Rent-A-Center, Inc. Reports Third Quarter 2005 Results; Cash Flow From Operations of $87.5 Million; Repurchased 3.9 Million Shares of Common Stock

Business Wire, Oct 24, 2005

PLANO, Texas -- Rent-A-Center, Inc. (the "Company") (Nasdaq:RCII), the nation's largest rent-to-own operator, today announced revenues and net earnings for the quarter ended September 30, 2005.

The Company reported total revenues for the quarter ended September 30, 2005 of $573.5 million, a $3.9 million increase from $569.6 million for the same period in the prior year. This increase of 0.7% in revenues was primarily driven by incremental revenues generated in new and acquired stores, offset by a decrease in same store sales of 0.4%.

Net earnings for the quarter ended September 30, 2005 were $26.0 million, or $0.35 per diluted share, when excluding the expenses for restructuring and the impact of the hurricanes discussed below, representing a decrease of 25.5% from the $0.47 per diluted share, or net earnings of $37.6 million for the same period in the prior year, when excluding the litigation and finance charges discussed below. The decrease in earnings per diluted share is primarily attributable to the decrease in same store sales as well as increases in operating expenses related to new store openings, acquisitions and normal operating costs such as utility and fuel costs, offset by a reduction in the number of the Company's outstanding shares.

Reported net earnings for the quarter ended September 30, 2005 were $11.3 million, or $0.15 per diluted share, when including the $0.20 effect of restructuring expenses and the impact of the hurricanes. Also, as a result of the hurricanes impact, the Company estimates that revenue in the third quarter was lower by approximately $1.7 million.

Total reported revenues for the nine months ended September 30, 2005 increased to $1.756 billion, a 1.6% increase from $1.728 billion for the same period in the prior year. Same store revenues for the nine month period ending September 30, 2005 decreased 2.8%. Net earnings for the nine months ended September 30, 2005 were $108.3 million, or $1.44 per diluted share, when excluding the restructuring expenses, the impact of the hurricanes and the credits for the litigation reversion and tax audit reserve discussed below, representing a decrease of 16.8% from the $1.73 per diluted share, or net earnings of $141.0 million for the same period in the prior year, when excluding the litigation and finance charges discussed below. Reported net earnings for the nine months ended September 30, 2005 were $100.7 million, or $1.34 per diluted share, when including the $0.10 effect of restructuring expenses and the impact of the hurricanes as well as the credits for the tax audit reserve and litigation.

"This quarter, as well as the past year and a half, have been challenging for our customer and for our company due, we believe, to the macroeconomic environment, and more specifically the higher energy prices," commented Mark E. Speese, the Company's Chairman and Chief Executive Officer. "Despite the challenges in the quarter, we saw an improvement in our same store sales trend, generated cash flow from operations of more than $87 million and made significant progress on our store consolidation plan, having closed 100 of the identified stores," Speese continued. "As we prepare to enter 2006, our strategic objectives will continue to be to enhance store level operations, open new stores, pursue opportunistic acquisitions in rent-to-own and other businesses that serve our customer demographic, and enhance stockholder value by repurchasing additional shares of our common stock, while maintaining a solid balance sheet," Speese stated.

During the third quarter of 2005, the Company opened 17 new store locations, acquired two stores as well as accounts from 15 additional locations, consolidated 114 stores into existing locations, sold two stores and closed eight stores. Since September 30, 2005, the Company has opened three new stores, acquired accounts from one location, consolidated seven stores into existing locations, sold 15 stores and closed five stores. For the fourth quarter ending December 31, 2005, the Company intends to open between 20 and 25 new store locations as well as pursue opportunistic acquisitions.

Through the nine month period ended September 30, 2005, the Company generated cash flow from operations of approximately $143.7 million, while ending the quarter with $52.8 million of cash on hand. On August 22, 2005, the Company announced that its Board of Directors increased the authorization for stock repurchases under the Company's common stock repurchase program to $400 million. Through the nine month period ended September 30, 2005, the Company repurchased 4,084,600 shares for $84.1 million in cash under the program and has utilized a total of $321.6 million of the total amount authorized by its Board of Directors since the inception of the plan.

During the third quarter of 2005, the Company recorded a pre-tax restructuring expense of approximately $13.0 million as part of the store consolidation plan announced on September 6, 2005. The costs with respect to these store closings relate primarily to lease terminations of approximately $6.5 million, goodwill impairment of approximately $4.5 million and fixed asset disposals of approximately $1.8 million. This restructuring expense reduced diluted earnings per share in the third quarter of 2005 by $0.12 and for the nine month period ended September 30, 2005 by $0.12.