Our operating team executed well in the second quarter in spite of the difficult economic conditions.
Mark E. Speese, Chairman and CEO, Rent-A-Center

Rent-A-Center (NASDAQ:RCII) today announced revenues and earnings for the quarter ended June 30, 2008.

Second Quarter 2008 Results

Total revenues for the quarter ended June 30, 2008 were $719.0 million, a decrease of $5.2 million from the total revenues of $724.2 million for the same period in the prior year. This decrease in revenues was primarily the result of approximately 325 fewer stores over the past year principally due to the previously announced restructuring plan, offset by a 0.9% increase in same store sales.

Net earnings for the quarter ended June 30, 2008 were $37.7 million, as compared to the net earnings of $41.3 million for the same period in the prior year. Net earnings per diluted share for the quarter ended June 30, 2008 were $0.56, as compared to the net earnings per diluted share of $0.58 for the same period in the prior year.

"Our operating team executed well in the second quarter in spite of the difficult economic conditions," commented Mark E. Speese, the Company's Chairman and Chief Executive Officer. "We exceeded our guidance for same store sales and were within our guidance for store rental and fee revenue and diluted earnings per share," Speese continued. "We continue to be cautiously optimistic about the near term. We believe that we are well positioned with our marketing and advertising plans in place and should also benefit from customers attracted to our transaction due to the difficult credit environment. And we will continue to use our account-management skills to maintain a focus on our collections," Speese concluded.

Six Months Ended June 30, 2008 Results

Total revenues for the six months ended June 30, 2008 were $1.476 billion, a decrease of $3.0 million from the total revenues of $1.479 billion for the same period in the prior year. This decrease in revenues was primarily the result of approximately 325 fewer stores over the past year principally due to the previously announced restructuring plan, offset by a 2.2% increase in same store sales.

Net earnings for the six months ended June 30, 2008 were $74.1 million, as compared to the net earnings of $56.4 million for the same period in the prior year. Net earnings for the six months ended June 30, 2008 were reduced by a $2.9 million pre-tax restructuring expense related to the previously announced restructuring plan, as discussed below. Net earnings for the six months ended June 30, 2007 were reduced by a $51.3 million pre-tax litigation charge related to the Hilda Perez matter, as discussed below.

Net earnings per diluted share for the six months ended June 30, 2008 were $1.10, as compared to the net earnings per diluted share of $0.79 for the same period in the prior year. Net earnings per diluted share for the six months ended June 30, 2008 were reduced by approximately $0.03 per share as a result of the restructuring expense related to the previously announced restructuring plan, as discussed below. Net earnings per diluted share for the six months ended June 30, 2007 were reduced by approximately $0.46 per share as a result of the litigation expense related to the Hilda Perez matter, as discussed below.

"As a result of our strong operating results, we generated cash flow from operations of approximately $213.1 million for the six month period through June 30, 2008, while ending the quarter with approximately $75.1 million of cash on hand," commented Robert D. Davis, the Company's Executive Vice President and Chief Financial Officer. "With our significant cash flow year-to-date, we were able to strengthen our balance sheet by reducing our outstanding indebtedness by approximately $200.9 million," Davis continued. "Since June 30, 2008, the Company has further reduced its outstanding indebtedness by $24.0 million," Davis concluded.

During the six month period ended June 30, 2008, the Company also repurchased 150,000 shares of its common stock for $3.1 million in cash under its common stock repurchase program. To date, the Company has repurchased a total of 18,610,950 shares and has utilized approximately $447.4 million of the $500.0 million authorized by its Board of Directors since the inception of the plan.

Operations Highlights

During the second quarter of 2008, the Company opened one new store location, acquired one store as well as accounts from 10 additional locations, consolidated nine stores into existing locations and sold six stores, for a net reduction of 13 stores and an ending balance as of June 30, 2008 of 3,053 company-owned stores. During the second quarter of 2008, the Company added financial services to 26 existing rent-to-own store locations, acquired accounts from one location, and closed two locations, for a net addition of 24 store locations and an ending balance as of June 30, 2008 of 304 store locations providing financial services.

Through the six month period ended June 30, 2008, the Company opened three new store locations, acquired one store as well as accounts from 16 additional locations, consolidated 19 stores into existing locations and sold 13 stores, for a net reduction of 28 stores since December 31, 2007. Through the six month period ending June 30, 2008, the Company added financial services to 33 existing rent-to-own store locations, acquired accounts from one location, consolidated two stores with financial services into existing locations, and closed three locations, for a net addition of 28 store locations since December 31, 2007.

Since June 30, 2008, the Company has opened one new store location and acquired accounts from one location. The Company has added financial services to 19 existing rent-to-own store locations since June 30, 2008.

2008 Significant Item

Restructuring Plan Expenses. During the first quarter of 2008, the Company recorded a pre-tax restructuring expense of approximately $2.9 million in connection with the restructuring plan previously announced on December 3, 2007. This restructuring expense reduced net earnings per diluted share by approximately $0.03 in the first quarter of 2008 and for the six month period ended June 30, 2008. As previously reported, the Company recorded a pre-tax restructuring expense of approximately $38.7 million related to this restructuring plan during the fourth quarter of 2007. The costs with respect to the restructuring plan relate primarily to lease terminations, fixed asset disposals and other miscellaneous items.

2007 Significant Item

Hilda Perez. On November 5, 2007, the Company paid an aggregate of $109.3 million, including plaintiffs' attorneys' fees and administration costs, pursuant to the court approved settlement of the Hilda Perez v. Rent-A-Center, Inc. matter pending 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 net earnings per diluted share by approximately $0.46 in the first quarter of 2007 and for the six month period ended June 30, 2007.

THIRD QUARTER 2008 GUIDANCE:

Revenues

The Company expects total revenues to be in the range of $700 million to $715 million.
Store rental and fee revenues are expected to be between $619 million and $631 million.
Total store revenues are expected to be in the range of $692 million to $707 million.
Same store sales are expected to be in the 3% to 4% range.
The Company expects to open approximately 5 new rent-to-own store locations.
The Company expects to add financial services to approximately 60 rent-to-own store locations.

Expenses

The Company expects cost of rental and fees to be between 22.6% and 23.0% of store rental and fee revenue and cost of merchandise sold to be between 75% and 79% of store merchandise sales.
Store salaries and other expenses are expected to be in the range of 58.4% to 59.9% 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 $14 million, depreciation of property assets is expected to be approximately $18 million and amortization of intangibles is expected to be approximately $3.5 million.
The effective tax rate is expected to be in the range of 36.0% to 36.5% of pre-tax income.
Diluted earnings per share are estimated to be in the range of $0.45 to $0.50.
Diluted shares outstanding are estimated to be between 67.0 million and 68.0 million.

FISCAL 2008 GUIDANCE:

Revenues

The Company expects total revenues to be in the range of $2.890 billion and $2.920 billion.
Store rental and fee revenues are expected to be between $2.520 billion and $2.550 billion.
Total store revenues are expected to be in the range of $2.851 billion and $2.881 billion.
Same store sales are expected to be in the 1% to 3% range.
The Company expects to open approximately 20 new rent-to-own store locations.
The Company expects to add financial services to approximately 150 rent-to-own store locations.

Expenses

The Company expects cost of rental and fees to be between 22.6% and 23.0% of store rental and fee revenue and cost of merchandise sold to be between 75% and 79% of store merchandise sales.
Store salaries and other expenses are expected to be in the range of 56.9% to 58.4% 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 $62 million, depreciation of property assets is expected to be between $70 million and $75 million and amortization of intangibles is expected to be approximately $14 million.
The effective tax rate is expected to be approximately 37% of pre-tax income.
Diluted earnings per share are estimated to be in the range of $2.20 to $2.30.
Diluted shares outstanding are estimated to be between 67.0 million and 68.0 million.