RCII
$25.66
Rent-A-Center
($.16)
(.62%)
Earnings Details
2nd Quarter June 2019
Wednesday, August 07, 2019 4:30:00 PM
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Summary

Rent-A-Center Raises Guidance but Remains In-line with Estimates

Rent-A-Center (RCII) reported 2nd Quarter June 2019 earnings of $0.60 per share on revenue of $641.0 million. The consensus earnings estimate was $0.56 per share on revenue of $641.7 million. Revenue fell 2.2% compared to the same quarter a year ago.

The company said it expects 2019 earnings of $2.05 to $2.40 per share on revenue of $2.595 billion to $2.640 billion. The company's previous guidance was earnings of $1.85 to $2.25 per share on revenue of $2.585 billion to $2.630 billion and the current consensus earnings estimate is $2.12 per share on revenue of $2.61 billion for the year ending December 31, 2019.

Rent-A-Center Inc is a rent-to-own operator in North America. It offers household durable goods to customers on a rent-to-own basis including name-brand furniture, electronics, appliances and computers through flexible rental purchase agreements.

Results
Reported Earnings
$0.60
Earnings Whisper
-
Consensus Estimate
$0.56
Reported Revenue
$641.0 Mil
Revenue Estimate
$641.7 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Rent-A-Center, Inc. Reports Second Quarter 2019 Results

Rent-A-Center Reports 5.8% Same Store Sales, Strong Earnings and Cash Flow

Refinances Debt and Increases 2019 Guidance

PLANO, Texas--(BUSINESS WIRE)--Rent-A-Center, Inc. (the "Company" or "Rent-A-Center") (NASDAQ/NGS: RCII) today announced results for the quarter ended June 30, 2019.

"Another solid quarter of results on both the top and bottom lines proves the execution of our strategic plan has been a success. Consolidated same stores sales increased 5.8 percent and our value proposition changes together with cost savings initiatives continue to drive strong EBITDA improvements," stated Mitch Fadel, Chief Executive Officer of Rent-A-Center.

Mr. Fadel continued, "We also completed the refinancing of our credit facility and redemption of our outstanding senior notes. As of August 5, 2019, our outstanding debt was $280 million, approximately $260 million lower than our outstanding debt as of June 30, 2019. As a result of our improved performance and the refinancing, our Board of Directors approved the initiation of a quarterly cash dividend of $0.25 cents per share on our common stock starting in the third quarter of 2019, as previously announced."

"Additionally, we are very excited about our recently announced agreement to acquire Merchants Preferred, a nationwide virtual rent-to-own provider. The transaction is expected to close in August and we believe this acquisition accelerates our existing virtual rent-to-own capabilities. Our improved financial health and the pending acquisition will be a growth catalyst for us in the over $20 billion dollar virtual rent-to-own market in the coming years," Mr. Fadel concluded.

Refinancing Completed

On August 5, 2019, the Company entered into new credit agreements with JPMorgan Chase Bank, N.A., as administrative agent and the several lenders party thereto providing for a five-year $300 million asset based revolving credit facility and a seven-year $200 million Term Loan B. The Company borrowed the full $200 million of initial term loans available under the Term Loan B and drew $80 million under the ABL revolving credit facility and used the proceeds plus cash on hand to prepay in full and terminate commitments under the Company's existing senior credit facility, and satisfy and discharge the Company's outstanding 6.625% notes and 4.75% notes. Following completion of the refinancing, outstanding indebtedness is $280 million.

Merchants Preferred Definitive Agreement to Acquire

On July 15, 2019, the Company announced it had entered into a definitive agreement to acquire substantially all of the assets of C/C Financial Corp d/b/a Merchants Preferred ("Merchants Preferred"), a nationwide virtual rent-to-own provider with approximately 2,500 locations and generating approximately $80 million in revenue during the last twelve months, as of June 30, 2019. The acquisition is expected to close in August.

Consolidated Overview

Results for the second quarter of 2019 are excluding special items and compared to the second quarter of last year unless otherwise noted.

On a consolidated basis, total revenues of $655.9 million were flat year over year driven by a consolidated same store sales increase of 5.8 percent offset by refranchising over 100 locations since the first quarter of 2018 and closures of certain Core U.S. stores. Net earnings and diluted earnings per share, on a GAAP basis, were $94.5 million and $1.70 compared to net earnings and diluted earnings per share of $13.8 million and $0.25 in the second quarter of 2018.

Special items in the second quarter of $(77.5) million impacting adjusted EBITDA primarily included proceeds from the Vintage merger termination settlement, net of associated costs, cost savings initiatives, and store closures.

Excluding special items, the Company’s diluted earnings per share were $0.60 and the Company generated $67.4 million in adjusted EBITDA in the second quarter, compared to diluted earnings per share of $0.47 and adjusted EBITDA of $61.1 million in the second quarter of 2018.

For the six months ended June 30, 2019, the Company generated $185.4 million of cash from operations. The Company ended the second quarter with $353.1 million of cash and cash equivalents compared to $116.8 million as of the end of the second quarter of 2018. The Company's net debt to adjusted EBITDA ratio ended the quarter at 0.8 times.

Segment Operating Performance

CORE U.S. second quarter revenues of $451.1 million decreased 1.0 percent due to the refranchising efforts and rationalization of the Core U.S. store base partially offset by a same store sales increase of 5.6 percent. Gross profit as a percent of total revenue versus the prior year decreased 180 basis points due to changes in the value proposition. Labor and other store expenses decreased by $12.2 million and $11.6 million, respectively, primarily driven by lower store count and our cost savings initiatives. As a percent of revenue, skip/stolen losses were 3.2 percent, 50 basis points lower than the first quarter and 10 basis points higher versus the prior year. Adjusted EBITDA was $73.0 million and as a percent of total revenue increased 280 basis points versus the prior year.

ACCEPTANCE NOW second quarter revenues of $176.4 million decreased 1.5 percent primarily due to store closures and partially offset by a same store sales increase of 6.0 percent. Gross profit as a percent of total revenue versus prior year decreased 250 basis points due to changes in the value proposition. Labor and other store expenses increased $3.8 million, primarily driven by higher skip/stolen losses. As a percent of revenue, skip/stolen losses were 9.6 percent, 40 basis points lower than the first quarter and 190 basis points higher versus the prior year. Adjusted EBITDA was $23.1 million and as a percent of total revenue decreased 350 basis points versus the prior year.

MEXICO second quarter revenues increased 8.7 percent on a constant currency basis. Gross profit as a percent of total revenue versus the prior year decreased 10 basis points. Adjusted EBITDA was $1.6 million and as a percent of total revenue increased 250 basis points versus the prior year.

FRANCHISING second quarter revenues of $14.9 million increased 71.3 percent primarily due to higher store count with over 80 locations refranchised in the past 12 months. Adjusted EBITDA was $1.8 million, a decrease of $0.1 million versus the prior year.

CORPORATE second quarter operating expenses decreased $1.4 million compared to the prior year primarily due to the realization of our cost savings initiatives partially offset by executive severance costs and higher incentive compensation.

SAME STORE SALES

(Unaudited)

 

Table 1

 

 

Period

 

Core U.S.

 

Acceptance Now

 

Mexico

 

Total

Three Months Ended June 30, 2019 (1)

 

5.6

%

 

6.0

%

 

10.2

%

 

5.8

%

Three Months Ended March 31, 2019 (1)

 

5.8

%

 

10.1

%

 

13.1

%

 

6.8

%

Three Months Ended June 30, 2018 (1)

 

3.5

%

 

3.7

%

 

7.1

%

 

3.7

%

Note: Same store sale methodology - Same store sales generally represents revenue earned in stores that were operated by us for 13 months or more and are reported on a constant currency basis. The Company excludes from the same store sales base any store that receives a certain level of customer accounts from closed stores or acquisitions. The receiving store will be eligible for inclusion in the same store sales base in the 24th full month following account transfer.

(1) Given the severity of the 2017 hurricanes, the Company instituted a change to the same store sales store selection starting in the month of September 2017, excluding geographically impacted regions for 18 months.

2019 Guidance (1)

The Company is providing the following guidance for its 2019 fiscal year which has been updated to reflect the impact of the completion of its refinancing on August 5, 2019 and improved performance.

  • Consolidated revenues of $2.595 billion to $2.640 billion
    • Core U.S. revenues of $1.800 billion to $1.825 billion
    • Acceptance NOW revenues of $700 million to $715 million
  • Consolidated Same Store Sales increases in the mid-single digits
  • Adjusted EBITDA of $240 million to $265 million
  • Non-GAAP diluted earnings per share of $2.05 to $2.40
  • Free cash flow of $200 million to $225 million (2)
  • Net debt of $195 million to $165 million
  • Net debt to EBITDA ratio of 0.90x to 0.60x (3)

(1) Guidance does not include the impact of new franchising transactions beyond the transactions completed in the second quarter of 2019 or the pending acquisition of Merchants Preferred.

(2) Free cash flow defined as net cash provided by operating activities less purchase of property assets (reference table 3). Free cash flow range includes approximately $80 million in pre-tax proceeds, or approximately $60 million in after-tax proceeds, relating to the merger termination settlement.

(3) Net debt to EBITDA ratio defined as outstanding debt less cash divided by trailing twelve months EBITDA.

Non-GAAP Reconciliation

To supplement the Company's financial results presented on a GAAP basis, Rent-A-Center uses the non-GAAP measures ("special items”) indicated in Table 2 below, which primarily excludes financial impacts in the second quarter of 2019 related to the settlement of all litigation with Vintage Rodeo Parent, LLC, Vintage Rodeo Acquisition, Inc., Vintage Capital Management, LLC and B. Riley Financial, Inc. relating to the termination of the Agreement and Plan of Merger (the "Merger Agreement") among Rent-A-Center Vintage Rodeo Parent, LLC, Vintage Rodeo Acquisition, Inc. and Rent-A-Center, insurance proceeds related to the 2017 hurricanes, store closures, state tax audit assessments, and cost savings initiatives. Gains or charges related to store closures will generally recur with the occurrence of these events in the future. The presentation of these financial measures is not in accordance with, or an alternative for, accounting principles generally accepted in the United States and should be read in conjunction with the Company's consolidated financial statements prepared in accordance with GAAP. Rent-A-Center management believes that excluding special items from the GAAP financial results provides investors a clearer perspective of the Company's ongoing operating performance and a more relevant comparison to prior period results. This press release also refers to the non-GAAP measures adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) and Free Cash Flow (net cash provided by operating activities less purchase of property assets). Reconciliation of adjusted EBITDA and Free Cash Flow to the most comparable GAAP measures are provided in Tables 3 and 4, below.

The Company believes that presentation of adjusted EBITDA is useful to investors as, among other things, this information impacts certain financial covenants under the Company's credit agreements. The Company believes that presentation of Free Cash Flow provides investors with meaningful additional information regarding the Company's liquidity. While management believes these non-GAAP financial measures are useful in evaluating the Company, 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, these non-GAAP financial measures may differ from similar measures presented by other companies.

Reconciliation of net earnings to net earnings excluding special items:

Table 2

Three Months Ended June 30,

 

2019

 

2018

(in thousands, except per share data)

Amount

 

Per Share

 

Amount

 

Per Share

Net earnings

$

94,455

 

 

$

1.70

 

 

$

13,753

 

 

$

0.25

 

Special items, net of taxes:

 

 

 

 

 

 

 

Other (gains) and charges (1)

(60,113

)

 

(1.09

)

 

10,830

 

 

0.20

 

Discrete income tax items

(818

)

 

(0.01

)

 

972

 

 

0.02

 

Net earnings excluding special items

$

33,524

 

 

$

0.60

 

 

$

25,555

 

 

$

0.47

 

(1) Other gains and charges for the three months ended June 30, 2019 primarily includes financial impacts, net of tax, related to the merger termination settlement and insurance proceeds for the 2017 hurricanes, partially offset by costs and fees related to the merger termination, store closures, state tax audit assessments, and cost savings initiatives. Other charges for the three months ended June 30, 2018 primarily includes financial impacts, net of tax, related to cost savings initiatives, including reductions in overhead and supply chain, incremental legal and advisory fees, store closures, and a favorable contract termination settlement. Charges related to store closures are primarily comprised of losses on rental merchandise, lease impairments, employee severance, asset disposals, and miscellaneous costs incurred as a result of the closures.

Reconciliation of net cash provided by operations to free cash flow:

Table 3

Six Months Ended June 30,

(In thousands)

2019

 

2018

Net cash provided by operating activities

$

185,418

 

 

$

142,906

 

Purchase of property assets

(5,088

)

 

(15,695

)

Hurricane insurance recovery proceeds

995

 

 

 

Free cash flow

$

181,325

 

 

$

127,211

 

 

 

 

 

Proceeds from sale of stores

$

13,792

 

 

$

14,792

 

Acquisitions of businesses

(155

)

 

(761

)

Free cash flow including acquisitions and divestitures

$

194,962

 

 

$

141,242

 

 

Webcast Information

Rent-A-Center, Inc. will host a conference call to discuss the second quarter results, guidance and other operational matters on Thursday morning, August 8, 2019, at 8:30 a.m. ET. For a live webcast of the call, visit https://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. Residents of the United States and Canada can listen to the call by dialing (800) 399-0012. International participants can access the call by dialing (404) 665-9632.

About Rent-A-Center, Inc.

A rent-to-own industry leader, Plano, Texas-based, Rent-A-Center, Inc., is focused on improving the quality of life for its customers by providing them the opportunity to obtain ownership of high-quality, durable products such as consumer electronics, appliances, computers, furniture and accessories, under flexible rental purchase agreements with no long-term obligation. The Company owns and operates approximately 2,200 stores in the United States, Mexico, and Puerto Rico, and approximately 1,100 Acceptance Now kiosk locations in the United States and Puerto Rico. Rent-A-Center Franchising International, Inc., a wholly owned subsidiary of the Company, is a national franchiser of approximately 330 rent-to-own stores operating under the trade names of "Rent-A-Center", "ColorTyme", and "RimTyme". For additional information about the Company, please visit our website at www.rentacenter.com.

Forward-Looking Statements

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," "predict," "continue," "should," "anticipate," "believe," or “confident,” or the negative thereof or variations thereon or similar terminology. The Company believes that the expectations reflected in such forward-looking statements are accurate. However, there can be no assurance that such expectations will occur. The Company's actual future performance could differ materially from such statements. Factors that could cause or contribute to such differences include, but are not limited to: the general strength of the economy and other economic conditions affecting consumer preferences and spending; factors affecting the disposable income available to the Company's current and potential customers; changes in the unemployment rate; difficulties encountered in improving the financial and operational performance of the Company's business segments, including its ability to execute its franchise strategy; risks associated with pricing changes and strategies being deployed in the Company's businesses; the Company's ability to continue to realize benefits from its initiatives regarding cost-savings and other EBITDA enhancements, efficiencies and working capital improvements; the Company's ability to continue to effectively operate and execute its strategic initiatives; failure to manage the Company's store labor and other store expenses; disruptions caused by the operation of the Company's store information management system; the Company's ability to satisfy all conditions required to successfully complete the acquisition of substantially all the assets and assumption of certain liabilities of C/C Financial Corp., a Delaware Corporation d/b/a Merchants Preferred ("Merchants Preferred" and the acquisition thereof, the "Merchants Preferred Acquisition"); the Company's ability to realize the strategic benefits from the Merchants Preferred Acquisition, including achieving expected growth rates, synergies and operating efficiencies from the Company's acquisition; the Company's ability to successfully integrate Merchants Preferred's operations which may be more difficult, time-consuming or costly than expected; operating costs, loss of retail partners and business disruption arising from the Merchants Preferred Acquisition; the ability to retain certain key employees at Merchants Preferred; risks related to Merchants Preferred's virtual rent-to-own business; the Company's transition to more-readily scalable, “cloud-based” solutions; the Company's ability to develop and successfully implement digital or E-commerce capabilities, including mobile applications; disruptions in the Company's supply chain; limitations of, or disruptions in, the Company's distribution network; rapid inflation or deflation in the prices of the Company's products; the Company's ability to execute and the effectiveness of a store consolidation, including the Company's ability to retain the revenue from customer accounts merged into another store location as a result of a store consolidation; the Company's available cash flow and its ability to generate sufficient cash flow to pay dividends; the Company's ability to identify and successfully market products and services that appeal to its customer demographic; consumer preferences and perceptions of the Company's brand; the Company's ability to retain the revenue associated with acquired customer accounts and enhance the performance of acquired stores; the Company's ability to enter into new and collect on its rental or lease purchase agreements; the passage of legislation adversely affecting the Rent-to-Own industry; the Company's compliance with applicable statutes or regulations governing its transactions; changes in interest rates; capital market conditions, including availability of funding sources for the Company; changes in the Company's credit ratings; changes in tariff policies; adverse changes in the economic conditions of the industries, countries or markets that the Company serves; information technology and data security costs; the impact of any breaches in data security or other disturbances to the Company's information technology and other networks and the Company's ability to protect the integrity and security of individually identifiable data of its customers and employees; changes in estimates relating to self-insurance liabilities and income tax and litigation reserves; changes in the Company's effective tax rate; fluctuations in foreign currency exchange rates; the Company's ability to maintain an effective system of internal controls; litigation or administrative proceedings to which the Company is or may be a party to from time to time; 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, 2018, and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2019. 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 hereof or to reflect the occurrence of unanticipated events.

Rent-A-Center, Inc. and Subsidiaries

STATEMENT OF EARNINGS HIGHLIGHTS - UNAUDITED

 

Table 4

Three Months Ended June 30,

 

 

2019

 

2019

 

2018

 

2018

 

 

Before

 

After

 

Before

 

After

 

 

Special Items

 

Special Items

 

Special Items

 

Special Items

 

 

(Non-GAAP

 

(GAAP

 

(Non-GAAP

 

(GAAP

 

(In thousands, except per share data)

Earnings)

 

Earnings)

 

Earnings)

 

Earnings)

 

Total revenues

$

655,925

 

 

$

655,925

 

 

$

655,730

 

 

$

655,730

 

 

Operating profit

52,292

 

(1)

129,829

 

 

43,640

 

(3)

27,151

 

 

Net earnings

33,524

 

(1)(2)

94,455

 

 

25,555

 

(3)(4)

13,753

 

 

Diluted earnings per common share

$

0.60

 

(1)(2)

$

1.70

 

 

$

0.47

 

(3)(4)

$

0.25

 

 

Adjusted EBITDA

$

67,413

 

 

$

67,413

 

 

$

61,068

 

 

$

61,068

 

 

Reconciliation to Adjusted EBITDA:

 

 

 

 

 

 

 

 

Earnings before income taxes

$

44,197

 

(1)

$

121,734

 

 

$

33,036

 

(3)

$

16,547

 

 

Add back:

 

 

 

 

 

 

 

 

Other charges

 

 

(77,537

)

 

 

 

16,489

 

 

Interest expense, net

8,095

 

 

8,095

 

 

10,604

 

 

10,604

 

 

Depreciation, amortization and impairment of intangibles

15,121

 

 

15,121

 

 

17,428

 

 

17,428

 

 

Adjusted EBITDA

$

67,413

 

 

$

67,413

 

 

$

61,068

 

 

$

61,068

 

 

(1) Excludes the effects of approximately $77.5 million of pre-tax gains including $92.5 million related to the merger termination settlement, and $1.0 million of insurance proceeds related to the 2017 hurricanes, partially offset by pre-tax charges including $10.2 million in merger termination and other incremental legal and professional fees, $2.9 million related to store closure costs, $1.9 million related to state tax audit assessments, and $1.0 million related to cost savings initiatives. These charges decreased net earnings and net earnings per diluted share for the three months ended June 30, 2019, by approximately $60.1 million and $1.09, respectively.

(2) Excludes the effects of $(0.8) million of discrete income tax adjustments.

(3) Excludes the effects of approximately $16.5 million of pre-tax charges including $7.0 million related to cost savings initiatives, $6.6 million in incremental legal and advisory fees, and $4.4 million related to store closure costs, partially offset by a $(1.5) million favorable contract termination settlement. These charges increased net earnings and net earnings per diluted share for the three months ended June 30, 2018, by approximately $10.8 million and $0.20, respectively.

(4) Excludes the effects of $1.0 million of discrete income tax adjustments.

SELECTED BALANCE SHEET HIGHLIGHTS - UNAUDITED

 

Table 5

June 30,

 

(In thousands)

2019

 

2018

 

Cash and cash equivalents

$

353,139

 

 

$

116,833

 

 

Receivables, net

65,666

 

 

69,678

 

 

Prepaid expenses and other assets

36,251

 

 

53,566

 

 

Rental merchandise, net

 

 

 

 

On rent

625,865

 

 

640,637

 

 

Held for rent

113,253

 

 

141,660

 

 

Operating lease right-of-use assets

265,767

 

 

 

 

Goodwill

56,815

 

 

56,781

 

 

Total assets

1,744,213

 

 

1,366,287

 

 

 

 

 

 

 

Operating lease liabilities

$

271,635

 

 

$

 

 

Senior debt, net

 

 

38,031

 

 

Senior notes, net

540,676

 

 

539,397

 

 

Total liabilities

1,352,323

 

 

1,097,950

 

 

Stockholders' equity

391,890

 

 

268,337

 

 

Rent-A-Center, Inc. and Subsidiaries

 

CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED

 

Table 6

Three Months Ended June 30,

 

(In thousands, except per share data)

2019

 

2018

 

Revenues

 

 

 

 

Store

 

 

 

 

Rentals and fees

$

551,680

 

 

$

562,403

 

 

Merchandise sales

70,842

 

 

64,990

 

 

Installment sales

17,270

 

 

17,374

 

 

Other

1,244

 

 

2,271

 

 

Total store revenues

641,036

 

 

647,038

 

 

Franchise

 

 

 

 

Merchandise sales

10,673

 

 

4,880

 

 

Royalty income and fees

4,216

 

 

3,812

 

 

Total revenues

655,925

 

 

655,730

 

 

Cost of revenues

 

 

 

 

Store

 

 

 

 

Cost of rentals and fees

155,658

 

 

156,041

 

 

Cost of merchandise sold

76,034

 

 

65,562

 

 

Cost of installment sales

5,682

 

 

5,617

 

 

Total cost of store revenues

237,374

 

 

227,220

 

 

Franchise cost of merchandise sold

10,480

 

 

4,624

 

 

Total cost of revenues

247,854

 

 

231,844

 

 

Gross profit

408,071

 

 

423,886

 

 

Operating expenses

 

 

 

 

Store expenses

 

 

 

 

Labor

152,899

 

 

164,172

 

 

Other store expenses

149,225

 

 

156,854

 

 

General and administrative expenses

38,534

 

 

41,792

 

 

Depreciation, amortization and impairment of intangibles

15,121

 

 

17,428

 

 

Other (gains) and charges

(77,537

)

(1)

16,489

 

(3)

Total operating expenses

278,242

 

 

396,735

 

 

Operating profit

129,829

 

 

27,151

 

 

Interest expense

10,092

 

 

10,806

 

 

Interest income

(1,997

)

 

(202

)

 

Earnings before income taxes

121,734

 

 

16,547

 

 

Income tax expense

27,279

 

(2)

2,794

 

(4)

Net earnings

$

94,455

 

 

$

13,753

 

 

Basic weighted average shares

54,153

 

 

53,450

 

 

Basic earnings per common share

$

1.74

 

 

$

0.26

 

 

Diluted weighted average shares

55,706

 

 

54,295

 

 

Diluted earnings per common share

$

1.70

 

 

$

0.25

 

 

(1)

Includes pre-tax gains of $92.5 million related to the merger termination settlement, and $1.0 million of insurance proceeds related to the 2017 hurricanes, partially offset by pre-tax charges including $10.2 million in merger termination and other incremental legal and professional fees, $2.9 million related to store closure costs, $1.9 million related to state tax audit assessments, and $1.0 million related to cost savings initiatives.

(2)

Includes $(0.8) million of discrete income tax adjustments.

(3)

Includes pre-tax charges of $7.0 million related to cost savings initiatives, $6.6 million in incremental legal and advisory fees, and $4.4 million related to store closure costs, partially offset by a $(1.5) million favorable contract termination settlement.

(4)

Includes $1.0 million of discrete income tax adjustments.

Rent-A-Center, Inc. and Subsidiaries

 

SEGMENT INFORMATION HIGHLIGHTS - UNAUDITED

 

Table 7

Three Months Ended June 30,

 

(In thousands)

2019

 

2018

 

Revenues

 

 

 

 

Core U.S.

$

451,096

 

 

$

455,720

 

 

Acceptance Now

176,389

 

 

179,011

 

 

Mexico

13,551

 

 

12,307

 

 

Franchising

14,889

 

 

8,692

 

 

Total revenues

$

655,925

 

 

$

655,730

 

 

 

 

 

 

 

 

 

 

 

Table 8

Three Months Ended June 30,

 

(In thousands)

2019

 

2018

 

Gross profit

 

 

 

 

Core U.S.

$

313,871

 

 

$

325,219

 

 

Acceptance Now

80,380

 

 

86,050

 

 

Mexico

9,411

 

 

8,549

 

 

Franchising

4,409

 

 

4,068

 

 

Total gross profit

$

408,071

 

 

$

423,886

 

 

 

 

 

 

 

 

 

 

 

Table 9

Three Months Ended June 30,

 

(In thousands)

2019

 

2018

 

Operating profit

 

 

 

 

Core U.S.

$

64,925

 

(1)

$

43,527

 

(3)

Acceptance Now

22,734

 

 

29,157

 

(4)

Mexico

1,474

 

 

887

 

 

Franchising

1,803

 

 

1,909

 

 

Total segments

90,936

 

 

75,480

 

 

Corporate

38,893

 

(2)

(48,329

)

(5)

Total operating profit

$

129,829

 

 

$

27,151

 

 

(1)

Includes approximately $3.0 million of pre-tax charges primarily related to $2.9 million for store closure costs, and $1.1 million related to cost savings initiatives, partially offset by $1.0 million of insurance proceeds related to the 2017 hurricanes.

(2)

Includes approximately $80.5 million of pre-tax gains primarily related to $92.5 million for the merger termination settlement, and $0.1 million related to cost savings initiatives, partially offset by $10.2 million in merger termination and other incremental legal and professional fees, and $1.9 million related to state tax audit assessments.

(3)

Includes approximately $11.4 million of pre-tax charges primarily related to $7.0 million in cost savings initiatives and $4.4 million for store closure plans.

(4)

Includes approximately $0.1 million of pre-tax charges primarily related to cost savings initiatives.

(5)

Includes approximately $5.0 million of pre-tax charges primarily related to $6.6 million for incremental legal and advisory fees, partially offset by credit adjustments of $(1.5) million and $(0.1) million related to a favorable contract termination settlement and cost savings initiatives, respectively.

Table 10

Three Months Ended June 30,

 

(In thousands)

2019

 

2018

 

Depreciation, amortization and impairment of intangibles

 

 

 

 

Core U.S.

$

5,110

 

 

$

6,440

 

 

Acceptance Now

313

 

 

432

 

 

Mexico

95

 

 

273

 

 

Franchising

9

 

 

44

 

 

Total segments

5,527

 

 

7,189

 

 

Corporate

9,594

 

 

10,239

 

 

Total depreciation, amortization and impairment of intangibles

$

15,121

 

 

$

17,428

 

 

Table 11

Three Months Ended June 30,

 

(In thousands)

2019

 

2018

 

Capital expenditures

 

 

 

 

Core U.S.

$

907

 

 

$

4,325

 

 

Acceptance Now

54

 

 

35

 

 

Mexico

27

 

 

35

 

 

Total segments

988

 

 

4,395

 

 

Corporate

1,592

 

 

2,651

 

 

Total capital expenditures

$

2,580

 

 

$

7,046

 

 

Table 12

On Rent at June 30,

 

Held for Rent at June 30,

 

(In thousands)

2019

 

2018

 

2019

 

2018

 

Rental merchandise, net

 

 

 

 

 

 

 

 

Core U.S.

$

392,904

 

 

$

377,142

 

 

$

107,778

 

 

$

135,563

 

 

Acceptance Now

216,988

 

 

248,510

 

 

982

 

 

1,336

 

 

Mexico

15,973

 

 

14,985

 

 

4,493

 

 

4,761

 

 

Total rental merchandise, net

$

625,865

 

 

$

640,637

 

 

$

113,253

 

 

$

141,660

 

 

Table 13

June 30,

 

(In thousands)

2019

 

2018

 

Assets

 

 

 

 

Core U.S.

$

922,482

 

 

$

703,499

 

 

Acceptance Now

281,835

 

 

314,773

 

 

Mexico

36,605

 

 

27,540

 

 

Franchising

7,159

 

 

4,434

 

 

Total segments

1,248,081

 

 

1,050,246

 

 

Corporate

496,132

 

 

316,041

 

 

Total assets

$

1,744,213

 

 

$

1,366,287

 

 

 

Rent-A-Center, Inc. and Subsidiaries

LOCATION ACTIVITY - UNAUDITED

 

Table 14

Three Months Ended June 30, 2019

 

Core U.S.

 

Acceptance Now Staffed

 

Acceptance Now Virtual

 

Mexico

 

Franchising

 

Total

Locations at beginning of period

2,093

 

 

1,038

 

 

94

 

 

122

 

 

318

 

 

3,665

 

New location openings

 

 

50

 

 

8

 

 

 

 

 

 

58

 

Conversions and refranchising

(20

)

 

(26

)

 

26

 

 

 

 

20

 

 

 

Closed locations

 

 

 

 

 

 

 

 

 

 

 

Merged with existing locations

(35

)

 

(31

)

 

(16

)

 

 

 

 

 

(82

)

Sold or closed with no surviving location

(3

)

 

 

 

 

 

 

 

(4

)

 

(7

)

Locations at end of period

2,035

 

 

1,031

 

 

112

 

 

122

 

 

334

 

 

3,634

 

Table 15

Three Months Ended June 30, 2018

 

Core U.S.

 

Acceptance Now Staffed

 

Acceptance Now Virtual

 

Mexico

 

Franchising

 

Total

Locations at beginning of period

2,287

 

 

1,114

 

 

129

 

 

123

 

 

252

 

 

3,905

 

New location openings

 

 

33

 

 

1

 

 

 

 

 

 

34

 

Conversions and refranchising

(4

)

 

1

 

 

(1

)

 

 

 

4

 

 

 

Closed locations

 

 

 

 

 

 

 

 

 

 

 

Merged with existing locations

(44

)

 

(24

)

 

(10

)

 

 

 

 

 

(78

)

Sold or closed with no surviving location

(6

)

 

 

 

 

 

 

 

(8

)

 

(14

)

Locations at end of period

2,233

 

 

1,124

 

 

119

 

 

123

 

 

248

 

 

3,847

 

 

Rent-A-Center, Inc.
Maureen Short
EVP, Chief Financial Officer
972-801-1899
maureen.short@rentacenter.com

Source: Rent-A-Center, Inc.