þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) | |
OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
For the fiscal year ended December 31, 2004 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) | |
OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 45-0491516 | |
(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer
Identification No.) |
Aggregate market value of the 67,199,548 shares of Common Stock held by non-affiliates of the registrant at the closing sales price on June 30, 2004 | $2,011,282,472 | |
Number of shares of Common Stock outstanding as of the close of business on March 8, 2005: | 74,591,020 |
i
Item 1. | Business |
1
| enhancing the operations and profitability in our store locations; | |
| opening new and acquiring existing rent-to-own stores both in the United States and internationally; | |
| expansion into additional lines of business offering products and services primarily designed to appeal to our customer demographic; and | |
| building our national brand. |
Enhancing Store Operations |
| use consumer focused advertising, including direct mail, television and print media, while also utilizing our new business relationships, such as our strategic alliances with a NASCAR racing team, McDonalds and Jackson-Hewitt, to increase store traffic and expand our customer base; | |
| expand the offering of product lines to appeal to more customers to increase the number of product rentals and grow our customer base; | |
| evaluate other growth strategies, including the entry into additional lines of business offering products and services designed to appeal to our customer demographic; | |
| employ strict store-level cost control; | |
| analyze and evaluate store operations against key performance indicators; and | |
| use a revenue and profit based incentive pay plan. |
Opening New and Acquiring Existing Rent-To-Own Stores |
2
2004 | 2003 | 2002 | |||||||||||
New store openings
|
94 | 101 | 70 | ||||||||||
Acquired stores remaining open
|
191 | 160 | 83 | ||||||||||
Acquired stores closed and accounts merged with existing stores
|
111 | 220 | 126 | ||||||||||
Closed stores
|
|||||||||||||
Merged with existing stores
|
48 | 20 | 23 | ||||||||||
Sold
|
10 | | 4 | ||||||||||
Total approximate purchase price of acquisitions
|
$ | 195.2 million (1) | $ | 126.1 million | $ | 59.5 million |
(1) | The total purchase price includes non-cash consideration of approximately $23.8 million in common stock issued and approximately $6.1 million in fair value assigned to the stock options assumed in connection with the acquisition of Rent Rite, Inc. |
Expansion into Complementary Lines of Business |
3
Building Our National Brand |
4
Number of Stores
Company
Location
Owned
Franchised
60
6
58
6
37
1
163
5
40
2
41
3
18
1
4
177
14
117
14
12
3
8
6
120
7
111
6
24
32
17
43
4
45
4
23
9
62
8
61
6
112
15
4
28
2
72
9
6
4
10
17
7
14
2
42
8
15
9
140
13
110
12
2
186
5
42
14
26
7
131
3
29
18
1
46
4
5
102
2
281
58
15
2
7
60
9
42
10
20
1
21
*
5
5
2,875
313
* | Represents stores operated by Get It Now, LLC, one of our subsidiaries. |
| Represents stores operated by Rent-A-Centre, Ltd., one of our subsidiaries. |
Product Selection |
5
Rental Purchase Agreements |
Product Turnover |
Customer Service |
6
Collections |
7
8
9
10
State Regulation |
Federal Legislation |
11
12
13
14
| quarterly variations in our results of operations, which may be impacted by, among other things, changes in same store sales and when and how many rent-to-own stores we acquire or open; | |
| quarterly variations in our competitors results of operations; | |
| changes in earnings estimates or buy/sell recommendations by financial analysts; | |
| the stock price performance of comparable companies; and | |
| general market conditions or market conditions specific to particular industries. |
15
Item 2. | Properties |
Item 3. | Legal Proceedings |
16
17
18
19
20
Item 4. | Submission of Matters to a Vote of Security Holders |
21
Item 5. | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
2004 | High | Low | ||||||
Fourth Quarter
|
$ | 26.890 | $ | 22.000 | ||||
Third Quarter
|
31.600 | 24.700 | ||||||
Second Quarter
|
33.930 | 27.630 | ||||||
First Quarter
|
33.342 | 27.030 |
2003 | High | Low | ||||||
Fourth Quarter
|
$ | 35.120 | $ | 28.910 | ||||
Third Quarter
|
33.100 | 26.748 | ||||||
Second Quarter
|
30.736 | 21.352 | ||||||
First Quarter
|
22.920 | 18.040 |
Maximum Dollar | ||||||||||||||||
Total Number of | Value that May | |||||||||||||||
Shares Purchased as | Yet Be Purchased | |||||||||||||||
Total Number | Average Price | Part of Publicly | Under the Plans | |||||||||||||
of Shares | Paid per Share | Announced | or Programs | |||||||||||||
Period | Purchased | (including fees) | Plans or Programs | (including fees) | ||||||||||||
October 1 through October 31
|
350,000 | $ | 25.2039 | 350,000 | $ | 94,362,487 | ||||||||||
November 1 through November 30
|
1,295,700 | $ | 24.6608 | 1,295,700 | $ | 62,409,452 | ||||||||||
December 1 through December 31
|
0 | $ | 0.0000 | 0 | $ | 62,409,452 | ||||||||||
Total
|
1,645,700 | $ | 24.7763 | 1,645,700 | $ | 62,409,452 | ||||||||||
22
Item 6. | Selected Financial Data |
Year Ended December 31, | ||||||||||||||||||||||
2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||||
Consolidated Statements of Earnings
|
||||||||||||||||||||||
Revenues
|
||||||||||||||||||||||
Store
|
||||||||||||||||||||||
Rentals and fees
|
$ | 2,071,866 | $ | 1,998,952 | $ | 1,828,534 | $ | 1,650,851 | $ | 1,459,664 | ||||||||||||
Merchandise sales
|
166,594 | 152,984 | 115,478 | 94,733 | 81,166 | |||||||||||||||||
Installment sales
|
24,304 | 22,203 | 6,137 | | | |||||||||||||||||
Other
|
3,568 | 3,083 | 2,589 | 3,476 | 3,018 | |||||||||||||||||
Franchise
|
||||||||||||||||||||||
Merchandise sales
|
41,398 | 45,057 | 51,514 | 53,584 | 51,769 | |||||||||||||||||
Royalty income and fees
|
5,525 | 5,871 | 5,792 | 5,884 | 5,997 | |||||||||||||||||
Total revenue
|
2,313,255 | 2,228,150 | 2,010,044 | 1,808,528 | 1,601,614 | |||||||||||||||||
Operating expenses
|
||||||||||||||||||||||
Direct store expenses
|
||||||||||||||||||||||
Cost of rentals and fees
|
450,035 | 432,696 | 383,400 | 343,197 | 299,298 | |||||||||||||||||
Cost of merchandise sold
|
119,098 | 112,283 | 84,628 | 72,539 | 65,332 | |||||||||||||||||
Cost of installment sales
|
10,512 | 10,639 | 3,776 | | | |||||||||||||||||
Salaries and other expenses
|
1,277,926 | 1,180,115 | 1,070,265 | 1,019,402 | 866,234 | |||||||||||||||||
Franchise cost of merchandise sold
|
39,472 | 43,248 | 49,185 | 51,251 | 49,724 | |||||||||||||||||
1,897,043 | 1,778,981 | 1,591,254 | 1,486,389 | 1,280,588 | ||||||||||||||||||
General and administrative expenses
|
75,481 | 66,635 | 63,296 | 55,359 | 48,093 | |||||||||||||||||
Amortization of intangibles
|
10,780 | 12,512 | 5,045 | 30,194 | 28,303 | |||||||||||||||||
Class action litigation settlements
|
47,000 | (1) | | | 52,000 | (2) | (22,383 | ) (3) | ||||||||||||||
Total operating expenses
|
2,030,304 | 1,858,128 | 1,659,595 | 1,623,942 | 1,334,601 | |||||||||||||||||
Operating profit
|
282,951 | 370,022 | 350,449 | 184,586 | 267,013 | |||||||||||||||||
Income from sale of charged off accounts
|
(7,924 | ) (4) | | | | | ||||||||||||||||
Finance charges from refinancing
|
4,173 | 35,260 | | | | |||||||||||||||||
Interest expense, net
|
35,323 | 43,932 | 62,006 | 59,780 | 72,618 | |||||||||||||||||
Earnings before income taxes
|
251,379 | 290,830 | 288,443 | 124,806 | 194,395 | |||||||||||||||||
Income tax expense
|
95,524 | 109,334 | 116,270 | 58,589 | 91,368 | |||||||||||||||||
NET EARNINGS
|
155,855 | 181,496 | 172,173 | 66,217 | 103,027 | |||||||||||||||||
Preferred dividends
|
| | 10,212 | 15,408 | 10,420 | |||||||||||||||||
Net earnings allocable to common shareholders
|
$ | 155,855 | $ | 181,496 | $ | 161,961 | $ | 50,809 | $ | 92,607 | ||||||||||||
Basic earnings per common share
|
$ | 1.99 | $ | 2.16 | $ | 2.20 | $ | 0.79 | $ | 1.52 | ||||||||||||
Diluted earnings per common share
|
$ | 1.94 | $ | 2.08 | $ | 1.89 | $ | 0.71 | $ | 1.18 | ||||||||||||
23
Item 6.
Selected Financial Data Continued
Year Ended December 31,
2004
2003
2002
2001
2000
(In thousands, except per share data)
$
759,111
$
680,700
$
631,724
$
653,701
$
587,232
922,404
797,434
743,852
711,096
708,328
1,967,788
1,831,302
1,626,652
1,630,315
1,486,910
708,250
698,000
521,330
702,506
741,051
1,173,517
1,036,472
784,252
1,224,937
1,177,539
794,271
794,830
842,400
405,378
309,371
2,875
2,648
2,407
2,281
2,158
(decrease)
(6)
(3.6
)%
3.0
%
6.0
%
8.0
%
12.6
%
2,788
2,560
2,325
2,235
2,103
313
329
318
342
364
(1) | Includes the effects of a pre-tax legal settlement charge of $47.0 million recorded in the third quarter of 2004 associated with the settlement of a class action lawsuit in the state of California. |
(2) | Includes the effects of a pre-tax legal settlement charge of $52.0 million associated with the 2001 settlement of class action lawsuits in the states of Missouri, Illinois, and Tennessee. |
(3) | Includes the effects of a pre-tax legal reversion of $22.4 million associated with the 1999 settlement of three class action lawsuits in the state of New Jersey. |
(4) | Includes the effects of $7.9 million in pre-tax income associated with the 2004 sale of previously charged off accounts. |
(5) | In accordance with the adoption of SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, total liabilities also includes redeemable convertible voting preferred stock. |
(6) | Comparable store revenue for each period presented includes revenues only of stores open throughout the full period and the comparable prior period. |
24
Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
25
| uncertainties regarding our ability to open new rent-to-own stores; | |
| our ability to acquire additional rent-to-own stores on favorable terms; | |
| our ability to enhance the performance of these acquired stores; | |
| our ability to control store level costs; | |
| our ability to realize benefits from our margin enhancement initiatives; | |
| our ability to identify and successfully market products and services that appeal to our customer demographic; | |
| the results of our litigation; | |
| the passage of legislation adversely affecting the rent-to-own industry; | |
| interest rates; | |
| our ability to collect on our rental purchase agreements; | |
| our ability to enter into new rental purchase agreements; | |
| economic pressures affecting the disposable income available to our targeted consumers, such as high fuel and utility costs; | |
| changes in our effective tax rate; | |
| our ability to maintain an effective system of internal controls; | |
| changes in our stock price and the number of shares of common stock that we may or may not repurchase; and | |
| the other risks detailed from time to time in our SEC reports. |
26
27
28
29
30
31
32
33
Year Ended December 31,
Year Ended December 31,
2004
2003
2002
2004
2003
2002
(Company-owned stores only)
(Franchise operations only)
91.4
%
91.8
%
93.6
%
%
%
%
8.4
8.0
6.2
88.2
88.5
89.9
0.2
0.2
0.2
11.8
11.5
10.1
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
19.9
%
19.9
%
19.6
%
%
%
%
5.7
5.6
4.5
84.1
84.9
85.8
56.4
54.2
54.8
82.0
79.7
78.9
84.1
84.9
85.8
3.2
3.1
3.2
6.3
4.1
4.2
0.5
0.1
0.3
0.6
0.6
0.5
2.1
87.8
82.9
82.4
91.0
89.6
90.5
12.2
17.1
17.6
9.0
10.4
9.5
1.4
3.7
3.2
(0.9
)
(1.1
)
(1.1
)
10.8
%
13.4
%
14.4
%
9.9
%
11.5
%
10.6
%
Overview of 2004 Results
Approximately $331 million in operating cash flow
9% increase in our store base, including the acquisitions of
Rainbow Rentals, Inc. and Rent Rite, Inc.
Revenue growth of approximately 4%
Repurchased 7,689,700 shares of our common stock for an
aggregate of $210.5 million
Comparison of the Years ended December 31, 2004 and
2003
Table of Contents
Table of Contents
Comparison of the Years ended December 31, 2003 and
2002
Table of Contents
Table of Contents
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
(In thousands, except per share data)
$
585,380
$
572,985
$
569,607
$
585,283
92,659
90,223
24,344
(1)
75,725
52,209
51,194
5,573
46,879
$
0.65
$
0.64
$
0.07
$
0.63
$
0.63
$
0.62
$
0.07
$
0.61
$
566,406
$
553,260
$
549,825
$
558,659
96,291
97,238
87,502
88,991
50,959
35,300
43,738
51,499
$
0.58
$
0.40
$
0.54
$
0.64
$
0.57
$
0.39
$
0.52
$
0.62
$
498,610
$
494,660
$
494,561
$
522,213
88,296
88,240
84,087
89,826
43,563
41,943
41,449
45,218
$
0.63
$
0.59
$
0.50
$
0.52
$
0.48
$
0.46
$
0.46
$
0.50
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
(As a percentage of revenues)
100.0
%
100.0
%
100.0
%
100.0
%
15.8
15.7
4.3
(1)
12.9
8.9
8.9
1.0
8.0
100.0
%
100.0
%
100.0
%
100.0
%
17.0
17.6
15.9
15.9
9.0
6.4
8.0
9.2
100.0
%
100.0
%
100.0
%
100.0
%
17.7
17.8
17.0
17.2
8.7
8.5
8.4
8.7
(1)
Includes the effects of a pre-tax legal settlement charge of
$47.0 million associated with the settlement of a class
action lawsuit in the state of California
Table of Contents
34
35
36
37
38
39
40
Table of Contents
Table of Contents
2004
2003
2002
2,648
2,407
2,281
94
101
70
191
160
83
48
20
23
10
4
2,875
2,648
2,407
111
220
126
$
195.2 million
(1)
$
126.1 million
$
59.5 million
(1)
The total purchase price includes non-cash consideration of
approximately $23.8 million in common stock issued and
approximately $6.1 million in fair value assigned to the
stock options assumed in connection with the acquisition of Rent
Rite, Inc.
Table of Contents
Year Ending December 31,
(In thousands)
$
3,500
3,500
3,500
3,500
168,000
166,250
$
348,250
incur additional debt (including subordinated debt) in excess of
$50 million at any one time outstanding;
repurchase our capital stock and
7
1
/
2
% notes;
incur liens or other encumbrances;
merge, consolidate or sell substantially all our property or
business;
sell assets, other than inventory in the ordinary course of
business;
make investments or acquisitions unless we meet financial tests
and other requirements;
make capital expenditures; or
enter into a new line of business.
Required Ratio
Actual Ratio
No greater than
2.75:1
1.73:1
No less than
4.0:1
10.37:1
No less than
1.50:1
2.51:1
Table of Contents
incur additional debt;
sell assets or our subsidiaries;
grant liens to third parties;
pay dividends or repurchase stock; and
engage in a merger or sell substantially all of our assets.
Table of Contents
Payments Due by Period
Contractual Cash Obligations
Total
2005
2006-2007
2008-2009
Thereafter
(In thousands)
$
408,250
$
3,500
$
7,000
$
231,500
$
166,250
423,750
22,500
45,000
45,000
311,250
421,712
145,973
192,199
80,646
2,894
$
1,253,712
$
171,973
$
244,199
$
357,146
$
480,394
(1)
Does not include the interest on our senior credit facilities.
Our senior credit facilities bear interest at varying rates
equal to the Eurodollar rate plus 1.75%. The Eurodollar rate at
December 31, 2004 was 2.42%.
(2)
Includes interest payments of $11.25 million on each of
May 1 and November 1 of each year.
Table of Contents
Effect of New Accounting Pronouncements
Table of Contents
Item 7A. | Quantitative and Qualitative Disclosure about Market Risk |
41
Item 8. | Financial Statements and Supplementary Data |
Page | |||||
Rent-A-Center, Inc. and Subsidiaries
|
|||||
Reports of Independent Registered Public Accounting Firm
|
43 | ||||
Managements Annual Report on Internal Control over
Financial Reporting
|
45 | ||||
Consolidated Financial Statements
|
|||||
Statements of Earnings
|
46 | ||||
Balance Sheets
|
47 | ||||
Statement of Stockholders Equity
|
48 | ||||
Statements of Cash Flows
|
49 | ||||
Notes to Consolidated Financial Statements
|
50 |
42
43
Table of Contents
44
45
Table of Contents
Table of Contents
Year Ended December 31,
2004
2003
2002
(In thousands, except per share data)
$
2,071,866
$
1,998,952
$
1,828,534
166,594
152,984
115,478
24,304
22,203
6,137
3,568
3,083
2,589
41,398
45,057
51,514
5,525
5,871
5,792
2,313,255
2,228,150
2,010,044
450,035
432,696
383,400
119,098
112,283
84,628
10,512
10,639
3,776
1,277,926
1,180,115
1,070,265
39,472
43,248
49,185
1,897,043
1,778,981
1,591,254
75,481
66,635
63,296
10,780
12,512
5,045
47,000
2,030,304
1,858,128
1,659,595
282,951
370,022
350,449
(7,924
)
4,173
35,260
40,960
48,577
64,682
(5,637
)
(4,645
)
(2,676
)
251,379
290,830
288,443
95,524
109,334
116,270
155,855
181,496
172,173
10,212
$
155,855
$
181,496
$
161,961
$
1.99
$
2.16
$
2.20
$
1.94
$
2.08
$
1.89
46
December 31,
2004
2003
(In thousands, except
share data)
ASSETS
$
58,825
$
143,941
16,269
14,949
65,050
70,702
596,447
542,909
162,664
137,791
1,311
1,667
144,818
121,909
913,415
788,059
8,989
9,375
$
1,967,788
$
1,831,302
LIABILITIES
$
94,399
$
72,708
207,835
132,844
163,031
132,918
408,250
398,000
300,000
300,000
2
2
1,173,517
1,036,472
1,023
1,012
618,486
572,628
765,785
609,930
(591,023
)
(388,740
)
794,271
794,830
$
1,967,788
$
1,831,302
47
Accumulated
Common Stock
Additional
Comprehensive
Paid-In
Retained
Treasury
Income
Shares
Amount
Capital
Earnings
Stock
(Loss)
Total
(In thousands)
69,315
$
277
$
191,438
$
269,982
$
(50,000
)
$
(6,319
)
$
405,378
172,173
172,173
(3,253
)
(3,253
)
5,846
5,846
2,593
2,593
174,766
(65,565
)
(65,565
)
5,383
(13,534
)
(8,151
)
26,955
108
299,951
300,059
112
112
2,575
10
26,782
26,792
9,009
9,009
98,845
395
532,675
428,621
(115,565
)
(3,726
)
842,400
181,496
181,496
6,504
6,504
(2,778
)
(2,778
)
3,726
3,726
185,222
(273,175
)
(273,175
)
28
28
605
(451
)
(154
)
2,303
12
29,771
29,783
10,605
10,605
(33
)
(33
)
101,148
1,012
572,628
609,930
(388,740
)
794,830
155,855
155,855
(210,520
)
(210,520
)
15,617
8,237
23,854
6,123
6,123
1,150
11
16,604
16,615
7,514
7,514
102,298
$
1,023
$
618,486
$
765,785
$
(591,023
)
$
$
794,271
48
Year Ended December 31,
2004
2003
2002
(In thousands)
$
155,855
$
181,496
$
172,173
446,578
432,696
383,400
48,566
43,384
38,359
10,780
12,512
5,045
690
844
5,944
30,113
46,776
94,914
4,173
23,329
(456,316
)
(424,397
)
(342,954
)
(1,320
)
(9,027
)
(4,258
)
(12,286
)
(8,752
)
(26,573
)
21,691
18,647
4,131
82,506
24,904
(35,691
)
331,030
342,412
294,490
(72,096
)
(55,987
)
(37,596
)
4,824
809
398
(165,219
)
(126,119
)
(59,504
)
(232,491
)
(181,297
)
(96,702
)
(210,520
)
(273,175
)
(65,565
)
16,615
29,783
26,792
300,000
(17,049
)
442,940
400,000
(290,956
)
(2,750
)
(432,690
)
(251,500
)
(178,500
)
(183,655
)
(102,897
)
(220,023
)
(85,116
)
58,218
(22,235
)
143,941
85,723
107,958
$
58,825
$
143,941
$
85,723
$
38,789
$
56,401
$
53,307
$
75,712
$
68,805
$
31,868
49
Principles of Consolidation and Nature of Operations |
Stock Split |
Rental Merchandise |
50
Cash Equivalents |
Revenue |
Receivables and Allowance for Doubtful Accounts |
Property Assets and Related Depreciation |
51
Intangible Assets and Amortization |
Accounting for Impairment of Long-Lived Assets |
Derivative Instruments and Hedging Activities |
52
Income Taxes |
Earnings Per Common Share |
Advertising Costs |
Stock-Based Compensation |
Year Ended December 31, | |||||||||||||
2004 | 2003 | 2002 | |||||||||||
(In thousands, except per share data) | |||||||||||||
Net earnings allocable to common stockholders
|
|||||||||||||
As reported
|
$ | 155,855 | $ | 181,496 | $ | 161,961 | |||||||
Deduct: Total stock-based employee compensation under fair value
based method for all awards, net of related tax benefit
|
9,868 | 15,687 | 11,290 | ||||||||||
Pro forma
|
$ | 145,987 | $ | 165,809 | $ | 150,671 | |||||||
Basic earnings per common share
|
|||||||||||||
As reported
|
$ | 1.99 | $ | 2.16 | $ | 2.20 | |||||||
Pro forma
|
$ | 1.87 | $ | 1.97 | $ | 2.05 | |||||||
Diluted earnings per common share
|
|||||||||||||
As reported
|
$ | 1.94 | $ | 2.08 | $ | 1.89 | |||||||
Pro forma
|
$ | 1.82 | $ | 1.90 | $ | 1.77 |
53
Use of Estimates |
Other Income |
New Accounting Pronouncements |
54
Prior Year Reclassifications on Financial Statements for Comparability |
At December 31, | |||||||||
2004 | 2003 | ||||||||
(In thousands) | |||||||||
Installment sales receivable
|
$ | 16,919 | $ | 14,372 | |||||
Trade receivables
|
1,956 | 2,495 | |||||||
Total
|
18,875 | 16,867 | |||||||
Less allowance for doubtful accounts
|
(2,606 | ) | (1,918 | ) | |||||
Net receivables
|
$ | 16,269 | $ | 14,949 | |||||
At December 31, | |||||||||
2004 | 2003 | ||||||||
(In thousands) | |||||||||
Beginning balance
|
$ | 1,918 | $ | 1,420 | |||||
Bad debt expense
|
1,101 | 753 | |||||||
Accounts written off
|
(744 | ) | (312 | ) | |||||
Recoveries
|
331 | 57 | |||||||
Ending balance
|
$ | 2,606 | $ | 1,918 | |||||
December 31, | ||||||||||
2004 | 2003 | |||||||||
(In thousands) | ||||||||||
On rent
|
||||||||||
Cost
|
$ | 999,265 | $ | 941,642 | ||||||
Less accumulated depreciation
|
402,818 | 398,733 | ||||||||
Net book value, on rent
|
$ | 596,447 | $ | 542,909 | ||||||
Held for rent
|
||||||||||
Cost
|
$ | 208,339 | $ | 177,399 | ||||||
Less accumulated depreciation
|
45,675 | 39,608 | ||||||||
Net book value, held for rent
|
$ | 162,664 | $ | 137,791 | ||||||
55
December 31,
2004
2003
2002
(In thousands)
$
682,367
$
631,724
$
653,701
68,317
58,942
18,469
654,261
612,276
494,903
(446,578
)
(432,696
)
(383,400
)
(129,610
)
(122,922
)
(88,404
)
(54,797
)
(50,216
)
(48,110
)
(13,538
)
(14,741
)
(15,435
)
$
760,422
$
682,367
$
631,724
(1) | Other inventory deletions include loss/damage waiver claims and unrepairable and missing merchandise, as well as acquisition charge offs. |
December 31, | ||||||||
2004 | 2003 | |||||||
(In thousands) | ||||||||
Furniture and equipment
|
$ | 175,735 | $ | 133,394 | ||||
Transportation equipment
|
21,984 | 29,924 | ||||||
Building and leasehold improvements
|
147,418 | 117,135 | ||||||
Construction in progress
|
1,988 | 6,494 | ||||||
347,125 | 286,947 | |||||||
Less accumulated depreciation
|
202,307 | 165,038 | ||||||
$ | 144,818 | $ | 121,909 | |||||
December 31, 2004 | December 31, 2003 | |||||||||||||||||||||||||
Avg. | Gross | Avg. | Gross | |||||||||||||||||||||||
Life | Carrying | Accumulated | Life | Carrying | Accumulated | |||||||||||||||||||||
(years) | Amount | Amortization | (years) | Amount | Amortization | |||||||||||||||||||||
Amortizable intangible assets
|
||||||||||||||||||||||||||
Franchise network
|
10 | $ | 3,000 | $ | 2,550 | 10 | $ | 3,000 | $ | 2,250 | ||||||||||||||||
Non-compete agreements
|
3 | 5,902 | 3,197 | 4 | 5,275 | 1,788 | ||||||||||||||||||||
Customer relationships
|
1.5 | 30,644 | 24,810 | 1.5 | 20,699 | 15,561 | ||||||||||||||||||||
Total
|
39,546 | 30,557 | 28,974 | 19,599 | ||||||||||||||||||||||
Intangible assets not subject to amortization
|
||||||||||||||||||||||||||
Goodwill
|
1,012,577 | 99,162 | 887,221 | 99,162 | ||||||||||||||||||||||
Total intangibles
|
$ | 1,052,123 | $ | 129,719 | $ | 916,195 | $ | 118,761 | ||||||||||||||||||
56
$
10,780
$
12,512
Estimated | ||||
Amortization Expense | ||||
(In thousands) | ||||
2005
|
$ | 7,468 | ||
2006
|
1,420 | |||
2007
|
101 | |||
2008
|
| |||
Total
|
$ | 8,989 | ||
2004 | 2003 | |||||||||
(In thousands) | ||||||||||
Balance as of January 1,
|
$ | 788,059 | $ | 736,395 | ||||||
Additions from acquisitions
|
112,209 | 48,445 | ||||||||
Post purchase price allocation adjustments
|
13,147 | 3,219 | ||||||||
Balance as of December 31,
|
$ | 913,415 | $ | 788,059 | ||||||
57
Acquisitions
Year Ended December 31,
2004
2003
2002
(Dollar amounts in thousands)
191
160
83
111
220
126
48
39
53
$
195,196
(1)
$
126,119
$
59,504
$
112,209
$
48,445
$
31,278
389
4,515
10
9,991
9,938
8,783
4,203
4,166
946
68,317
58,942
18,469
87
113
18
(1) | The total purchase price includes non-cash consideration of approximately $23.8 million in common stock issued and approximately $6.1 million in fair value assigned to the stock options assumed in connection with the acquisition of Rent Rite, Inc. |
Fair Values | ||||
(In thousands) | ||||
Inventory
|
$ | 50,100 | ||
Property assets
|
4,300 | |||
Customer relationships
|
7,900 | |||
Non-compete agreement
|
4,300 | |||
Goodwill
|
33,800 | |||
Total assets acquired
|
$ | 100,400 | ||
58
Fair Values | ||||
(In thousands) | ||||
Rental merchandise
|
$ | 18,644 | ||
Property assets
|
1,262 | |||
Customer relationships
|
3,180 | |||
Non-compete agreements
|
242 | |||
Goodwill
|
36,568 | |||
Total assets acquired
|
$ | 59,896 | ||
Fair Values | ||||
(In thousands) | ||||
Rental merchandise
|
$ | 41,337 | ||
Property assets
|
2,864 | |||
Customer relationships
|
4,553 | |||
Non-compete agreements
|
100 | |||
Goodwill
|
60,192 | |||
Total assets acquired
|
$ | 109,046 | ||
59
60
2004 | 2003 | ||||||||||||||||||||||||||||
Facility | Maximum | Amount | Amount | Maximum | Amount | Amount | |||||||||||||||||||||||
Maturity | Facility | Outstanding | Available | Facility | Outstanding | Available | |||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||
Senior Credit Facility:
|
|||||||||||||||||||||||||||||
Term Loan B
|
2010 | $ | 350,000 | $ | 348,250 | $ | | $ | 398,000 | $ | 398,000 | $ | | ||||||||||||||||
Tranche A LC
|
2009 | | | | 80,000 | | | ||||||||||||||||||||||
Revolver
(1)
|
2009 | 250,000 | 60,000 | 84,435 | 120,000 | | 90,176 | ||||||||||||||||||||||
600,000 | 408,250 | 84,435 | 598,000 | 398,000 | 90,176 | ||||||||||||||||||||||||
Other Indebtedness:
|
|||||||||||||||||||||||||||||
Line of credit
|
10,000 | | 10,000 | 10,000 | | 10,000 | |||||||||||||||||||||||
Total Debt Facilities
|
$ | 610,000 | $ | 408,250 | $ | 94,435 | $ | 608,000 | $ | 398,000 | $ | 100,176 | |||||||||||||||||
(1) | At December 31, 2004 and 2003, the amounts available under the Companys revolving facility were reduced by approximately $105.6 million and $29.8 million, respectively, for outstanding letters of credit used to support the Companys insurance obligations. The Company provides assurance to its insurance providers that if they are not able to draw funds from the Company for claims paid, they have the ability to draw against the Companys letters of credit. At that time, the Company would then owe the drawn amount to the financial institution providing the letter of credit. One of the Companys letters of credit is renewed automatically every year unless the Company notifies the institution not to renew. The other letter of credit expires in August 2005, but is automatically renewed each year for a one year period unless the institution notifies the Company no later than thirty days prior to the applicable expiration date that such institution does not elect to renew the letter of credit for such additional one year period. |
| incur additional debt (including subordinated debt) in excess of $50 million at any one time outstanding; | |
| repurchase its capital stock and 7 1 / 2 % notes; | |
| incur liens or other encumbrances; | |
| merge, consolidate or sell substantially all its property or business; | |
| sell assets, other than inventory in the ordinary course of business; | |
| make investments or acquisitions unless it meets financial tests and other requirements; | |
| make capital expenditures; or | |
| enter into a new line of business. |
61
Required Ratio
Actual Ratio
No greater than
2.75:1
1.73:1
No less than
4.0:1
10.37:1
No less than
1.50:1
2.51:1
Year Ending December 31, | ||||
(In thousands) | ||||
2005
|
$ | 3,500 | ||
2006
|
3,500 | |||
2007
|
3,500 | |||
2008
|
3,500 | |||
2009
|
168,000 | |||
Thereafter
|
166,250 | |||
$ | 348,250 | |||
62
| incur additional debt; | |
| sell assets or its subsidiaries; | |
| grant liens to third parties; | |
| pay dividends or repurchase stock; and | |
| engage in a merger or sell substantially all of its assets. |
Parent | Subsidiary | |||||||||||
Company | Guarantors | Total | ||||||||||
(In thousands) | ||||||||||||
Year ended December 31, 2004
|
||||||||||||
Total revenues
|
$ | | $ | 2,313,255 | $ | 2,313,255 | ||||||
Direct store expenses
|
| 1,857,571 | 1,857,571 | |||||||||
Other
|
| 299,829 | 299,829 | |||||||||
Net earnings
|
$ | | $ | 155,855 | $ | 155,855 | ||||||
Parent | Subsidiary | |||||||||||
Company | Guarantors | Total | ||||||||||
Year ended December 31, 2003
|
||||||||||||
Total revenues
|
$ | | $ | 2,228,150 | $ | 2,228,150 | ||||||
Direct store expenses
|
| 1,735,733 | 1,735,733 | |||||||||
Other
|
| 310,921 | 310,921 | |||||||||
Net earnings
|
$ | | $ | 181,496 | $ | 181,496 | ||||||
63
Parent
Rent-A-Center
Subsidiary
Company
East
Guarantors
Total
$
$
1,946,601
$
63,443
$
2,010,044
1,538,293
3,776
1,542,069
238,288
57,514
295,802
$
$
170,020
$
2,153
$
172,173
Parent
Subsidiary
Consolidating
Company
Guarantors
Adjustments
Totals
(In thousands)
$
$
759,111
$
$
759,111
922,404
922,404
808,861
90,075
(612,663
)
286,273
$
808,861
$
1,771,590
$
(612,663
)
$
1,967,788
$
408,250
$
$
$
408,250
300,002
736,186
(270,921
)
765,267
100,609
1,035,404
(341,742
)
794,271
$
808,861
$
1,771,590
$
(612,663
)
$
1,967,788
Parent
Subsidiary
Consolidating
Company
Guarantors
Adjustments
Totals
$
$
680,700
$
$
680,700
797,434
797,434
882,876
233,560
(763,268
)
353,168
$
882,876
$
1,711,694
$
(763,268
)
$
1,831,302
$
398,000
$
$
$
398,000
300,002
759,996
(421,526
)
638,472
184,874
951,698
(341,742
)
794,830
$
882,876
$
1,711,694
$
(763,268
)
$
1,831,302
64
Parent
Subsidiary
Company
Guarantors
Total
(In thousands)
$
$
331,030
$
331,030
(72,096
)
(72,096
)
4,824
4,824
(165,219
)
(165,219
)
(232,491
)
(232,491
)
(210,520
)
(210,520
)
16,615
16,615
442,940
442,940
(432,690
)
(432,690
)
122,649
(122,649
)
(61,006
)
(122,649
)
(183,655
)
(61,006
)
(24,110
)
(85,116
)
61,006
82,935
143,941
$
$
58,825
$
58,825
Parent
Subsidiary
Company
Guarantors
Total
(In thousands)
$
$
342,412
$
342,412
(55,987
)
(55,987
)
(126,119
)
(126,119
)
809
809
(181,297
)
(181,297
)
(273,175
)
(273,175
)
29,783
29,783
300,000
300,000
(17,049
)
(17,049
)
400,000
400,000
(290,956
)
(290,956
)
(2,000
)
(249,500
)
(251,500
)
(376,553
)
376,553
61,006
(163,903
)
(102,897
)
61,006
(2,788
)
58,218
85,723
85,723
$
61,006
$
82,935
$
143,941
65
Parent
Rent-A-Center
Subsidiary
Company
East
Guarantors
Total
(In thousands)
$
$
288,843
$
5,647
$
294,490
(36,895
)
(701
)
(37,596
)
(59,504
)
(59,504
)
398
398
(96,001
)
(701
)
(96,702
)
(65,565
)
(65,565
)
26,792
26,792
(178,500
)
(178,500
)
(2,750
)
(2,750
)
4,946
(4,946
)
(215,077
)
(4,946
)
(220,023
)
(22,235
)
(22,235
)
107,958
107,958
$
$
85,723
$
$
85,723
December 31,
2004
2003
(In thousands)
$
27,190
$
26,394
48,975
1,800
87,462
69,763
4,605
3,589
39,603
31,298
$
207,835
$
132,844
66
Year Ended December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Tax at statutory rate
|
35.0 | % | 35.0 | % | 35.0 | % | ||||||
State income taxes, net of federal benefit
|
2.5 | % | 2.3 | % | 4.6 | % | ||||||
Effect of foreign operations, net of foreign tax credits
|
0.1 | % | 0.1 | % | 0.1 | % | ||||||
Other, net
|
0.4 | % | 0.2 | % | 0.6 | % | ||||||
Total
|
38.0 | % | 37.6 | % | 40.3 | % | ||||||
67
Year Ended December 31,
2004
2003
2002
(In thousands)
$
60,996
$
53,615
$
11,211
1,844
9,382
9,625
2,571
2,232
1,855
65,411
65,229
22,691
22,307
43,349
84,368
7,806
756
9,211
30,113
44,105
93,579
$
95,524
$
109,334
$
116,270
December 31, | ||||||||||
2004 | 2003 | |||||||||
(In thousands) | ||||||||||
Deferred tax assets
|
||||||||||
State net operating loss carryforwards
|
$ | 2,101 | $ | 2,101 | ||||||
Accrued expenses
|
12,968 | | ||||||||
Intangible assets
|
| 5,306 | ||||||||
Property assets
|
15,479 | 21,809 | ||||||||
Foreign tax credit carryforwards
|
1,501 | 508 | ||||||||
32,049 | 29,724 | |||||||||
Valuation allowance
|
(1,501 | ) | (508 | ) | ||||||
Deferred tax liabilities
|
||||||||||
Rental merchandise
|
(191,960 | ) | (157,404 | ) | ||||||
Intangible assets
|
(1,619 | ) | | |||||||
Accrued expenses
|
| (4,730 | ) | |||||||
(193,579 | ) | (162,134 | ) | |||||||
Net deferred taxes
|
$ | (163,031 | ) | $ | (132,918 | ) | ||||
68
Year Ending December 31,
(In thousands)
$
145,973
111,227
80,972
55,357
25,289
2,894
$
421,712
69
70
71
State Wage and Hour Class Actions |
72
73
74
At December 31, | ||||||||||||||||||||||||
2004 | 2003 | 2002 | ||||||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||
Exercise | Exercise | Exercise | ||||||||||||||||||||||
Shares | Price | Shares | Price | Shares | Price | |||||||||||||||||||
Outstanding at beginning of year
|
6,206,897 | $ | 15.78 | 8,627,690 | $ | 14.13 | 9,894,850 | $ | 11.37 | |||||||||||||||
Granted
|
838,500 | 29.30 | 1,335,438 | 23.31 | 3,483,438 | 18.97 | ||||||||||||||||||
Exercised
|
(1,144,295 | ) | 14.51 | (2,302,494 | ) | 12.94 | (2,574,660 | ) | 10.38 | |||||||||||||||
Forfeited
|
(669,564 | ) | 20.55 | (1,453,737 | ) | 17.37 | (2,175,938 | ) | 13.78 | |||||||||||||||
Outstanding at end of year
|
5,231,538 | $ | 17.62 | 6,206,897 | $ | 15.78 | 8,627,690 | $ | 14.13 | |||||||||||||||
Options exercisable at end of year
|
2,612,207 | $ | 13.98 | 1,922,152 | $ | 11.88 | 2,131,908 | $ | 10.85 | |||||||||||||||
Options Outstanding | ||||||||||||
Weighted Average | ||||||||||||
Number | Remaining | Weighted Average | ||||||||||
Range of Exercise Prices | Outstanding | Contractual Life | Exercise Price | |||||||||
$0.00 to $2.67
|
39,750 | 0.33 years | $ | 2.67 | ||||||||
$2.68 to $7.40
|
113,904 | 3.29 years | $ | 6.28 | ||||||||
$7.41 to $11.40
|
1,652,897 | 6.18 years | $ | 9.96 | ||||||||
$11.41 to $13.55
|
664,457 | 6.15 years | $ | 13.23 | ||||||||
$13.56 to $19.62
|
380,854 | 6.44 years | $ | 18.34 | ||||||||
$19.63 to $32.76
|
2,255,489 | 8.31 years | $ | 24.37 | ||||||||
$32.77 to $33.34
|
124,187 | 9.25 years | $ | 33.34 | ||||||||
5,231,538 | ||||||||||||
75
Options Exercisable
Number
Weighted Average
Range of Exercise Prices
Exercisable
Exercise Price
39,750
$
2.67
113,904
$
6.28
1,271,944
$
9.97
408,824
$
13.12
216,779
$
18.49
530,382
$
23.81
30,624
$
33.34
2,612,207
76
Net Earnings
Shares
Per Share
(In thousands, except per share data)
$
155,855
78,150
$
1.99
2,097
$
155,855
80,247
$
1.94
$
181,496
84,139
$
2.16
3,069
$
181,496
87,208
$
2.08
$
161,961
73,458
$
2.20
1,237
10,212
16,170
$
172,173
90,865
$
1.89
1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Year ended December 31, 2004
|
||||||||||||||||
Revenues
|
$ | 585,380 | $ | 572,985 | $ | 569,607 | $ | 585,283 | ||||||||
Gross profit
|
422,417 | 423,831 | 419,282 | 428,608 | ||||||||||||
Operating profit
|
92,659 | 90,223 | 24,344 | (1) | 75,725 | |||||||||||
Net earnings
|
52,209 | 51,194 | 5,573 | 46,879 | ||||||||||||
Basic earnings per common share
|
$ | 0.65 | $ | 0.64 | $ | 0.07 | $ | 0.63 | ||||||||
Diluted earnings per common share
|
$ | 0.63 | $ | 0.62 | $ | 0.07 | $ | 0.61 |
77
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
(In thousands, except per share data)
$
566,406
$
553,260
$
549,825
$
558,659
408,416
408,648
403,729
408,491
96,291
97,238
87,502
88,991
50,959
35,300
43,738
51,499
$
0.58
$
0.40
$
0.54
$
0.64
$
0.57
$
0.39
$
0.52
$
0.62
(1) | Includes the effects of a pre-tax legal settlement charge of $47.0 million associated with the settlement of a class action lawsuit in the state of California |
78
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Item 9A. | Controls and Procedures |
79
Item 9B. | Other Information |
2005 Annual | 2004 Cash | ||||||||
Name & Principal Position | Base Salary | Bonus Amount | |||||||
Mark E. Speese
|
$ | 685,000 | $ | 142,500 | |||||
Chairman of the Board & Chief Executive Officer
|
|||||||||
Mitchell E. Fadel
|
$ | 500,000 | $ | 85,500 | |||||
President & Chief Operating Officer
|
|||||||||
Robert D. Davis
|
$ | 295,000 | $ | 47,700 | |||||
Senior Vice President Finance, Treasurer and Chief
Financial Officer
|
|||||||||
Anthony M. Doll
|
$ | 251,520 | $ | 49,000 | |||||
Executive Vice President Operations
|
|||||||||
Dana F. Goble
|
$ | 285,668 | $ | 47,750 | |||||
Executive Vice President Operations
|
|||||||||
Christopher A. Korst
|
$ | 270,600 | $ | 34,000 | |||||
Senior Vice President General Counsel and Secretary
|
80
2005 Target | Maximum 2005 | ||||||||
Name & Principal Position | Bonus Percentage | Bonus Amount(1) | |||||||
Mitchell E. Fadel
|
40% | $ | 200,000 | ||||||
President & Chief Operating Officer
|
|||||||||
Robert D. Davis
|
35% | $ | 103,250 | ||||||
Senior Vice President Finance, Treasurer and Chief
Financial Officer
|
|||||||||
Anthony M. Doll
|
40% | $ | 100,608 | ||||||
Executive Vice President Operations
|
|||||||||
Dana F. Goble
|
40% | $ | 114,267 | ||||||
Executive Vice President Operations
|
|||||||||
Christopher A. Korst
|
30% | $ | 81,180 | ||||||
Senior Vice President General Counsel and Secretary
|
(1) | Assumes (1) the after-tax profit goal for Rent-A-Center is met and (2) 100% achievement of the individuals goals and objectives. |
Item 10. | Directors and Executive Officers of the Registrant(*) |
Item 11. | Executive Compensation(*) |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters(*) |
Item 13. | Certain Relationships and Related Transactions(*) |
Item 14. | Principal Accountant Fees and Services(*) |
* | The information required by Items 10, 11, 12, 13 and 14 is or will be set forth in the definitive proxy statement relating to the 2005 Annual Meeting of Stockholders of Rent-A-Center, Inc., which is to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. This definitive proxy statement relates to a meeting of stockholders involving the election of directors and the portions therefrom required to be set forth in this Form 10-K by Items 10, 11, 12, 13 and 14 are incorporated herein by reference pursuant to General Instruction G(3) to Form 10-K. |
81
Item 15. | Exhibits and Financial Statement Schedules |
82
83
Rent-A-Center, Inc.
By:
/s/
Robert D. Davis
Robert D. Davis
Senior Vice President Finance,
Treasurer and Chief Financial Officer
Signature
Title
Date
/s/
Mark E. Speese
Chairman of the Board
and Chief Executive Officer
(Principal Executive Officer)
March 10, 2005
/s/
Mitchell E. Fadel
President, Chief Operating Officer
and Director
March 10, 2005
/s/
Robert D. Davis
Senior Vice President Finance,
Treasurer and Chief Financial Officer
(Principal Financial and
Accounting Officer)
March 10, 2005
/s/
Richard K. Armey
Director
March 10, 2005
Director
March 10, 2005
/s/
Mary Elizabeth
Burton
Director
March 10, 2005
/s/
Peter P. Copses
Director
March 10, 2005
/s/
Andrew S. Jhawar
Director
March 10, 2005
/s/
J. V. Lentell
Director
March 10, 2005
Table of Contents
84
85
Exhibit No.
Description
2
.1
Agreement and Plan of Merger, dated as of February 4, 2004,
by and between Rent-A-Center, Inc., Eagle Acquisition Sub, Inc.
and Rainbow Rentals, Inc. (Pursuant to the rules of the SEC, the
schedules and exhibits have been omitted. Upon the request of
the SEC, Rent-A-Center, Inc. will supplementally supply such
schedules and exhibits to the SEC.) (Incorporated herein by
reference to Exhibit 2.7 to the registrants Annual
Report on Form 10-K/A for the year ended
December 31, 2003.)
2
.2
Agreement and Plan of Merger, dated as of April 27, 2004,
by and between Rent-A-Center, Inc., RAC RR, Inc. and Rent Rite,
Inc. d/b/a Rent Rite Rental Purchase (Pursuant to the rules of
the SEC, the schedules and exhibits have been omitted. Upon the
request of the SEC, Rent-A-Center, Inc. will supplementally
supply such schedules and exhibits to the SEC.) (Incorporated
herein by reference to Exhibit 2.8 to the registrants
Quarterly Report on Form 10-Q for the quarter ended
March 31, 2004.)
3
.1
Certificate of Incorporation of Rent-A-Center, Inc., as amended
(Incorporated herein by reference to Exhibit 3.1 to the
registrants Current Report on Form 8-K dated as of
December 31, 2002.)
3
.2
Certificate of Amendment to the Certificate of Incorporation of
Rent-A-Center, Inc., dated May 19, 2004 (Incorporated
herein by reference to Exhibit 3.2 to the registrants
Quarterly Report on Form 10-Q for the quarter ended
June 30, 2004.)
3
.3
Amended and Restated Bylaws of Rent-A-Center, Inc. (Incorporated
herein by reference to Exhibit 3.3 to the registrants
Quarterly Report on Form 10-Q for the quarter ended
June 30, 2004.)
4
.1
Form of Certificate evidencing Common Stock (Incorporated herein
by reference to Exhibit 4.1 to the registrants
Registration Statement on Form S-4/A filed on
January 13, 1999.)
4
.2
Certificate of Elimination of Series A Preferred Stock
(Incorporated herein by reference to Exhibit 4.2 to the
registrants Quarterly Report on Form 10-Q for the quarter
ended September 30, 2003.)
4
.3
Certificate of Designations, Preferences and relative Rights and
Limitations of Series C Preferred Stock of Rent-A-Center,
Inc. (Incorporated herein by reference to Exhibit 4.4 to
the registrants Registration Statement on Form S-4
filed July 11, 2003.)
4
.4
Form of Certificate evidencing Series C Preferred Stock
(Incorporated herein by reference to Exhibit 4.5 to the
registrants Registration Statement on Form S-4 filed
July 11, 2003.)
4
.5
Indenture, dated as of May 6, 2003, by and among
Rent-A-Center, Inc., as Issuer, Rent-A-Center East, Inc.,
ColorTyme, Inc., Rent-A-Center West, Inc., Get It Now, LLC,
Rent-A-Center Texas, L.P. and Rent-A-Center Texas, L.L.C., as
Guarantors, and The Bank of New York, as Trustee (Incorporated
herein by reference to Exhibit 4.9 to the registrants
Quarterly Report on Form 10-Q for the quarter ended
March 31, 2003.)
4
.6
First Supplemental Indenture, dated as of December 4, 2003,
between Rent-A-Center, Inc., as Issuer, the Guarantors named
therein, as Guarantors, and The Bank of New York, as Trustee
(Incorporated herein by reference to Exhibit 4.6 to the
registrants Annual Report on Form 10-K/A for the year
ended December 31, 2003.)
4
.7
Second Supplemental Indenture, dated as of April 26, 2004,
between Rent-A-Center, Inc., as Issuer, the Guarantors named
therein, as Guarantors, and The Bank of New York, as Trustee
(Incorporated herein by reference to Exhibit 4.7 to the
registrants Quarterly Report on Form 10-Q for the quarter
ended March 31, 2004.)
4
.8
Third Supplemental Indenture, dated as of May 7, 2004,
between Rent-A-Center, Inc., as Issuer, the Guarantors named
therein, as Guarantors, and The Bank of New York, as Trustee
(Incorporated herein by reference to Exhibit 4.8 to the
registrants Quarterly Report on Form 10-Q for the quarter
ended June 30, 2004.)
4
.9
Fourth Supplemental Indenture, dated as of May 14, 2004,
between Rent-A-Center, Inc., as Issuer, the Guarantors named
therein, as Guarantors, and The Bank of New York, as Trustee
(Incorporated herein by reference to Exhibit 4.9 to the
registrants Quarterly Report on Form 10-Q for the quarter
ended June 30, 2004.)
4
.10
Form of 2003 Exchange Note (Incorporated herein by reference to
Exhibit 4.11 to the registrants Registration
Statement on Form S-4 filed July 11, 2003.)
Table of Contents
Exhibit No.
Description
10
.1+
Amended and Restated Rent-A-Center, Inc. Long-Term Incentive
Plan (Incorporated herein by reference to Exhibit 10.1 to
the registrants Quarterly Report on Form 10-Q for the
quarter ended September 30, 2003.)
10
.2
First Amendment, dated as of April 22, 2003, to the Amended
and Restated Credit Agreement, dated as of August 5, 1998,
as amended and restated as of December 31, 2002, among
Rent-A-Center, Inc., Rent-A-Center East, Inc., Comerica Bank, as
Documentation Agent, Bank of America NA, as Syndication Agent,
and JP Morgan Chase Bank (formerly known as The Chase Manhattan
Bank), as Administrative Agent (Incorporated herein by reference
to Exhibit 10.3 to the registrants Quarterly Report
on Form 10-Q for the quarter ended March 31, 2003.)
10
.3
Credit Agreement, dated as of May 28, 2003, among
Rent-A-Center, Inc., Morgan Stanley Senior Funding Inc., as
Documentation Agent, JPMorgan Chase Bank and Bear,
Stearns & Co. Inc., each as Syndication Agent, and
Lehman Commercial Paper Inc., as Administrative Agent
(Incorporated herein by reference to Exhibit 10.4 to the
registrants Registration Statement on Form S-4 filed
July 11, 2003.)
10
.4
Guarantee and Collateral Agreement, dated as of May 28,
2003, made by Rent-A-Center, Inc., Rent-A-Center East, Inc. and
certain of its Subsidiaries in favor of Lehman Commercial Paper
Inc., as Administrative Agent (Incorporated herein by reference
to Exhibit 10.6 to the registrants Registration
Statement on Form S-4 filed July 11, 2003.)
10
.5
First Amendment, dated as of May 28, 2003, to the Credit
Agreement and the Guarantee and Collateral Agreement, both dated
as of May 28, 2003, among Rent-A-Center, Inc.,
Rent-A-Center East, Inc., ColorTyme, Inc., Rent-A-Center West,
Inc., Remco America, Inc., Get It Now LLC, Rent-A-Center Texas,
L.P., Rent-A-Center Texas, L.L.C. and Lehman Commercial Paper,
Inc., as administrative agent (Incorporated herein by reference
to Exhibit 10.7 to the registrants Annual Report on
Form 10-K/A for the year ended December 31, 2003.)
10
.6
Amended and Restated Credit Agreement, dated as of May 28,
2003, as amended and restated as of July 14, 2004, among
Rent-A-Center, Inc., the several lenders from time to time
parties thereto, Calyon New York Branch, SunTrust Bank and Union
Bank of California, N.A., as Documentation Agents, Lehman
Commercial Paper Inc., as Syndication Agent, and JPMorgan Chase
Bank, as Administrative Agent (Incorporated herein by reference
to Exhibit 10.1 to the registrants Current Report on
Form 8-K dated July 15, 2004.)
10
.7
Amended and Restated Guarantee and Collateral Agreement, dated
as of May 28, 2003, as amended and restated as of
July 14, 2004, made by Rent-A-Center, Inc. and certain of
its Subsidiaries in favor of JPMorgan Chase Bank, as
Administrative Agent (Incorporated herein by reference to
Exhibit 10.2 to the registrants Current Report on
Form 8-K dated July 15, 2004.)
10
.8
Fourth Amended and Restated Stockholders Agreement, dated as of
July 11, 2003, by and among Apollo Investment Fund IV,
L.P., Apollo Overseas Partners IV, L.P., Mark E. Speese,
Rent-A-Center, Inc., and certain other persons (Incorporated
herein by reference to Exhibit 10.15 to the
registrants Registration Statement on Form S-4 filed
July 11, 2003.)
10
.9
Fifth Amended and Restated Stockholders Agreement, dated as of
August 13, 2004, by and among Apollo Investment
Fund IV, L.P., Apollo Overseas Partners IV, L.P., Mark E.
Speese, Rent-A-Center, Inc., and certain other persons
(Incorporated herein by reference to Exhibit 10.3 to the
registrants Registration Statement on Form S-3/A
filed on September 21, 2004.)
10
.10
Registration Rights Agreement, dated August 5, 1998, by and
between Renters Choice, Inc., Apollo Investment Fund IV,
L.P., and Apollo Overseas Partners IV, L.P. (Incorporated herein
by reference to Exhibit 10.22 to the registrants
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998.)
10
.11
Fourth Amendment to Registration Rights Agreement, dated as of
July 11, 2003, by and between Rent-A-Center, Inc., Apollo
Investment Fund IV, L.P., and Apollo Overseas Partners IV,
L.P. (Incorporated herein by reference to Exhibit 10.10 to
the registrants Registration Statement on Form S-4
filed July 11, 2003.)
10
.12
Registration Rights Agreement, dated as of May 6, 2003, by
and among Rent-A-Center, Inc., as Issuer, Rent-A-Center East,
Inc., ColorTyme, Inc., Rent-A-Center West, Inc., Get It Now,
LLC, Rent-A-Center Texas, L.P. and Rent-A-Center Texas, L.L.C.,
as Guarantors, and Lehman Commercial Paper Inc.,
J.P. Morgan Securities, Inc., Morgan Stanley & Co.
Incorporated, Bear, Stearns & Co. Inc., UBS Warburg LLC
and Wachovia Securities, Inc., as Initial Purchasers
(Incorporated herein by reference to Exhibit 10.19 to the
registrants Quarterly Report on Form 10-Q for the
quarter ended March 31, 2003.)
Table of Contents
Exhibit No.
Description
10
.13
Franchisee Financing Agreement, dated April 30, 2002, but
effective as of June 28, 2002, by and between Texas Capital
Bank, National Association, ColorTyme, Inc. and Rent-A-Center,
Inc. (Incorporated herein by reference to Exhibit 10.14 to
the registrants Quarterly Report on Form 10-Q for the
quarter ended June 30, 2002.)
10
.14
Supplemental Letter Agreement to Franchisee Financing Agreement,
dated May 26, 2003, by and between Texas Capital Bank,
National Association, ColorTyme, Inc. and Rent-A-Center, Inc.
(Incorporated herein by reference to Exhibit 10.23 to the
registrants Registration Statement on Form S-4 filed
July 11, 2003.)
10
.15
Amended and Restated Franchise Financing Agreement, dated
October 1, 2003, by and among Wells Fargo Foothill, Inc.,
ColorTyme, Inc. and Rent-A-Center East, Inc. (Incorporated
herein by reference to Exhibit 10.22 to the
registrants Quarterly Report on Form 10-Q for the
quarter ended September 30, 2003.)
10
.16
First Amendment to Amended and Restated Franchisee Financing
Agreement, dated December 15, 2003, by and among Wells
Fargo Foothill, Inc., ColorTyme, Inc. and Rent-A-Center East,
Inc. (Incorporated herein by reference to Exhibit 10.23 to
the registrants Annual Report on Form 10-K/A for the
year ended December 31, 2003.)
10
.17
Second Amendment to Amended and Restated Franchisee Financing
Agreement, dated as of March 1, 2004, by and among Wells
Fargo Foothill, Inc., ColorTyme, Inc. and Rent-A-Center East,
Inc. (Incorporated herein by reference to Exhibit 10.24 to
the registrants Quarterly Report on Form 10-Q for the
quarter ended March 31, 2004.)
10
.18
Purchase Agreement, dated May 1, 2003, among Rent-A-Center,
Inc., Rent-A-Center East, Inc., ColorTyme, Inc., Rent-A-Center
West, Inc., Get It Now, LLC, Rent-A-Center Texas, L.P.,
Rent-A-Center Texas, L.L.C., Lehman Brothers Inc.,
J.P. Morgan Securities, Inc., Morgan Stanley & Co.
Incorporated, Bear, Stearns & Co. Inc., UBS Warburg LLC
and Wachovia Securities, Inc. (Incorporated herein by reference
to Exhibit 10.18 to the registrants Quarterly Report
on Form 10-Q for the quarter ended March 31, 2003.)
10
.19
Stock Purchase and Exchange Agreement, dated April 25,
2003, by and among Apollo Investment Fund IV, L.P., Apollo
Overseas Partners IV, L.P. and Rent-A-Center, Inc.
(Incorporated herein by reference to Exhibit 99(d)(1) to
the registrants Schedule TO filed on April 28,
2003.)
10
.20*
Form of Stock Option Agreement issuable to Directors pursuant to
the Amended and Restated Rent-A-Center, Inc. Long-Term Incentive
Plan
10
.21*
Form of Stock Option Agreement issuable to management pursuant
to the Amended and Restated Rent-A-Center, Inc. Long-Term
Incentive Plan
10
.22*
Summary of Director Compensation
10
.23*
Summary of Named Executive Officer Compensation
21
.1
Subsidiaries of Rent-A-Center, Inc. (Incorporated herein by
reference to the registrants Quarterly Report on
Form 10-Q for the quarter ended June 30, 2004.)
23
.1*
Consent from Independent Registered Public Accounting Firm
31
.1*
Certification pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 1934 implementing Section 302 of the
Sarbanes-Oxley Act of 2002 by Mark E. Speese
31
.2*
Certification pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 1934 implementing Section 302 of the
Sarbanes-Oxley Act of 2002 by Robert D. Davis
32
.1*
Certification pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 by Mark E. Speese
32
.2*
Certification pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 by Robert D. Davis
Management contract or compensatory plan or arrangement
*
Filed herewith.
86
Exhibit 10.20
DIRECTOR NONQUALIFIED
STOCK OPTION AGREEMENT
UNDER THE AMENDED AND RESTATED
RENT-A-CENTER, INC.
LONG-TERM INCENTIVE PLAN
Rent-A-Center, Inc. (the Company ) hereby grants, effective as of , 20 , to [NAME] (the Optionee ), a nonemployee Director of the Company, the Nonqualified Option (the Option ) to purchase from the Company up to but not exceeding in the aggregate shares of the Companys common stock, par value $.01 per share (the Common Stock ), at a price of and Dollars ($26.54) per share (the Exercise Price ), such number of shares and such price per share being subject to adjustment as provided in paragraph 15(b) of the Amended and Restated Rent-A-Center, Inc. Long-Term Incentive Plan, as amended from time to time (the Plan ), and further subject to the following terms and conditions:
1. Relationship to Plan . This Option is issued in accordance with and subject to all of the terms, conditions and provisions of the Plan and administrative interpretations thereunder, if any, which have been adopted by the Compensation Committee thereunder and are in effect on the date hereof. Except as defined herein, capitalized terms shall have the same meanings ascribed to them under the Plan. A copy of the Plan is being provided to Optionee herewith and is attached hereto as Appendix A.
2. Exercise Schedule . This Option shall be exercisable immediately upon its grant and shall remain exercisable, in whole or in part, until terminated pursuant to the provisions of Section 3 hereof.
3. Termination of Option . This Option shall terminate and be of no force and effect with respect to any shares not previously purchased by the Optionee on January 3, 20___(the tenth anniversary of the date of grant).
4. Exercise of Option . Subject to the limitations set forth herein and in the Plan, this Option may be exercised by written notice provided to the Company as set forth in Section 5, which written notice shall state the number of shares with respect to which the Option is being exercised. The Optionee shall deliver to the Secretary of the Company a cashiers check payable in United States currency (unless a personal check shall be acceptable to such office) to the order of the Company for an amount equal to the Exercise Price times the number of shares with respect to which the Option is being exercised. The check shall be accompanied by such other instruments or agreements duly signed by the Optionee as in the opinion of counsel for the Company may be necessary or advisable in order that the issuance of such number of shares comply with applicable rules and regulations under the Securities Act of 1933, as amended (the Act ), any appropriate state securities laws or any requirement of any national securities exchange on which such Common Stock may be traded. As soon as practicable after any such exercise of the Option in whole or in part by the Optionee, the Company will deliver to the Optionee a certificate for the number of shares with respect to which the Option shall have been so exercised, issued in the Optionees name. Such Common Stock certificate shall carry such appropriate legend, and such written instructions shall be
Director Option Agreement
given to the Companys transfer agent, as may be deemed necessary or advisable by counsel to the Company to satisfy the requirements of the Act or any state securities laws.
If any law or regulation requires the Company to take any action with respect to the shares specified in such notice, the time for delivery thereof, which would otherwise be promptly as possible, shall be postponed for the period of time necessary to take such action.
5. Notice of Exercise . Notice of exercise of the Option must be made in the following manner, using such forms as the Company may from time to time provide:
(a) by registered or certified United States mail, postage prepaid, to Rent-A-Center, Inc., Attention: General Counsel and Secretary, 5700 Tennyson Parkway, Suite 100, Plano, Texas 75024, in which case the date of exercise shall be the date of mailing; or
(b) by hand delivery or otherwise to Rent-A-Center, Inc., Attention: General Counsel and Secretary, 5700 Tennyson Parkway, Suite 100, Plano, Texas 75024, in which case the date of exercise shall be the date when receipt is acknowledged by the Company.
Notwithstanding the foregoing, in the event that the location of the corporate offices of the Company is changed prior to the date of any exercise of this Option, notice of exercise shall instead be made pursuant to the foregoing provisions at the address of the corporate offices of the Company as of the date of the exercise.
6. Assignment of Option . The Optionees rights under the Plan and this Nonqualified Stock Option Agreement are personal. No assignment or transfer of the Optionees rights under and interest in this Option may be made by the Optionee otherwise than by will or by the laws of descent and distribution. This Option is exercisable only by the Optionee during the Optionees lifetime.
7. Stockholder Rights . The Optionee shall have no rights of a stockholder with respect to shares of Common Stock subject to the Option, whether or not vested, unless and until such time as the Option has been exercised and ownership of such shares of Common Stock has been transferred to the Optionee.
8. Governing Law . This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Texas.
[The remainder of this page is intentionally left blank]
-2-
RENT-A-CENTER, INC.
|
||||
Dated: , 20 | By: | |||
Robert D. Davis | ||||
Senior Vice President Finance, Chief Financial Officer and Treasurer | ||||
This Option has been accepted as of the date set forth above by the undersigned, subject to the terms and provisions of the Plan and administrative interpretations thereof referred to above.
Optionee | ||||
-3-
Exhibit 10.21
EMPLOYEE NONQUALIFIED STOCK OPTION AGREEMENT
UNDER THE AMENDED AND RESTATED RENT-A-CENTER, INC.
LONG-TERM INCENTIVE PLAN
This STOCK OPTION AGREEMENT (the Agreement ) is made and entered into as of the ___ day of ___, 20___, by and between RENT-A-CENTER, INC., a Delaware corporation (herein called the Company ), and ___(herein called the Employee ).
W I T N E S S E T H :
WHEREAS, the Board of Directors of the Company (the Board ) has resolved that the interests of the Company will be advanced by encouraging and enabling certain selected employees of the Company and its Subsidiaries (as such term is defined in the Amended and Restated Rent-A-Center, Inc. Long-Term Incentive Plan) who are mainly responsible for the management, growth and success of the Company and the Subsidiaries to acquire proprietary shares in the Company, thus providing them with a more direct concern in the welfare of the Company and the Subsidiaries and assuring a closer identification of their interests with those of the Company and the Subsidiaries; and
WHEREAS, the Board believes that the acquisition of such an interest in the Company will stimulate the endeavors of such employees on behalf of the Company and its Subsidiaries and strengthen their desire to remain with the Company and its Subsidiaries; and
WHEREAS, the individual above named is one of such employees.
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained and other good and valuable consideration, the parties hereto agree as follows:
1. Subject to the terms of Paragraph 17 hereof, the Company hereby grants to the Employee as a matter of separate inducement and agreement in connection with his employment by the Company or a Subsidiary, and not in lieu of any salary or other compensation for his services, the right and option to purchase, at the time and on the terms and conditions hereinafter set forth, ___shares of the presently authorized common stock, par value $0.01 per share, of the Company (the Common Stock ) at the purchase price of ___and ___Dollars ($___) per share.
2. The option provided for in this Agreement is granted pursuant to the Amended and Restated Rent-A-Center, Inc. Long-Term Incentive Plan (hereinafter referred to as the Plan ). The terms and provisions of such Plan are incorporated herein by reference and, in the event of any conflict between the terms and provisions of this Agreement and those of such Plan, the terms and provisions of the Plan, including, without limitation, those with respect to the powers of the administrative committee appointed thereunder (hereinafter referred to as the Committee ), shall prevail and be controlling.
3. This option shall continue for ten (10) years from the date hereof, except and to the extent that such term may be reduced as provided in Paragraphs 6, 7, 8, 9, 14 and 17 hereof; provided, however , that if any termination date provided for herein shall fall on a Saturday, Sunday or legal holiday, then such termination date shall be deemed to be the first normal business day of the Company, at its office specified in Paragraph 20 hereof, before such Saturday, Sunday or legal holiday.
4. Except as otherwise provided herein, this option shall be exercisable not later than ten
(10) years from the date hereof, and only to the extent of shares that have vested in accordance
with the following schedule:
Portion of Shares That is Vested
Vesting Date
On or After Such Vesting Date
0
%
25
%
50
%
75
%
100
%
The Employees right to exercise the option granted hereunder accrues only in accordance with the preceding sentence and, except as otherwise provided herein, only to the extent that he or she remains in the continuous employ of the Company or a Subsidiary. This option shall be exercisable during the lifetime of the Employee only by him or her. In no event may the Employee or any person exercising this option pursuant to Paragraph 7 hereof exercise this option (before or after any adjustment or substitution pursuant to Paragraph 13 or 14 hereof) for a fraction of a share.
5. The option granted hereby shall be exercisable upon and subject to the following terms and conditions:
(a) The option granted hereby may be exercised by delivering to the Secretary of the Company from time to time within the time period specified in Paragraph 4 hereof a written notice specifying the number of vested shares the Employee then desires to purchase.
(b) Upon receipt of the Employees written notice of exercise and full compliance with all other obligations under this Agreement, the Company shall allow the Employee to consummate the purchase of the number of shares indicated in the notice of exercise in accordance with the terms of this Agreement.
(c) The Employee shall have delivered to the Secretary of the Company a cashiers check payable in United States currency (unless a personal check shall be acceptable to such offer) to the order of the Company for an amount equal to the option price for such number of shares; or, with the prior consent of the Committee, and upon receipt of all regulatory approvals, the Employee shall have tendered Common Stock or surrendered all
2
or part of any other Employee Award (as such term is defined in the Plan), valued at the Fair Market Value (as such term is defined in the Plan) of such Common Stock or other Employee Award on the date of exercise of this option, as payment of all or any portion of the option price for such number of shares. The check or, if applicable, the certificates for Common Stock, or instruments evidencing the surrender of all or any portion of any other Employee Award, shall be accompanied by such other instruments or agreements duly signed by the Employee as in the opinion of counsel for the Company may be necessary or advisable in order that the issuance of such number of shares comply with applicable rules and regulations under the Securities Act of 1933, as amended (the Act ), any appropriate state securities laws or any requirement of any national securities exchange on which such stock may be traded. As soon as practicable after any such exercise of the option in whole or in part by the Employee, the Company will deliver to the Employee a certificate for the number of shares with respect to which the option shall have been so exercised, issued in the Employees name. Such stock certificate shall carry such appropriate legend, and such written instructions shall be given to the Companys transfer agent, as may be deemed necessary or advisable by counsel to the Company to satisfy the requirements of the Act or any state securities laws.
6. If the employment of the Employee is terminated by reason of Disability (as hereinafter defined) of the Employee, then the Employee shall have the right at any time WITHIN TWELVE (12) MONTHS after the termination of such employment or, if shorter, during the unexpired term of this option, to exercise this option for the full number of shares or any portion thereof, except as to the issuance of fractional shares, BUT ONLY TO THE EXTENT THIS OPTION WAS OTHERWISE EXERCISABLE in accordance with Paragraph 4 hereof on the date of such cessation of employment.
As used herein, the term Disability shall mean the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months. The determination of whether or not an Employees employment is terminated by reason of Disability shall be in the sole and absolute discretion of the Committee. An individual shall not be considered Disabled unless he furnishes proof of the existence thereof in such form and manner, and at such times, as the Committee may require.
7. If the Employee dies while in the employ of the Company or a Subsidiary, this option may be exercised for the full number of shares, or any portion thereof, except as to the issuance of fractional shares, BUT ONLY TO THE EXTENT THIS OPTION WAS OTHERWISE EXERCISABLE in accordance with Paragraph 4 hereof on the date of the Employees death, at any time WITHIN TWELVE (12) MONTHS from the date of death of the Employee or within the unexpired term of this option, whichever is shorter, by the person or persons to whom the Employees rights under this option shall pass by the Employees will or by the laws of descent and distribution, whichever is applicable.
8. If the employment of the Employee is terminated for cause (which determination shall be made in the sole and absolute discretion of the Committee), this option shall automatically terminate as of the date of such cessation of employment.
3
9. If the employment of the Employee is terminated for any reason other than Disability, death or for cause, then the Employee shall have the right at any time WITHIN THREE (3) MONTHS after the termination of such employment or, if shorter, during the unexpired term of this option, to exercise this option for the full number of shares or any portion thereof, except as to the issuance of fractional shares, BUT ONLY TO THE EXTENT THIS OPTION WAS OTHERWISE EXERCISABLE in accordance with Paragraph 4 hereof on the date of such cessation of employment.
10. Shares to be issued on the exercise of this option may, at the election of the Company, be either authorized and unissued shares, or shares previously issued and reacquired by the Company.
11. The Company shall not be required to issue or deliver any certificates for shares purchased upon the exercise of this option prior to: (i) the obtaining of any approval from any governmental agency which the Company shall, in its sole discretion, determine to be necessary or advisable; (ii) the completion of any registration or other qualification of such shares under any state or federal law or ruling or regulation of any governmental body which the Company shall, in its sole discretion, determine to be necessary or advisable; and (iii) the determination by the Committee that the Employee has tendered to the Company the full purchase price plus any federal, state or local tax owed by the Employee as a result of exercising this option when the Company has a legal liability to satisfy such tax. In addition, if shares reserved for issuance upon the exercise of this option shall not then be registered under the Act, the Company may, upon the Employees exercise of this option, require the Employee or his permitted transferee to represent in writing that the shares being acquired are for investment and not with a view to distribution, and may mark the certificate for the shares with a legend restricting transfer and may issue stop transfer orders relating to such certificate to the Companys transfer agent.
12. In connection with the exercise of the option by the Employee, and as a condition to the Companys obligation to deliver shares upon exercise of the option, the Employee shall make arrangements satisfactory to the Committee, including, with the prior approval of the Committee, the withholding of an appropriate amount of cash or number of shares of Common Stock or a combination thereof, or the transfer to the Company of shares of Common Stock theretofore owned by the Employee, to ensure that the amount of federal, state or local withholding tax, if any, required to be withheld with respect to delivery of the shares is made available by the Employee for timely payment of the tax by the Company to the appropriate taxing authority.
13. If, prior to the delivery of all the shares in respect to which this option is granted, there shall be any subdivision or consolidation of outstanding shares of Common Stock or declaration of a dividend payable in shares of Common Stock or capital reorganization or reclassification or other transaction involving an increase or reduction in the number of outstanding shares of Common Stock, the Committee may adjust proportionally (i) the number of shares of Common Stock reserved under the Plan and covered by outstanding options denominated in Common Stock or units of Common Stock; (ii) the exercise or other price in respect of such options; and (iii) the appropriate Fair Market Value and other price determinations for such options.
4
14. If, prior to the delivery of all the shares in respect to which this option is granted, there shall be a consolidation or merger of the Company with another corporation or entity or the adoption by the Company of a plan of exchange affecting the Common Stock or any distribution to holders of Common Stock of securities or property (other than normal cash dividends or dividends payable in Common Stock), the Committee shall make such adjustments or other provisions as it may deem equitable, including adjustments to avoid fractional shares, to give proper effect to such event. In the event of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the Committee shall be authorized to issue or assume options, regardless of whether in a transaction to which Section 424(a) of the Code applies, by means of substitution of new options for previously issued options or an assumption of previously issued options, or to make provision for the acceleration of the exercisability of, or lapse of restrictions with respect to, options and the termination of unexercised options in connection with such transaction.
15. Neither the Employee nor his legal representative shall be or have any of the rights or privileges of a stockholder of the Company in respect to any of the shares issuable upon the exercise of this option unless and until certificates representing such shares shall have been issued and delivered to the Employee.
16. Neither the granting of this option, the exercise of any part hereof, nor any provision of this Agreement shall constitute or be evidence of any understanding, express or implied, on the part of the Company or a Subsidiary, to employ the Employee for any specified period.
17. This Agreement shall be null and void and no options shall be granted hereby in the event the Employee shall fail to execute and return a counterpart hereof to the Company, at the address set forth in Paragraph 20 hereof, within sixty (60) days from the date hereof.
18. Except as otherwise herein provided, this option and the rights and privileges conferred hereby may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option or any right or privilege conferred hereby, contrary to the provisions hereof, this option and the rights and privileges conferred hereby shall immediately become null and void.
19. The Committee shall have authority to make reasonable constructions of this option and to correct any defect or supply any omission or reconcile any inconsistency in this option, and to prescribe reasonable rules and regulations relating to the administration of this option and other similar options granted under the Plan.
20. Any notice relating to this Agreement shall be in writing and delivered in person or by registered mail to the Company at the Companys main office, 5700 Tennyson Parkway, Suite 100, Plano, TX 75024, or to such other address as may be hereafter specified by the Company, to the attention of its Secretary. All notices to the Employee or other person or persons then entitled to exercise the option shall be delivered to the Employee or such other person or persons at the Employees address specified below.
5
21. Any payment or any issuance or transfer of shares of the Common Stock to the Employee or his legal representative, heir, legatee or distributee, in accordance with the provisions hereof, shall, to the extent thereof, be in full satisfaction of all claims of such persons hereunder. The Committee may require the Employee, legal representative, heir, legatee or distributee, as a condition precedent to such payment, to execute a release and receipt therefor in such form as it shall determine.
22. This option is not intended to qualify as an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in its name by its Senior Vice President Finance and Chief Financial Officer and its corporate seal to be hereunto affixed and attested by its Secretary on the date and year first above written, and the Employee has hereunto set his or her hand on the day and year specified above.
7
EXHIBIT 10.22
Rent-A-Center, Inc.
Summary of Director Compensation
Non-employee directors each receive an annual retainer of $30,000, payable in four equal installments on the first day of each fiscal quarter. Additionally, non-employee directors each receive $2,000 for each Board of Directors meeting and $1,000 for each committee meeting attended in person and are reimbursed for their expenses in attending such meetings. Non-employee directors also each receive $500 for each telephonic Board of Directors or committee meeting attended.
Non-employee directors receive options to purchase 9,000 shares of Rent-A-Center, Inc. common stock on the first business day of the first full fiscal year of service as a director and options to purchase 5,000 shares of Rent-A-Center common stock on the first business day of each year thereafter. The exercise price of the options is the fair market value of shares of Rent-A-Center common stock on the grant date. These options vest and are exercisable immediately.
Exhibit 10.23
Rent-A-Center, Inc.
Summary of 2005 Compensation Payable
To Named Executive Officers
On
December 8, 2004, the Compensation Committee of our Board of
Directors established the annual
base salaries for 2005 (effective as of January 1, 2005) of our named executive officers after a
review of performance and competitive market data. In addition, the Compensation Committee
authorized the payment of cash bonuses to each of the executive officers in respect of the year
ended December 31, 2004. The following table sets forth the 2005 annual base salary and 2004 cash
bonus amount for each of our named executive officers (determined by reference to our proxy
statement dated April 12, 2004):
Name & Principal Position
2005 Annual Base Salary
2004 Cash Bonus Amount
$
685,000
$
142,500
$
500,000
$
85,500
$
295,000
$
47,700
$
251,520
$
49,000
$
285,668
$
47,750
$
270,600
$
34,000
Also on December 8, 2004, the Compensation Committee adopted a cash bonus program for the 2005 fiscal year. Our named executive officers, other than Mr. Speese, as well as other officers and employees at our corporate office, are eligible to participate in the 2005 bonus program. The 2005 bonus program has not been set forth in a formal plan document. Below is a description of the 2005 bonus program, as adopted by the Compensation Committee.
The purpose of the 2005 bonus program is to promote the interests of Rent-A-Center and its stockholders by providing key employees with financial rewards upon achievement of specified business objectives, as well as help us attract and retain key employees by providing attractive compensation opportunities linked to performance results.
Bonuses are capped at a certain percentage of the eligible participants base salary, with the percentage depending on the individuals position within Rent-A-Center. Of the maximum cash bonus amount an eligible participant may earn, 40% is contingent on the achievement by Rent-A-Center of a target amount of after tax profit, and the remaining 60% is subject to the achievement of individual goals and objectives, which are set at the beginning of the fiscal year.
The target bonus percentage and maximum bonus amount for each named executive officer (other than
Mr. Speese) pursuant to the 2005 bonus program is as follows:
2005 Target Bonus
Maximum 2005 Bonus
Name & Principal Position
Percentage
Amount
1
40
%
$
200,000
35
%
$
103,250
40
%
$
100,608
40
%
$
114,267
30
%
$
81,180
1 Assumes (1) the after tax profit goal for Rent-A-Center is met and (2) 100% achievement of the individuals goals and objectives.
The bonus to be paid to our Chief Executive Officer with respect to the 2005 fiscal year will be determined by the Compensation Committee and recommended to the Board of Directors for approval.
Payment of bonuses (if any) is normally made in January after the end of the performance period during which the bonuses were earned. In order to be eligible for a bonus under the 2005 Bonus Program, eligible participants must be employed on the date on which bonuses are paid. Bonuses normally will be paid in cash in a single lump sum, subject to payroll taxes and tax withholdings.
EXHIBIT 23.1
Consent of Independent
Registered Public Accounting Firm
We have issued our reports,
dated March 10, 2005, accompanying the
consolidated financial statements and managements assessment
of the effectiveness of internal control over financial reporting
which are included in the Annual Report of
Rent-A-Center, Inc. and Subsidiaries on Form 10-K for the year ended December
31, 2004. We hereby consent to the incorporation by reference of said
reports in
the Registration Statements of Rent-A-Center, Inc. and Subsidiaries
on Forms S-3
(File No. 333-116684), (File No. 333-116686) and (File
No. 333-77985) and on Forms S-8 (File No. 333-62582), (File
No. 33-98800),
(File No. 333-53471), (File No. 333-66645), (File No. 333-40958) and (File
No. 333-32296).
/s/ Grant Thornton LLP
Dallas, Texas
March 10, 2005
Exhibit 31.1
I, Mark E. Speese, certify that:
1. | I have reviewed this annual report on Form 10-K of Rent-A-Center, Inc.; | |||
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |||
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |||
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |||
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting, to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |||
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |||
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | |||
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: March 10, 2005
/s/ Mark E. Speese | ||||
Mark E. Speese | ||||
Chairman of the Board
and Chief Executive Officer |
||||
Exhibit 31.2
I, Robert D. Davis, certify that:
1. I have reviewed this annual report on Form 10-K of Rent-A-Center, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |||
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting, to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |||
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |||
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | |||
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: March 10, 2005
/s/ Robert D. Davis | ||||
Robert D. Davis | ||||
Senior Vice President-Finance, Treasurer
and Chief Financial Officer |
||||
Exhibit 32.1
CERTIFICATION PURSUANT TO
In connection with the Annual Report of Rent-A-Center, Inc. (the
Company
) on Form 10-K for
the period ended December 31, 2004, as filed with the Securities and Exchange Commission on the
date hereof (the
Report
), I, Mark E. Speese, Chairman of the Board and Chief Executive Officer of
the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
Dated: March 10, 2005
A signed original of this written statement required by Section 906 has been provided to
Rent-A-Center, Inc. and will be retained by Rent-A-Center, Inc. and furnished to the Securities and
Exchange Commission or its staff upon request. The foregoing certification is being
furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or
as a separate disclosure document.
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.
/s/ Mark E. Speese
Mark E. Speese
Chairman of the Board and
Chief Executive Officer
Exhibit 32.2
CERTIFICATION PURSUANT TO
In connection with the Annual Report of Rent-A-Center, Inc. (the
Company
) on Form 10-K for
the period ended December 31, 2004, as filed with the Securities and Exchange Commission on the
date hereof (the
Report
), I, Robert D. Davis, Senior Vice President Finance, Treasurer and
Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my
knowledge:
Dated: March 10, 2005
A signed original of this written statement required by Section 906 has been provided to
Rent-A-Center, Inc. and will be retained by Rent-A-Center, Inc. and furnished to the Securities and
Exchange Commission or its staff upon request. The foregoing certification is being
furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or
as a separate disclosure document.
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.
/s/ Robert D. Davis
Robert D. Davis
Senior Vice President Finance,
Treasurer and Chief Financial Officer