We believe that higher energy costs and the overall difficult retail environment continue to challenge our business, as evidenced by our same store sales
Mark E. Speese, Chairman and CEO
 

Rent-A-Center (RCII) today announced revenues and net earnings for the quarter ended March 31, 2005.

The Company reported total revenues for the quarter ended March 31, 2005 of $601.9 million, a $16.5 million increase from $585.4 million for the same period in the prior year. This increase of 2.8% in revenues was primarily driven by incremental revenues generated in new and acquired stores, offset by a decrease in same store sales of 5.0%.

Net earnings for the quarter ended March 31, 2005 were $42.7 million, or $0.56 per diluted share, when excluding the litigation credit discussed below, representing a decrease of 11.1% from the $0.63 per diluted share, or net earnings of $52.2 million for the same period in the prior year. The decrease in earnings per diluted share is attributable primarily to the decrease in same store sales as well as an increase in operating expenses related to new store openings and acquisitions, offset by a reduction in the number of the Company's outstanding shares.

"Our revenue and earnings per diluted share were within our expectations for the first quarter," commented Mark E. Speese, the Company's Chairman and Chief Executive Officer. "We believe that higher energy costs and the overall difficult retail environment continue to challenge our business, as evidenced by our same store sales. However, we continue to control our expenses on a per store basis as salaries and other expenses were approximately flat year over year. We also generated over $87.0 million in operating cash flow, repaid $60.9 million of our senior secured debt, and continue to invest in our core business and institute initiatives to improve execution at the store level," Speese added.

During the first quarter of 2005, the Company opened 10 new store locations, acquired three stores as well as accounts from 10 additional locations, while consolidating 22 stores into existing locations and selling three stores. Since March 31, 2005, the Company has opened six new stores and acquired two other stores while consolidating five stores into existing locations. For the entire year ending December 31, 2005, the Company intends to open between 70 and 80 new store locations as well as pursue opportunistic acquisitions.

On April 12, 2005, the settlement of the Benjamin Griego, et al. v. Rent-A-Center, Inc., et al/Arthur Carrillo, et al. v. Rent-A-Center, Inc., et al litigation pending in California received final approval from the court. Under the terms of the settlement approved by the court, the Company agreed to pay the plaintiffs' attorneys' fees, as well as an aggregate of $37.5 million in cash, such amount to be distributed to the class of eligible Company customers who entered into rental-purchase agreements with the Company anytime from February 1, 1999 through October 31, 2004, with the Company being entitled to any undistributed monies in the settlement fund up to an aggregate of $8.0 million, and any additional undistributed funds being paid to non-profit organizations. As a result of the response rate to the notice of the settlement mailed to class members on February 7, 2005, the parties agreed that the Company could retain the $8.0 million reversion, rather than deposit it as part of the settlement fund. Accordingly, on April 22, 2005, the Company paid $29.5 million to fund the settlement, as well as $9.0 million in attorneys' fees, for a total of $38.5 million in cash. To record the retention of the $8.0 million reversion, the Company recorded an $8.0 million pre-tax credit during the first quarter of 2005. This pre-tax credit increased diluted earnings per share in the first quarter of 2005 by $0.07, from $0.56 per diluted earnings per share to the reported diluted earnings per share of $0.63. As previously reported, the Company recorded a pre-tax charge of $47.0 million in the third quarter of 2004 to account for the settlement, as well as attorneys' fees.

Rent-A-Center will host a conference call to discuss the first quarter financial results on Tuesday morning, April 26, 2005, at 10:45 a.m. EDT. Audio of the call will be broadcast live. A link to the live webcast will be available from My RTO Portfolio.