-Center, Inc., RAC RR, Inc. and Rent Rite, Inc. d/b/a Rent Rite Rental Purchase (Pursuant to the rules of the SEC, the schedules and exhibits have been omitted. Upon the request of the SEC, Rent-A-Center, Inc. will supplementally supply such schedules and exhibits to the SEC.) (Incorporated herein by reference to Exhibit 2.8 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.) | ||
3 | .1 | Certificate of Incorporation of Rent-A-Center, Inc., as amended (Incorporated herein by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K dated as of December 31, 2002.) | ||
3 | .2 | Certificate of Amendment to the Certificate of Incorporation of Rent-A-Center, Inc., dated May 19, 2004 (Incorporated herein by reference to Exhibit 3.2 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004.) | ||
3 | .3 | Amended and Restated Bylaws of Rent-A-Center, Inc. (Incorporated herein by reference to Exhibit 3.(ii) to the registrant’s Current Report on Form 8-K dated as of September 20, 2005.) | ||
4 | .1 | Form of Certificate evidencing Common Stock (Incorporated herein by reference to Exhibit 4.1 to the registrant’s Registration Statement on Form S-4/ A filed on January 13, 1999.) | ||
4 | .2 | Certificate of Elimination of Series A Preferred Stock (Incorporated herein by reference to Exhibit 4.2 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.) | ||
4 | .3 | Certificate of Designations, Preferences and relative Rights and Limitations of Series C Preferred Stock of Rent-A-Center, Inc. (Incorporated herein by reference to Exhibit 4.4 to the registrant’s Registration Statement on Form S-4 filed July 11, 2003.) | ||
4 | .4 | Certificate of Elimination of Series C Preferred Stock (Incorporated herein by reference to Exhibit 3.(i) to the registrant’s Current Report on Form 8-K dated as of September 20, 2005.) | ||
4 | .5 | Indenture, dated as of May 6, 2003, by and among Rent-A-Center, Inc., as Issuer, Rent-A-Center East, Inc., ColorTyme, Inc., Rent-A-Center West, Inc., Get It Now, LLC, Rent-A-Center Texas, L.P. and Rent-A-Center Texas, L.L.C., as Guarantors, and The Bank of New York, as Trustee (Incorporated herein by reference to Exhibit 4.9 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003.) | ||
4 | .6 | First Supplemental Indenture, dated as of December 4, 2003, between Rent-A-Center, Inc., as Issuer, the Guarantors named therein, as Guarantors, and The Bank of New York, as Trustee (Incorporated herein by reference to Exhibit 4.6 to the registrant’s Annual Report on Form 10-K/ A for the year ended December 31, 2003.) | ||
4 | .7 | Second Supplemental Indenture, dated as of April 26, 2004, between Rent-A-Center, Inc., as Issuer, the Guarantors named therein, as Guarantors, and The Bank of New York, as Trustee (Incorporated herein by reference to Exhibit 4.7 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.) | ||
4 | .8 | Third Supplemental Indenture, dated as of May 7, 2004, between Rent-A-Center, Inc., as Issuer, the Guarantors named therein, as Guarantors, and The Bank of New York, as Trustee (Incorporated herein by reference to Exhibit 4.8 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004.) | ||
4 | .9 | Fourth Supplemental Indenture, dated as of May 14, 2004, between Rent-A-Center, Inc., as Issuer, the Guarantors named therein, as Guarantors, and The Bank of New York, as Trustee (Incorporated herein by reference to Exhibit 4.9 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004.) | ||
4 | .10 | Fifth Supplemental Indenture, dated as of June 30, 2005, between Rent-A-Center, Inc., as Issuer, the Guarantors named therein, as Guarantors, and The Bank of New York, as Trustee (Incorporated herein by reference to Exhibit 4.10 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.) | ||
4 | .11 | Form of 2003 Exchange Note (Incorporated herein by reference to Exhibit 4.11 to the registrant’s Registration Statement on Form S-4 filed July 11, 2003.) |
80
Exhibit No. | Description | |||
10 | .1† | Amended and Restated Rent-A-Center, Inc. Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.) | ||
10 | .2 | Amended and Restated Credit Agreement, dated as of May 28, 2003, as amended and restated as of July 14, 2004, among Rent-A-Center, Inc., the several lenders from time to time parties thereto, Calyon New York Branch, SunTrust Bank and Union Bank of California, N.A., as Documentation Agents, Lehman Commercial Paper Inc., as Syndication Agent, and JPMorgan Chase Bank, as Administrative Agent (Incorporated herein by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K dated July 15, 2004.) | ||
10 | .3 | Amended and Restated Guarantee and Collateral Agreement, dated as of May 28, 2003, as amended and restated as of July 14, 2004, made by Rent-A-Center, Inc. and certain of its Subsidiaries in favor of JPMorgan Chase Bank, as Administrative Agent (Incorporated herein by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K dated July 15, 2004.) | ||
10 | .4 | Fifth Amended and Restated Stockholders Agreement, dated as of August 13, 2004, by and among Apollo Investment Fund IV, L.P., Apollo Overseas Partners IV, L.P., Mark E. Speese, Rent-A-Center, Inc., and certain other persons (Incorporated herein by reference to Exhibit 10.3 to the registrant’s Registration Statement on Form S-3/ A filed on September 21, 2004.) | ||
10 | .5 | Franchisee Financing Agreement, dated April 30, 2002, but effective as of June 28, 2002, by and between Texas Capital Bank, National Association, ColorTyme, Inc. and Rent-A-Center, Inc. (Incorporated herein by reference to Exhibit 10.14 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.) | ||
10 | .6 | Supplemental Letter Agreement to Franchisee Financing Agreement, dated May 26, 2003, by and between Texas Capital Bank, National Association, ColorTyme, Inc. and Rent-A-Center, Inc. (Incorporated herein by reference to Exhibit 10.23 to the registrant’s Registration Statement on Form S-4 filed July 11, 2003.) | ||
10 | .7 | First Amendment to Franchisee Financing Agreement, dated August 30, 2005, by and among Texas Capital Bank, National Association, ColorTyme, Inc. and Rent-A-Center East, Inc. (Incorporated herein by reference to Exhibit 10.7 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005.) | ||
10 | .8 | Amended and Restated Franchise Financing Agreement, dated October 1, 2003, by and among Wells Fargo Foothill, Inc., ColorTyme, Inc. and Rent-A-Center East, Inc. (Incorporated herein by reference to Exhibit 10.22 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.) | ||
10 | .9 | First Amendment to Amended and Restated Franchisee Financing Agreement, dated December 15, 2003, by and among Wells Fargo Foothill, Inc., ColorTyme, Inc. and Rent-A-Center East, Inc. (Incorporated herein by reference to Exhibit 10.23 to the registrant’s Annual Report on Form 10-K/ A for the year ended December 31, 2003.) | ||
10 | .10 | Second Amendment to Amended and Restated Franchisee Financing Agreement, dated as of March 1, 2004, by and among Wells Fargo Foothill, Inc., ColorTyme, Inc. and Rent-A-Center East, Inc. (Incorporated herein by reference to Exhibit 10.24 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.) | ||
10 | .11† | Form of Stock Option Agreement issuable to Directors pursuant to the Amended and Restated Rent-A-Center, Inc. Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.20 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2004.) | ||
10 | .12† | Form of Stock Option Agreement issuable to management pursuant to the Amended and Restated Rent-A-Center, Inc. Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.21 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2004.) | ||
10 | .13† | Summary of Director Compensation (Incorporated herein by reference to Exhibit 10.22 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2004.) | ||
10 | .14† | Summary of Named Executive Officer Compensation (Incorporated herein by reference to Exhibit 10.23 to the registrant’s Current Report on Form 8-K dated December 21, 2005.) |
81
Exhibit No. | Description | |||
10 | .15†* | Form of Stock Compensation Agreement issuable to management pursuant to the Amended and Restated Rent-A-Center, Inc. Long-Term Incentive Plan | ||
10 | .16†* | Form of Long-Term Incentive Cash Award issuable to management pursuant to the Amended and Restated Rent-A-Center, Inc. Long-Term Incentive Plan | ||
10 | .17†* | Form of Loyalty and Confidentiality Agreement entered into with management | ||
21 | .1 | Subsidiaries of Rent-A-Center, Inc. (Incorporated herein by reference to Exhibit 21.1 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.) | ||
23 | .1* | Consent from Independent Registered Public Accounting Firm | ||
31 | .1* | Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 implementing Section 302 of the Sarbanes-Oxley Act of 2002 by Mark E. Speese | ||
31 | .2* | Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 implementing Section 302 of the Sarbanes-Oxley Act of 2002 by Robert D. Davis | ||
32 | .1* | Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Mark E. Speese | ||
32 | .2* | Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Robert D. Davis |
† | Management contract or compensatory plan or arrangement |
* | Filed herewith. |
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