Rent-to-own News - Rent-A-Center releases Q2 Report

Rent-A-Center today announced revenues and earnings for the quarter ended June 30, 2011.

Total revenues for the quarter ended June 30, 2011, were $698.3 million, an increase of $26.8 million from total revenues of $671.5 million for the same period in the prior year. This 4.0% increase in total revenues was primarily due to an increase in revenue driven by the RAC Acceptance business, offset by a reduction in revenue due to the discontinuation of the financial services business. Same store sales for the three months ended June 30, 2011, decreased 0.3%.

Net earnings and net earnings per diluted share for the three months ended June 30, 2011, were $39.9 million and $0.63, respectively, as compared to $47.8 million and $0.72, respectively, for the same period in the prior year. Net earnings and net earnings per diluted share for the three months ended June 30, 2011, were reduced by $4.9 million, and approximately $0.05 per share, respectively, due to a pre-tax restructuring charge related to the acquisition of The Rental Store, Inc. as discussed below.

When excluding the pre-tax restructuring charge above, adjusted net earnings per diluted share for the three months ended June 30, 2011, were $0.68, as compared to net earnings per diluted share for the three months ended June 30, 2010, of $0.72. These results include approximately $0.06 per share dilution related to the Company's growth initiatives.

"Our results for the quarter for our total revenues and earnings were within our expectations," said Mark E. Speese, the Company's Chairman and Chief Executive Officer. "Our core rent-to-own customer demand outperformed the comparable period in 2010 even though our customers remain financially constrained by higher fuel and food prices," Speese added. "The revenue from our growth initiatives continues to perform well with RAC Acceptance contributing close to 6% of our total store revenue. We believe our investment in these growth initiatives will provide both revenue and earnings growth in the future," Speese continued. "With our strong cash flow generation, we continue to return value to our stockholders with the repurchase of 2.1 million shares of our common stock in the quarter and an increase in our quarterly cash dividend to $0.16 per share beginning in the third quarter," Speese concluded.

Six Months Ended June 30, 2011, Results
Total revenues for the six months ended June 30, 2011, were $1.440 billion, an increase of $50.0 million from total revenues of $1.390 billion for the same period in the prior year. This 3.6% increase in total revenues was primarily due to an increase in revenue driven by the RAC Acceptance business, offset by a reduction in revenue due to the discontinuation of the financial services business. Same store sales for the six months ended June 30, 2011, decreased 0.1%.

Net earnings and net earnings per diluted share for the six months ended June 30, 2011, were $84.1 million and $1.32, respectively, as compared to $99.3 million and $1.49, respectively, for the same period in the prior year.

Net earnings and net earnings per diluted share for the six months ended June 30, 2011, were impacted by the following significant items, as discussed below:

    •    A $4.9 million pre-tax restructuring charge, or approximately $0.05 per share, related to the acquisition of The Rental Store, Inc.;
    •    A $7.3 million pre-tax impairment charge, or approximately $0.07 per share, related to the discontinuation of the financial services business; and
    •    A $2.8 million pre-tax litigation expense, or approximately $0.03 per share, related to the prospective settlement of wage and hour claims in California.

Collectively, these items reduced net earnings per diluted share by approximately $0.15 for the six months ended June 30, 2011.

When excluding the items above, adjusted net earnings per diluted share for the six months ended June 30, 2011, were $1.47, as compared to net earnings per diluted share for the six months ended June 30, 2010, of $1.49.

Through the six month period ended June 30, 2011, the Company generated cash flow from operations of approximately $171.2 million, while ending the quarter with approximately $74.0 million of cash on hand. During the six month period ended June 30, 2011, the Company repurchased 2,938,702 shares of its common stock for approximately $92.7 million in cash under its common stock repurchase program. To date, the Company has repurchased a total of 26,409,047 shares and has utilized approximately $644.0 million of the $800.0 million authorized by its Board of Directors since the inception of the plan.

Also, reflecting the confidence in its strong cash flows, the Company announced on May 12, 2011, that its Board of Directors approved a 167% increase in its quarterly cash dividend from $0.06 per share to $0.16 per share, beginning with the dividend for the third quarter of 2011.

In addition, on July 14, 2011, the Company announced the completion of the refinancing of its senior credit facility. The new $750 million senior credit facility consists of $250 million in term loans and a $500 million revolving credit facility. Based on the Company's present consolidated leverage ratio, the Company expects an approximate 100 basis point improvement in interest rates on the new credit facility as compared to the prior facility. The facility will mature in July 2016.

2011 Significant Items
Restructuring Charge. During thesecond quarterof 2011, the Company recorded a pre-tax restructuring charge of approximately $4.9 million in connection with the December 2010 acquisition of The Rental Store, Inc. This charge relates to post-acquisition lease terminations. This pre-tax restructuring charge of $4.9 million reduced net earnings per diluted share by approximately $0.05 in both the three month and six month periods ended June 30, 2011.

Financial Services Charge. As previously reported, theCompany recorded an $18.9 million pre-tax impairment charge during the fourth quarter of 2010 related to the discontinuation of the financial services business. The charge with respect to discontinuing the operations of all 331 store locations related primarily to fixed asset disposals, goodwill impairment, loan write-downs, and other miscellaneous items. During the first quarter of 2011, the Company recorded an additional pre-tax impairment charge of $7.3 million related primarily to loan write-downs, fixed asset disposals (store reconstruction), and other miscellaneous items. For the six months ended June 30, 2011, this pre-tax impairment charge of $7.3 million reduced net earnings per diluted share by approximately $0.07.

Settlement of Wage & Hour Claims in California.

As previously reported, the Company recorded a $2.8 million pre-tax litigation expense during the first quarter of 2011 in connection with the settlement of certain putative class actions pending in California alleging various claims, including violations of California wage and hour laws. For the six months ended June 30, 2011, this pre-tax litigation expense of $2.8 million reduced net earnings per diluted share by approximately $0.03.

Rent-A-Center, Inc. will host a conference call to discuss the second quarter results, guidance and other operational matters on Tuesday morning, July 26, 2011, 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 3,020 company-owned stores nationwide and in Canada, Mexico 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 210 rent-to-own stores operating under the trade name of "ColorTyme."