Rent-A-Center, Inc. Reports First Quarter 2007 Results

Business Wire, April 30, 2007

Same Store Sales Increase 2.9%

Reported Diluted Earnings per Share of $0.21, or $0.66 Excluding Litigation Expense

Announces Prospective Settlement of Perez Litigation

PLANO, Texas -- Rent-A-Center, Inc. (the "Company") (NASDAQ/NGS:RCII), the nation's largest rent-to-own operator, today announced revenues and earnings for the quarter ended March 31, 2007.

First Quarter 2007 Results

The Company reported total revenues for the quarter ended March 31, 2007 of $755.3 million, a $148.3 million increase from the reported total revenues of $607.0 million for the same period in the prior year. This 24.4% increase in revenues was primarily driven by the Rent-Way acquisition that closed on November 15, 2006, and a 2.9% increase in same store sales.

Reported net earnings for the quarter ended March 31, 2007 were $15.1 million, when including the Perez litigation charges discussed below, a decrease of $25.2 million from the reported net earnings of $40.3 million for the same period in the prior year. Reported diluted earnings per share were $0.21, when including the Perez litigation charges discussed below, a decrease of $0.36 from the reported diluted earnings per share of $0.57 for the same period in the prior year.

Adjusted net earnings for the quarter ended March 31, 2007 were $47.3 million, when excluding the Perez litigation charges discussed below, an increase of $7.0 million, or 17.4% from the reported net earnings of $40.3 million for the same period in the prior year. Adjusted diluted earnings per share were $0.66, when excluding the Perez litigation charges discussed below, an increase of $0.09, or 15.8% from the reported diluted earnings per share of $0.57 for the same period in the prior year.

"We continued to execute in our core rent-to-own business as demonstrated by our 2.9% increase in same store sales, our fifth consecutive quarter of positive same store sales," commented Mark E. Speese, the Company's Chairman and Chief Executive Officer. "In the quarter, we also completed the integration of the Rent-Way acquisition and are now working to enhance the profitability of these stores. In addition, we continued our expansion into the financial services industry with the opening of 29 financial services locations within existing rent-to-own stores, ending the quarter with 177 locations," Speese continued. "As a result of our strong operating results, we generated cash flow from operations of approximately $86.0 million and reduced our outstanding senior debt by approximately $77.1 million," Speese added.

The Company also announced today that it has reached a prospective settlement with the plaintiffs to resolve Hilda Perez v. Rent-A-Center, Inc., a putative class action filed in the Superior Court, Law Division, Camden County, New Jersey. This matter alleges that the rent-to-own contracts entered into by Perez and a class of similarly situated individuals violated New Jersey's Retail Installment Sales Act and New Jersey's Consumer Fraud Act, because such contracts imposed a time price differential in excess of the per annum interest rate permitted under New Jersey's criminal usury statute. Under the terms contemplated, the Company anticipates it will pay an aggregate of approximately $85.8 million in cash, to be distributed to an agreed-upon class of Company customers from April 23, 1999 through March 16, 2006, as well as pay the plaintiffs' attorneys fees and costs to administer the settlement, in the aggregate amount of approximately $23.5 million. Under the terms of the prospective settlement, the Company would be entitled to 50% of any undistributed monies in the settlement fund. In connection with the prospective settlement, the Company is not admitting liability for its past business practices in New Jersey. As previously reported, the Company recorded a pre-tax expense of $58.0 million in connection with the Perez matter during the fourth quarter of 2006. To account for the aforementioned costs, the Company recorded an additional pre-tax charge of $51.3 million in the first quarter of 2007.

The terms of the prospective settlement are subject to the parties entering into a definitive settlement agreement and obtaining court approval. While the Company believes that the terms of this prospective settlement are fair, there can be no assurance that the settlement, if completed, will be approved by the court in its present form. The Company expects to fund the prospective settlement with cash flow generated from operations, together with amounts available under its senior credit facilities.

Operations Highlights

During the first quarter of 2007, the Company opened six new rent-to-own store locations, acquired accounts from three locations, consolidated 33 stores (of which 23 stores were due to the Rent-Way transaction) into existing locations and sold one acquired Rent-Way store, for a net reduction of 28 stores and an ending balance as of March 31, 2007 of 3,378 stores. During the first quarter of 2007, the Company added financial services to 29 existing rent-to-own store locations, closed two locations and ended the quarter with a total of 177 stores providing these services.