Question-and-Answer Session
Operator
[Operator Instructions]. Your first question comes from Dennis Telzrow [Stephens, Inc.].
Dennis Telzrow - Stephens, Inc.
Good morning, Mark, Mitch, Robert.
Mark E. Speese - Chairman and Chief Executive Officer
Good morning, Dennis.
Mitchell E. Fadel - President and Chief Operating Officer
Hi, Dennis.
Dennis Telzrow - Stephens, Inc.
Mark, is the October trend that you are seeing sort of consistent with your guidance of flat to up 2?
Mark E. Speese - Chairman and Chief Executive Officer
I am sorry, is it consistent with --?
Dennis Telzrow - Stephens, Inc.
The guidance on same-store sales of flat to up 2%?
Mark E. Speese - Chairman and Chief Executive Officer
Yes.
Dennis Telzrow - Stephens, Inc.
Okay.
Mark E. Speese - Chairman and Chief Executive Officer
Yes. I mean, obviously, the October is near conclusion, we've got the benefit of that hindsight and that is factored in our expectation.
Dennis Telzrow - Stephens, Inc.
And with regard, I didn't catch... you launched the Worry-Free, was that in late September.
Mitchell E. Fadel - President and Chief Operating Officer
Yes, the last week of September we launched that.
Dennis Telzrow - Stephens, Inc.
And I wonder why for next year I think you hear some discussion that Rent-Way would add so much to their earnings, is that obviously factor in, and just part of what's going on with the business.
Mitchell E. Fadel - President and Chief Operating Officer
Yes it is. That's factored in, they probably, like the rest of our stores, slightly behind that number after the summer we've had but they're still accretive and that is factored in yes.
Dennis Telzrow - Stephens, Inc.
And last question, Robert. What is available to buyback on the stock per year, I guess, your credit covenants?
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
Yes, right now, Dennis. As I mentioned, the Board approved plan was $59 million. The credit facility; right now where we are today, is currently unlimited. The leverage test is senior debt-to-EBITDA, it has to be below 275, and we were right around 202 at the end of the quarter. So from a senior leverage standpoint, so right now we have an unlimited basket for share repurchase within our credit facility.
Dennis Telzrow - Stephens, Inc.
Okay. Thank you very much.
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
Thank you.
Mark E. Speese - Chairman and Chief Executive Officer
Thank you.
Operator
Your next question comes from Henry Coffey [Ferris, Baker Watts, Inc.].
Henry Coffey, Jr. - Ferris, Baker Watts, Inc.
One; I am looking at what look liked kind of your revised '07 guidance and that looks down. And then I am looking at the '08 guidance which is pretty conservative. Where is the... and looking at some of the revenue figures which this is kind of... this is sort of a replay of what we talked about in June where you know revenue is still basically there but the slippage appears to be occurring in the operating metrics at the store level. Can you... and then you are fairly rosy about October. And I am having trouble reconciling all this. Maybe you can give us a sense of what do you think is going wrong in '08 say versus where your numbers were in '06? And kind of give us a little more perspective on why the numbers are falling the way they are?
Mitchell E. Fadel - President and Chief Operating Officer
Henry, this is Mitch. Good morning.
Henry Coffey, Jr. - Ferris, Baker Watts, Inc.
Good morning.
Mitchell E. Fadel - President and Chief Operating Officer
We finished the quarter behind where we thought we would be on agreements on Rent. And from a revenue standpoint the rental and fee revenue at the store level is down from we've forecasted earlier. And --
Henry Coffey, Jr. - Ferris, Baker Watts, Inc.
Because you went in with lower balances.
Mitchell E. Fadel - President and Chief Operating Officer
That's right. We ended quarter with lower balances and that translates 30,000 or 40,000 less agreements which is only about 2% of our agreements on rent, lower than we thought we would be, that translates to $3 million or $4 million a month which can... it takes a lot of pennies away by the time you annualize it.
Henry Coffey, Jr. - Ferris, Baker Watts, Inc.
Right. And then there seem to be I know back in '06 the store operating cost to the store were running at around 57.9 and now you are looking for something in the neighborhood in '08 of closer to 58.5 to 60 which again you know that knocks a lot of pennies out of the numbers?
Mitchell E. Fadel - President and Chief Operating Officer
Well it's not like the expenses are going up at the store level, it's a matter of the revenue being flat or slightly down, and then relatively fixed cost business.
Henry Coffey, Jr. - Ferris, Baker Watts, Inc.
Right.
Mitchell E. Fadel - President and Chief Operating Officer
And the leverage works really well when you have a positive comp and not so low when you have a negative confident. Now that doesn't mean we are not looking for more efficiencies within our operation to try and get that number back down. I'd say a relatively fixed cost business. That's not a lot we can take out but we are in the process of analyzing what we can take out because we are not going to just sit here and say well, we can't take any of the expenses out. So we are in the process of evaluating if we can make that any better.
Henry Coffey, Jr. - Ferris, Baker Watts, Inc.
Just two other questions, Rent-Way, I know it sounds like the contribution is going to be down consistent with what's going on at the other businesses. Can you put some numbers on that versus kind of where you were and where you are today?
Mitchell E. Fadel - President and Chief Operating Officer
We are not... when we build our internal models we got them all merged together now in absolute numbers but --
Henry Coffey, Jr. - Ferris, Baker Watts, Inc.
Okay. No, that's fair.
Mitchell E. Fadel - President and Chief Operating Officer
You know roughly we had said around $0.15, the first full year being next year contribution, it will be slightly less than that. It's less than that but it's not like it's closer to zero. It's still close, the thing is probably in that $0.10 range consistent with what's going on in the rest of the business.
Henry Coffey, Jr. - Ferris, Baker Watts, Inc.
And are you making money this year or still losing money in the paid alone product?
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
We are still losing money this year in the paid alone product. We talked about last quarter roughly $0.08 to $0.10 for '08 or '07. It's probably a penny or two worse than that now, given the higher losses that we experienced in the third quarter that Mark mentioned. Next year we anticipate financial services to be, instead of neutral down $0.05 or $0.06 next year, and part of that has to do with the fact that we are slowing down openings this year to focus on our core business and the stores that are there. So, where you might have some offset at the back end of '08 are the stores that we otherwise would have opened this quarter, that's not going to be there next year to help offset some of that dilution. And then also just some of that middle management leverage that we talked about in the call last time, until we get those stores opened that has an impact as well.
Henry Coffey, Jr. - Ferris, Baker Watts, Inc.
And then on the buyback. I was listening to you answer to Dennis' questions, but I am guessing it sounds like you have about $70 million or $75 million of capacity left on your lines?
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
There is two... I am sorry if I confused, there is two different baskets that I was referring to. The $500 million approved authorizations from the Board, there is about $59 million remaining.
Henry Coffey, Jr. - Ferris, Baker Watts, Inc.
Right.
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
However, we are unlimited in our senior credit facility right now.
Henry Coffey, Jr. - Ferris, Baker Watts, Inc.
And that would be a fairly substantial number than if you really exercise all of that...
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
All --
Henry Coffey, Jr. - Ferris, Baker Watts, Inc.
If you were to use your senior line facility to buy shares?
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
I am sorry. Yes, there is $280 million in unutilized revolver right now.
Henry Coffey, Jr. - Ferris, Baker Watts, Inc.
That's the bit. This detail is really helpful. I know you are facing some tough challenges but I appreciate the focus here as well the information you are sharing with us. So thank you.
Mark E. Speese - Chairman and Chief Executive Officer
Thanks Henry.
Operator
Your next question comes from John Baugh [Stifel Nicolaus & Company, Inc.].
John Baugh - Stifel Nicolaus & Company, Inc.
Thank you. Good morning.
Mitchell E. Fadel - President and Chief Operating Officer
Good morning, John.
John Baugh - Stifel Nicolaus & Company, Inc.
Really nice cash flow generation. My questions are centered around, when did you close the Rent-Way transaction again?
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
November... mid-late November last year.
John Baugh - Stifel Nicolaus & Company, Inc.
Okay. So, I had somewhere in my files a pro forma inventory on Rent number for the year ago third quarter of around $800 million, is that correct? And where I am going with this is it 9% reduction, if that number is right in inventory on Rent at the end of September year-over-year pro forma? And I guess that speaks to your lower agreements. I am sure your store count is down from closing some Rent-Way stores. I am just trying to get a feel because I don't really like comps. I am trying to get a feel for... I don't know agreements on rent in terms of numbers year-over-year or BOR whatever metric that maybe a better way to look at how much the decline there has been and trying to of course take out the store closings that would influence that number as well?
Mitchell E. Fadel - President and Chief Operating Officer
John, it's probably, that... I don't have those numbers that you are referring to right in front of me, there 9% sounds right. And Robert, shake and said yes. So, that sounds right. That's down about 9%, but with the store count, and not just apposed to this year but a lot of mergers we did within the Rent-Way last when we bought. That's going to be at least half of that number. And to think the business so far this year from an agreements on rent standpoint, down in that 3% to 4% range is a reasonable assumption. Now that, we are not showing that kind of comp number down because we have got higher average revenue per agreement, to get us back towards that flat number, but if agreements are down 3% or 4% we are making that up on the... I am just using round numbers here... but if we are down 3% or 4 % on agreements we are making that up on the average revenue. Because both Rent-Way stores have... we had a lot of opportunity to raise the average revenue per agreement when we put our product mix in there. So, hopefully that clears it up for you.
John Baugh - Stifel Nicolaus & Company, Inc.
Thank you. That's terrific additional color. Do you have any guess as to how many stores you closed in '08 at this point?
Mitchell E. Fadel - President and Chief Operating Officer
No, we are going through that process right now to figure out what, now that we've had Rent-Way in our system about a year, we are evaluating those stores and there will some more closures, don't have the exact numbers yet but we're going to that kind of rationalization analysis right now.
John Baugh - Stifel Nicolaus & Company, Inc.
I am curious, is there an impact of revenue agreements on Rent-Way, are you at the front-end in terms of the approval making it tougher. I understand your collections are lot better and that's obviously working with existing customers. But I am curious at the front-end; whether you are doing anything differently to maybe keep that marginal customer that might delinquent from running in the first place?
Mitchell E. Fadel - President and Chief Operating Officer
I'd say when you put an additional focus like we had the last three months on account management that that tightens up a little bit. So, I would say that we are... we tightened up a little bit. Of course, it depends on what we are talking about. Do you mean a lot tighter in the inner city than we will be in a rural store but with the focus on collections and account management the intensity level has increased in the last three months. We haven't changed policies or anything, but I'd say the intensity level, the store level of insuring those procedures and just the evaluation of the customers, the qualification of the customer is a little tighter than it was 90 days ago.
John Baugh - Stifel Nicolaus & Company, Inc.
Okay. Thanks. And then on the skips, lost, stolen what was the number for the quarter? Am I right in assuming that's in the salaries and other number? I am interested in kind of the percentage year-over-year?
Mitchell E. Fadel - President and Chief Operating Officer
It is in the salary and other number, Rent-High that we run on an annual basis, historically, between 2.3 and 2.5. December is always our worst quarter. Last year was 2.8 and this year was 3.2. So, its 40 basis points higher in the... on the skips and stolen side. From 2.8 to 3.2 for the year, it's about 2.8 for the year versus a 2.4 last year. And we'd anticipate that 2.8, we think in the fourth quarter it will be back around that number, and as Mark pointed out, that with these lower delinquency numbers when anticipate being back in that 2.5 range or lower beginning next year.
John Baugh - Stifel Nicolaus & Company, Inc.
And with that though in the fourth quarter still be a little bit of a drag year-over-year in comparison?
Mitchell E. Fadel - President and Chief Operating Officer
Maybe slightly. I would anticipate it being pretty close to last year in the fourth quarter, as our delinquency has been great now for 90 days.
John Baugh - Stifel Nicolaus & Company, Inc.
Good. Well, congratulations on that. Thanks for answering my questions in detail.
Mitchell E. Fadel - President and Chief Operating Officer
Thanks John.
Operator
Your next question comes from Arvind Bhatia [Sterne, Agee & Leach].
Arvind Bhatia - Sterne, Agee & Leach
Thank you, and good morning.
Mitchell E. Fadel - President and Chief Operating Officer
Good morning, Arvind.
Arvind Bhatia - Sterne, Agee & Leach
First question is on the same-store sales guidance for next year; flat to plus 2%. How much of that do you think is coming from Rent-Way and how much of that is do you think your best guess on the help from the financial services business? So, I guess, trying to get a number for the core business, what your assumptions are given what you have talked about on the trend. And then you talked about the financial services business being, I think you said $0.05 to $0.06, Robert, negative impact. How much do you think of that is lower store opening and how much is just assumptions on higher delinquencies and what not, those will be the two first questions.
Mark E. Speese - Chairman and Chief Executive Officer
Robert, do you want to take that comp question first?
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
Sure.
Mark E. Speese - Chairman and Chief Executive Officer
The flat to 2%, of course, the Rent-Way kept open stores will come into the comp for the first time in the first quarter of '08.
Arvind Bhatia - Sterne, Agee & Leach
Right.
Mark E. Speese - Chairman and Chief Executive Officer
And again it's in the neighborhood of 600 or so locations. And our expectation at this point much like we have seen with all past acquisitions, when they typically come in, given the level they started that. At the time of acquisition, we are expecting pretty close to a double-digit comp number for those stores. So, if that's 20% or 25% of the whole and they are coming in a strong single-digit low double, what impact does that have on the whole, obviously that's driving a fair amount of the total. In terms of the cash advantage or financial services they continue to be adding about 0.5%, if you will, influence on the overall comp... my expression there right now, probably booking business so it was a negative 1.8., it would have been a negative 2 or so without it.
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
Hey, Arvind, let me try to add a little bit more color there. The Rent-Way stores, obviously, we kept open stores, Mark was referring to, that has the benefit of higher cost when they come in. We also have the merger, you have to take an authorization that offset that, in that in merged stores, there is a rationalization process, where you anticipate to loose some of that business in the first 90, 120 days or so. Of the 0% or 2% comp has about a 1% benefit from Rent-Way, I would guess, about a 0.5% from financial services and the other 0.5% core business that we try to get to 2% total.
Mitchell E. Fadel - President and Chief Operating Officer
Right. And the 1% Rent-Way in, Robert, was the kept open stores being offset by the merged stores, that probably only get about 1% bump there out of the two, and then the other half is financial services and half in the quarter.
Mark E. Speese - Chairman and Chief Executive Officer
Right that's a good breakdown. And then in terms of financial services 5% to 6%, just to kind of clarify $0.05 to $0.06 next year, just to clarify. Mark alluded to in his opening comments losses were a little higher in the third quarter than anticipated. We are talking about $500,000 roughly. The percentage is a lot higher just given the age of the source then we model but we are modeling around a 20% to 22% loss factor in those stores. We would anticipate that to be the case next year. We are seeing some improvements there thus far this quarter. So, out of that $0.05 to $0.06 dilution. I would expect the vast majority of it to be related to not opening the stores in the fourth quarter and getting a leverage in the middle management more so than the losses that we experienced in the third quarter having that drag.
Arvind Bhatia - Sterne, Agee & Leach
So the 20% to 22%, how is that running right now or last three months performance?
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
The first quarter we were around 19%, the second quarter we were around 20%, the third quarter was 34%, but again that 34% from the 19% or so in the second quarter was topping $500,000. This sounds significant, when you think about it percentage wise, but on a gross dollar basis it's $500,000 higher than --
Mark E. Speese - Chairman and Chief Executive Officer
Purchase on [ph] new and small revenue wise, it doesn't take much for that percentage to drive up, and we are already seeing trends coming back down in the fourth quarter on the delinquencies, so we are comfortable with that forecast of 20% to 22% for '08.
Arvind Bhatia - Sterne, Agee & Leach
Right. Last quarter you guys touched on the price changes that went into effect, lower cash prices, but rentals were higher. Can you help us understand what than was the reaction from customers; was it pretty much what you expected? And I see the merchandize sales number was up nicely, so I suppose that's where the cash sales are being reflected. Just some color on what really is the reaction of the customer was to those changes?
Mitchell E. Fadel - President and Chief Operating Officer
On the reaction of customer, we had almost none. They are very de minimis increases on a weekly rate and the overall rent-to-own price and cash prices being lower. It's almost none... it is helping our average revenue per agreement, fine; but almost no reaction from the customer. Again, they are pretty de minimis weekly increases, but the overall price coming down is a positive thing. So, if anything, it was a positive reaction but pretty minimal on either side of the coin. On the merchandize sales that's not related to the price increases; Robert, you are going to explain why the merchandize sales is up.
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
Yes, Arvind, as you know when we bought Rent-Way, we also acquired, as a majority owner, the DPI business that Rent-Way had. As that business has gone throughout the year, we made it to re-class the way we were accounting for that, whereas most of that revenue and cost were being netted in their other income line; we broke that out in the third quarter between other up to merchandize sales and the cost of that will be down and cost to merchandize sold. There was a cumulative of adjustment for the nine month period. On a run rate basis merchandize sales will be about $4 million higher in the quarter, but for the nine months period it's like 12 million because of, we re-class in the third quarter.
Arvind Bhatia - Sterne, Agee & Leach
I see.
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
So, DPI is driving that merchandize sales not the customers in the storage. So reclassification of DPI there, Arvind.
Arvind Bhatia - Sterne, Agee & Leach
Got you. And my last question is on geography. Last quarter I think you guys had indicated not much difference across the country. Your competitor on the call recently said Florida was worst; wondering if you had anything, any similar experiences or not?
Mitchell E. Fadel - President and Chief Operating Officer
Well, of course, you know being in all 50 states and in Puerto Rico and the District of Columbia we've certainly got some variations in our numbers. They are not all... they weren't all exactly a negative 1.8% in comp list for you. So, there was some ups and downs from that but there is no one part of the country that's dragging it down or anything like that, there is variation, slight variations but again there is no one part of the country dragging it down.
Arvind Bhatia - Sterne, Agee & Leach
Great. Thanks guy.
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
Thank you.
Mitchell E. Fadel - President and Chief Operating Officer
Thanks Arvind.
Operator
Your next question comes from Carla Casella [JP Morgan].
Carla Casella - JP Morgan
Hi, I'm wondering if you can comment on any regional differences you are seeing in either delinquencies or just in same-store sales?
Mitchell E. Fadel - President and Chief Operating Officer
As I just mentioned now on the... we certainly have some variations in our same-store sales that every state didn't run 1.8%, but there is no one part of the country dragging us down or lifting us up, there is some slight difference but again there is no one part of country dragging us down. On the delinquency; very, very consistent there as well. It's our standard, our standard delinquency is to be at 6% less or less every week and we are generally speaking hitting that everywhere.
Carla Casella - JP Morgan
And then it's not in the... constitute any one product area as well?
Mitchell E. Fadel - President and Chief Operating Officer
No, it's not. It's unlike a few years ago where we had some electronic loss on the low-end electronics with the deflation it's... our numbers are pretty consistent throughout categories from a percentage on rent standpoint.
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
Were you talking delinquency losses Carla or --
Carla Casella - JP Morgan
Right, delinquency, I don't know if it was on any specific type of item.
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
Yeah, no, I don't think so.
Mitchell E. Fadel - President and Chief Operating Officer
Sorry, I misunderstood the question. Also I might... units on rental percentages are staying pretty consistent but also on the delinquency side as well.
Carla Casella - JP Morgan
Okay. And sorry for the review, I had hop off for a second. Thank you.
Mitchell E. Fadel - President and Chief Operating Officer
No problem, Carla.
Operator
Your next question comes from Justin Desu [ph].
Unidentified Analyst
Hi, thanks. Could you give us the cash flow from operations expected through 2007-2008 and also the CapEx numbers you estimated from the two years?
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
For 2007, the operations cash flow is going to be around $200 million, now that does have the anticipated funding of programs in the fourth quarter of about $100 million which is offset by the charge we took in the first quarter. So, roughly 250 million in operating cash for '07, when you back out those one time items. We anticipate a similar number next year, 250 million operating cash flow. CapEx for '07 roughly $95 million and then CapEx for '08 roughly $70 million.
Unidentified Analyst
Okay. And then can you talk a little bit about the seasonality in the business and how we should think about it on a quarterly basis going forward. It maybe seems, maybe a bit more pronounced, maybe that's due to macro issues this year in particular, but what sort of seasonality should we expect on a quarterly basis?
Mark E. Speese - Chairman and Chief Executive Officer
On the rent-to-own business, the third quarter is always been are, I guess, most challenging, if you will, the demand is the lowest and delinquency, historically, tends to run the highest. This year, as you said, given some of the macro economic things that were going on, it proved to be even more so. With regards to the financial service business, it is typically the first quarter, from a demand standpoint, that tends to be the slowest. And again if you think about who this consumer is, and getting income tax refunds and so forth, they've got more cash readily available, therefore the demand is not as strong. And that's again been our experience in the past and our expectations going forward as well on both of those.
Unidentified Analyst
Okay. And then lastly can you talk a little bit about the long-term outlook for margins whether it's EBITDA or otherwise. It seems like the trend has generally been down over the last several years whether it was a positive comp year or negative comp year. What sort of external pressures do you think are causing that and where do you think it starts to level out longer term? Thanks.
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
Though our EBITDA margin that I alluded to in my... the opening comments, anticipated for '08 is around 13% of consolidated EBITDA for 2008. That's down about 1% from 2007. And when we look at EBITDA margins a lot of that is a direct result of the cost structure in the business and how we get leverage through the top-line. And so, as Mitch alluded to the fact that, we ended the quarter with lower agreements on rent than we otherwise anticipated, it has a direct impact on margins. Obviously, we're not satisfied with 13% EBITDA margins. I would like to get back to where we had been historically, in the 15% plus range. And our focus is on looking at growing the top-line but at the same time on rationalizing the cost structure be at the store level or otherwise. So our focus long-term is to have EBITDA margins in the 15% plus range and that's where our focus is today.
Unidentified Analyst
And you said, you think you'll get there through a combination of positive comps and then additional cost cutting is that right?
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
Correct. I mean, cost cutting, we're not out looking to just cut cost, what we're talking about is looking for ways to be more efficient in the way we operate the business. And I indicated here at the store level or otherwise, whether it's G&A cost or overhead. So, store rationalization, etcetera, but more focus on the top-line because that's what drive this business. BOR, customers, average revenue per agreement. And I think what you've seen here in the last few quarters is how a softer comp or negative comp in the third quarter, which was anticipated given the guidance we gave has a direct correlation on the margins.
Unidentified Analyst
Right. Thanks.
Operator
Your next question comes from Shannon Moore [ph].
Unidentified Analyst
Hi, good morning.
Mitchell E. Fadel - President and Chief Operating Officer
Good morning, Shannon.
Unidentified Analyst
Your guidance for cash from ops for '08 is little higher than I thought, the 250 million. Can you just fill in the blanks between EBITDA and cash from ops, what you're going to spend on taxes, and I assume the interest expense number is what it is in your 90-millionish?
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
You are referring to this year or --
Unidentified Analyst
No, '08.
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
'08 EBITDA, roughly $385 million; working capital investment, approximately $30 million; taxes of approximately $60 million; CapEx of 70, as I indicated and net interest is what it is, $85 million; free cash flow in the $140 million to $150 million range. And so, operating cash of $250 million, CapEx of $70 million; if you are down about $180 million range, and the real flux number there is in our working capital as well as our taxes.
So, I'll walk you through an EBITDA reconciliation and got you down to $140 million; operating cash minus CapEx gets you down to $180 million. It will be in that $140 million to $180 million range as we flux through the working capital and the cash tax number. The CapEx and interest for the numbers that are once that are pretty solid.
Unidentified Analyst
Okay. And the reduction in CapEx in '08 versus '07, is that because you are anticipating fewer substantial product launches or is that a small piece of that?
Mitchell E. Fadel - President and Chief Operating Officer
The majority of that reduction is due to moving into our new headquarter facility. A lot of that CapEx was booked in the first quarter of '07, about $9 million or $10 million of that, $95 million for 2007. And then as you thinking about rationalizing the store base and the Rent-Way base stores that we converted, there was a lot more capital spent in 2007 on re-branding and showrooms and signage and so forth, and that's not recurring in 2008.
Unidentified Analyst
Okay. Thank you. And then the two pieces, I guess, they are unknown for '08 is what you are going to do with regard to share repurchases and acquisitions. Can you comment on your plans for both of those?
Mitchell E. Fadel - President and Chief Operating Officer
Well acquisitions are not forecasted in the expectations that we gave, they never are, just because you can't predict timing, size, contribution, etcetera. In terms of share repurchase, I think we will continue to evaluate that as we always have. I would like to just remind everyone that going into 2008 our leverage test with our covenants and our senior credit facility dropped from 4.25 to 3.5 terms. And so, there will probably be a larger emphasis and focus on debt reduction in 2008 and perhaps just a little bit smaller focus on share repurchase, but there will be a balance still. I mean in 2007 we reduced the debt to $120 million, $130 million and $80 million in share repurchases. So, I'll anticipate maybe more of a focus on debt reduction and still some focus on share repurchases but probably not $80 million worth.
Unidentified Analyst
Okay. Sorry. The covenant on the senior facility that's the total leverage covenant, right, you take those from what to what?
Mitchell E. Fadel - President and Chief Operating Officer
It goes from 4.25 down to 3.5.
Unidentified Analyst
When does that step happen?
Mitchell E. Fadel - President and Chief Operating Officer
This happened at 12/31 of this year.
Unidentified Analyst
Okay. And then give me share repurchases, when was the last time you actually bought a share of stock?
Mitchell E. Fadel - President and Chief Operating Officer
The last share repurchase we did was in August of this year. The open window period, generally we have an open period 72 hours after our conference call that continues through the end of that current month. So, by way of example, if we were going to be repurchasing shares after this call, it will be during the month of November.
Unidentified Analyst
Okay. And do you have plans for the remainder of the year in terms of share buybacks. I know you have the capacity to do 59 million, what's your intention?
Mitchell E. Fadel - President and Chief Operating Officer
Yes. We can't comment we're always evaluating the use of capital, and again we repurchased $18 million worth this year. And there will be an option on the table as we go into this fourth quarter but we're not anticipating or committing to see anything at this point other than publishing it on the business. And if this demand continues to be an uptick, like we think, hopefully most of our capital will be deployed in the merchandize purchases and satisfying the customer demand.
Unidentified Analyst
Okay. And then I thought that the EBITDA guidance for the full year of '07 was 4.10. Is that's still in effect or is that no longer the case?
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
It will be down slightly from that, it will be closer to 3.90-ish, if you will, kind of flat with what our expectation is for next year.
Unidentified Analyst
Okay. And the cash you got on your balance sheet now $100 million, is that. What would you say is a comfortable amount, that you'd like to have, or that you need to have just to run operations? Is there any excess in that $100 million?
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
I'd say about half and half. About $50 million is tied up in working capital and the other $50 million is deployable.
Unidentified Analyst
Okay, so we shouldn't expect you to stay on this $100 million number. That's a little bit higher maybe --
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
No, Shannon, as I alluded to, we've essentially reducing debt since the end of the quarter to $40 million, so.
Unidentified Analyst
Okay. And then my last question is just trying to flip to the need of cash that you have in the fourth quarter, both for the price settlement, and then I guess also this California AG thing. So, if you walk through what cash needs you'll have in the fourth quarter?
Mitchell E. Fadel - President and Chief Operating Officer
Right now we are expecting about a $50 million negative cash flow from operations that's being impacted by the price settlement and the AG settlement. So about those two numbers which is roughly 110, 115, between the two of them, cash flow from operations would have been roughly 50, 55 million bucks. And then with CapEx of roughly $20 million expected in the fourth quarter, part of the settlement we would expected of the free cash flow in the fourth quarter of roughly $30 million.
Unidentified Analyst
Okay, and then just to do the math for me, what is that -- what that make you end up at, in terms of total debt at the end of the year?
Mitchell E. Fadel - President and Chief Operating Officer
About 50... I would say about maybe $20 million higher than where we are right now.
Unidentified Analyst
Okay that's not as much as I thought. So, $20 million increase from here to the end of the year?
Mitchell E. Fadel - President and Chief Operating Officer
Correct.
Unidentified Analyst
Okay, thanks very much for all my questions.
Mitchell E. Fadel - President and Chief Operating Officer
You're welcome.
Operator
Your next question comes from Lance Ettus.
Unidentified Analyst
I just had a question as far as, I know that you are talking about lowering cost, and I think you came out with a good program about a year ago, and that was around certain fuel costs and different things you could kind of change for the business. But if you looked at sort of cutting headcount in corporate headquarters or at the corporate level, and also if you looked at, I know that you looked at the Rent-Way stores but if you looked at potentially closing down some underperforming core Rent-A-Center stores, and what's the potential is from there?
Mark E. Speese - Chairman and Chief Executive Officer
Lance, this is Mark. We, first of all I don't mind, I would tell you very candidly we run a pretty lean organization and always have. At the same time, it's fair to say that not just now, but we always look at our infrastructure and our cost structure and where we might here be waste or it not make sense, and we are looking at it now but again I say in the context we always look at it, don't have any drastic plans as we are sitting here, no. I think we again, we run a pretty lean and efficient corporate office, and most of the costs that's in place is necessary, and again I think the other thing that you have got a balance is we are facing some headwinds, we are seeing some positive trends, we believe we will come out of it. We have been through these kind of experiences in the past, and we are wanting to manage the business for the benefit of the near term as well as the long-term. Now, what I don't want to do is anything drastic today that could have other repercussions in the future.
And is there opportunity in the field and synergies, whether the consolidation...? I know that question was question was asked earlier by somebody. If you look at us historically, we've always consolidated, maybe 20 stores, maybe two dozen stores a quarter. So, we're always kind of evaluating the performance in the field of individual stores and where they are and might it make sense to rationalize the store-base, that's ongoing. And I think Mitch mentioned, we continue to look at that, we'll do so. It is generally fixed cost. There is some opportunities. And I think it's just fair to say that we are looking at all of that but I wouldn't... at this point, I don't expect anything dramatic and we are certainly not going to bake or anticipating getting dramatic at this point.
Unidentified Analyst
Thanks Mark.
Operator
Your next question comes from Alex Ryerson [Northern Trust Global Investments].
Alex Ryerson - Northern Trust Global Investments
Good morning, guys.
Mitchell E. Fadel - President and Chief Operating Officer
Good morning.
Alex Ryerson - Northern Trust Global Investments
Just couple of quick questions or some clean up stuff. The $70 million of CapEx, can you kind give me how much of that is on your Kiosk additions for the financial services and how much of that is just core business maintenance CapEx, that's for '08, the '08 number?
Mitchell E. Fadel - President and Chief Operating Officer
The $70 million for '08, there's about $10 million for financial services.
Alex Ryerson - Northern Trust Global Investments
It's the same 50,000 the Kiosks --?
Mitchell E. Fadel - President and Chief Operating Officer
Right. 50,200 locations, $2 million, and then the rest is kind of maintenance on the RTO side, a few new stores but not many.
Alex Ryerson - Northern Trust Global Investments
All right. Okay. And then I, you kind of went quickly on the free cash flow for '08. I had 3.85 of EBITDA, $30 million working capital investment, $70 million CapEx, and $85 of interest, how much was taxes?
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
60.
Alex Ryerson - Northern Trust Global Investments
50?
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
60.
Alex Ryerson - Northern Trust Global Investments
60. Okay. All right. Great. Thank you. And then just on the covenant stepping down to 3.5 at the end of this year, it seems like, with the press settlement, it maybe little bit tight kind of in '08, is that, are you guys, how comfortable are you with the covenant levels where they are?
Mitchell E. Fadel - President and Chief Operating Officer
Of course, we were at two and three turns at the end of this quarter and that's coming from the base that we start from going forward. So, we are not uncomfortable where we are today.
Alex Ryerson - Northern Trust Global Investments
Yes. And I am just kind of adding, I am kind of performing it for what you have pay out for the litigation, but it's... yes, I am not saying you are close, but if you kind of predict EBITDA was going to go down, I mean, you kind of at $400 million LTM and you are kind of predicting a $20 million decline next year?
Mitchell E. Fadel - President and Chief Operating Officer
Well, we are forecasting EBITDA to be relatively flat with '07.
Alex Ryerson - Northern Trust Global Investments
Right.
Mitchell E. Fadel - President and Chief Operating Officer
And given the free cash flow expectations for next year, our ability to reduce indebtedness pretty significantly next year, we're not uncomfortable with the leverage test going forward.
Alex Ryerson - Northern Trust Global Investments
Okay, okay, that's fair. So, I mean it seems like the cash is going to be spend paying down debt, and you guys will likely kind of maintain your conservative acquisitions stance you have had this year.
Mitchell E. Fadel - President and Chief Operating Officer
I guess that's a fair assessment.
Alex Ryerson - Northern Trust Global Investments
Okay. And then just on the litigation... basically, my reading is on the K's and Q's and stuff, it seems like you guys have cleaned up, basically all sort of the big litigation and outstanding. Am I missing anything, emerging anything else on the horizon, that you have disclosed that you see could kind of superior?
Mark E. Speese - Chairman and Chief Executive Officer
No. I think you are evaluating the right. We have made pretty good progress, not that it hasn't come with a price in some cases obliviously, but as you alluded all the material... as we sit here today any material litigations has been disclosed, and I feel pretty comfortable with how we are doing on that front, and obliviously it's something we are very mindful of, and hope to be with a... frankly improve even further as we go forward.
Alex Ryerson - Northern Trust Global Investments
Yes, then I know you disclose it but, is there anything else out there, that you maybe selling? I mean, I have kind of gone through the docs and I can't find the lock that you even have to settle anymore?
Mark E. Speese - Chairman and Chief Executive Officer
It's obviously material. No, there is your ordinary core stuff that is not disclosed but it's ordinary course, if you will, so --
Mitchell E. Fadel - President and Chief Operating Officer
I think the question is for how long, if you look at our litigation profile, I mean given through... given where we have been last few years and where we kind of headed. I think there are lot of things that are getting cleaned up the way that we want them to and get them up to knock this industry.
Alex Ryerson - Northern Trust Global Investments
All right. Okay, that's great. And I have one final question, someone talked about margins earlier. And I know they've kind of been close to 20%, in kind of '02, '03 timeframe and now like you say, they are going to trend back down towards like the 13% range. How should I kind think about you guys more longer term and you have just sort of a base business going to be sort of 0% growth over kind of a core business is 0% growth and as soon as they are kind of trend up and show margins over time, should go down and you guys have kind of offset that by buying lower margins businesses and then improving them. Or, I mean how should I kind of think about just your margin profile and what kind of margin business this really is?
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
Yes I think, what you are referring to, we were posting roughly 19% and 20% EBITDA margins in '02 and '03. Obviously, we went into the headwinds and the challenges in '04 and '05, and we came out of that with the realization, the expectation that 20% is most likely not something that is something that could be a consistent margin going forward. We kind of lowered our expectations to high teens, 15% to 17% range, just given the large base of stores. And more focused on the profit dollars than margins, if you will. So, if you have three or four stores in the market, as opposed the two, your margins will most likely be less than they otherwise could be. But, their overall profit dollars would be higher.
And so, coming out of the headwinds that we faced in '04 and '05 was probably given guidance to 15% to 17% EBITDA margins going forward. And that's what we are focused on today. And so, yes, we are anticipating 13% margins in 2008, from EBITDA perspective, but longer term, as the financial services business, there is no longer a drag and actually contributing as well as getting some of the business that we lost in this summer time period. We are not uncomfortable thinking that our EBITDA margin into our margin profiles of 15% to 17% EBITDA margin company going forward.
As we have always said we need a 1.5% comp to kind of breakeven on the margin perspective or earnings perspective, and anything above and beyond that will significant leveraging flow through. And so if we are able to go into kind of a steady state period and post comps 3% or 4%, then you would get the margin expansion above that high teen.
Mark E. Speese - Chairman and Chief Executive Officer
Or even at the one to two, Robert, without the drag of the financial services, we see... we'd at least hold the margin, like you said, at 1% to 1.5% and this 2% to 3%, you have margin enhancement getting back to that 15%, 16%, 17% range. And, you know once we don't have the drag of the financial services, once we are up in running, and the ones we have opened this year offsets the future openings and that's not a drag we can get back to those margins.
Alex Ryerson - Northern Trust Global Investments
Right, right. I guess, I mean you guys have spent like a close to $1 billion in acquisitions over the last four years or so and I assume they were all lower margin business than you guys had. So, I would have expect sort of an initial hit to margin, but I would think that kind of over the next couple of years margins would have improved substantially. So, I guess time will tell on the Rent-Way in the next four or five years.
Mitchell E. Fadel - President and Chief Operating Officer
Of course we are not giving guidance beyond '08 right now. And so, I think that we would anticipate over the course of the next two or three years we will be back in that 15% plus range.
Alex Ryerson - Northern Trust Global Investments
Okay. All right. That's great. And just on the financial services, does that flow through your rentals and fees on the income statement like where is actually the revenue you guys are bringing?
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
Revenue, majority of that revenue is in the other line on the income statement.
Alex Ryerson - Northern Trust Global Investments
Okay, got you. And this wasn't flow through on the expense side?
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
It would be embedded in the salaries and other lines.
Alex Ryerson - Northern Trust Global Investments
Okay, all right, great. Thanks so much for answering all my questions guys.
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
Thanks.
Operator
Your next question comes from Robert Straus [Merriman Curhan Ford & Co., Inc.].
Robert Straus - Merriman Curhan Ford & Co., Inc.
Hi, guys. Just a one quick question, regarding your Worry-Free GUARANTEE program, can you just talk to us a little bit about the trends within that area and especially as that relates to the match that people are coming in for?
Mitchell E. Fadel - President and Chief Operating Officer
Well the... and from a match standpoint, we don't have to use it very often. As I said earlier, the Worry-Free GUARANTEE is really a... it focuses our sales people as well as the customers. Focuses our sales people and gives them an ability to overcome objections in a very clear way. It's packaged very well. The benefits of the transaction and we use those to overcome the objection whether it's, well I am not very sure, we of course then you would the money-back guarantee because you might as well try it for a week, and we will give you your money back anyhow.
If they can find it somewhere else for less money, then we will match their price. So, it really gives them the peace of mind. They are not... to some people, the fact what happens if I break this, is their biggest worry. And of course, we included all service, while the renting, as well as the loaner what we are, if we have to take those out of their home and fix it. So each customer has their own, might have a different worry and we use the Worry-Free GUARANTEE as to overcome any of those objections because there is nothing we can overcome in our program. Any concerns that customer has, especially when you talk about, if you try and hit and you are not satisfied, you get your money back, that's pretty much overcomes any objections. But from a match standpoint, we are not having to use it very often. But as there, as the tool to use when a customer does find it less expensive somewhere else or is wondering if they could find it somewhere else, it just gives them a peace of mind that if they do, we will match the price.
Robert Straus - Merriman Curhan Ford & Co., Inc.
Thank you. Good luck.
Mitchell E. Fadel - President and Chief Operating Officer
Thanks Robert.
Robert D. Davis - Senior Vice President, Finance and Chief Financial Officer
Thank you.
Operator
We have reached the allotted time for questions. Mr. Speese, do you have any comments.
Mark E. Speese - Chairman and Chief Executive Officer
Well as always we want to thank everyone for your time and support. As we mentioned, while the quarter itself prove challenging, we are very encouraged by our current trends and the tone of business, if you will. As we also said, we are intensely focused on continuing to improve all aspects of our operations.
And I would say we remain optimistic about the long-term prospects. And we will continue to manage for the long-term benefits as well. So, again, thank you for your time and support. We look forward to reporting back to you next quarter with our current results.
Thank you very much.
Operator
This concludes today's conference call. You may now disconnect.
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