For Immediate Release:
RENT-A-CENTER, INC. REPORTS
SECOND QUARTER 2005 RESULTS
Diluted Earnings per Share of $0.52, Excluding Tax Credit
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Plano, Texas, July 25, 2005— Rent-A-Center, Inc. (the “Company”) (NASDAQ/NNM:RCII), the nation’s largest rent-to-own operator, today announced revenues and net earnings for the quarter ended June 30, 2005.
The Company reported total revenues for the quarter ended June 30, 2005 of $580.6 million, a $7.6 million increase from $573.0 million for the same period in the prior year. This increase of 1.3% in revenues was primarily driven by incremental revenues generated in new and acquired stores, offset by a decrease in same store sales of 2.6%.
Net earnings for the quarter ended June 30, 2005 were $39.6 million, or $0.52 per diluted share, when excluding the benefit of the tax audit reserve credit discussed below, representing a decrease of 16.1% from the $0.62 per diluted share, or net earnings of $51.2 million, for the same period in the prior year. The decrease in earnings per diluted share is primarily attributable to the decrease in same store sales as well as an increase in operating expenses, primarily related to new store openings and acquisitions, offset by a reduction in the number of the Company’s outstanding shares.
Total revenues for the six months ended June 30, 2005 increased to $1.182 billion, a 2.1% increase from $1.158 billion for the same period in the prior year. Same store revenues for the six month period ending June 30, 2005 decreased 4.0%. Net earnings for the six months ended June 30, 2005 were $82.3 million, or $1.08 per diluted share, when excluding the litigation reversion credit and tax audit reserve credit discussed below, a decrease of 13.6% over the $1.25 per diluted share, or net earnings of $103.4 million, for the same period in the prior year.
“While our revenue and earnings per diluted share were within our guidance for the second quarter,” commented Mark E. Speese, the Company’s Chairman and Chief Executive Officer, “our business environment remains challenged. We currently have fewer agreements on rent relative to our prior expectations due to weaker than expected demand in June and to date in the month of July. As such, including a softer outlook for the balance of this year, we are lowering our guidance for the remainder of 2005. We believe a key challenge centers around higher energy costs impacting both our customers and our operations, but also believe that product evolution, particularly in low end consumer electronics, is placing additional pressure on our business,” Speese continued. “We continue to evaluate new product offerings that we believe will provide additional revenue streams to leverage our mature store base,” Speese stated.
During the second quarter of 2005, the Company opened 12 new store locations, acquired 34 stores, including 27 stores from a ColorTyme franchisee offering an array of financial services in addition to traditional rent-to-own products, as well as accounts from 10 additional locations, while consolidating 17 stores into existing locations and selling one store. Since June 30, 2005, the Company has opened 5 new stores and acquired one other store while consolidating 6 stores into existing locations. For the entire year ending December 31, 2005, the Company intends to open between 60 and 70 new store locations as well as pursue opportunistic acquisitions.
During the second quarter of 2005, the Company recorded a $2.0 million tax audit reserve credit associated with the examination and favorable resolution of the Company’s 1998 and 1999 federal tax returns. The tax audit reserve credit increased diluted earnings per share in the second quarter of 2005 by $0.03, from $0.52 per diluted earnings per share to the reported diluted earnings per share of $0.55.
In addition, during 2005, the Company recorded an $8.0 million pre-tax credit in the first quarter associated with the settlement of the Griego/Carrillo litigation. This pre-tax litigation reversion credit increased diluted earnings per share for the six month period ended June 30, 2005 by $0.07. The litigation reversion credit, combined with the $2.0 million tax audit reserve credit in the second quarter, increased diluted earnings per share for the six month period ended June 30, 2005 by $0.10 to the reported diluted earnings per share of $1.18.
Rent-A-Center will host a conference call to discuss the second quarter financial results on Tuesday morning, July 26, 2005, at 10:45 a.m. EST. For a live web cast of the call, visit http://investor.rentacenter.com. Certain financial and other statistical information that will be discussed during the conference call will also be provided on the same website.
Rent-A-Center, Inc., headquartered in Plano, Texas, currently operates 2,892 company-owned stores nationwide and in Canada and Puerto Rico. The stores generally offer high-quality, durable goods such as major consumer electronics, appliances, computers and furniture and accessories under flexible rental purchase agreements that generally allow the customer to obtain ownership of the merchandise at the conclusion of an agreed upon rental period. ColorTyme, Inc., a wholly owned subsidiary of the Company, is a national franchiser of 281 rent-to-own stores, 269 of which operate under the trade name of "ColorTyme," and the remaining 12 of which operate under the "Rent-A-Center" name.
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. These statements do not include the potential impact of any repurchases of common stock the Company may make or the potential impact of acquisitions that may be completed after July 25, 2005.
THIRD QUARTER 2005 GUIDANCE:
Revenues
| · | The Company expects total revenues to be in the range of $572 million to $580 million. |
| · | Store rental and fee revenues are expected to be between $517 million and $522 million. |
| · | Total store revenues are expected to be in the range of $560 million to $568 million. |
| · | Same store sales are expected to be in the (1.0%) to (2.0%) range. |
| · | The Company expects to open 15-20 new store locations. |
Expenses
| · | The Company expects cost of rental and fees to be between 21.6% and 22.0% of store rental and fee revenue and cost of goods merchandise sales to be between 75% and 80% of store merchandise sales. |
| · | Store salaries and other expenses are expected to be in the range of 59.5% to 61.0% of total store revenue. |
| · | General and administrative expenses are expected to be between 3.4% and 3.6% of total revenue. |
| · | Net interest expense is expected to be approximately $10.2 million, depreciation of property assets to be approximately $13.5 million and amortization of intangibles is expected to be approximately $2.2 million. |
| · | The effective tax rate is expected to be in the range of 37.5% to 38.0% of pre-tax income. |
| · | Diluted earnings per share are estimated to be in the range of $0.38 to $0.42. |
| · | Diluted shares outstanding are estimated to be between 75.7 million and 76.7 million. |
FISCAL 2005 GUIDANCE:
Revenues
| · | The Company expects total revenues to be in the range of $2.34 billion and $2.36 billion. |
| · | Store rental and fee revenues are expected to be between $2.085 billion and $2.100 billion. |
| · | Total store revenues are expected to be in the range of $2.290 billion and $2.310 billion. |
| · | Same store sales are expected to be in the (2.0%) to (4.0%) range. |
| · | The Company expects to open 60 - 70 new store locations. |
Expenses
| · | The Company expects cost of rental and fees to be between 21.6% and 22.0% of store rental and fee revenue and cost of goods merchandise sales to be between 72% and 75% of store merchandise sales. |
| · | Store salaries and other expenses are expected to be in the range of 58.0% to 59.5% of total store revenue. |
| · | General and administrative expenses are expected to be between 3.3% and 3.5% of total revenue. |
| · | Net interest expense is expected to be between $38.0 million and $42 million, depreciation of property assets is expected to be between $50.0 million and $55.0 million and amortization of intangibles is expected to be approximately $8.0 million. |
| · | The effective tax rate is expected to be in the range of 37.5% to 38.0% of pre-tax income. |
| · | Diluted earnings per share are estimated to be in the range of $1.90 to $2.00. |
| · | Diluted shares outstanding are estimated to be between 75.7 million and 76.7 million. |
This press release and the guidance above contain forward-looking statements that involve risks and uncertainties. Such forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,”“will,”“expect,”“intend,”“could,”“estimate,”“should,”“anticipate,” or “believe,” or the negative thereof or variations thereon or similar terminology. Although the Company believes that the expectations reflected in such forward-looking statements will prove to be correct, the Company can give no assurance that such expectations will prove to have been correct. The actual future performance of the Company could differ materially from such statements. Factors that could cause or contribute to such differences include, but are not limited to: uncertainties regarding the ability to open new rent-to-own stores; the Company’s ability to acquire additional rent-to-own stores on favorable terms; the Company’s ability to enhance the performance of these acquired stores; the Company’s ability to control store level costs; the Company’s ability to identify and successfully market products and services that appeal to our customer demographic; the Company’s ability to identify and successfully enter new lines of business offering products and services that appeal to our customer demographic; the results of the Company’s litigation; the passage of legislation adversely affecting the rent-to-own industry; interest rates; the Company’s ability to collect on its rental purchase agreements; the Company’s ability to enter into new rental purchase agreements; economic pressures affecting the disposable income available to our targeted consumers, such as high fuel and utility costs; changes in the Company’s effective tax rate; changes in the Company’s stock price and the number of shares of common stock that the Company may or may not repurchase; and the other risks detailed from time to time in the Company’s SEC filings, including but not limited to, its annual report on Form 10-K for the year ended December 31, 2004 and its quarterly report on Form 10-Q for the quarter ended March 31, 2005. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Except as required by law, the Company is not obligated to publicly release any revisions to these forward-looking statements to reflect the events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.
Contacts for Rent-A-Center, Inc.:
David E. Carpenter Vice President of Investor Relations (972) 801-1214 dcarpenter@racenter.com |
Rent-A-Center, Inc. and Subsidiaries
STATEMENT OF EARNINGS HIGHLIGHTS
