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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
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Date of Report (Date of earliest event reported):
February 6, 1998
ALRENCO, INC.
(Exact name of registrant as specified in its charter)
Indiana 0-27490 35-1480655
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
1736 E. Main Street, New Albany, Indiana 47150
(Address of principal executive offices) (Zip Code)
(812) 949-3370
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
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<PAGE>
Item 5. Other Events.
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On February 6, 1998, Alrenco, Inc. ("Alrenco")
announced financial results for the quarter and year ended
December 31, 1997. At the same time, RTO, Inc. ("RTO") announced
preliminary unaudited operating results for the quarter ended
December 31, 1997. A copy of the joint press release announcing
results for both companies is attached as Exhibit 99 hereto and
incorporated herein by reference.
On September 28, 1997, Alrenco executed an Agreement
and Plan of Merger, dated as of September 28, 1997, between Alrenco
and RTO, pursuant to which, among other things, (a) RTO will
merge with and into Alrenco, and (b) Alrenco will be the
surviving corporation in the merger, and (c) each stockholder of
RTO will be entitled to receive 89.795 shares of Alrenco's common
stock in exchange for each outstanding share of RTO's common
stock.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
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(c) Exhibits.
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The following exhibit is filed as a part of this report:
Exhibit
Number Description of Exhibits
- ------- -----------------------
99 -- Joint Press Release dated February 6, 1998,
announcing financial and operating results
for Alrenco, Inc. and RTO, Inc.
<PAGE>
Signatures
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Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
Dated: February 9, 1998
ALRENCO, INC.
By: /s/ Theodore H. Wilson
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Theodore H. Wilson
Executive Vice President and
Chief Financial Officer
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibits
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99 -- Joint Press Release dated February 6, 1998,
announcing financial and operating results for
Alrenco, Inc. and RTO, Inc.
<PAGE>
NEWS RELEASE
ALRENCO, INC.
1736 EAST MAIN STREET
NEW ALBANY, IN 47150
Telephone: (812) 949-3370
Facsimile: (812) 948-2579
FOR IMMEDIATE RELEASE
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Contact: AT ALRENCO:
Theodore H. Wilson
Chief Financial Officer
812-949-3370
AT RTO:
K. David Belt
Chief Financial Officer
972-288-9327
ALRENCO REPORTS 1997 EARNINGS
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Revenues Increase 61% to Record $102.6 Million
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RTO, INC. ANNOUNCES PRELIMINARY OPERATING
RESULTS FOR FOURTH QUARTER
NEW ALBANY, IN and MESQUITE, TX (February 6, 1998) - Alrenco,
Inc. (Nasdaq/NM: RNCO), one of the largest rental-purchase
companies in the U.S., today reported results for the fourth
quarter and year ended December 31, 1997.
Revenues for the year ended December 31, 1997, increased 61%
to a record $102.6 million from $63.9 million in 1996. Operating
profit was $7.0 million compared with $6.7 million for the year-
earlier period. Net earnings for the year decreased 2% to $3.6
million from $3.7 million for the prior year. Earnings per
diluted share were $0.59 for 1997 compared with $0.76 for 1996.
For the fourth quarter, revenues increased 34% to $26.4
million from $19.7 million for the fourth quarter of 1996.
Operating profit was $218,000 compared with $1.4 million for the
year-earlier period. Net loss for the quarter was ($540,000), or
($0.09) per diluted share, compared with net earnings of
$914,000, or $0.15 per diluted share, for the prior year period.
Michael D. Walts, chairman and president of Alrenco, said,
"As we announced earlier, our results for the quarter and the
year were below expectations. There were three primary factors
which impacted our 1997 performance. First, the decline in units
on rent that we experienced during the summer and early fall did
not recover to the extent we expected during the fourth quarter.
Second, our collection percentages in the fourth quarter fell
below average historical levels. Third, in anticipation of the
merger with RTO, we took a more critical look at our business and
incurred expenses which we believe better position the company
for the merger and 1998. Also impacting our fourth quarter
numbers
-MORE-
<PAGE>
RNCO Announces Fourth Quarter Results
Page 2
February 6, 1998
was a negotiated partial settlement relating to a federal income
tax audit which resulted in an additional expense of
approximately $0.03 per share.
"We believe that when the merger with RTO is completed, all
of our employees can refocus on day-to-day operations and store
level performance."
RTO, Inc. also today announced preliminary unaudited results
for the fourth quarter of 1997. RTO expects to incur a pre-tax
loss of approximately $8.5 million to $9.5 million for the
quarter, compared to a pre-tax loss for the third quarter of 1997
of approximately $2.0 million. This loss is primarily
attributable to losses incurred at stores opened in 1997, costs
incurred with respect to the merger, higher advertising expenses
and other costs associated with changing the name of 165 of RTO's
existing stores to "Home Choice," higher store level expenses and
higher corporate expenses due both to the merger and to RTO's
substantial growth since its inception.
George D. Johnson, Jr., chairman of RTO, said, "Our business
remained strong in the fourth quarter. Units on rent increased
by 20,808, or 10%, during the quarter as compared to units on
rent at September 30, 1997. We believe that the steps taken by
RTO in the fourth quarter of 1997 will improve the profitability
of our existing operations and contribute to a successful
integration of our business with Alrenco. We remain confident
that our strategy of aggressive store openings and acquisitions
will enable the combined company to pursue the strategic
objective of becoming one of the leading rental-purchase store
operators in the rental-purchase industry."
As previously announced, on September 29, 1997, Alrenco and
RTO entered into a definitive merger agreement. Under terms of
the agreement, RTO shareholders will receive approximately 10.9
million shares of Alrenco's common stock in exchange for all of
the outstanding common stock of RTO. The combined company, to
operate as Alrenco, Inc., will be the third largest company in
the rental-purchase industry with 432 rental-purchase stores and
aggregate annual revenues in 1997 of more than $230 million.
Alrenco operates 165 rental-purchase stores in 18 states,
primarily in the Midwest and Southeast, offering high quality,
brand-name consumer merchandise under flexible rental-purchase
agreements, also known as rent-to-own agreements.
RTO, headquartered in Mesquite, Texas, operates 267 rental-
purchase stores in 16 states, primarily in the Southwest and
Southeast.
THIS RELEASE CONTAINS FORWARD-LOOKING STATEMENTS WHICH
INVOLVE CERTAIN RISKS AND UNCERTAINTIES. THE ACTUAL RESULTS OF
THE COMBINED COMPANY FOLLOWING THE MERGER MAY DIFFER
SIGNIFICANTLY FROM THE RESULTS AND EXPECTATIONS DISCUSSED IN THE
FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A
DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, GENERAL ECONOMIC AND
BUSINESS CONDITIONS, CHANGES IN THE COMPETITIVE ENVIRONMENT
WITHIN THE RENTAL-PURCHASE INDUSTRY, THE ABILITY OF ALRENCO AND
RTO TO INTEGRATE THEIR RESPECTIVE OPERATIONS FOLLOWING THE
MERGER, THE ABILITY TO INTEGRATE AND MANAGE FUTURE ACQUIRED
BUSINESSES, AND THE ABILITY TO OPEN NEW RENTAL-PURCHASE STORES ON
A PROFITABLE BASIS.
-MORE-
<PAGE>
RNCO Announces Fourth Quarter Results
Page 3
February 6, 1998
ALRENCO, INC.
FINANCIAL HIGHLIGHTS
(In thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED FOR THE YEARS ENDED
DECEMBER 31, DECEMBER 31,
---------------------------- ----------------------------
1997 1996 1997 1996
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
REVENUE
Rentals and fees $26,026,335 $19,249,218 $100,724,601 $62,536,490
Sales 382,998 370,874 1,769,872 1,199,375
Other 17,532 64,139 103,787 119,043
----------- ----------- ------------ -----------
Total revenues 26,426,865 19,684,231 102,598,240 63,855,808
OPERATING EXPENSES
Direct store expenses
Depreciation of
rental merchandise 6,399,040 4,352,200 24,464,675 13,964,028
Cost of sales 372,112 302,558 1,446,148 835,667
Salaries and other
expenses 14,360,976 11,402,543 55,850,291 35,640,094
----------- ----------- ------------ -----------
21,132,128 16,057,301 81,761,114 50,439,789
General and administrative
expenses 4,170,161 1,685,711 10,469,013 5,588,925
Amortization of
intangibles 906,690 527,334 3,355,492 1,140,675
----------- ----------- ------------ -----------
Total operating
expenses 26,208,979 18,270,346 95,585,619 57,169,389
----------- ----------- ------------ -----------
Operating profit 217,886 1,413,885 7,012,621 6,686,419
Gain on sale of assets -- -- (950,366) --
Interest income (189) (127,569) (1,555) 133,688
Interest expense 400,863 37,050 1,245,464 652,255
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Earnings before
income taxes (182,808) 1,504,404 6,719,078 6,167,852
Income tax expense 357,444 590,700 3,132,774 2,504,474
----------- ----------- ------------ -----------
NET EARNINGS $ (540,252) $ 913,704 $ 3,586,304 $ 3,663,378
=========== =========== ============ ===========
Weighted average
shares - Basic 6,095,516 6,044,778 6,082,844 4,766,506
Earnings per common
share - Basic $ (0.09) $ 0.15 $ 0.59 $ 0.77
Weighted average
shares - Diluted 6,116,247 6,061,492 6,090,855 4,789,733
Earnings per common
share - Diluted $ (0.09) $ 0.15 $ 0.59 $ 0.76
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</TABLE>
