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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
April 28, 2003
RENT-A-CENTER, INC.
(Exact name of registrant as specified in charter)
Delaware 0-25370 45-0491516
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
5700 Tennyson Parkway
Third Floor
Plano, Texas 75024
(Address of Principal Executive Offices) (Zip Code)
(972) 801-1100
(Registrant's telephone
number, including area code)
No Change
(Former Name or Former Address, if Changed Since Last Report)
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits
99.1 Press release, dated April 28, 2003.
Item 9. Regulation FD Disclosure and Item 12. Results of Operations and
Financial Condition.
Attached hereto as Exhibit 99.1 is the Registrant's press release reflecting
earnings information for the quarter ended March 31, 2003.
The press release contains information regarding EBITDA (earnings before
interest, taxes, depreciation and amortization), which is a non-GAAP financial
measure as defined in Item 10(e) of Regulation S-K. The press release also
contains a reconciliation of EBITDA to the Registrant's reported earnings before
income taxes. Management of the Registrant believes that presentation of EBITDA
is useful to investors, as, among other things, this information impacts certain
financial covenants under the Registrant's senior credit facility and the
indenture governing its 11% Senior Subordinated Notes due 2008. While management
believes this non-GAAP financial measure is useful in evaluating the Registrant,
this information should be considered as supplemental in nature and not as a
substitute for or superior to the related financial information prepared in
accordance with GAAP. Further, the non-GAAP financial measure may differ from
similar measures presented by other companies.
The information under this caption is furnished under Item 9 in place of Item 12
of Form 8-K in accordance with interim guidance provided by the Securities and
Exchange Commission in Release No. 33-8216 issued March 27, 2003. All of the
information in this Form 8-K and the accompanying exhibit shall not be deemed to
be "filed" for the purposes of Section 18 of the Securities Exchange Act of
1934, as amended, and shall not be incorporated by reference in any filing under
the Securities Act of 1933, as amended.
-2-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
RENT-A-CENTER, INC.
Date: April 28, 2003 By: /s/ Mitchell E. Fadel
---------------------------------------
Mitchell E. Fadel
President and Chief Operating Officer
-3-
Exhibit Index
Exhibit No. Description of Exhibit
- ----------- ----------------------
99.1 Press Release, dated April 28, 2003
-4-
Exhibit 99.1
Rent-A-Center, Inc. Reports
Record First Quarter 2003 Results
Same Store Sales Increase 6.2%
Announces Plans for Recapitalization
Raises EPS Guidance to $5.80 to $5.90 for 2003
PLANO, Texas--(BUSINESS WIRE)--April 28, 2003--Rent-A-Center, Inc.
(the "Company") (Nasdaq/NNM:RCII), announced today record revenues and
record net earnings for the quarter ended March 31, 2003.
The Company, the nation's largest rent-to-own operator, had total
revenues for the quarter ended March 31, 2003 of $566.4 million, a
$67.8 million increase from $498.6 million for the same period in the
prior year. This increase of 13.6% was largely a result of better than
expected same store sales growth of 6.2%, which includes the benefit
of increased merchandise sales, and incremental revenues generated in
new and acquired stores.
Net earnings for the quarter ended March 31, 2003 were $51.0
million, or $1.42 per diluted share, representing an increase of 17.0%
over the net earnings of $43.6 million, or $1.20 per diluted share,
reported for the same period in the prior year. The increase in net
earnings and earnings per diluted share are primarily attributable to
the Company's increase in revenues as described previously, as well as
the continued benefit of the cost control programs implemented in the
fall of 2001.
"We continue to witness the resilience of our industry, and more
specifically, our own business model, as evidenced by the record
levels of revenue and profitability for the first quarter of 2003,"
commented Mr. Mark E. Speese, the Company's Chairman and Chief
Executive Officer.
Last week, the Company announced that, through a series of
transactions, it is pursuing plans to recapitalize its debt and equity
structure. As part of that process, the Company announced that it
anticipates refinancing its current senior debt by entering into a new
$650 million senior credit facility, consisting of a $450 million term
loan, a $120 million revolving credit facility and an $80 million
synthetic term loan, the terms of which will, among other things,
permit the Company to repurchase up to approximately an additional
$200 million of its common stock. In that connection, the Company also
announced earlier today a tender offer to purchase up to 2.2 million
shares of its outstanding common stock at prices between $60 and $66
per share pursuant to a modified "Dutch Auction." The Company also
announced it had entered into an agreement with Apollo Investment Fund
IV, L.P. and Apollo Overseas Partners IV, L.P. to purchase additional
shares of the Company's common stock from such entities at the price
established in the tender offer, subject to certain conditions.
Furthermore, the Company announced last week that it commenced a debt
tender offer for all of its outstanding 11% senior subordinated notes
due 2008, which will be funded with the proceeds of a senior
subordinated financing announced the same day. Following the
completion of the foregoing recapitalization, the Company expects to
realize the benefit of approximately $.30 in additional diluted
earnings per share for the year ended December 31, 2003, before
non-recurring charges as described below. The Company expects to
record non-recurring pre-tax charges associated with the new
recapitalization of its debt and equity structures of approximately
$40.2 million during the second quarter ending June 30, 2003. The
aforementioned items assume the entire debt and equity tender offers
are completed at the maximum levels described.
"We believe we are strategically positioned to expand our presence
in the industry via new store development and opportunistic
acquisitions," added Mr. Speese. "Upon the completion of our announced
recapitalization, our resulting capital structure, we believe, will
provide value to all of our stakeholders, as well as enhance our
flexibility to achieve our growth objectives."
During the first quarter of 2003, the Company opened 20 new store
locations and acquired one new store in addition to the 295 stores
acquired from Rent-Way in February 2003. All of the Rent-Way stores
have been fully integrated, 176 have been merged with existing
Rent-A-Center locations and 119 were kept as new store fronts. In
addition, the Company consolidated five locations into existing stores
and purchased accounts from two locations. Since March 31, 2003, the
Company has opened five additional new stores and has purchased
accounts from two additional locations. For the entire year ending
December 31, 2003, the Company intends to open approximately 80 new
store locations as well as continuing to pursue opportunistic
acquisitions. The Company expects to accelerate the number of new
store openings each year beginning in 2004 to between 80 and 120 new
store locations.
Rent-A-Center will host a conference call to discuss the first
quarter financial results and other business updates on Tuesday
morning, April 29, 2003, at 10:45 a.m. EST. For a live webcast of the
call, visit http://investor.rentacenter.com. Certain financial and
other statistical information that will be discussed during the
conference call will also be provided on the same website.
Rent-A-Center, Inc., headquartered in Plano, Texas currently
operates 2,547 company-owned stores nationwide and in Puerto Rico. The
stores generally offer high-quality, durable goods such as home
electronics, appliances, computers, and furniture and accessories to
consumers 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 franchisor of 319
rent-to-own stores, 307 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,
including the impact of our recapitalization plans. These statements
are forward-looking, and actual results may differ materially. These
statements do not include the potential impact of store acquisitions
that may be completed after April 28, 2003.
SECOND QUARTER 2003 GUIDANCE:
Revenues
-- The Company expects total revenues to be in the range of
$548.8 million to $553.8 million.
-- Store rental and fee revenues are expected to be between
$505.0 million and $510.0 million.
-- Total store revenues are expected to be in the range of $538.0
million to $543.0 million.
-- Same store sales increases are expected to be in the 2.0% to
4.0% range.
-- The Company expects to open 15-20 new store locations.
Expenses
-- The Company expects depreciation of rental merchandise to be
between 21.6% and 22.0% of store rental and fee revenue and
cost of goods on 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 53.5% to 55.0% of total store revenue.
-- General and administrative expenses are expected to be between
3.0% and 3.2% of total revenue.
-- Net interest expense is expected to be approximately $11.0
million and amortization of intangibles is expected to be
approximately $3.0 million.
-- The effective tax rate is expected to be approximately 38.75%
of pre-tax income.
-- Diluted earnings per share are estimated to be in the range of
$1.41 to $1.44.
-- Diluted shares outstanding are estimated to be between 36.0
million and 36.4 million.
FISCAL 2003 GUIDANCE:
Revenues
-- The Company expects total revenues to be in the range of $2.21
billion and $2.24 billion.
-- Store rental and fee revenues are expected to be between $1.99
billion and $2.02 billion.
-- Total store revenues are expected to be in the range of $2.15
billion and $2.18 billion.
-- Same store sales increases are expected to be in the 2.0% to
4.0% range.
-- The Company expects to open approximately 80 new store
locations.
Expenses
-- The Company expects depreciation of rental merchandise to be
between 21.6% and 22.0% of store rental and fee revenue and
cost of goods on merchandise sales to be between 73% and 78%
of store merchandise sales.
-- Store salaries and other expenses are expected to be in the
range of 53.5% to 55.0% of total store revenue.
-- General and administrative expenses are expected to be between
3.0% and 3.2% of total revenue.
-- Net interest expense is expected to be between $45.0 million
and $50.0 million and amortization of intangibles is expected
to be approximately $12.0 million.
-- The effective tax rate is expected to be approximately 38.75%
of pre-tax income.
-- Diluted earnings per share are estimated to be in the range of
$5.80 to $5.90.
-- Diluted shares outstanding are estimated to be between 34.5
million and 35.0 million.
This press release and the guidance above contain forward-looking
statements that involve risks and uncertainties. Such forward-looking
statements generally can be identified by the use of forward-looking
terminology such as "may," "will," "expect," "intend," "could,"
"estimate," "should," "anticipate," or "believe," or the negative
thereof or variations thereon or similar terminology. Although the
Company believes that the expectations reflected in such
forward-looking statements will prove to be correct, the Company can
give no assurance that such expectations will prove to have been
correct. The actual future performance of the Company could differ
materially from such statements. Factors that could cause or
contribute to such differences include, but are not limited to:
uncertainties regarding the ability to open new stores; the Company's
ability to acquire additional rent-to-own stores on favorable terms;
the Company's ability to enhance the performance of these acquired
stores, including the stores acquired in the Rent-Way acquisition; the
Company's ability to control store level costs; the Company's ability
to realize benefits from its margin enhancement initiatives; the
results of the Company's litigation; the passage of legislation
adversely affecting the rent-to-own industry; interest rates; the
Company's ability to collect on its rental purchase agreements; the
Company's ability to effectively hedge interest rates on its
outstanding debt; changes in the Company's effective tax rate; changes
in the Company's stock price and the number of shares of common stock
that the Company may or may not repurchase; uncertainties and
volatility in the credit markets; the ability to enter into a new
senior credit agreement containing terms acceptable to the Company;
the ability to obtain the financing to refinance the Company's 11%
senior subordinated notes; factors that may restrict the Company's
ability to redeem any outstanding notes on August 15, 2003, including
the Company's financial situation at that time; 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, 2002. You are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date of
this press release. Except as required by law, the Company is not
obligated to publicly release any revisions to these forward-looking
statements to reflect the events or circumstances after the date of
this press release or to reflect the occurrence of unanticipated
events.
CONTACT: Rent-A-Center, Inc., Plano
David E. Carpenter, 972/801-1214
dcarpenter@racenter.com
or
Robert D. Davis, 972/801-1204
rdavis@racenter.com
or
Mitchell E. Fadel, 972/801-1114
mfadel@racenter.com
or
Mark E. Speese, 972/801-1199
mspeese@racenter.com
Rent-A-Center, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF EARNINGS HIGHLIGHTS
(In Thousands of Dollars, except per share data) Three Months Ended
March 31,
-------------------
2003 2002
--------- ---------
Unaudited
Total Revenues $566,406 $498,610
Operating Profit 96,291 88,296
Net Earnings 50,959 43,563
Diluted Earnings Per Common Share 1.42 1.20
EBITDA $109,284 $98,482
Reconciliation to EBITDA:
Reported earnings before income taxes $83,539 $73,221
Add back:
Interest expense, net 12,752 15,075
Depreciation of property assets 10,120 9,466
Amortization of intangibles 2,873 720
--------- ---------
EBITDA $109,284 $98,482
Selected Balance Sheet Data:
(in Thousands of Dollars) March 31, March 31,
2003 2002
---------- ----------
Cash and cash equivalents $ 103,151 $ 167,264
Prepaid expenses and other assets 25,717 32,499
Rental merchandise, net
On rent 556,415 544,471
Held for rent 135,051 112,073
Total Assets 1,729,618 1,677,036
Senior debt 249,500 428,000
Subordinated notes payable 271,849 274,525
Total Liabilities 841,687 957,630
Stockholders' Equity and
Redeemable Preferred Stock 887,931 719,406
Rent-A-Center, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF EARNINGS
(In Thousands of Dollars,
except per share data) Three months ended March 31,
------------------------------
2003 2002
---------------- -------------
Revenues Unaudited
Store
Rentals and fees $493,419 $443,705
Merchandise sales 52,664 39,605
Installment sales 6,045 --
Other 715 614
---------------- -------------
552,843 483,924
Franchise
Merchandise sales 12,072 13,253
Royalty income and fees 1,491 1,433
---------------- -------------
Total revenues 566,406 498,610
Operating expenses
Direct store expenses
Depreciation of rental merchandise 106,660 92,223
Cost of merchandise sold 36,548 26,982
Cost of installment sales 3,231 --
Salaries and other expenses 292,496 262,619
Franchise cost of merchandise sold 11,551 12,653
---------------- -------------
450,486 394,477
General and administrative expenses 16,756 15,117
Amortization of intangibles 2,873 720
---------------- -------------
Total operating expenses 470,115 410,314
---------------- -------------
Operating profit 96,291 88,296
Interest expense 13,523 15,798
Interest income (771) (723)
---------------- -------------
Earnings before income taxes 83,539 73,221
Income tax expense 32,580 29,658
---------------- -------------
NET EARNINGS 50,959 43,563
Preferred dividends -- 4,992
---------------- -------------
Net earnings allocable to common
stockholders $50,959 $38,571
================ =============
Basic weighted average shares
outstanding 34,896 24,515
================ =============
Basic earnings per common share $1.46 $1.57
================ =============
Diluted weighted average shares
outstanding 35,936 36,321
================ =============
Diluted earnings per common share $1.42 $1.20
================ =============