Our portfolio of customer agreements was softer than expected in the first quarter.
Mark Speese, CEO, Rent-A-Center

Rent-A-Center (NASDAQ:RCII), the nation's largest rent-to-own operator, today announced total revenues for the quarter ended March 31, 2009 were $728.2 million, a decrease of $28.4 million from total revenues of $756.6 million for the same period in the prior year. This decrease in revenues was primarily the result of a 2.5% reduction in same store sales and the anticipated revenue attrition from approximately 380 stores that received customer agreements from stores closed in the 2007 restructuring plan.

"In the first quarter, we improved our operating profit margin by increasing our gross profit margin on both our rentals and fees and merchandise sales as well as reducing our expenses, resulting in our adjusted earnings per share exceeding our guidance," commented Mark E. Speese, the Company's Chairman and Chief Executive Officer. "Our portfolio of customer agreements was softer than expected in the first quarter; however, we believe April's results point to a more positive trend," Speese stated. "Despite the softness in customer agreements during the first quarter, we believe we are improving our margins and prudently using our cash. As a result, we have increased the lower end of our previous 2009 earnings guidance with diluted earnings per share now at $2.18 to $2.32," Speese ended.

Net earnings and net earnings per diluted share for the quarter ended March 31, 2009 were $45.4 million and $0.68, respectively, as compared to $36.4 million and $0.54, respectively, for the same period in the prior year.

Through the three month period ended March 31, 2009, the Company generated cash flow from operations of approximately $140.0 million, while ending the quarter with approximately $196.0 million of cash on hand. As previously announced on April 6, 2009, the Company provided notice to The Bank of New York Mellon Trust Company, the indenture trustee, of its election to redeem $150.0 million in aggregate principal amount of its 7 ½% Senior Subordinated Notes due May 2010, at a redemption price equal to 100% of the principal amount outstanding, plus accrued interest to the redemption date. The Company expects the redemption to occur on or about May 19, 2009. The Company expects to fund the redemption price primarily with cash on hand, together with amounts available under its senior credit facilities.

Significant Items

Litigation Credit Related to the Hilda Perez Matter. As previously reported, the Company recorded during the fourth quarter of 2006 a pre-tax expense of $58.0 million and an additional pre-tax charge of $51.3 million in the first quarter of 2007, in connection with the settlement of the Hilda Perez v. Rent-A-Center, Inc. matter in New Jersey. In November 2007, we paid an aggregate of $109.3 million, including plaintiffs' attorneys' fees and administration costs, pursuant to the court approved settlement. Under the terms of the settlement, the Company is entitled to 50% of any undistributed monies in the settlement fund. During the fourth quarter of 2008, the parties agreed to an interim distribution to the Company of cash in the amount of $2.7 million from the remaining settlement fund. The Company recorded a $2.7 million pre-tax credit during the fourth quarter of 2008 to account for such payment. During the first quarter of 2009, the Company recorded a $3.0 million pre-tax credit to account for cash payments to the Company representing additional 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. This $3.0 million pre-tax credit increased diluted earnings per share for the three month period ended March 31, 2009 by approximately $0.03.

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 in the first quarter of 2008 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.

SECOND QUARTER 2009 GUIDANCE:

Revenues

The Company expects total revenues to be in the range of $679 million to $694 million.
Store rental and fee revenues are expected to be between $592 million and $604 million.
Total store revenues are expected to be in the range of $670 million to $685 million.
Same store sales are expected to be in the range down 4% to down 6%.
The Company expects to open 10 to 15 new company-owned store locations.