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Rent-A-Center, Inc. Reports Third Quarter Same Store Revenue Decline

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Rent-A-Center, Inc., the nation’s largest rent-to-own operator, announced revenues and earnings for the quarter ended September 30, 2007. Third Quarter 2007 Results The Company reported total revenues for the quarter ended September 30, 2007 of $709.7 million, an increase of $122.5 million from the reported total revenues of $587.2 million for the same period in the prior year. This 20.9% increase in revenues was primarily driven by the Rent-Way acquisition that closed on November 15, 2006. Same store revenues for the quarter ended September 30, 2007 decreased 1.8%. Reported net earnings for the quarter ended September 30, 2007 were $25.3 million, an increase of $0.1 million or 0.4% from the reported net earnings of $25.2 million for the same period in the prior year. Reported diluted earnings per share for the quarter ended September 30, 2007 were $0.37, an increase of $0.01, or 2.8% from the reported diluted earnings per share of $0.36 for the same period in the prior year. Reported net earnings per diluted share for the quarter ended September 30, 2007 includes $0.04 per share as a result of the receipt of accelerated royalty payments from former franchisees in consideration of the termination of their franchise agreements, as discussed below. For the quarter ended September 30, 2007, the Company generated cash flow from operations of approximately $127.2 million, while ending the quarter with $100.3 million of cash on hand. During the quarter ended September 30, 2007, the Company repurchased 2,307,400 shares of its common stock for $45.1 million in cash under its common stock repurchase program. To date, the Company has repurchased a total of 18,235,950 shares and has utilized approximately $441.0 million of the $500.0 million authorized by its Board of Directors since the inception of the plan. In addition, during the quarter ended September 30, 2007, the Company reduced its outstanding indebtedness by approximately $31.2 million. “Our third quarter financial results for total revenue and earnings per diluted share were within our guidance range; however, the business environment was very challenging throughout the quarter,” commented Mark E. Speese, the Company's Chairman and Chief Executive Officer. “Although we believe that our customer continues to face financial challenges, we have been encouraged by the positive results from our operational initiatives, as well as an increase in demand in October,” Speese continued. “As we prepare to enter 2008, we intend to focus on enhancing store level operations, improving operational efficiencies, and further investing in our financial services business, while maintaining a solid balance sheet,” Speese stated. The Company also announced that it has reached a prospective settlement with the plaintiffs to resolve Terry Walker, et al. v. Rent-A-Center, Inc., et al., a putative class action filed in federal court in Texarkana, Texas, alleging that the Company and certain of its current and former officers and directors violated various federal securities laws. Under the terms contemplated, the Company anticipates its insurance carrier will pay an aggregate of approximately $3.6 million in cash, which will be distributed to an agreed upon class of claimants who purchased the Company’s common stock from April 25, 2001 through October 8, 2001, as well as used to pay costs of notice and settlement administration, and attorneys’ fees and expenses. In connection with the settlement, neither the Company nor any officer and director defendants are admitting liability for any securities laws violations. 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 its insurance carrier to fund the prospective settlement and related costs. Nine Months Ended September 30, 2007 Results Total reported revenues for the nine months ended September 30, 2007 were $2.189 billion, an increase of $0.411 billion, or 23.1% from the reported total revenues of $1.778 billion for the same period in the prior year. Same store revenues for the nine month period ending September 30, 2007 increased 1.4%. Reported net earnings for the nine months ended September 30, 2007 were $81.6 million, a decrease of $23.8 million from the reported net earnings of $105.4 million for the same period in the prior year. This decrease is primarily a result of the $51.3 million litigation expense recorded in the first quarter of 2007 in connection with the settlement of the Perez matter, as discussed below. Reported diluted earnings per share for the nine months ended September 30, 2007 were $1.16, a decrease of $0.33 from the reported diluted earnings per share of $1.49 for the same period in the prior year. The decrease in the reported diluted earnings per share for the nine months ended September 30, 2007 is primarily driven by the $0.47 per share effect for the Perez litigation settlement expense, as discussed below. Through the nine month period ended September 30, 2007, the Company generated cash flow from operations of approximately $270.3 million. During the nine month period ended September 30, 2007, the Company repurchased 3,607,150 shares of its common stock for $80.1 million in cash under its common stock repurchase program. In addition, during the nine month period ended September 30, 2007, the Company reduced its outstanding indebtedness by approximately $91.5 million. Operations Highlights During the third quarter of 2007, the Company opened 10 new store locations, acquired one store as well as accounts from 24 additional locations, consolidated 24 stores into existing locations, and sold one store, for a net reduction of 14 stores and an ending balance as of September 30, 2007 of 3,361 company-owned stores. During the third quarter of 2007, the Company added financial services to 61 existing rent-to-own store locations, ending the quarter with a total of 282 stores providing these services. Through the nine month period ended September 30, 2007, the Company opened 20 new store locations, acquired 14 stores as well as accounts from 30 additional locations, consolidated 76 stores into existing locations, and sold three stores, for a net reduction of 45 stores since December 31, 2006. Through the nine month period ending September 30, 2007, the Company added financial services to 148 existing rent-to-own store locations, consolidated seven stores with financial services into existing locations, and closed nine locations, for a net addition of 132 stores providing these services. Since September 30, 2007, the Company has opened three new store locations and acquired accounts from one location. The Company has added financial services to four existing rent-to-own store locations since September 30, 2007. 2007 Significant Items Settlement with ColorTyme Franchisees. On July 31, 2007, ColorTyme entered into a settlement agreement with five affiliated ColorTyme franchisees pursuant to which the franchise agreements with respect to approximately 65 ColorTyme stores were terminated. ColorTyme received a cash payment in satisfaction of the contractually required, future royalties owed to ColorTyme pursuant to the franchise agreements. This settlement payment increased diluted earnings per share by approximately $0.04 in both the third quarter of 2007 and for the nine month period ended September 30, 2007. Hilda Perez. On September 14, 2007, the settlement of the Hilda Perez v. Rent-A-Center matter pending in New Jersey received final approval from the court. Under the terms of the settlement approved by the court, the Company agreed to pay an aggregate of approximately $85.8 million in cash, to be distributed to an agreed-upon class of its customers from April 23, 1999 through March 16, 2006. The Company also agreed to 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 settlement, the Company is entitled to 50% of any undistributed monies in the settlement. In connection with the 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, and an additional pre-tax charge of $51.3 million in the first quarter of 2007, to account for the aforementioned costs. The litigation expense with respect to the Perez settlement reduced diluted earnings per share by approximately $0.47 for the nine month period ended September 30, 2007. The Company expects to fund the settlement with cash flow generated from operations, together with amounts available under its senior credit facilities, in the fourth quarter of 2007. Rent-A-Center will host a conference call to discuss the third quarter results, guidance and other operational matters on Tuesday morning, October 30, 2007, at 10:45 a.m. EDT. For a live webcast 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 approximately 3,360 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 approximately 210 rent-to-own stores operating under the trade name of "ColorTyme." The following statements are based on current expectations. These statements are forward-looking and actual results may differ materially. These statements do not include the potential impact of any repurchases of common stock the Company may make, or the potential impact of acquisitions or dispositions that may be completed after October 29, 2007. FOURTH QUARTER 2007 GUIDANCE: Revenues - The Company expects total revenues to be in the range of $708 million to $723 million. - Store rental and fee revenues are expected to be between $638 million and $650 million. - Total store revenues are expected to be in the range of $700 million to $715 million. - Same store sales are expected to be flat. - The Company expects to open 5 - 10 new rent-to-own store locations. - The Company expects to add financial services to approximately 5 rent-to-own store locations. Expenses - The Company expects cost of rental and fees to be between 22.1% and 22.5% of store rental and fee revenue and cost of merchandise sold to be between 76% and 80% of store merchandise sales. - Store salaries and other expenses are expected to be in the range of 59.5% to 61.0% of total store revenue. - General and administrative expenses are expected to be between 4.3% and 4.5% of total revenue. - Net interest expense is expected to be approximately $21 million, depreciation of property assets is expected to be approximately $18 million and amortization of intangibles is expected to be approximately $4 million. - The effective tax rate is expected to be approximately 36.0% of pre-tax income. - Diluted earnings per share are estimated to be in the range of $0.38 to $0.44. - Diluted shares outstanding are estimated to be between 67.2 million and 68.2 million. FISCAL 2008 GUIDANCE: Revenues - The Company expects total revenues to be in the range of $2.920 billion and $2.960 billion. - Store rental and fee revenues are expected to be between $2.585 billion and $2.625 billion. - Total store revenues are expected to be in the range of $2.890 billion and $2.930 billion. - Same store sales are expected to be in the flat to 2% range. - The Company expects to open approximately 40 new rent-to-own store locations. - The Company expects to add financial services to approximately 200 rent-to-own store locations. Expenses - The Company expects cost of rental and fees to be between 22.1% and 22.5% of store rental and fee revenue and cost of merchandise sold to be between 72% and 76% of store merchandise sales. - Store salaries and other expenses are expected to be in the range of 58.5% to 60.0% of total store revenue. - General and administrative expenses are expected to be between 4.3% and 4.5% of total revenue. - Net interest expense is expected to be between $80 million and $85 million, depreciation of property assets is expected to be between $68 million and $73 million and amortization of intangibles is expected to be approximately $12 million. - The effective tax rate is expected to be approximately 37.0% of pre-tax income. - Diluted earnings per share are estimated to be in the range of $1.95 to $2.10. - Diluted shares outstanding are estimated to be between 67.5 million and 68.5 million.

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