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

October 27, 2008

RENT-A-CENTER, INC.

(Exact name of registrant as specified in charter)

Delaware		0-25370		45-0491516
(State or other jurisdiction of		(Commission File Number)		(IRS Employer Identification
incorporation or organization)				No.)

5501 Headquarters Drive
Plano, Texas 75024
(Address of principal executive offices and zip code)


(972) 801-1100
(Registrant’s telephone
number, including area code)

N/A
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions (see General Instruction A.2. below):

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425).
o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12).
o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)).
o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)).

 

 

Item 2.02 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 September 30, 2008.

     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 facilities and the indenture governing its 7 1/2 % Senior Subordinated Notes due 2010. 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.

     Pursuant to General Instruction B.2. of Form 8-K, all of the information contained in this Form 8-K and the accompanying exhibit shall be deemed to be “furnished” and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and, therefore, shall not be incorporated by reference in any filing under the Securities Act of 1933, as amended.

Item 9.01 Financial Statements and Exhibits.

     (d) Exhibits

Exhibit 99.1		Press Release, dated October 27, 2008.

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.

EXHIBIT INDEX

Exhibit No.		Description
99.1		Press release, dated October 27, 2008

Exhibit 99.1

For Immediate Release:

RENT-A-CENTER, INC. REPORTS
THIRD QUARTER 2008 RESULTS

Same Store Sales Increase 3.4%
Diluted Earnings per Share of $0.44
Cash Flow from Operations Exceeds $314 million Year-To-Date

Plano, Texas, October 27, 2008 — Rent-A-Center, Inc. (the “Company”) (NASDAQ/NGS:RCII), the nation’s largest rent-to-own operator, today announced revenues and earnings for the quarter ended September 30, 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.

Operations Highlights

During the three and nine month periods ended September 30, 2008, the Company owned stores and Financial Services locations changed as follows:

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2008				2008
Company Owned Stores
Beginning Store Count			3,054				3,081
Opens			4				8
Acquisitions			1				2
Closes / Mergers			(14	)			(33	)
Sold			—				(13	)
Ending Store Count			3,045				3,045
Account Purchases			8				24
Financial Services
Beginning Store Count			304				276
Opens			49				82
Acquisitions			—				—
Closes / Mergers			(3	)			(8	)
Sold			—				—
Ending Store Count			350				350
Account Purchases			—				1

Since September 30, 2008, the Company has opened three 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.

2008 Significant Item

Restructuring Plan Expenses. During the first quarter of 2008, the Company recorded a pre-tax restructuring expense of approximately $2.9 million in connection with the restructuring plan previously announced on December 3, 2007. This restructuring expense reduced net earnings per diluted share by approximately $0.03 in the first quarter of 2008. The Company recorded additional pre-tax restructuring expense in the third quarter of 2008 of approximately $0.2 million. Through the nine month period ended September 30, 2008, the total pre-tax restructuring expense of approximately $3.1 million reduced net earnings per diluted share by approximately $0.03. As previously reported, the Company recorded a pre-tax restructuring expense of approximately $38.7 million related to this restructuring plan during the fourth quarter of 2007. The costs with respect to the restructuring plan relate primarily to lease terminations, fixed asset disposals and other miscellaneous items.

2007 Significant Items

Settlement with ColorTyme Franchisees. On July 31, 2007, ColorTyme entered into a settlement agreement with five affiliated ColorTyme franchisees pursuant to which the franchise agreements with respect to approximately 65 ColorTyme stores were terminated. ColorTyme received a cash payment in satisfaction of the contractually required, future royalties owed to ColorTyme pursuant to the franchise agreements. This settlement payment increased diluted earnings per share by approximately $0.04 in both the third quarter of 2007 and for the nine month period ended September 30, 2007.

Hilda Perez. On November 5, 2007, the Company paid an aggregate of $109.3 million, including plaintiffs’ attorneys’ fees and administration costs, pursuant to the court approved settlement of the Hilda Perez v. Rent-A-Center, Inc. matter pending in New Jersey. As previously reported, the Company recorded a pre-tax expense of $58.0 million in connection with the Perez matter during the fourth quarter of 2006, and an additional pre-tax charge of $51.3 million in the first quarter of 2007, to account for the aforementioned costs. The litigation expense with respect to the Perez settlement reduced net earnings per diluted share by approximately $0.47 for the nine month period ended September 30, 2007.

-   -   -

Rent-A-Center, Inc. will host a conference call to discuss the third quarter results, guidance and other operational matters on Tuesday morning, October 28, 2008, at 10:45 a.m. EDT. For a live webcast of the call, visit http://investor.rentacenter.com. Certain financial and other statistical information that will be discussed during the conference call will also be provided on the same website.

Rent-A-Center, Inc., headquartered in Plano, Texas, currently operates approximately 3,045 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.”

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, reduction in outstanding indebtedness, any additional restructuring expenses related to the restructuring plan announced on December 3, 2007, or the potential impact of acquisitions or dispositions that may be completed after October 27, 2008.

FOURTH QUARTER 2008 GUIDANCE:

Revenues

•

The Company expects total revenues to be in the range of $698 million to $713 million.

•

Store rental and fee revenues are expected to be between $610 million and $622 million.

•

Total store revenues are expected to be in the range of $687 million to $702 million.

•

Same store sales are expected to be in the flat to 1% range.

•

The Company expects to open approximately 15 new company owned store locations.

Expenses

•

The Company expects cost of rental and fees to be between 22.6% and 23.0% of store rental and fee revenue and cost of merchandise sold to be between 75% and 79% of store merchandise sales.

•

Store salaries and other expenses are expected to be in the range of 58.4% to 59.9% of total store revenue.

•

General and administrative expenses are expected to be between 4.3% and 4.5% of total revenue.

•

Net interest expense is expected to be approximately $14 million, depreciation of property assets is expected to be approximately $18 million and amortization of intangibles is expected to be approximately $2 million.

•

The effective tax rate is expected to be approximately 37% of pre-tax income.

•

Diluted earnings per share are estimated to be in the range of $0.44 to $0.49.

•

Diluted shares outstanding are estimated to be between 67.0 million and 68.0 million.

FISCAL 2009 GUIDANCE:

Revenues

•

The Company expects total revenues to be in the range of $2.830 billion and $2.890 billion.

•

Store rental and fee revenues are expected to be between $2.435 billion and $2.485 billion.

•

Total store revenues are expected to be in the range of $2.790 billion and $2.850 billion.

•

Same store sales are expected to be flat.

•

The Company expects to open 30 to 40 new company owned store locations.

Expenses

•

The Company expects cost of rental and fees to be between 22.4% and 23.0% of store rental and fee revenue and cost of merchandise sold to be between 74% and 78% of store merchandise sales.

•

Store salaries and other expenses are expected to be in the range of 57.7% to 59.2% of total store revenue.

•

General and administrative expenses are expected to be between 4.5% and 4.7% of total revenue.

•

Net interest expense is expected to be approximately $55 million, depreciation of property assets is expected to be between $70 million and $75 million and amortization of intangibles is expected to be approximately $1 million.

•

The effective tax rate is expected to be approximately 38% of pre-tax income.

•

Diluted earnings per share are estimated to be in the range of $2.10 to $2.30.

•

Diluted shares outstanding are estimated to be between 67.3 million and 68.3 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 or customer accounts on favorable terms; the Company’s ability to successfully add financial services locations within its existing rent-to-own stores; the Company’s ability to identify and successfully enter new lines of business offering products and services that appeal to its customer demographic, including its financial services products; the Company’s ability to enhance the performance of acquired stores; the Company’s ability to control costs; the Company’s ability to identify and successfully market products and services that appeal to its customer demographic; the Company’s ability to enter into new and collect on its rental purchase agreements; the Company’s ability to enter into new and collect on its 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; economic pressures, such as high fuel and utility costs, affecting the disposable income available to the Company’s targeted consumers; changes in the Company’s stock price and the number of shares of common stock that it may or may not repurchase; changes in estimates relating to self-insurance liabilities and income tax and litigation reserves; changes in the Company’s effective tax rate; the Company’s ability to maintain an effective system of internal controls; changes in the number of share-based compensation grants, methods used to value future share-based payments and changes in estimated forfeiture rates with respect to share-based compensation; the resolution of the Company’s litigation; and the other risks detailed from time to time in the Company’s SEC reports, including but not limited to, its annual report on Form 10-K for the year ended December 31, 2007, and its quarterly reports for the quarters ended March 31, 2008, and June 30, 2008. 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 for Rent-A-Center, Inc.:

David E. Carpenter
Vice President of Investor Relations
(972) 801-1214
david.carpenter@rentacenter.com

Rent-A-Center, Inc. and Subsidiaries

STATEMENT OF EARNINGS HIGHLIGHTS

		Three Months Ended September 30,
		2008				2008				2007				2007
		Before				After
		Restructuring				Restructuring				Before Royalty				After Royalty
		Expense				Expense				Payment				Payment
(In Thousands of Dollars, except per share data)		(Non-GAAP)				(GAAP)				(Non-GAAP)				(GAAP)
Total Revenue		$	708,755			$	708,755			$	705,801			$	709,701	(2)
Operating Profit			58,762				58,549	(1)			56,675				60,575	(2)
Net Earnings			29,531				29,379	(1)			22,723				25,275	(2)
Diluted Earnings per Common Share		$	0.44			$	0.44			$	0.33			$	0.37	(2)
Adjusted EBITDA		$	80,498			$	80,498			$	78,656			$	78,656
Reconciliation to Adjusted EBITDA:
Earnings before income taxes			45,795				45,582				34,959				38,859
Add back:
Restructuring Expense			—				213				—				—
ColorTyme franchisees settlement			—				—				—				(3,900	)
Interest expense, net			12,967				12,967				21,716				21,716
Depreciation of property assets			18,191				18,191				18,028				18,028
Amortization of intangibles			3,545				3,545				3,953				3,953
Adjusted EBITDA		$	80,498			$	80,498			$	78,656			$	78,656
		Nine Months Ended September 30,
		2008				2008				2007				2007
										Before Royalty				After Royalty
		Before				After				Payment &				Payment &
		Restructuring				Restructuring				Legal				Legal
		Expense				Expense				Settlement				Settlement
(In Thousands of Dollars, except per share data)		(Non-GAAP)				(GAAP)				(Non-GAAP)				(GAAP)
Total Revenue		$	2,184,422			$	2,184,422			$	2,185,258			$	2,189,158	(2)
Operating Profit			213,621				210,523	(1)(3)			241,104				193,754	(2)(4)
Net Earnings			105,433				103,478	(1)(3)			111,886				81,629	(2)(4)
Diluted Earnings per Common Share		$	1.57			$	1.54			$	1.59			$	1.16	(2)(4)
Adjusted EBITDA		$	280,327			$	280,327			$	305,635			$	305,635
Reconciliation to Adjusted EBITDA:
Earnings before income taxes		$	167,141			$	164,043			$	175,095			$	127,745
Add back:
Litigation settlement expense			—				—				—				51,250
Restructuring Expense			—				3,098				—				—
ColorTyme franchisees settlement			—				—				—				(3,900	)
Interest expense, net			46,480				46,480				66,009				66,009
Depreciation of property assets			54,569				54,569				52,606				52,606
Amortization of intangibles			12,137				12,137				11,925				11,925
Adjusted EBITDA		$	280,327			$	280,327			$	305,635			$	305,635

Selected Balance Sheet Highlights

Selected Balance Sheet Data: (in Thousands of Dollars)		September 30, 2008				September 30, 2007
Cash and cash equivalents		$	99,188			$	100,337
Prepaid expenses and other assets			58,552				60,897
Rental merchandise, net
On rent			620,438				728,922
Held for rent			213,096				236,782
Total Assets			2,510,034				2,665,286
Senior debt			753,964				901,802
Subordinated notes payable			240,375				300,000
Total Liabilities			1,456,573				1,711,000
Stockholders’ Equity			1,053,461				954,286

Rent-A-Center, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF EARNINGS

		Three Months Ended September 30,
		2008				2007
(In Thousands of Dollars, except per share data)		Unaudited
Store Revenue
Rentals and Fees		$	621,290			$	631,132
Merchandise Sales			57,062				53,574
Installment Sales			10,554				8,593
Other			10,704				3,940
			699,610				697,239
Franchise Revenue
Franchise Merchandise Sales			7,969				7,376
Royalty Income and Fees			1,176				5,086
Total Revenue			708,755				709,701
Operating Expenses
Direct Store Expenses
Cost of Rentals and Fees			142,314				140,219
Cost of Merchandise Sold			44,714				41,065
Cost of Installment Sales			4,065				2,822
Salaries and Other Expenses			417,354				422,294
Franchise Cost of Merchandise Sold			7,640				7,072
			616,087				613,472
General and Administrative Expenses			30,361				31,701
Amortization of Intangibles			3,545				3,953
Restructuring Expenses			213				—
Total Operating Expenses			650,206				649,126
Operating Profit			58,549				60,575
Interest Expense			15,040				23,419
Interest Income			(2,073	)			(1,703	)
Earnings before Income Taxes			45,582				38,859
Income Tax Expense			16,203				13,584
NET EARNINGS			29,379				25,275
BASIC WEIGHTED AVERAGE SHARES			66,696				67,939
BASIC EARNINGS PER COMMON SHARE		$	0.44			$	0.37
DILUTED WEIGHTED AVERAGE SHARES			67,473				68,587
DILUTED EARNINGS PER COMMON SHARE		$	0.44			$	0.37

Rent-A-Center, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF EARNINGS

		Nine Months Ended September 30,
		2008				2007
(In Thousands of Dollars, except per share data)		Unaudited
Store Revenue
Rentals and Fees		$	1,896,594			$	1,953,341
Merchandise Sales			198,104				161,495
Installment Sales			29,685				24,649
Other			30,912				17,686
			2,155,295				2,157,171
Franchise Revenue
Franchise Merchandise Sales			25,386				24,256
Royalty Income and Fees			3,741				7,731
Total Revenue			2,184,422				2,189,158
Operating Expenses
Direct Store Expenses
Cost of Rentals and Fees			433,987				429,215
Cost of Merchandise Sold			153,206				117,043
Cost of Installment Sales			11,875				9,496
Salaries and Other Expenses			1,241,340				1,260,135
Franchise Cost of Merchandise Sold			24,270				23,222
			1,864,678				1,839,111
General and Administrative Expenses			93,986				93,118
Amortization of Intangibles			12,137				11,925
Litigation Settlement Expense			—				51,250
Restructuring Expense			3,098				—
Total Operating Expenses			1,973,899				1,995,404
Operating Profit			210,523				193,754
Interest Expense			52,706				70,946
Interest Income			(6,226	)			(4,937	)
Earnings before Income Taxes			164,043				127,745
Income Tax Expense			60,565				46,116
NET EARNINGS			103,478				81,629
BASIC WEIGHTED AVERAGE SHARES			66,697				69,349
BASIC EARNINGS PER COMMON SHARE		$	1.55			$	1.18
DILUTED WEIGHTED AVERAGE SHARES			67,336				70,229
DILUTED EARNINGS PER COMMON SHARE		$	1.54			$	1.16