Rent-A-Center, Inc. Reports Third Quarter 2008 Result

Furniture World News

Rent-A-Center, Inc. the nation’s largest rent-to-own operator, today announced revenues and earnings for the quarter ended September 30, 2008. Third Quarter 2008 Results Total revenues for the quarter ended September 30, 2008 were $708.8 million, a decrease of $0.9 million from the total revenues of $709.7 million for the same period in the prior year. This decrease in revenues was primarily the result of approximately 315 fewer stores over the past year principally due to the previously announced restructuring plan, offset by a 3.4% increase in same store sales. Net earnings for the quarter ended September 30, 2008 were $29.4 million, an increase of $4.1 million, or 16.2% from the net earnings of $25.3 million for the same period in the prior year. Net earnings per diluted share for the quarter ended September 30, 2008 were $0.44, an increase of 18.9% from the same period in the prior year. As a result of Hurricanes Gustav and Ike, the Company estimates that net earnings per diluted share were negatively impacted by approximately $0.02 for the quarter ended September 30, 2008. Net earnings per diluted share for the quarter ended September 30, 2007 were $0.37 when including $0.04 per share as a result of the receipt of accelerated royalty payments from former franchisees in consideration of the termination of their franchise agreements, as discussed below. "We met our guidance for same store sales, revenues and, when giving consideration for the impact of the hurricanes, diluted earnings per share,” commented Mark E. Speese, the Company’s Chairman and Chief Executive Officer. "While we believe the economic environment creates opportunities for potential customers whose available credit is diminished or eliminated, it is creating challenges for our existing customers,” Speese continued. "Therefore, we believe the current severity of the financial crisis and its effect on the economy has resulted in a softening in our business and as a result we have reduced our outlook for the fourth quarter. Assuming a continued weak economy in 2009, our focus will be on improving our rent-to-own and financial services operations and as such, we believe it is prudent to delay adding any financial services locations until a later date,” Speese added. "We believe that even in this environment our business will continue to generate sufficient cash flow to not only meet our operating requirements but also maintain a solid balance sheet,” Speese concluded. Nine Months Ended September 30, 2008 Results Total revenues for the nine months ended September 30, 2008 were $2.184 billion, a decrease of $5.0 million from the total revenues of $2.189 billion for the same period in the prior year. This decrease in revenues was primarily the result of approximately 315 fewer stores over the past year principally due to the previously announced restructuring plan, offset by a 2.8% increase in same store sales. Net earnings for the nine months ended September 30, 2008 were $103.5 million as compared to the net earnings of $81.6 million for the same period in the prior year, an increase of 26.8%. Net earnings for the nine months ended September 30, 2008 were reduced by $3.1 million in pre-tax restructuring expenses related to the previously announced restructuring plan, as discussed below. Net earnings for the nine months ended September 30, 2007 were reduced primarily by a $51.3 million pre-tax litigation charge related to the Hilda Perez matter, as discussed below. Net earnings per diluted share for the nine months ended September 30, 2008 were $1.54, as compared to the net earnings per diluted share of $1.16 for the same period in the prior year, an increase of 32.8%. Net earnings per diluted share for the nine months ended September 30, 2008 were reduced by approximately $0.03 per share as a result of the restructuring expenses related to the previously announced restructuring plan, as discussed below. Net earnings per diluted share for the nine months ended September 30, 2007 were reduced primarily by the $0.47 per share effect for the litigation expense related to the Hilda Perez matter, as discussed below. "As a result of our solid operating results, and despite the challenging market environment, we have generated positive cash flow from operations of approximately $315 million for the nine month period through September 30, 2008, while ending the quarter with approximately $99.2 million of cash on hand,” commented Robert D. Davis, the Company’s Executive Vice President and Chief Financial Officer. "This significant cash flow enabled us to enhance our capital structure by reducing our outstanding indebtedness by approximately $265 million year to date, while internally funding our operations,” Davis concluded. During the nine month period ended September 30, 2008, the Company also repurchased 150,000 shares of its common stock for $3.1 million in cash under its common stock repurchase program. To date, the Company has repurchased a total of 18,610,950 shares and has utilized approximately $447.4 million of the $500.0 million authorized by its Board of Directors since the inception of the plan. Since September 30, 2008, the Company has opened four new store locations, acquired accounts from one location and consolidated one store into an existing location. The Company has added financial services to six existing rent-to-own store locations, consolidated one store with financial services into an existing location and closed one location since September 30, 2008. Rent-A-Center, Inc., headquartered in Plano, Texas, currently operates approximately 3,045 company-owned stores nationwide and in Canada and Puerto Rico. The stores generally offer high-quality, durable goods such as major consumer electronics, appliances, computers and furniture and accessories under flexible rental purchase agreements that generally allow the customer to obtain ownership of the merchandise at the conclusion of an agreed upon rental period. ColorTyme, Inc., a wholly owned subsidiary of the Company, is a national franchiser of approximately 225 rent-to-own stores operating under the trade name of "ColorTyme."