Rent-A-Center, Inc. Reports Second Quarter 2005 Results; Diluted Earnings per Share of $0.52, Excluding Tax Credit

Business Wire, July 25, 2005

PLANO, Texas -- Rent-A-Center, Inc. (the "Company") (Nasdaq:RCII), the nation's largest rent-to-own operator, today announced revenues and net earnings for the quarter ended June 30, 2005.

The Company reported total revenues for the quarter ended June 30, 2005 of $580.6 million, a $7.6 million increase from $573.0 million for the same period in the prior year. This increase of 1.3% in revenues was primarily driven by incremental revenues generated in new and acquired stores, offset by a decrease in same store sales of 2.6%.

Net earnings for the quarter ended June 30, 2005 were $39.6 million, or $0.52 per diluted share, when excluding the benefit of the tax audit reserve credit discussed below, representing a decrease of 16.1% from the $0.62 per diluted share, or net earnings of $51.2 million, for the same period in the prior year. The decrease in earnings per diluted share is primarily attributable to the decrease in same store sales as well as an increase in operating expenses, primarily related to new store openings and acquisitions, offset by a reduction in the number of the Company's outstanding shares.

Total revenues for the six months ended June 30, 2005 increased to $1.182 billion, a 2.1% increase from $1.158 billion for the same period in the prior year. Same store revenues for the six month period ending June 30, 2005 decreased 4.0%. Net earnings for the six months ended June 30, 2005 were $82.3 million, or $1.08 per diluted share, when excluding the litigation reversion credit and tax audit reserve credit discussed below, a decrease of 13.6% over the $1.25 per diluted share, or net earnings of $103.4 million, for the same period in the prior year.

"While our revenue and earnings per diluted share were within our guidance for the second quarter," commented Mark E. Speese, the Company's Chairman and Chief Executive Officer, "our business environment remains challenged. We currently have fewer agreements on rent relative to our prior expectations due to weaker than expected demand in June and to date in the month of July. As such, including a softer outlook for the balance of this year, we are lowering our guidance for the remainder of 2005. We believe a key challenge centers around higher energy costs impacting both our customers and our operations, but also believe that product evolution, particularly in low end consumer electronics, is placing additional pressure on our business," Speese continued. "We continue to evaluate new product offerings that we believe will provide additional revenue streams to leverage our mature store base," Speese stated.

During the second quarter of 2005, the Company opened 12 new store locations, acquired 34 stores, including 27 stores from a ColorTyme franchisee offering an array of financial services in addition to traditional rent-to-own products, as well as accounts from 10 additional locations, while consolidating 17 stores into existing locations and selling one store. Since June 30, 2005, the Company has opened 5 new stores and acquired one other store while consolidating 6 stores into existing locations. For the entire year ending December 31, 2005, the Company intends to open between 60 and 70 new store locations as well as pursue opportunistic acquisitions.

During the second quarter of 2005, the Company recorded a $2.0 million tax audit reserve credit associated with the examination and favorable resolution of the Company's 1998 and 1999 federal tax returns. The tax audit reserve credit increased diluted earnings per share in the second quarter of 2005 by $0.03, from $0.52 per diluted earnings per share to the reported diluted earnings per share of $0.55.

In addition, during 2005, the Company recorded an $8.0 million pre-tax credit in the first quarter associated with the settlement of the Griego/Carrillo litigation. This pre-tax litigation reversion credit increased diluted earnings per share for the six month period ended June 30, 2005 by $0.07. The litigation reversion credit, combined with the $2.0 million tax audit reserve credit in the second quarter, increased diluted earnings per share for the six month period ended June 30, 2005 by $0.10 to the reported diluted earnings per share of $1.18.

Rent-A-Center will host a conference call to discuss the second quarter financial results on Tuesday morning, July 26, 2005, at 10:45 a.m. EDT. For a live web cast of the call, visit http://investor.rentacenter.com. Certain financial and other statistical information that will be discussed during the conference call will also be provided on the same website.

Rent-A-Center, Inc., headquartered in Plano, Texas, currently operates 2,892 company-owned stores nationwide and in Canada and Puerto Rico. The stores generally offer high-quality, durable goods such as major consumer electronics, appliances, computers and furniture and accessories under flexible rental purchase agreements that generally 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 franchiser of 281 rent-to-own stores, 269 of which operate under the trade name of "ColorTyme," and the remaining 12 of which operate under the "Rent-A-Center" name.