Rent-A-Center cuts $19 million of debt after end of third quarter

By Lisa Kerner

Charlotte, N.C., Oct. 22 - Rent-A-Center, Inc. reduced its debt by an additional $19 million subsequent to the end of the quarter, said chief financial officer Robert Davis, who did not detail the reduction.

"We ended the quarter with roughly $53 million in cash on hand, and our leverage ratio at the end of the third quarter remained essentially flat at 2.17 times, well below the floor on our covenant requirement of 3.25 turns," Davis said during the company's third-quarter earnings conference call on Tuesday.

Cash on hand at Sept. 30, 2012 was $81.8 million.

For the third quarter, the company reported senior debt of about $285 million and its senior notes totaled $550 million. This compares with about $293 million and $300 million, respectively, for the prior-year period.

The company's $200 million accelerated share buyback continues to be executed in the market, said Davis.

To date, Rent-A-Center has repurchased a total of 36,177,737 shares and has used about $994.8 million of the $1.25 billion authorized by its board of directors since the plan's inception, according to the company's earnings release.

"Dividends continue to play a vital role in our total shareholder return, and we did make an $11 million dividend payment in the quarter and anticipate making our 14th consecutive quarterly cash dividend payment later this week," Davis said.

According to Davis, the balance sheet remains strong and Rent-A-Center is well positioned to continue to execute on its growth initiatives.

Financial highlights

Chairman and chief executive officer Mark Speese said he is "disappointed" with the company's overall results but is encouraged by current trends "that remain positive."

Total revenues for the quarter ended Sept. 30 were $754.8 million, up 2.1% from the prior-year period. The increase was primarily driven by a $40 million increase in the RAC Acceptance segment and a $4.1 million increase in the international segment, partially offset by a decrease of about $26 million in the core U.S. segment.

Weakness in the core U.S. segment led to a 0.8% decline in same-store sales for the period for the Plano, Texas-based rent-to-own operator.

Net earnings and net earnings per diluted share for the quarter were $27.6 million and $0.51, respectively, compared with $39.9 million and $0.67, respectively, for the same period in 2012.

"Our growth initiatives continue to perform very well," Speese said. Mexico grew revenues over 91% and met its store opening goal for the year, ending the quarter with 150 locations.

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