Rent-A-Center, Inc. Reports 6.1% Decrease In Third Quarter Same Store Sales

Furniture World News

Rent-A-Center, Inc., the nation’s largest rent-to-own operator, announced revenues and earnings for the quarter ended September 30, 2009. Third Quarter 2009 Results Total revenues for the quarter ended September 30, 2009 were $671.3 million, a decrease of $37.5 million from total revenues of $708.8 million for the same period in the prior year. This decrease in revenues was primarily the result of a 6.1% reduction in same store sales, predominantly attributable to a decrease in the number of units per customer and the anticipated revenue attrition from approximately 365 stores that received customer agreements from stores closed in the 2007 restructuring plan. Net earnings and net earnings per diluted share for the quarter ended September 30, 2009 were $36.8 million and $0.55, respectively, as compared to $29.4 million and $0.44, respectively, for the same period in the prior year. Net earnings for the quarter ended September 30, 2008 were reduced by a $200,000 pre-tax expense related to our 2007 restructuring plan as discussed below. The restructuring expense had no impact on the net earnings per diluted share in the third quarter of 2008. “I am pleased with our results for the third quarter, where we met our revenue guidance and exceeded our net earnings per diluted share through our continued focus on managing our costs,” commented Mark E. Speese, the Company's Chairman and Chief Executive Officer. “Both our customer count and our deliveries per store have outperformed the comparable period in 2008 for each month during the third quarter,” Speese stated. “We are encouraged by these trends in our customer traffic, and we remain cautiously optimistic regarding 2010. Accordingly, our 2010 guidance includes flat to slightly increasing total revenue with net earnings per diluted share in the $2.30 to $2.50 range. In addition, our focus on improving our financial services operations in 2009 has resulted in positive results, and as such, we anticipate expanding this business with the opening of approximately 50 locations in 2010,” Speese concluded. Nine Months Ended September 30, 2009 Results Total revenues for the nine months ended September 30, 2009 were $2.079 billion, a decrease of $105.0 million from total revenues of $2.184 billion for the same period in the prior year. This decrease in revenues was primarily the result of a 3.9% reduction in same store sales, predominantly attributable to a decrease in the number of units per customer, plus the impact of the 2007 restructuring plan. Net earnings and net earnings per diluted share for the nine months ended September 30, 2009 were $124.2 million and $1.86, respectively, as compared to $103.5 million and $1.54, respectively, for the same period in the prior year. Net earnings and net earnings per diluted share for the nine months ended September 30, 2009 include $4.9 million, or approximately $0.04 per share, as a result of pre-tax litigation credits related to the Hilda Perez matter as discussed below. Net earnings and net earnings per diluted share for the nine months ended September 30, 2008 were reduced by $3.1 million, or approximately $0.03 per share, as a result of a pre-tax expense related to our 2007 restructuring plan as discussed below. When excluding the items above, adjusted net earnings per diluted share for the nine months ended September 30, 2009 were $1.82, as compared to adjusted net earnings per diluted share for the nine months ended September 30, 2008 of $1.57, an increase of 15.9%. Through the nine month period ended September 30, 2009, the Company generated cash flow from operations of approximately $300.0 million, while ending the quarter with approximately $39.9 million of cash on hand. The Company utilized its cash flow from operations to reduce its outstanding indebtedness by approximately $288.0 million in 2009, or approximately 30% from year end 2008. During the quarter ended September 30, 2009, the Company redeemed its outstanding balance of $75.4 million in aggregate principal amount of its 7½% Senior Subordinated Notes as well as repaid approximately $41.7 million of its senior debt. Significant Items Litigation Credit Related to the Hilda Perez Matter. In November 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 in New Jersey. Under the terms of the settlement, the Company is entitled to 50% of any undistributed monies in the settlement fund. The Company previously recorded during the fourth quarter of 2008 a pre-tax credit in the amount of $2.7 million and additional pre-tax credits in the amount of $3.0 million in the first quarter of 2009 and $1.9 million in the second quarter of 2009, to account for cash payments to the Company representing undistributed monies in the settlement fund to which the Company is entitled pursuant to the terms of the settlement, as well as a refund of costs to administer the settlement previously paid by the Company which were not expended during the administration of the settlement. Through the nine month period ended September 30, 2009, the total pre-tax credit of approximately $4.9 million increased net earnings per diluted share by approximately $0.04. 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 these store closings relate primarily to lease terminations, fixed asset disposals and other miscellaneous items. Rent-A-Center, Inc., headquartered in Plano, Texas, currently operates approximately 3,000 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 215 rent-to-own stores operating under the trade name of "ColorTyme."