RentACenter Inc. Reports Operating Results (10-Q)
Rent-A-Center operates company owned rent-to-own stores which offer high-quality durable goods such as consumer electronics appliances furniture and accessories to consumers under flexible rental purchase arrangements that allow the customer to obtain ownership of the merchandise at the conclusion of an agreed-upon rental period. ColorTyme Inc. a wholly-owned subsidiary of the Company is a national franchisor of rent-to-own stores which operate under the trade name of ``ColorTyme'' and under the ``Rent-A-Center'' name. (Press Release) Rentacenter Inc. has a market cap of $1.24 billion; its shares were traded at around $18.81 with a P/E ratio of 8.6 and P/S ratio of 0.5. Rentacenter Inc. had an annual average earning growth of 4.7% over the past 10 years. Highlight of Business Operations:As of September 30, 2009, the amount accrued for losses within our self-insured retentions with respect to workers compensation, general liability and auto liability insurance was $126.9 million, as compared to $117.9 million at December 31, 2008 and $117.2 million at September 30, 2008. If any of the factors that contribute to the overall cost of insurance claims were to change, the actual amount incurred for our self-insurance liability would be directly affected. While we believe our loss prevention programs will reduce our total cost for self-insurance claims, our actual cost could be greater than the amounts currently accrued.
Amortization and Write-Down of Intangibles. Amortization of intangibles decreased by $9.7 million, or 80.0%, to $2.4 million for the nine months ended September 30, 2009 from $12.1 million in 2008. This decrease was due to intangible assets associated with the acquisition of Rent-Way that were fully amortized in 2009 as compared to 2008.
Amortization and Write-Down of Intangibles. Amortization of intangibles decreased by $2.9 million, or 83.5%, to approximately $600,000 for the three months ended September 30, 2009 from $3.5 million in 2008. This decrease was due to intangible assets associated with the acquisition of Rent-Way that were fully amortized in 2009 as compared to 2008.
Cash provided by operating activities decreased by $15.5 million to $299.3 million for the nine months ended September 30, 2009 from $314.8 million in 2008. This decrease is primarily attributable to a decrease in deferred taxes, partially offset by an increase in earnings.
We believe the cash flow generated from operations, together with amounts available under our senior credit facilities, will be sufficient to fund our liquidity requirements as discussed above (including mandatory principal payments) during the next twelve months. Our revolving credit facilities, including our $20.0 million line of credit at Intrust Bank, provide us with revolving loans in an aggregate principal amount not exceeding $420.0 million, of which $300.5 million was available at October 27, 2009. At October 27, 2009, we had $42.8 million in cash. To the extent we have available cash that is not necessary to fund the items listed above, we intend to make additional payments to service our existing debt, and may repurchase additional shares of our common stock. While our operating cash flow has been strong and we expect this strength to continue, our liquidity could be negatively impacted if we do not remain as profitable as we expect.
Deferred Taxes. The 2008 Stimulus Act provided for accelerated depreciation by allowing a bonus first-year depreciation deduction of 50% of the adjusted basis of qualified property placed in service during 2008. Accordingly, our cash flow benefited in 2008 from having a lower cash tax obligation which, in turn, provided additional cash flow from operations. We estimate that our 2008 operating cash flow increased by approximately $75.0 million as a result of the 2008 Stimulus Act with the associated deferral expected to begin to reverse over a three year period beginning in 2009. However, on February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (the 2009 Recovery Act) which extends the bonus depreciation provision of the 2008 Stimulus Act by continuing the bonus first-year depreciation deduction of 50% of the adjusted basis of qualified property placed in service during 2009. We estimate the cash tax benefit of the 2009 Recovery Act to be approximately $75.0 million, of which $59.0 million will offset the 2008 deferral that reverses in 2009, and the remaining $16.0 million will increase our 2009 operating cash flow. We estimate that at December 31, 2009 the remaining tax deferral associated with the 2008 Stimulus Act and the 2009 Recov
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