RENT A CENTER INC DE - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

----------

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2003

Commission File Number 0-25370

RENT-A-CENTER, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 45-0491516
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

5700 Tennyson Parkway, Third Floor
Plano, Texas 75024
(972) 801-1100
(Address, including zip code, and telephone
number, including area code, of registrant's
principal executive offices)

NONE
(Former name, former address and former
fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

YES [X] NO [ ]

Indicate by check mark whether the registrant is an accelerated filed (as
defined in Rule 12b-2 of the Exchange Act).

YES [X] NO [ ]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of August 1, 2003:

TABLE OF CONTENTS

PAGE NO.
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PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Consolidated Balance Sheets as of June 30, 2003 and December 31, 2002 3

Consolidated Statements of Earnings for the six months ended
June 30, 2003 and 2002 4

Consolidated Statements of Earnings for the three months ended
June 30, 2003 and 2002 5

Consolidated Statements of Cash Flows for the six months ended
June 30, 2003 and 2002 6

Notes to Consolidated Financial Statements 8

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 18

Item 3. Quantitative and Qualitative Disclosure About Market Risk 29

Item 4. Controls and Procedures 30

PART II. OTHER INFORMATION

Item 1. Legal Proceedings 30

Item 4. Submission of Matters to a Vote of Security Holders 33

Item 6. Exhibits and Reports on Form 8-K 33

SIGNATURES

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RENT-A-CENTER, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

See accompanying notes to consolidated financial statements.

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RENT-A-CENTER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

See accompanying notes to consolidated financial statements

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RENT-A-CENTER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

See accompanying notes to consolidated financial statements.

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RENT-A-CENTER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying notes to consolidated financial statements.

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RENT-A-CENTER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

Supplemental cash flow information Cash paid during the year for:

Interest ..................................................... $ 32,773 $ 26,345
Income taxes ............................................... $ 41,141 $ 17,609

Supplemental schedule of non-cash investing and financing
activities
Fair value of assets acquired ................................... $106,240 $ 27,179
Cash paid ....................................................... $106,240 $ 27,179
Liabilities assumed ............................................. $ -- $ --

During the first six months of 2003, the Company paid dividends on its
Series A preferred stock of approximately $39.00 in cash. During the
first six months of 2002, the Company paid dividends on its Series A
preferred stock of approximately $5.5 million by issuing 5,494 shares
of Series A preferred stock.

See accompanying notes to consolidated financial statements.

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RENT-A-CENTER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. The interim financial statements of Rent-A-Center, Inc. included herein
have been prepared by us pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United
States of America have been condensed or omitted pursuant to the
Commission's rules and regulations, although we believe that the
disclosures are adequate to make the information presented not
misleading. We suggest that these financial statements be read in
conjunction with the financial statements and notes included in our
Annual Report on Form 10-K for the year ended December 31, 2002, and
our Quarterly Report on Form 10-Q for the three months ended March 31,
2003. In our opinion, the accompanying unaudited interim financial
statements contain all adjustments, consisting only of those of a
normal recurring nature, necessary to present fairly our results of
operations and cash flows for the periods presented. The results of
operations for the periods presented are not necessarily indicative of
the results to be expected for the full year.

2. Principles of Consolidation and Nature of Operations. Unless the
context indicates otherwise, references to "Rent-A-Center" refer only
to Rent-A-Center, Inc., the parent, and references to "we," "us" and
"our" refer to the consolidated business operations of Rent-A-Center
and all of its direct and indirect subsidiaries. These financial
statements include the accounts of Rent-A-Center and its direct and
indirect wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.

At June 30, 2003, we operated 2,567 company-owned stores nationwide and
in Puerto Rico, including 23 stores in Wisconsin operated by a
subsidiary, Get It Now, LLC, under the name "Get It Now."
Rent-A-Center's primary operating segment consists of leasing household
durable goods to customers on a rent-to-own basis. Get It Now offers
merchandise on an installment sales basis in Wisconsin.

ColorTyme, Inc., an indirect wholly-owned subsidiary of Rent-A-Center,
is a nationwide franchisor of rent-to-own stores. At June 30, 2003,
ColorTyme had 321 franchised stores operating in 40 states. ColorTyme's
primary source of revenues is the sale of rental merchandise to its
franchisees, who, in turn, offer the merchandise to the general public
for rent or purchase under a rent-to-own program. The balance of
ColorTyme's revenues is generated primarily from royalties based on
franchisees' monthly gross revenues.

3. Reconciliation of Rental Merchandise.

- ----------

(1) Other inventory deletions include loss/damage waiver claims and
unrepairable and missing merchandise, as well as acquisition
write-offs.

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RENT-A-CENTER, INC. AND SUBSIDIARIES

4. Intangibles.

Amortization of intangibles consists primarily of the amortization of
customer relationships and non-compete agreements. Effective January 1,
2002, under SFAS 142 all goodwill and intangible assets with indefinite
lives are no longer subject to amortization. We conducted the required
transition test, which showed no impairment of our goodwill.

Intangibles consist of the following (in thousands):

The estimated amortization expense, assuming current intangible
balances and no new acquisitions, for each of the years ending December
31, is as follows:

Changes in the carrying amount of goodwill for the six months ended
June 30, 2003 are as follows (in thousands):

Balance as of January 1, 2003 $ 736,395
Additions during first six months 38,525
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Balance as of June 30, 2003 $ 774,920
================

5. Stock Based Compensation.

Rent-A-Center's Amended and Restated Long-Term Incentive Plan (the
"Plan") for the benefit of certain key employees, consultants and
directors provides the Board of Directors broad discretion in creating
equity incentives. Under the Plan, 7,900,000 shares of Rent-A-Center's
common stock are reserved for issuance under stock options, stock
appreciation rights or restricted stock grants. Options granted to our
employees under the Plan generally become exercisable over a period of
one to four years from the date of grant and may be exercised up to a
maximum of 10 years from date of grant. Options granted to directors
are exercisable immediately. There have been no grants of stock
appreciation rights and all options have been granted with fixed
prices. At June 30, 2003, there were 4,623,775 shares available for
issuance under the Plan, of which 2,974,586 shares were allocated to
options currently outstanding. However, pursuant to the terms of the
Plan, when an optionee leaves our employ, unvested options granted to
that employee terminate and become available for re-issuance under the
Plan. Vested options not exercised within 90 days from the date the
optionee leaves the Company's employ terminate and become available for
re-issuance under the Plan.

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RENT-A-CENTER, INC. AND SUBSIDIARIES

Rent-A-Center accounts for the Plan under the recognition and
measurement principles of APB Opinion No. 25, Accounting for Stock
Issued to Employees, and related Interpretations. No stock-based
employee compensation cost is reflected in net earnings, as all options
granted under those plans had an exercise price equal to the market
value of the underlying common stock on the date of grant. The
following table illustrates the effect on net earnings and earnings per
share if Rent-A-Center had applied the fair value recognition
provisions of FASB Statement No. 123, Accounting for Stock-Based
Compensation, to stock-based employee compensation.

The fair value of these options was estimated at the date of grant
using the Black-Scholes option pricing model with the following
weighted-average assumptions: expected volatility of 54.6% to 55.2% and
55.8% to 57.3% and risk-free interest rates of 3.3% to 3.7% and 3.5% to
5.5% in 2003 and 2002, respectively, no dividend yield and expected
lives of seven years.

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RENT-A-CENTER, INC. AND SUBSIDIARIES

6. Earnings Per Share.

Basic and diluted earnings per common share is computed based on the
following information:

For the six months ended June 30, 2003 and 2002, the number of stock
options that were outstanding but not included in the computation of
diluted earnings per common share because their exercise price was
greater than the average market price of our common stock, and
therefore anti-dilutive, was 5,000 and 276,500, respectively. For the
three months ended June 30, 2003 and 2002, the number of stock options
that were outstanding but not included in the computation of diluted
earnings per common share because their exercise price was greater than
the average market price of our common stock, and therefore
anti-dilutive, was 0 and 5,000, respectively.

Dividends on our Series A preferred stock are payable quarterly at an
annual rate of 3.75%. We accounted for shares of preferred stock
distributed as dividends in-kind in 2002 at the greater of the stated
value or the value of the common stock obtainable upon conversion on
the payment date. In 2003, we began paying dividends on our Series A
preferred stock in cash and paid approximately $19.00 in the second
quarter of 2003.

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RENT-A-CENTER, INC. AND SUBSIDIARIES

7. Subsidiary Guarantors.

11% Notes. At June 30, 2003, Rent-A-Center East, Inc., one of our
subsidiaries, had $84.5 million, net of discount, of 11% senior
subordinated notes outstanding, maturing on August 15, 2008. The notes
require semi-annual interest-only payments at 11%, and are guaranteed
by Rent-A-Center and certain of Rent-A-Center East's direct and
indirect wholly-owned subsidiaries, consisting of ColorTyme,
Rent-A-Center West, Inc., Get It Now, Rent-A-Center Texas, L.L.C. and
Rent-A-Center Texas, L.P. (collectively, the "2001 Subsidiary
Guarantors"). The notes are redeemable at Rent-A-Center East's option,
at any time on or after August 15, 2003, at a set redemption price that
varies depending upon the proximity of the redemption date to final
maturity. Upon a change of control, the holders of the subordinated
notes have the right to require Rent-A-Center East to redeem the notes.

The 11% notes contain restrictive covenants, as defined therein,
including a consolidated interest coverage ratio and limitations on
incurring additional indebtedness, selling assets of the 2001
Subsidiary Guarantors, granting liens to third parties, making
restricted payments and engaging in a merger or selling substantially
all of Rent-A-Center East's assets.

Rent-A-Center and the 2001 Subsidiary Guarantors have fully, jointly
and severally, and unconditionally guaranteed the obligations of
Rent-A-Center East with respect to these notes. The only direct or
indirect subsidiaries of Rent-A-Center that are not Guarantors are
minor subsidiaries. There are no restrictions on the ability of any of
the Guarantors to transfer funds to Rent-A-Center East in the form of
loans, advances or dividends, except as provided by applicable law.

On May 6, 2003, Rent-A-Center East repurchased approximately $183.0
million of its outstanding 11% senior subordinated notes pursuant to a
tender offer announced in April 2003. On June 17, 2003, we announced
that, in accordance with the 2001 indenture, we intended to optionally
redeem on August 15, 2003 all of the 11% notes then outstanding at the
applicable redemption price. See "Recent Developments" discussed later
in this report.

7 1/2% Notes. On May 6, 2003, Rent-A-Center issued $300.0 million
aggregate principal amount of 7 1/2% senior subordinated notes,
maturing on May 1, 2010. The notes require semi-annual interest-only
payments at 7 1/2%, and are guaranteed by certain of Rent-A-Center's
direct and indirect wholly-owned subsidiaries, consisting of ColorTyme,
Rent-A-Center East, Get It Now, Rent-A-Center Texas, L.L.C.,
Rent-A-Center Texas, L.P. and Rent-A-Center West, Inc. (collectively,
the "2003 Subsidiary Guarantors" and together with the 2001 Subsidiary
Guarantors, the "Subsidiary Guarantors"). The notes are redeemable at
Rent-A-Center's option, at any time on or after May 1, 2006, at a set
redemption price that varies depending upon the proximity of the
redemption date to final maturity. Upon a change of control, the
holders of the 7 1/2% subordinated notes have the right to require
Rent-A-Center to redeem the notes.

The notes contain restrictive covenants, as defined therein, including
a consolidated coverage ratio and limitations on incurring additional
indebtedness, selling assets of the 2003 Subsidiary Guarantors,
granting liens to third parties, making restricted payments and
engaging in a merger or selling substantially all of Rent-A-Center's
assets.

The 2003 Subsidiary Guarantors have fully, jointly and severally, and
unconditionally guaranteed the obligations of Rent-A-Center with
respect to these notes. The only direct or indirect subsidiaries of
Rent-A-Center that are not 2003 Subsidiary Guarantors are minor
subsidiaries.

Set forth below is certain condensed consolidating financial
information as of June 30, 2003 and December 31, 2002, and for the six
months ended June 30, 2003 and 2002. The financial information includes
the Subsidiary Guarantors from the dates they were acquired or formed
by Rent-A-Center and Rent-A-Center East and is presented using the
push-down basis of accounting.

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RENT-A-CENTER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

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RENT-A-CENTER, INC. AND SUBSIDIARIES

7. Subsidiary Guarantors - (continued)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

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RENT-A-CENTER, INC. AND SUBSIDIARIES

8. Comprehensive Income.

Comprehensive income includes net earnings and items of other
comprehensive income or loss. The following table provides information
regarding comprehensive income, net of tax:

9. Common and Preferred Stock Transactions.

In connection with the retirement of J. Ernest Talley, our former
Chairman of the Board and Chief Executive Officer, we entered into an
agreement to repurchase $25.0 million worth of shares of our common
stock beneficially held by Mr. Talley at a purchase price equal to the
average closing price of our common stock over the 10 trading days
beginning October 9, 2001, subject to a maximum of $27.00 per share and
a minimum of $20.00 per share. Under this formula, the purchase price
for the repurchase was calculated at $20.258 per share. Accordingly, on
October 23, 2001 we repurchased 493,632 shares of our common stock
beneficially held by Mr. Talley at $20.258 per share for a total
purchase price of $10.0 million, and on November 30, 2001, we
repurchased an additional 740,448 shares of our common stock
beneficially held by Mr. Talley at $20.258 per share, for a total
purchase price of an additional $15.0 million. On January 25, 2002, we
exercised the option to repurchase all of the remaining 1,714,086
shares of common stock beneficially held by Mr. Talley at $20.258 per
share. We repurchased those remaining shares on January 30, 2002.

On April 25, 2003, we announced that we entered into an agreement with
Apollo Investment Fund IV, L.P. and Apollo Overseas Partners IV, L.P.
which provided for the repurchase of a number of shares of our common
stock sufficient to reduce Apollo's aggregate record ownership to
19.00% after consummation of our planned tender offer at the price per
share paid in the tender offer. On April 28, 2003, we commenced a
tender offer to purchase up to 2.2 million shares of our common stock
pursuant to a modified "Dutch Auction." On June 25, 2003, we closed the
tender offer and purchased 1,769,690 shares of our common stock at $73
per share for approximately $129.2 million. On July 11, 2003, we closed
the Apollo transaction and purchased 774,457 shares of our common stock
at $73 per share for approximately $56.5 million. As contemplated by
the Apollo agreement, Apollo exchanged their shares of Series A
preferred stock for shares of Series C preferred stock. The terms of
the Series A preferred stock and Series C preferred stock are
substantially similar, except the Series C preferred stock does not
have the right to directly elect any members of our Board of Directors.

In April 2000, we announced that our Board of Directors had authorized
a program to repurchase in the open market and in privately negotiated
transactions up to an aggregate of $25.0 million of our common stock.
In October 2002, our Board of Directors increased the amount of
repurchases authorized under our common stock repurchase program from
$25.0 million to $50.0 million. In March 2003, our Board of Directors
again increased such amount from $50.0 million to $100.0 million.
Through June 30, 2003, we have repurchased approximately 937,000 shares
of our common stock under this program for approximately $44.3 million.
On August 1, 2003, we agreed to repurchase under this program an
aggregate of 440,000 shares of our common stock at $73 per share,
200,000 of which will be repurchased from Mark E. Speese, our Chairman
of the Board and Chief Executive Officer, 200,000 of which will be
repurchased from Apollo Investment Fund IV, L.P. and Apollo Overseas
Partners IV, L.P., and 40,000 of which will be repurchased from
Mitchell E. Fadel, our President and Chief Operating Officer. We have
purchased an additional 99,000 shares of our common stock under this
program for approximately $7.0 million during the third quarter of
2003. Following such repurchases, approximately $16.6 million will be
available for additional repurchases under this program.

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RENT-A-CENTER, INC. AND SUBSIDIARIES

10. Rent-Way Acquisition.

On February 8, 2003, we completed the acquisition of substantially all
of the assets of 295 rent-to-own stores from Rent-Way, Inc. for an
aggregate purchase price of $100.4 million in cash. Of the aggregate
purchase price, we held back $10.0 million to pay for various
indemnified liabilities and expenses, if any, of which $5.0 million was
remitted in the second quarter of 2003. We funded the acquisition
entirely from cash on hand. Of the 295 stores, 176 were subsequently
merged with our existing store locations. We entered into this
transaction seeing it as an opportunistic acquisition that would allow
us to expand our store base in conjunction with our strategic growth
plans. The acquisition price was determined by evaluating the average
monthly rental income of the acquired stores and applying a multiple to
the total. We utilized a third party to review the valuation of certain
intangible assets, which resulted in a $4.0 million decrease in the
value assigned to customer relationships and a $4.0 increase in the
value placed on the non-compete agreement as compared to our original
estimates as disclosed in our 2002 annual report on Form 10-K. The
table below summarizes the allocation of the purchase price based on
the fair values of the assets acquired:

Customer relationships are amortized over an 18 month period. The
non-compete agreement is for four years and, in accordance with SFAS
142, the goodwill associated with the acquisition will not be
amortized.

11. Guarantees.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirement for Guarantees, Including
Guarantees of Indebtedness of Others." FIN 45 requires a liability be
recorded in the guarantor's balance sheet upon issuance of a guarantee.
In addition, FIN 45 requires disclosures about the guarantees that an
entity has issued. We have applied the recognition provisions of FIN 45
prospectively to guarantees issued after December 31, 2002, and have
adopted the quarterly disclosure provisions of FIN 45 for the quarter
ended June 30, 2003. The adoption of FIN 45 did not have a material
impact on our results of operations, financial condition or cash flows.

We provide assurance to our insurance providers that if they are not
able to draw funds from us for claims paid, they have the ability to
draw against our letters of credit. One of our letters of credit is
renewed automatically every year unless we notify the institution not
to renew. The other letter of credit expires in August 2004.

At June 30, 2003, we had $85.9 million to support our outstanding
letters of credit. Of the $85.9 million, $80.0 million is supported by
our additional term loan facility. Under this additional term loan
facility, in the event that a letter of credit is drawn upon, we have
the right to either repay the additional term loan facility lenders the
amount withdrawn or request a loan in that amount. Interest on any
requested additional term loan facility accrues at an adjusted prime
rate plus 1.75% or, at our option, at the Eurodollar Rate plus 2.80%,
with the entire amount of the additional term loan facility due on
December 31, 2007. The remaining $5.9 million reduces the amount
available under our $120.0 million revolving facility.

ColorTyme is a party to an agreement with Textron Financial
Corporation, who provides $40.0 million in financing to qualifying
franchisees of ColorTyme of up to five times their average monthly
revenues. Under this agreement, upon an event of default by the
franchisee under agreements governing this financing and upon the
occurrence of certain other events, Textron may assign the loans and
the collateral securing such loans to ColorTyme, with ColorTyme then
succeeding to the rights of Textron under the debt agreements,
including the rights to foreclose on the collateral. An additional
$12.0 million of financing is provided by Texas Capital Bank, National
Association under an agreement similar to the Textron financing.
Rent-A-Center guarantees the obligations of ColorTyme under these
agreements, excluding the effects of any amounts that could be
recovered under collateralization provisions, up to a maximum amount of
$52.0 million, of which $30.4 million was outstanding as of June 30,
2003. Mark E. Speese, Rent-A-Center's Chairman of the Board and Chief
Executive Officer, is a passive investor in Texas Capital Bank, owning
less than 1% of its outstanding equity.

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RENT-A-CENTER, INC. AND SUBSIDIARIES

12. Recapitalization.

Commencing in April 2003, we recapitalized a portion of our financial
structure in a series of transactions. The recapitalization consisted
of the tender offer for all of our $272.25 million principal amount of
11% notes, the notice of optional redemption of the remaining 11%
notes, the issuance of $300.0 million principal amount of 7 1/2% notes,
the refinancing of our senior debt and the repurchase of shares of our
common stock.

On April 23, 2003, we announced a tender offer for all of our $272.25
million principal amount of 11% notes. On May 6, 2003, we repurchased
approximately $183 million principal amount of 11% notes pursuant to
the tender offer. This tender offer expired at 12:00 midnight, New York
City time, on Tuesday, May 20, 2003. On June 17, 2003, we announced
that, in accordance with the terms of the underlying indenture, we
intended to optionally redeem on August 15, 2003 all of the 11% notes
then outstanding at the applicable redemption price. On June 17, 2003,
the trustee provided formal notice to the holders of the 11% notes that
the 11% notes would be redeemed at 105.5% of the principal amount, plus
accrued and unpaid interest on August 15, 2003. Under the terms of our
senior credit facilities, we are required to redeem our 11% notes no
later than August 15, 2003.

On April 25, 2003, we announced that we entered into an agreement with
Apollo Investment Fund IV, L.P. and Apollo Overseas Partners IV, L.P.
which provided for the repurchase of a number of shares of our common
stock sufficient to reduce Apollo's aggregate record ownership to
19.00% after consummation of our planned tender offer at the price per
share paid in the tender offer. On April 28, 2003, we commenced a
tender offer to purchase up to 2.20 million shares of our common stock
pursuant to a modified "Dutch Auction." On June 25, 2003, we closed the
tender offer and purchased 1,769,960 shares of our common stock at $73
per share. On July 11, 2003, we closed the Apollo transaction and
purchased 774,547 shares of our common stock at $73 per share. As
contemplated by the Apollo agreement, Apollo exchanged their shares of
Series A preferred stock for shares of Series C preferred stock. The
terms of the Series A preferred stock and Series C preferred stock are
substantially similar, except the Series C preferred stock does not
have the right to directly elect any members of our Board of Directors.

On May 6, 2003, we issued $300.0 million in senior subordinated notes
due 2010, bearing interest at 7 1/2%, the proceeds of which were used,
in part, to fund the repurchase and redemption of the 11% notes.

On May 28, 2003, we refinanced our then existing senior debt by
entering into a new $600.0 million senior credit facility, consisting
of a $400.0 million term loan, a $120.0 million revolving credit
facility and an $80.0 million additional term loan.

During the second quarter of 2003, we recorded $27.7 million in
non-recurring financing charges in connection with the foregoing
recapitalization.

13. Subsequent Events.

Repurchase of Common Stock. On July 11, 2003, we repurchased a total of
774,547 shares of our common stock at $73 per share pursuant to the
previously announced agreement with Apollo Investment Fund IV, L.P. and
Apollo Overseas Partners IV, L.P. We funded this transaction with the
proceeds of our recently completed senior credit financing. On August
1, 2003, we agreed to repurchase an aggregate of 440,000 shares of our
common stock at $73 per share, 200,000 of which will be repurchased
from Mark E. Speese, our Chairman of the Board and Chief Executive
Officer, 200,000 of which will be repurchased from Apollo Investment
Fund IV, L.P. and Apollo Overseas Partners IV, L.P., and 40,000 of
which will be repurchased from Mitchell E. Fadel, our President and
Chief Operating Officer. We have repurchased an additional 99,000
shares of our common stock under this program for approximately $7.0
million during the third quarter of 2003. Following such repurchases,
approximately $16.6 million will be available for additional
repurchases under our stock repurchase program.

Stock Split. On July 28, 2003, we announced that our Board of Directors
had approved a 5 for 2 stock split on our common stock to be paid in
the form of a stock dividend. Each common stockholder of record on
August 15, 2003 will receive 1.5 additional shares of common stock for
each share of common stock held on that date. No fractional shares will
be issued in connection with the stock dividend. Each stockholder who
would otherwise receive a fractional share will receive an additional
share of common stock. The distribution date for the stock dividend
will be August 29, 2003.

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RENT-A-CENTER, INC. AND SUBSIDIARIES

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

FORWARD-LOOKING STATEMENTS

The statements, other than statements of historical facts, included in this
report are forward-looking statements. Forward-looking statements generally can
be identified by the use of forward-looking terminology such as "may," "will,"
"would", "expect," "intend," "could", "estimate," "should," "anticipate" or
"believe." We believe that the expectations reflected in such forward-looking
statements are accurate. However, we cannot assure you that these expectations
will occur. Our actual future performance could differ materially from such
statements. Factors that could cause or contribute to these differences include,
but are not limited to:

o uncertainties regarding the ability to open new stores;

o our ability to acquire additional rent-to-own stores on favorable
terms;

o our ability to enhance the performance of these acquired stores,
including the stores acquired in the Rent-Way acquisition;

o our ability to control store level costs;

o our ability to realize benefits from our margin enhancement
initiatives;

o the results of our litigation;

o the passage of legislation adversely affecting the rent-to-own
industry;

o interest rates;

o our ability to collect on our rental purchase agreements;

o changes in our effective tax rate;

o factors that may restrict our ability to redeem our outstanding 11%
senior subordinated notes on August 15, 2003, including our financial
situation at that time;

o changes in our stock price and the number of shares of common stock
that we may or may not repurchase; and

o the other risks detailed from time to time in our SEC reports.

Additional important factors that could cause our actual results to differ
materially from our expectations are discussed under Risk Factors in our Annual
Report on Form 10-K for our fiscal year ended December 31, 2002. You should not
unduly rely on these forward-looking statements, which speak only as of the date
of this report. Except as required by law, we are not obligated to publicly
release any revisions to these forward-looking statements to reflect events or
circumstances occurring after the date of this report or to reflect the
occurrence of unanticipated events.

OUR BUSINESS

We are the largest rent-to-own operator in the United States with an approximate
31% market share based on store count. At June 30, 2003, we operated 2,567
company-owned stores nationwide and in Puerto Rico, including 23 stores located
in Wisconsin and operated by our subsidiary Get It Now, LLC under the name "Get
It Now." Another of our subsidiaries, ColorTyme, is a national franchisor of
rent-to-own stores. At June 30, 2003, ColorTyme had 321 franchised stores in 40
states, 309 of which operated under the ColorTyme name and 12 stores of which
operated under the Rent-A-Center name. Our stores generally offer high quality
durable products such as home 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. These rental purchase agreements are designed to
appeal to a wide variety of customers by allowing them to obtain merchandise
that they might otherwise be unable to obtain due to insufficient cash resources
or a lack of access to credit. These agreements also cater to customers who only
have a temporary need or who simply desire to rent rather than purchase the
merchandise.

We have pursued an aggressive growth strategy since 1989. We have sought to
acquire underperforming stores to which we could apply our operating model as
well as open new stores. As a result, the acquired stores have generally
experienced more significant revenue growth during the initial periods following
their acquisition than in subsequent periods. Because of

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RENT-A-CENTER, INC. AND SUBSIDIARIES

significant growth since our formation our historical results of operations and
period-to-period comparisons of such results and other financial data, including
the rate of earnings growth, may not be meaningful or indicative of future
results.

We plan to accomplish our future growth through selective and opportunistic
acquisitions, with an emphasis on new store development. Typically, a newly
opened store is profitable on a monthly basis in the ninth to twelfth month
after its initial opening. Historically, a typical store has achieved cumulative
break-even profitability in 18 to 24 months after its initial opening. Total
financing requirements of a typical new store approximate $450,000, with roughly
70% of that amount relating to the purchase of rental merchandise inventory. A
newly opened store historically has achieved results consistent with other
stores that have been operating within the system for greater than two years by
the end of its third year of operation. As a result, our quarterly earnings are
impacted by how many new stores we opened during a particular quarter and the
quarters preceding it. There can be no assurance that we will open any new
stores in the future or as to the number, location or profitability thereof.

In addition, to provide any additional funds necessary for the continued pursuit
of our operating and growth strategies, we may incur from time to time
additional short or long-term bank indebtedness and may issue, in public or
private transactions, equity and debt securities. The availability and
attractiveness of any outside sources of financing will depend on a number of
factors, some of which will relate to our financial condition and performance,
and some of which are beyond our control, such as prevailing interest rates and
general economic conditions. There can be no assurance additional financing will
be available, or if available, will be on terms acceptable to us.

RECENT DEVELOPMENTS

Store Growth. We are actively seeking to increase our store base and annual
revenues and profits through opportunistic acquisitions and new store openings.
On February 8, 2003, we acquired substantially all of the assets of 295 stores
located throughout the United States from Rent-Way, Inc. and certain of its
subsidiaries for approximately $100.4 million in cash. Of the 295 stores, 176
were merged with existing locations. Furthermore, during the first six months of
2003, we acquired 11 additional stores, accounts from 14 additional locations,
opened 38 new stores, and closed eight stores. All of the closed stores were
merged with existing store locations. The additional stores and acquired
accounts were the result of 18 separate transactions for an aggregate price of
approximately $5.8 million in cash. As of August 4, 2003, we have acquired two
additional stores, accounts from four additional locations, opened 10 new stores
and closed two stores, merging them both with existing locations during the
third quarter of 2003. It is our intention to increase the number of stores we
operate by an average of approximately 5 to 10% per year over the next several
years.

Recapitalization. Commencing in April 2003, we recapitalized a portion of our
financial structure in a series of transactions. The recapitalization consisted
of the tender offer for all of our $272.25 million principal amount of 11%
notes, the notice of optional redemption of the remaining 11% notes, the
issuance of $300.0 million principal amount of 7 1/2% notes, the refinancing of
our senior debt and the repurchase of shares of our common stock.

On April 23, 2003, we announced a tender offer for all of our $272.25 million
principal amount of 11% notes. On May 6, 2003, we repurchased approximately $183
million principal amount of 11% notes pursuant to the tender offer. This tender
offer expired at 12:00 midnight, New York City time, on Tuesday, May 20, 2003.
On June 17, 2003, we announced that, in accordance with the terms of the
underlying indenture, we intended to optionally redeem on August 15, 2003 all of
the 11% notes then outstanding at the applicable redemption price. On June 17,
2003, the trustee provided formal notice to the holders of the 11% notes that
the 11% notes would be redeemed at 105.5% of the principal amount, plus accrued
and unpaid interest on August 15, 2003. Under the terms of our senior credit
facilities, we are required to redeem our 11% notes no later than August 15,
2003.

On April 25, 2003, we announced that we entered into an agreement with Apollo
Investment Fund IV, L.P. and Apollo Overseas Partners IV, L.P. which provided
for the repurchase of a number of shares of our common stock sufficient to
reduce Apollo's aggregate record ownership to 19.00% after consummation of our
planned tender offer at the price per share paid in the tender offer. On April
28, 2003, we commenced a tender offer to purchase up to 2.20 million shares of
our common stock pursuant to a modified "Dutch Auction." On June 25, 2003, we
closed the tender offer and purchased 1,769,960 shares of our common stock at
$73 per share. On July 11, 2003, we closed the Apollo transaction and purchased
774,547 shares of our common stock at $73 per share. As contemplated by the
Apollo agreement, Apollo exchanged their shares of Series A preferred stock for
shares of Series C preferred stock. The terms of the Series A preferred stock
and Series C preferred stock are substantially similar, except the Series C
preferred stock does not have the right to directly elect any members of our
Board of Directors.

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RENT-A-CENTER, INC. AND SUBSIDIARIES

On May 6, 2003, we issued $300.0 million in senior subordinated notes due 2010,
bearing interest at 7 1/2%, the proceeds of which were used, in part, to fund
the repurchase and redemption of the 11% notes.

On May 28, 2003, we refinanced our then existing senior debt by entering into a
new $600.0 million senior credit facility, consisting of a $400.0 million term
loan, a $120.0 million revolving credit facility and an $80.0 million additional
term loan.

During the second quarter of 2003, we recorded $27.7 million in non-recurring
financing charges in connection with the forgoing recapitalization.

CRITICAL ACCOUNTING POLICIES INVOLVING CRITICAL ESTIMATES, UNCERTAINTIES OR
ASSESSMENTS IN OUR FINANCIAL STATEMENTS

The preparation of our financial statements in conformity with accounting
principles generally accepted in the United States requires us to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. In applying accounting principles, we must often make
individual estimates and assumptions regarding expected outcomes or
uncertainties. As you might expect, the actual results or outcomes are generally
different than the estimated or assumed amounts. These differences are usually
minor and are included in our consolidated financial statements as soon as they
are known. Our estimates, judgments and assumptions are continually evaluated
based on available information and experience. Because of the use of estimates
inherent in the financial reporting process, actual results could differ from
those estimates.

Actual results related to the estimates and assumptions made by us in preparing
our consolidated financial statements will emerge over periods of time, such as
estimates and assumptions underlying the determination of our self-insurance
liabilities. These estimates and assumptions are closely monitored by us and
periodically adjusted as circumstances warrant. For instance, our liability for
our self-insured retentions related to our workers compensation, general
liability, medical and auto liability may be adjusted based on higher or lower
actual loss experience. Although there is greater risk with respect to the
accuracy of these estimates and assumptions because of the period over which
actual results may emerge, such risk is mitigated by our ability to make changes
to these estimates and assumptions over the same period.

In preparing our financial statements at any point in time, we are also
periodically faced with uncertainties, the outcomes of which are not within our
control and will not be known for prolonged periods of time. As discussed in
Part II, Item 1 "Legal Proceedings" and the notes to our consolidated financial
statements included in our Annual Report on Form 10-K, we are involved in
actions relating to claims that our rental purchase agreements constitute
installment sales contracts, violate state usury laws or violate other state
laws enacted to protect consumers, claims asserting violations of wage and hour
laws in our employment practices, as well as claims we violated the federal
securities laws. We, together with our counsel, make estimates, if determinable,
of our probable liabilities and record such amounts in our consolidated
financial statements. These estimates represent our best estimate, or may be the
minimum range of probable loss when no single best estimate is determinable. We,
together with our counsel, monitor developments related to these legal matters
and, when appropriate, adjustments are made to liabilities to reflect current
facts and circumstances.

We periodically review the carrying value of our goodwill and other intangible
assets when events and circumstances warrant such a review. One of the methods
used for this review is performed using estimates of future cash flows. If the
carrying value of our goodwill or other intangible assets is considered
impaired, an impairment charge is recorded for the amount by which the carrying
value of the goodwill or intangible assets exceeds its fair value. We believe
that the estimates of future cash flows and fair value are reasonable. Changes
in estimates of such cash flows and fair value, however, could affect the
evaluation.

Based on an assessment of our accounting policies and the underlying judgments
and uncertainties affecting the application of those policies, we believe that
our consolidated financial statements provide a meaningful and fair perspective
of our company. However, we do not suggest that other general risk factors, such
as those discussed in our Annual Report on Form 10-K as well as changes in our
growth objectives or performance of new or acquired stores, could not adversely
impact our consolidated financial position, results of operations and cash flows
in future periods.

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RENT-A-CENTER, INC. AND SUBSIDIARIES

OTHER SIGNIFICANT ACCOUNTING POLICIES

Our significant accounting policies are summarized below and in Note A to our
consolidated financial statements included in our Annual Report on Form 10-K.

Revenue. We collect non-refundable rental payments and fees in advance,
generally on a weekly or monthly basis. This revenue is recognized over the term
of the agreement. Rental purchase agreements generally include a discounted
early purchase option. Upon exercise of this option, and upon sale of used
merchandise, revenue is recognized as these payments are received.

Franchise Revenue. Revenue from the sale of rental merchandise is recognized
upon shipment of the merchandise to the franchisee. Franchise fee revenue is
recognized upon completion of substantially all services and satisfaction of all
material conditions required under the terms of the franchise agreement.

Depreciation of Rental Merchandise. We depreciate our rental merchandise using
the income forecasting method. The income forecasting method of depreciation we
use does not consider salvage value and does not allow the depreciation of
rental merchandise during periods when it is not generating rental revenue. The
objective of this method of depreciation is to provide for consistent
depreciation expense while the merchandise is on rent. On July 1, 2002, we began
accelerating the depreciation on computers that are 21 months old or older and
which have become idle using the straight-line method for a period of at least
six months. The purpose for this change is to better reflect the depreciable
life of a computer in our stores and to encourage the sale of older computers.

Cost of Merchandise Sold. Cost of merchandise sold represents the book value net
of accumulated depreciation of rental merchandise at time of sale.

Salaries and Other Expenses. Salaries and other expenses include all salaries
and wages paid to store level employees, together with market managers'
salaries, travel and occupancy, including any related benefits and taxes, as
well as all store level general and administrative expenses and selling,
advertising, insurance, occupancy, fixed asset depreciation and other operating
expenses.

General and Administrative Expenses. General and administrative expenses include
all corporate overhead expenses related to our headquarters such as salaries,
taxes and benefits, occupancy, administrative and other operating expenses, as
well as regional directors' salaries, travel and office expenses.

Amortization of Intangibles. Amortization of intangibles consists primarily of
the amortization of customer relationships and non-compete agreements resulting
from acquisitions. Effective January 1, 2002, under SFAS 142 all goodwill and
intangible assets with indefinite lives are no longer subject to amortization.

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RENT-A-CENTER, INC. AND SUBSIDIARIES

RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2003 COMPARED TO SIX MONTHS ENDED JUNE 30, 2002

Store Revenue. Total store revenue increased by $130.7 million, or 13.5%, to
$1,095.3 million for the six months ended June 30, 2003 from $964.6 million for
the six months ended June 30, 2002. The increase in total store revenue is
primarily attributable to growth in same store revenues, an increase in cash
sales and early purchase options, new stores, incremental revenues related to
all acquisitions, including the 295 Rent-Way stores acquired in February 2003,
as well as installment sales in our Get It Now stores.

Same store revenues represent those revenues earned in stores that were operated
by us for each of the entire six month periods ending June 30, 2003 and 2002.
Same store revenues increased by $34.9 million, or 4.2%, to $857.3 million for
the six months ended June 30, 2003 from $822.4 million in 2002. The increase in
same store revenues was primarily attributable to an increase in the total
revenue earned per customer including all rentals, fees and cash sales
(approximately $1,109 per customer for the six months ending June 30, 2003
versus approximately $1,063 per customer for the six months ending June 30,
2002). Merchandise sales for all stores increased $21.6 million, or 34.0%, to
$85.2 million for 2003 from $63.6 million in 2002. The increase in merchandise
sales was primarily attributable to an increase in the number of items sold in
the first six months of 2003 (approximately 570,000) from the number of items
sold in 2002 (approximately 446,000). This increase in the number of items sold
in 2003 versus the same period in 2002 was primarily the result of an increase
in the amount of customers exercising early purchase options.

Franchise Revenue. Total franchise revenue decreased by $4.2 million, or 14.8%,
to $24.4 million for the six months ended June 30, 2003 from $28.6 million in
2002. This decrease was primarily attributable to a decrease in merchandise
sales to franchise locations as a result of fewer franchised locations, many of
which where acquired by us, during the first six months of 2003 as compared to
the first six months of 2002.

Depreciation of Rental Merchandise. Depreciation of rental merchandise increased
by $29.4 million, or 15.8%, to $216.0 million for the six months ended June 30,
2003 from $186.6 million in 2002. Depreciation of rental merchandise expressed
as a percentage of store rentals and fees revenue increased to 21.6% in 2003
from 20.7% for the same period in 2002. These increases were primarily
attributable to an increase in rental and fee revenue, a different pricing mix
in 2003 versus 2002 and higher depreciation associated with the Rent-Way
inventory acquired in February 2003.

Cost of Merchandise Sold. Cost of merchandise sold increased by $16.3 million,
or 36.7%, to $60.8 million for the six months ended June 30, 2003 from $44.5
million in 2002. This increase was primarily a result of an increase in the
number of items sold during the first six months of 2003 as compared to the
first six months of 2002, as well as the additional sales of inventory gained
through the acquisition of 295 Rent-Way stores. The gross margin percent on
merchandise sales decreased to 28.6% in 2003 from 30.1% in 2002. This percentage
decrease was primarily attributable to the sale of merchandise acquired from
Rent-Way in February 2003.

Salaries and Other Expenses. Salaries and other expenses expressed as a
percentage of total store revenue decreased to 53.3% for the six months ended
June 30, 2003 from 54.6% for the six months ended June 30, 2002. This decrease
was primarily attributable to an increase in store revenues in the first six
months of 2003 as compared to 2002 coupled with the continued realization of our
margin enhancement initiatives and reductions in store level costs.

Franchise Cost of Merchandise Sold. Franchise cost of merchandise sold decreased
by $4.0 million, or 16.5%, to $20.5 million for the six months ended June 30,
2003 from $24.5 million in 2002. This decrease was primarily attributable to a
decrease in merchandise sales to franchise locations as a result of fewer
franchised locations, many of which were acquired by us, during the first six
months of 2003 as compared to the first six months of 2002.

General and Administrative Expenses. General and administrative expenses
expressed as a percentage of total revenue decreased to 3.0% for the six months
ending June 30, 2003 as compared to 3.3% for the six months ending June 30,
2002. This decrease is primarily attributable to the effect of a $2.0 million
legal charge associated with the settlement of class action gender
discrimination lawsuits in the second quarter of 2002.

Amortization of Intangibles. Amortization of intangibles increased by $4.6
million, or 275.7%, to $6.2 million for the six months ended June 30, 2003 from
$1.6 for the six months ended June 30, 2002. This increase was primarily
attributable to the Rent-Way acquisition and the number of acquisitions made
during the later part of 2002 versus 2001. As a result of these acquisitions,
amortization of intangibles is higher in the first six months of 2003 versus
2002.

Operating Profit. Operating profit increased by $17.0 million, or 9.6%, to
$193.5 million for the six months ended June 30, 2003 from $176.5 million in
2002. Operating profit as a percentage of total revenue decreased to 17.3% for
the six months ended June 30, 2003, from 17.8% in 2002. This percentage decrease
was primarily attributable to the increase in amortization of intangibles during
the first six months of 2003 versus 2002, as well as the effect of the Rent-Way
acquisition.

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RENT-A-CENTER, INC. AND SUBSIDIARIES

Net Earnings. Net earnings increased by $753,000, or 0.9%, to $86.3 million for
the six months ended June 30, 2003 from $85.5 million in 2002. Before the
after-tax effect of the $27.7 million non-recurring recapitalization charges
recorded in the second quarter of 2003, the $2.0 million non-recurring charge
associated with the settlement of class action gender discrimination lawsuits
and $2.9 million associated with the early retirement of debt in the second
quarter of 2002, net earnings increased by $14.8 million, or 16.8%, to $103.2
million for the six months ended June 30, 2003 from $88.4 million in 2002. This
increase is primarily attributable to growth in total revenues, a decrease in
interest expense, a lower tax rate and the improvements in salaries and other
expenses under our cost control programs offset by an increase in amortization
of intangibles.

Preferred Dividends. Dividends on our Series A preferred stock are payable
quarterly at an annual rate of 3.75%. Preferred dividends decreased by $8.9
million, or nearly 100%, for the six months ended June 30, 2003, due to the
conversion of all but two shares of outstanding Series A preferred stock in
August 2002.

THREE MONTHS ENDED JUNE 30, 2003 COMPARED TO THREE MONTHS ENDED JUNE 30, 2002

Store Revenue. Total store revenue increased by $61.7 million, or 12.8%, to
$542.4 million for the three months ended June 30, 2003 from $480.7 million for
the three months ended June 30, 2002. The increase in total store revenue is
primarily attributable to growth in same store revenues, an increase in cash
sales and early purchase options, new stores, incremental revenues related to
all acquisitions, including the 295 Rent-Way stores acquired in February 2003,
as well as installment sales in our Get It Now stores.

Same store revenues represent those revenues earned in stores that were operated
by us for each of the entire three month periods ending June 30, 2003 and 2002.
Same store revenues increased by $11.3 million, or 2.7%, to $427.4 million for
the three months ended June 30, 2003 from $416.1 million in 2002. The increase
in same store revenues was primarily attributable to an increase in the total
revenue earned per customer including all rentals, fees and cash sales
(approximately $546 per customer for the quarter ending June 30, 2003 versus
approximately $530 per customer for the quarter ending June 30, 2002).
Merchandise sales for all stores increased $8.5 million, or 35.6%, to $32.5
million for 2003 from $24.0 million in 2002. The increase in merchandise sales
was primarily attributable to an increase in the number of items sold in the
second quarter of 2003 (approximately 252,000) from the number of items sold in
2002 (approximately 188,000). This increase in the number of items sold in 2003
versus the same period in 2002 was primarily the result of an increase in the
amount of customers exercising early purchase options.

Franchise Revenue. Total franchise revenue decreased by $3.1 million, or 22.4%,
to $10.8 million for the three months ended June 30, 2003 from $13.9 million in
2002. This decrease was primarily attributable to a decrease in merchandise
sales to franchise locations as a result of a decrease in the number of
franchised locations, many of which were acquired by us, in the second quarter
of 2003 as compared to the second quarter of 2002.

Depreciation of Rental Merchandise. Depreciation of rental merchandise increased
by $15.0 million, or 15.9%, to $109.3 million for the three months ended June
30, 2003 from $94.3 million in 2002. Depreciation of rental merchandise
expressed as a percentage of store rentals and fees revenue increased to 21.7%
in 2003 from 20.7% for the same period in 2002. These increases were primarily
attributable to an increase in rental and fee revenue, a different pricing mix
in 2003 versus 2002 and higher depreciation associated with the Rent-Way
inventory acquired in February 2003.

Cost of Merchandise Sold. Cost of merchandise sold increased by $6.7 million, or
38.5%, to $24.2 million for the three months ended June 30, 2003 from $17.5
million in 2002. This increase was primarily a result of an increase in the
number of items sold during the second quarter of 2003 as compared to the second
quarter 2002, as well as the additional sales of inventory gained through the
acquisition of 295 Rent-Way stores. The gross margin percent on merchandise
sales decreased to 25.5% in 2003 from 27.1% in 2002. This percentage decrease
was primarily attributable to the sale of merchandise acquired from Rent-Way in
February 2003.

Salaries and Other Expenses. Salaries and other expenses expressed as a
percentage of total store revenue decreased to 53.8% for the three months ended
June 30, 2003 from 55.0% for the three months ended June 30, 2002. This decrease
was primarily attributable to an increase in store revenues in the second
quarter of 2003 as compared to 2002 coupled with the continued realization of
our margin enhancement initiatives and reductions in store level costs.

Franchise Cost of Merchandise Sold. Franchise cost of merchandise sold decreased
by $2.9 million, or 24.7%, to $9.0 million for the three months ended June 30,
2003 from $11.9 million in 2002. This decrease was primarily attributable to a
decrease in merchandise sales to franchise locations as a result of fewer
franchised locations, many of which were acquired by us, in the second quarter
of 2003 as compared to the second quarter of 2002.

General and Administrative Expenses. General and administrative expenses
expressed as a percentage of total revenue decreased to 3.0% for the three
months ending June 30, 2003 as compared to 3.5% for the three months ending June
30, 2002. This decrease is primarily attributable to the effect of a $2.0
million legal charge associated with the settlement of class action gender
discrimination lawsuits in the second quarter of 2002.

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RENT-A-CENTER, INC. AND SUBSIDIARIES

Amortization of Intangibles. Amortization of intangibles increased by $2.4
million, or 257.5%, to $3.3 million for the three months ended June 30, 2003
from $900,000 for the three months ended June 30, 2002. This increase was
primarily attributable to the Rent-Way acquisition.

Operating Profit. Operating profit increased by $9.0 million, or 10.2%, to $97.2
million for the three months ended June 30, 2003 from $88.2 million in 2002.
Operating profit as a percentage of total revenue decreased to 17.6% for the
three months ended June 30, 2003, from 17.8% in 2002. This percentage decrease
was primarily attributable to the increase in amortization of intangibles during
the second quarter of 2003 versus 2002, as well as the effect of the Rent-Way
acquisition.

Net Earnings. Net earnings decreased by $6.6 million, or 15.8%, to $35.3 million
for the three months ended June 30, 2003 from $41.9 million in 2002. Before the
after-tax effect of the $27.7 million non-recurring recapitalization charges
recorded in the second quarter of 2003, the $2.0 million non-recurring charge
associated with the settlement of class action gender discrimination lawsuits
and $2.9 million associated with the early retirement of debt in the second
quarter of 2002, net earnings increased by $7.4 million, or 16.6%, to $52.3
million for the six months ended June 30, 2003 from $44.9 million in 2002. This
increase is primarily attributable to growth in total revenues, a decrease in
interest expense, a lower tax rate and the improvements seen in salaries and
other expenses under our cost control programs offset by an increase in
amortization of intangibles.

Preferred Dividends. Dividends on our Series A preferred stock are payable
quarterly at an annual rate of 3.75%. Preferred dividends decreased by $3.9
million, or nearly 100%, for the three months ended June 30, 2003, due to the
conversion of all but two shares of outstanding Series A preferred stock in
August 2002.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operating activities increased by $10.5 million to $183.4
million for the six months ending June 30, 2003 from $172.9 million in 2002.
This increase resulted primarily from an increase in depreciation as well as a
decrease in prepaid expenses during the first six months of 2003 as compared to
2002 and the non-recurring finance charges in the second quarter of 2003 offset
by a decrease in accrued liabilities and increased inventory purchases during
the first six months of 2003 as compared to 2002.

Cash used in investing activities increased by $85.4 million to $128.8 million
during the six month period ending June 30, 2003 from $43.4 million in 2002.
This increase is primarily attributable to the acquisition of 295 stores from
Rent-Way in February 2003.

Cash provided by financing activities increased by $251.5 million to $107.9
million during the six month period ending June 30, 2003 from $143.6 million
used in financing activities in 2002. This increase is a result of the $300.0
million received from our issuance of the 7 1/2% notes as well as the new $400.0
million term loan under our senior credit facilities entered into in May 2003,
offset by our repurchase of $187.8 million of our 11% notes, the repayment of
our old senior credit facilities and repurchase of $142.6 million of our common
stock.

Liquidity Requirements. Our primary liquidity requirements are for debt service,
rental merchandise purchases, capital expenditures, litigation and our store
expansion program. Our primary sources of liquidity have been cash provided by
operations, borrowings and sales of equity securities. In the future, we may
incur additional debt, or may issue debt or equity securities to finance our
operating and growth strategies. The availability and attractiveness of any
outside sources of financing will depend on a number of factors, some of which
relate to our financial condition and performance, and some of which are beyond
our control, such as prevailing interest rates and general economic conditions.
There can be no assurance that additional financing will be available, or if
available, that it will be on terms we find acceptable.

We believe that the cash flow generated from operations, together with amounts
available under our senior credit facilities, will be sufficient to fund our
debt service requirements, rental merchandise purchases, capital expenditures,
litigation and our store expansion programs during 2003. Our existing revolving
credit facilities provide us with revolving loans in an aggregate principal
amount not exceeding $130.0 million, of which $124.1 million was available at
August 4, 2003. At August 1, 2003, we had in excess of $210.0 million in cash,
$93.7 million of which will be used for the redemption of our 11% notes and
approximately $39.1 million of which will be used for the repurchase of 539,000
shares of our common stock. To the extent we have available cash that is not
necessary for store openings or acquisitions, we intend to repurchase additional
shares of our common stock as well as make payments to service our existing
debt. While our operating cash flow has been strong and we expect this strength
to continue, our liquidity could be negatively impacted if we do not remain as
profitable as we expect.

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RENT-A-CENTER, INC. AND SUBSIDIARIES

Our senior credit facilities and the indentures governing our senior
subordinated notes contain certain change in control provisions. A change in
control would result in an event of default under our senior credit facilities,
and, pursuant to the underlying indentures, would also require us to offer to
repurchase all of our senior subordinated notes at 101% of their principal
amount, plus accrued interest to the date of repurchase. Provisions of our
senior credit facilities restrict the repurchase of all of our senior
subordinated notes. In the event a change in control occurs, we cannot be sure
that we would have enough funds to immediately pay our accelerated senior credit
facility obligations and all of the senior subordinated notes, or that we would
be able to obtain financing to do so on favorable terms, if at all.

Deferred Taxes. On March 9, 2002, President Bush signed into law the Job
Creation and Worker Assistance Act of 2002, which provides for accelerated tax
depreciation deductions for qualifying assets placed in service between
September 11, 2001 and September 10, 2004. Under these provisions, 30 percent of
the basis of qualifying property is deductible in the year the property is
placed in service, with the remaining 70 percent of the basis depreciated under
the normal tax depreciation rules. For assets placed in service between May 6,
2003 and December 31, 2004, the Jobs and Growth Tax Relief Reconciliation Act of
2003 increased the percent of the basis of qualifying property deductible in the
year the property is placed in service from 30% to 50%. Accordingly, our cash
flow will benefit from having a lower current cash tax obligation, which in turn
will provide additional cash flows from operations until the deferred tax
liabilities begin to reverse. We estimate that our operating cash flow will have
increased by approximately $105.6 million through 2004 before the deferred tax
liabilities begin to reverse over a three year period beginning in 2005.

Rental Merchandise Purchases. We purchased $305.1 million and $252.3 million of
rental merchandise during the six month periods ending June 30, 2003 and 2002,
respectively.

Capital Expenditures. We make capital expenditures in order to maintain our
existing operations as well as for new capital assets in new and acquired
stores. We spent $22.9 million and $16.8 million on capital expenditures during
the six month periods ending June 30, 2003 and 2002, respectively, and expect to
spend approximately $25.0 million for the remainder of 2003.

Acquisitions and New Store Openings. For the first six months of 2003, we spent
approximately $106.2 million on acquiring stores and accounts, of which $100.4
million was for the Rent-Way acquisition. For the entire year ending December
31, 2003, we intend to add approximately 10% to our store base by opening
approximately 80 new store locations as well as continuing to pursue
opportunistic acquisitions.

The profitability of our stores tends to grow at a slower rate approximately
five years from the time we open or acquire them. As a result, in order for us
to show improvements in our profitability, it is important for us to continue to
open stores in new locations or acquire under-performing stores on favorable
terms. There can be no assurance that we will be able to acquire or open new
stores at the rates we expect, or at all. We cannot assure you that the stores
we do acquire or open will be profitable at the same levels that our current
stores are, or at all.

Borrowings. The table below shows the scheduled maturity dates of our senior
debt outstanding at June 30, 2003.

Senior Credit Facilities. On May 28, 2003, we entered into a new senior credit
facility provided by a syndicate of banks and other financial institutions led
by Lehman Commercial Paper, Inc., as administrative agent. At June 30, 2003, we
had a total of $400.0 million outstanding under our senior credit facilities
related to our term loans and $114.1 million of availability under the revolving
credit line portion of our senior credit facilities.

Under our $80.0 million additional term loan facility, in the event that a
letter of credit is drawn upon, we have the right to either repay the additional
term loan facility lenders the amount withdrawn or request a loan in that
amount. Interest on any requested additional term loan facility loan accrues at
an adjusted prime rate plus 1.25% or, at our option, at the Eurodollar base rate
plus 2.25%, with the entire amount of the additional term loan facility due on
May 28, 2008.

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RENT-A-CENTER, INC. AND SUBSIDIARIES

Borrowings under our senior credit facilities bear interest at varying rates
equal to 2.25% over the Eurodollar rate, which was 1.12% at June 30, 2003. We
also have a prime rate option under the facilities, but have not exercised it to
date. We have not entered into any interest rate protection agreements with
respect to term loans under our senior credit facilities.

Our senior credit facilities are secured by a security interest in substantially
all of our tangible and intangible assets, including intellectual property and
real property. Our senior credit facilities are also secured by a pledge of the
capital stock of our subsidiaries.

Our senior credit facilities contain covenants, including without limitation,
covenants that generally limit our ability to:

o incur additional debt (including subordinated debt) in excess of $35
million at any one time outstanding;

o repurchase our capital stock and senior subordinated notes;

o incur liens or other encumbrances;

o merge, consolidate or sell substantially all our property or business;

o sell assets, other than inventory in the ordinary course of business;

o make investments or acquisitions unless we meet financial tests and
other requirements;

o make capital expenditures; or

o enter into a new line of business.

Our senior credit facilities require us to comply with several financial
covenants, including a maximum consolidated leverage ratio, a minimum
consolidated interest coverage ratio and a minimum fixed charge coverage ratio.
At June 30, 2003, the maximum consolidated leverage ratio was 2.75:1, the
minimum consolidated interest coverage ratio was 3.50:1, and the minimum fixed
charge coverage ratio was 1.50:1. On that date, our actual ratios were 1.76:1,
5.78:1 and 2.53:1, respectively. In addition, we are required to use 25% of the
net proceeds from any equity offering to repay our term loans.

Events of default under our senior credit facilities include customary events,
such as a cross-acceleration provision in the event that we default on other
debt. In addition, an event of default under the senior credit facilities would
occur if we undergo a change of control. This is defined to include the case
where a third party becomes the beneficial owner of 35% or more of our voting
stock or certain changes in our Board of Directors occur.

11% Senior Subordinated Notes. At June 30, 2003, Rent-A-Center East had
outstanding $84.5 million in 11% senior subordinated notes pursuant to an
indenture dated as of December 19, 2001 among Rent-A-Center East, its subsidiary
guarantors and The Bank of New York, as trustee.

The 2001 indenture contains covenants that limit Rent-A-Center East's ability
to:

o incur additional debt;

o sell assets or our subsidiaries;

o grant liens to third parties;

o pay dividends or repurchase stock; and

o engage in a merger or sell substantially all of our assets.

Events of default under the 2001 indenture include customary events, such as a
cross-acceleration provision in the event that we default in the payment of
other debt due at maturity or upon acceleration for default in an amount
exceeding $25.0 million.

The 11% notes may be redeemed on or after August 15, 2003, at our option, in
whole or in part, at a premium declining from 105.5%. The 11% notes also require
that upon the occurrence of a change of control (as defined in the 2001
indenture), the holders of the 11% notes have the right to require Rent-A-Center
East to repurchase the 11% notes at a price equal to 101% of the original
aggregate principal amount, together with accrued and unpaid interest, if any,
to the date of repurchase. If Rent-A-Center East did not comply with this
repurchase obligation, this would trigger an event of default under our senior
credit facilities.

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RENT-A-CENTER, INC. AND SUBSIDIARIES

On May 6, 2003, we repurchased approximately $183 million principal amount of
11% notes pursuant to a tender offer that expired at 12:00 midnight, New York
City time, on Tuesday, May 20, 2003. On June 17, 2003, we announced that, in
accordance with the 2001 indenture, we intended to optionally redeem on August
15, 2003 all of the 11% notes then outstanding at the applicable redemption
price. On June 17, 2003, the trustee provided formal notice to the holders of
the 11% notes that the 11% notes would be redeemed at 105.5% of the principal
amount, plus accrued and unpaid interest on August 15, 2003. Under the terms of
our senior credit facilities, we are required to redeem our 11% notes no later
than August 15, 2003. We have set aside $93.7 million of cash for the redemption
of our 11% notes.

7 1/2% Senior Subordinated Notes. On May 6, 2003, we issued an additional $300.0
million in senior subordinated notes due 2010, bearing interest at 7 1/2%,
pursuant to an indenture dated May 6, 2003, among Rent-A-Center, Inc., its
subsidiary guarantors and The Bank of New York, as trustee. The proceeds of this
offering are to be used to fund the repurchase and redemption of the 11% senior
subordinated notes.

The 2003 indenture contains covenants that limit Rent-A-Center's ability to:

o incur additional debt;

o sell assets or our subsidiaries;

o grant liens to third parties;

o pay dividends or repurchase stock; and

o engage in a merger or sell substantially all of our assets.

Events of default under the 2003 indenture include customary events, such as a
cross-acceleration provision in the event that we default in the payment of
other debt due at maturity or upon acceleration for default in an amount
exceeding $50.0 million. It is also an event of default under the 2003 indenture
if we fail to purchase or redeem all of the 11% senior subordinated notes by
August 30, 2003.

The 7 1/2% notes may be redeemed on or after May 1, 2006, at our option, in
whole or in part, at a premium declining from 103.75%. The 7 1/2% subordinated
notes also require that upon the occurrence of a change of control (as defined
in the 2003 indenture), the holders of the notes have the right to require us to
repurchase the notes at a price equal to 101% of the original aggregate
principal amount, together with accrued and unpaid interest, if any, to the date
of repurchase. If we do not comply with this repurchase obligation, this would
trigger an event of default under our senior credit facilities.

Store Leases. We lease space for all of our stores as well as our corporate and
regional offices under operating leases expiring at various times through 2010.

ColorTyme Guarantee. ColorTyme is a party to an agreement with Textron Financial
Corporation, who generally provides $40.0 million in aggregate financing to
qualifying franchisees of ColorTyme of up to five times their average monthly
revenues. Under this agreement, upon an event of default by the franchisee under
agreements governing this financing and upon the occurrence of certain other
events, Textron may assign the loans and the collateral securing such loans to
ColorTyme, with ColorTyme then succeeding to the rights of Textron under the
debt agreements, including the rights to foreclose on the collateral. An
additional $12.0 million of financing is provided by Texas Capital Bank,
National Association under an arrangement similar to the Textron financing. We
guarantee the obligations of ColorTyme under these agreements up to a maximum
amount of $52.0 million, of which $30.4 million was outstanding as of June 30,
2003. Mark E. Speese, our Chairman of the Board and Chief Executive Officer, is
a passive investor in Texas Capital Bank, owning less than 1% of its outstanding
equity.

Litigation. In 1998, we recorded an accrual of approximately $125.0 million for
estimated probable losses on litigation assumed in connection with the Thorn
Americas acquisition. As of June 30, 2003, we have paid approximately $124.5
million of this accrual in settlement of most of these matters and legal fees.
These settlements were funded primarily from amounts available under our senior
credit facilities, as well as from cash flow from operations.

On November 12, 2002, we signed a settlement agreement settling the Wisconsin
Attorney General matter, which was approved by the court on the same day. Under
the terms of the settlement, we created a restitution fund in the amount of $7.0

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RENT-A-CENTER, INC. AND SUBSIDIARIES

million for our eligible Wisconsin customers who had completed or active
transactions with us as of September 30, 2002. In addition, we paid $1.4 million
to the State of Wisconsin for fines, penalties, costs and fees. The settlement
of this matter was fully reserved for in our financial statements. A portion of
the restitution fund is allocated for customers with completed transactions as
of September 30, 2002, and the balance is allocated for restitution on active
transactions as of September 30, 2002, which will be allowed to terminate
according to their terms when customers either acquire or return the
merchandise. Restitution will be offered on the active transactions when all
such active transactions have terminated, which we anticipate will occur by the
end of fiscal 2003. Any unclaimed restitution funds at the conclusion of the
restitution period will be returned to us. To the extent the amount in the
restitution fund is insufficient to pay the required amount of restitution, we
are obligated to provide additional funds to do so. However, we believe the
amount in the restitution fund allocated for the active transactions, together
with the amount of funds we anticipate will remain unclaimed by customers with
completed transactions, will be sufficient to pay the required amount of
restitution on all eligible active transactions.

Additional settlements or judgments against us on our existing litigation could
affect our liquidity. Please refer to Note J of our consolidated financial
statements included in our Annual Report on Form 10-K.

Sales of Equity Securities. During 1998, we issued 260,000 shares of our Series
A preferred stock at $1,000 per share, resulting in aggregate proceeds of $260.0
million. Dividends on our Series A preferred stock accrue on a quarterly basis
at the rate of 3.75%, or $37.50 per annum. Prior to the conversion of all but
two shares of our Series A preferred stock in August 2002, we paid these
dividends in additional shares of Series A preferred stock because of
restrictive provisions in our senior credit facilities. We have the ability to
pay the dividends in cash and may do so under our senior credit facilities so
long as we are not in default.

In connection with the issuance of our Series A preferred stock in August 1998,
we entered into a registration rights agreement with Apollo which, among other
things, granted them two rights to request that their shares be registered, and
a registration rights agreement with an affiliate of Bear Stearns, which granted
them the right to participate in any company-initiated registration of shares,
subject to certain exceptions. In May 2002, Apollo exercised one of their two
rights to request that their shares be registered and an affiliate of Bear
Stearns elected to participate in such registration. In connection therewith,
Apollo and an affiliate of Bear Stearns converted 97,197 shares of our Series A
preferred stock held by them into 3,500,000 shares of our common stock, which
they sold in the May 2002 public offering that was the subject of Apollo's
request. We did not receive any of the proceeds from this offering.

On August 5, 2002, the first date on which we had the right to optionally redeem
the shares of Series A preferred stock, the holders of our Series A preferred
stock converted all but two shares of our Series A preferred stock held by them
into 7,281,548 shares of our common stock. As a result, the dividend on our
Series A preferred stock has been substantially eliminated for future periods.
In connection with Apollo's conversion of all but two of the shares of Series A
preferred stock held by them on August 5, 2002, we granted Apollo an additional
right to effect a demand registration under the existing registration rights
agreement we entered into with them in 1998, such that Apollo now has two demand
rights.

Contractual Cash Commitments. The table below summarizes debt, lease and other
minimum cash obligations outstanding as of June 30, 2003:

- ----------

(1) Includes interest payments of $4.65 million, bond premium of $4.65 million
and principal payments of $84.45 million, representing amounts necessary
to redeem the 11% notes on August 15, 2003.

(2) Includes interest payments of $11.25 million on each of May 1 and November
1 of each year.

Repurchases of Outstanding Securities. In connection with the retirement of J.
Ernest Talley, our former Chairman of the Board and Chief Executive Officer, we
entered into an agreement to repurchase $25.0 million worth of shares of our
common stock beneficially held by Mr. Talley at a purchase price equal to the
average closing price of our common stock over the 10

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RENT-A-CENTER, INC. AND SUBSIDIARIES

trading days beginning October 9, 2001, subject to a maximum of $27.00 per share
and a minimum of $20.00 per share. Under this formula, the purchase price for
the repurchase was calculated at $20.258 per share. Accordingly, on October 23,
2001 we repurchased 493,632 shares of our common stock beneficially held by Mr.
Talley at $20.258 per share for a total purchase price of $10.0 million, and on
November 30, 2001, we repurchased an additional 740,448 shares of our common
stock beneficially held by Mr. Talley at $20.258 per share, for a total purchase
price of an additional $15.0 million. On January 25, 2002, we exercised the
option to repurchase all of the remaining 1,714,086 shares of common stock
beneficially held by Mr. Talley at $20.258 per share. We repurchased those
remaining shares on January 30, 2002.

On April 25, 2003, we announced that we entered into an agreement with Apollo
Investment Fund IV, L.P. and Apollo Overseas Partners IV, L.P. which provided
for the repurchase of a number of shares of our common stock sufficient to
reduce Apollo's aggregate record ownership to 19.00% after consummation of our
planned tender offer at the price per share paid in the tender offer. On April
28, 2003, we commenced a tender offer to purchase up to 2.20 million shares of
our common stock pursuant to a modified "Dutch Auction." On June 25, 2003, we
closed the tender offer and purchased approximately 1.77 million shares of our
common stock at $73 per share. On July 11, 2003 we closed the Apollo transaction
and purchased approximately 775,000 shares of our common stock at $73 per share.
As contemplated by the Apollo agreement, Apollo exchanged their shares of Series
A preferred stock for shares of Series C preferred stock. The terms of the
Series A preferred stock and Series C preferred stock are substantially similar,
except the Series C preferred stock does not have the right to directly elect
any members of our Board of Directors.

In April 2000, we announced that our Board of Directors had authorized a program
to repurchase in the open market and in privately negotiated transactions up to
an aggregate of $25.0 million of our common stock. In October 2002, our Board of
Directors increased the amount of repurchases authorized under our common stock
repurchase program from $25.0 million to $50.0 million. In March 2003, our Board
of Directors again increased such amount from $50.0 million to $100.0 million.
Through June 30, 2003, we have repurchased approximately 937,000 shares of our
common stock under this program for approximately $44.3 million. On August 1,
2003, we agreed to repurchase under this program an aggregate of 440,000 shares
of our common stock at $73 per share, 200,000 of which will be repurchased from
Mark E. Speese, our Chairman of the Board and Chief Executive Officer, 200,000
of which will be repurchased from Apollo Investment Fund IV, L.P. and Apollo
Overseas Partners IV, L.P., and 40,000 of which will be repurchased from
Mitchell E. Fadel, our President and Chief Operating Officer. We have
repurchased an additional 99,000 shares of our common stock under this program
for approximately $7.0 million during the third quarter of 2003. Following such
repurchases, approximately $16.6 million will be available for additional
repurchases under this program.

Economic Conditions. Although our performance has not suffered in previous
economic downturns, we cannot assure you that demand for our products,
particularly in higher price ranges, will not significantly decrease in the
event of a prolonged recession.

Seasonality. Our revenue mix is moderately seasonal, with the first quarter of
each fiscal year generally providing higher merchandise sales than any other
quarter during a fiscal year, primarily related to federal income tax refunds.
Generally, our customers will more frequently exercise their early purchase
option on their existing rental purchase agreements or purchase pre-leased
merchandise off the showroom floor during the first quarter of each fiscal year.
We expect this trend to continue in future periods. Furthermore, we tend to
experience slower growth in the number of rental purchase agreements on rent in
the third quarter of each fiscal year when compared to other quarters throughout
the year. As a result, we would expect revenues for the third quarter of each
fiscal year to remain relatively flat with the prior quarter. We expect this
trend to continue in future periods unless we add significantly to our store
base during the third quarter of future fiscal years as a result of new store
openings or opportunistic acquisitions.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

INTEREST RATE SENSITIVITY

As of June 30, 2003, we had $84.5 million in subordinated notes outstanding at a
fixed interest rate of 11.0%, $300.0 million in subordinated notes outstanding
at a fixed interest rate of 7 1/2% and $400.0 million in term loans outstanding
at interest rates indexed to the LIBOR rate. The 11% subordinated notes mature
on August 15, 2008. The fair value of the subordinated notes is estimated based
on discounted cash flow analysis using interest rates currently offered for
loans with similar terms to borrowers of similar credit quality. The fair value
of the 11% and 7 1/2% subordinated notes at June 30, 2003 was $90.2 million and
$313.5 million, respectively, which is $18.2 million above their carrying value.
Unlike the subordinated notes, the $400.0 million in term loans have variable
interest rates indexed to current LIBOR rates. As of June 30, 2003, we have not
entered into any interest rate swap agreements with respect to term loans under
our senior credit facilities.

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RENT-A-CENTER, INC. AND SUBSIDIARIES

MARKET RISK

Market risk is the potential change in an instrument's value caused by
fluctuations in interest rates. Our primary market risk exposure is fluctuations
in interest rates. Monitoring and managing this risk is a continual process
carried out by the Board of Directors and senior management. We manage our
market risk based on an ongoing assessment of trends in interest rates and
economic developments, giving consideration to possible effects on both total
return and reported earnings.

INTEREST RATE RISK

We hold long-term debt with variable interest rates indexed to prime or LIBOR
that exposes us to the risk of increased interest costs if interest rates rise.

ITEM 4. CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the participation of
our management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the period covered by this quarterly
report. Based on that evaluation, our management, including our Chief Executive
Officer and our Chief Financial Officer, concluded that our disclosure controls
and procedures were effective. There have been no significant changes in our
internal controls or in other factors that have materially affected, or are
reasonably likely to materially affect, our internal controls.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we, along with our subsidiaries, are party to various legal
proceedings arising in the ordinary course of business. Except as described
below, we are not currently a party to any material litigation.

Colon v. Thorn Americas, Inc. The plaintiff filed this class action in November
1997 in New York state court. This matter was assumed by us in connection with
the Thorn Americas acquisition, and appropriate purchase accounting adjustments
were made for such contingent liabilities. The plaintiff acknowledges that
rent-to-own transactions in New York are subject to the provisions of New York's
Rental Purchase Statute but contends the Rental Purchase Statute does not
provide Thorn Americas immunity from suit for other statutory violations. The
plaintiff alleges Thorn Americas has a duty to disclose effective interest under
New York consumer protection laws, and seek damages and injunctive relief for
Thorn Americas' failure to do so. This suit also alleges violations relating to
excessive and unconscionable pricing, late fees, harassment, undisclosed
charges, and the ease of use and accuracy of its payment records. In the prayer
for relief, the plaintiff requested class certification, injunctive relief
requiring Thorn Americas to cease certain marketing practices and price their
rental purchase contracts in certain ways, unspecified compensatory and punitive
damages, rescission of the class members contracts, an order placing in trust
all moneys received by Thorn Americas in connection with the rental of
merchandise during the class period, treble damages, attorney's fees, filing
fees and costs of suit, pre- and post-judgment interest, and any further relief
granted by the court. The plaintiff has not alleged a specific monetary amount
with respect to the request for damages.

The proposed class includes all New York residents who were party to our
rent-to-own contracts from November 26, 1994. In November 2000, following
interlocutory appeal by both parties from the denial of cross-motions for
summary judgment, we obtained a favorable ruling from the Appellate Division of
the State of New York, dismissing the plaintiff's claims based on the alleged
failure to disclose an effective interest rate. The plaintiff's other claims
were not dismissed. The plaintiff moved to certify a state-wide class in
December 2000. The plaintiff's class certification motion was heard by the court
on November 7, 2001 and, on September 12, 2002, the court issued an opinion
denying in part and granting in part the plaintiff's requested certification.
The opinion grants certification as to all of the plaintiff's claims except the
plaintiff's pricing claims pursuant to the Rental Purchase Statute, as to which
certification was denied. The parties have differing views as to the effect of
the court's opinion, and accordingly, the court granted the parties permission
to submit competing orders as to the effect of the opinion on the plaintiff's
specific claims. Both proposed orders were submitted to the court on March 27,
2003, and on May 30, 2003, the court held a hearing regarding such orders. No
order has yet been entered by the court. Regardless of the determination of the
final certification order by the court, we intend to pursue an interlocutory
appeal of the court's certification order.

We believe these claims are without merit and will continue to vigorously defend
ourselves in this case. However, we cannot assure you that we will be found to
have no liability in this matter.

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RENT-A-CENTER, INC. AND SUBSIDIARIES

Wisconsin Attorney General Proceeding. On August 4, 1999, the Wisconsin Attorney
General filed suit against us and our subsidiary ColorTyme in the Circuit Court
of Milwaukee County, Wisconsin, alleging that our rent-to-rent transaction,
coupled with the opportunity afforded our rental customers to purchase the
rented merchandise under what we believed was a separate transaction, was a
disguised credit sale subject to the Wisconsin Consumer Act. Accordingly, the
Attorney General alleged that we failed to disclose credit terms, misrepresented
the terms of the transaction and engaged in unconscionable practices. The
Attorney General sought injunctive relief, restoration of any losses suffered by
any Wisconsin consumer harmed and civil forfeitures and penalties in amounts
ranging from $50 to $10,000 per violation.

On October 1, 2002, in anticipation of the settlement of this matter, we changed
our business practices in Wisconsin to a retail sale model. Accordingly, our 23
Wisconsin stores now offer credit sale transactions and operate under our
subsidiary Get It Now, which is subject to regulation under the Wisconsin
Consumer Act.

On November 12, 2002, we signed a settlement agreement for this suit with the
Attorney General, which was approved by the court on the same day. Under the
terms of the settlement, we created a restitution fund in the amount of $7.0
million for our eligible Wisconsin customers who had completed or active
transactions with us as of September 30, 2002. In addition, we paid $1.4 million
to the State of Wisconsin for fines, penalties, costs and fees. A portion of the
restitution fund is allocated for customers with completed transactions as of
September 30, 2002, and the balance is allocated for restitution on active
transactions as of September 30, 2002, which will be allowed to terminate
according to their terms when customers either acquire or return the
merchandise. Restitution will be offered on the active transactions when all
such active transactions have terminated, which we anticipate will occur by the
end of fiscal 2003. Any unclaimed restitution funds at the conclusion of the
restitution period will be returned to us. To the extent the amount in the
restitution fund is insufficient to pay the required amount of restitution, we
are obligated to provide additional funds to do so. However, we believe the
amount in the restitution fund allocated for the active transactions, together
with the amount of funds we anticipate will remain unclaimed by customers with
completed transactions, will be sufficient to pay the required amount of
restitution on all eligible active transactions. Any customer accepting a
restitution check will be required to release us and our subsidiary ColorTyme
from all claims related to their transaction or transactions with us. We,
together with ColorTyme, also agreed to enter into an injunction requiring each
of us to comply with the Wisconsin Consumer Act in any transaction in Wisconsin
in which the customer can become the owner of merchandise other than through a
single lump sum payment.

Terry Walker, et. al. v. Rent-A-Center, Inc., et. al. On January 4, 2002, a
putative class action was filed against us and certain of our current and former
officers and directors by Terry Walker in federal court in Texarkana, Texas. The
complaint alleges that the defendants violated Sections 10(b) and/or Section
20(a) of the Securities Exchange Act and Rule 10b-5 promulgated thereunder by
issuing false and misleading statements and omitting material facts regarding
our financial performance and prospects for the third and fourth quarters of
2001. The complaint purports to be brought on behalf of all purchasers of our
common stock from April 25, 2001 through October 8, 2001 and seeks damages in
unspecified amounts. Similar complaints were consolidated by the court with the
Walker matter in October 2002.

On November 25, 2002, the lead plaintiffs in the Walker matter filed an amended
consolidated complaint which added certain of our outside directors as
defendants to the Exchange Act claims. The amended complaint also added
additional claims that we, and certain of our current and former officers and
directors, violated various provisions of the Securities Act as a result of
alleged misrepresentations and omissions in connection with an offering in May
2001 and also added the managing underwriters in that offering as defendants.

On February 7, 2003, we, along with certain officer and director defendants,
filed a motion to dismiss the matter as well as a motion to transfer venue. In
addition, our outside directors named in the matter separately filed a motion to
dismiss the Securities Act claims on statute of limitations grounds. On February
19, 2003, the underwriter defendants also filed a motion to dismiss the matter.
The plaintiffs filed response briefs to these motions, and our response to these
response briefs was filed on May 21, 2003. A hearing was held by the Court on
June 26, 2003 to hear each of these motions. No decision has yet been entered by
the Court.

We believe the plaintiff's claims in this matter are without merit and intend to
vigorously defend ourselves. However, we cannot assure you that we will be found
to have no liability in this matter.

Gregory Griffin, et. al. v. Rent-A-Center, Inc. On June 25, 2002, a suit
originally filed by Gregory Griffin in state court in Philadelphia, Pennsylvania
was amended to seek relief both individually and on behalf of a class of
customers in Pennsylvania, alleging that we violated the Pennsylvania Goods and
Services Installment Sales Act and the Pennsylvania Unfair Trade Practices and
Consumer Protection Law. The amended complaint asserts that our rental purchase
transactions are, in fact, retail installment sales transactions, and as such,
are not governed by the Pennsylvania Rental-Purchase Agreement Act, which was
enacted after the adoption of the Pennsylvania Goods and Services Installment
Sales Act and the Pennsylvania Unfair Trade Practices Act. Griffin's suit seeks
class-wide remedies, including injunctive relief, unspecified statutory, actual
and treble damages, as well as attorney's fees and costs.

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RENT-A-CENTER, INC. AND SUBSIDIARIES

In July 2002, we filed preliminary objections to the complaint in Griffin. On
December 13, 2002, the court granted our preliminary objections and dismissed
the plaintiffs' claims. On January 6, 2003, the plaintiffs filed a notice of
appeal. The plaintiffs' appeal brief was filed on May 9, 2003 and we
subsequently filed our response brief. Oral argument on the appeal was held on
July 30, 2003 in the Superior Court of Pennsylvania. No decision has yet been
entered by the Court. We believe the plaintiffs' claims in this matter are
without merit and intend to vigorously defend ourselves. However, we cannot
assure you that we will be found to have no liability in this matter.

State Wage and Hour Class Actions. On August 20, 2001, a putative class action
was filed against us in state court in Multnomah County, Oregon entitled Rob
Pucci, et. al. v. Rent-A-Center, Inc. alleging violations of Oregon state law
regarding overtime, lunch and work breaks and failure to timely pay all wages
due our Oregon employees, as well as contract claims that we promised but failed
to pay overtime. Pucci seeks to represent a class of all present and former
executive assistants, inside/outside managers and account managers employed by
us within the six year period prior to the filing of the complaint as to the
contract claims, and three years as to the statutory claims, and seeks class
certification, payments for all unpaid wages under Oregon law, statutory and
civil penalties, costs and disbursements, pre- and post-judgment interest in the
amount of 9% per annum and attorneys fees. As of June 30, 2003, we operated 20
stores in Oregon. On July 25, 2002, the plaintiffs filed a motion for class
certification and on July 31, 2002, we filed our motion for summary judgment. On
January 15, 2003, the court orally granted our motion for summary judgment in
part, ruling that the plaintiffs were prevented from recovering overtime
payments at the rate of "time and a half," but stated that the plaintiffs may
recover "straight-time" to the extent plaintiffs could prove purported class
members worked in excess of forty hours in a work week but were not paid for
such time worked. The court denied our motion for summary judgment on the
remaining claims and granted plaintiff's motion for class certification with
respect to the remaining claims. We strongly disagree with the court's rulings
against our positions and have requested that the court grant us interlocutory
appeal on those matters. Our request for interlocutory appeal is currently
pending before the Court. The plaintiffs filed a motion for summary judgment
seeking to resolve certain factual issues related to the purported class, which
was denied on July 1, 2003. Although we believe the claims remaining in this
case are without merit, we cannot assure you we will be found to have no
liability in this matter.

We are subject to a similar suit pending in Clark County, Washington entitled
Kevin Rose, et al. v. Rent-A-Center, Inc., et al. and two similar suits pending
in Los Angeles, California entitled Jeremy Burdusis, et al. v. Rent-A-Center,
Inc., et al. and Israel French, et al. v. Rent-A-Center, Inc., each of which
allege similar violations of the wage and hour laws of those respective states.
As of June 30, 2003, we operated 41 stores in Washington and 151 stores in
California. The same law firm seeking to represent the purported class in Pucci
is seeking to represent the purported class in two of the three similar suits.
On March 24, 2003, the Burdusis court denied the plaintiffs' motion for class
certification in that case, which we view as a favorable development in that
proceeding. On April 25, 2003, the plaintiffs in Burdusis filed a notice of
appeal of that ruling, and on May 8, 2003, the Burdusis court, at our request,
stayed further proceedings in Burdusis and French pending the resolution on
appeal of the court's denial of class certification in Burdusis. The Burdusis
and French proceedings are pending before the same judge in California. On May
14, 2003, the Rose court denied the plaintiffs' motion for class certification
in that case, which we view as a favorable development in that proceeding. On
June 3, 2003, the plaintiffs in Rose filed a notice of appeal. Although the wage
and hour laws and class certification procedures of Oregon, Washington and
California contain certain differences that could cause differences in the
outcome of the pending litigation in these states, we believe the claims of the
purported classes involved in each are without merit. We cannot assure you,
however, that we will be found to have no liability in these matters.

32

RENT-A-CENTER, INC. AND SUBSIDIARIES

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

At our Annual Meeting of Stockholders held on May 21, 2003, the nominees for our
Class III directors were elected. Both Class III directors were elected by all
of our stockholders.

The voting was as follows for the directors elected by all of our stockholders:

In addition to the directors elected at our Annual Meeting of Stockholders, the
following directors' terms of office as a director continued after the Annual
Meeting of Stockholders:

Mitchell E. Fadel
Peter P. Copses
Mary Elizabeth Burton
Mark E. Speese
Laurence M. Berg

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

CURRENT REPORTS ON FORM 8-K

Current Report on Form 8-K filed April 23, 2003

Current Report on Form 8-K filed April 29, 2003

Current Report on Form 8-K filed April 29, 2003

Current Report on Form 8-K filed May 2, 2003

EXHIBITS

The exhibits required to be furnished pursuant to Item 6 are listed in the
Exhibit Index filed herewith, which Exhibit Index is incorporated herein by
reference.

33

RENT-A-CENTER, INC. AND SUBSIDIARIES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this Report to be signed on its behalf by the
undersigned duly authorized officer.

RENT-A-CENTER, INC.

By: /s/ Robert D. Davis
------------------------------------
Robert D. Davis
Senior Vice President-Finance,
Chief Financial Officer and Treasurer

Date: August 5, 2003

RENT-A-CENTER, INC. AND SUBSIDIARIES

INDEX TO EXHIBITS

RENT-A-CENTER, INC. AND SUBSIDIARIES

RENT-A-CENTER, INC. AND SUBSIDIARIES

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* Filed herewith.
+ Management contract or company plan or arrangement

RENT-A-CENTER, INC. AND SUBSIDIARIES

(1) Incorporated herein by reference to Exhibit 2.1 to the registrant's
Current Report on Form 8-K dated as of December 31, 2002

(2) Incorporated herein by reference to Exhibit 2.2 to the registrant's
Annual Report on Form 10-K for the year ended December 31, 2002

(3) Incorporated herein by reference to Exhibit 2.3 to the registrant's
Annual Report on Form 10-K for the year ended December 31, 2002

(4) Incorporated herein by reference to Exhibit 2.4 to the registrant's
Annual Report on Form 10-K for the year ended December 31, 2002

(5) Incorporated herein by reference to Exhibit 2.5 to the registrant's
Annual Report on Form 10-K for the year ended December 31, 2002

(6) Incorporated herein by reference to Exhibit 2.6 to the registrant's
Annual Report on Form 10-K for the year ended December 31, 2002

(7) Incorporated herein by reference to Exhibit 2.7 to the registrant's
Annual Report on Form 10-K for the year ended December 31, 2002

(8) Incorporated herein by reference to Exhibit 3.1 to the registrant's
Current Report on Form 8-K dated as of December 31, 2002

(9) Incorporated herein by reference to Exhibit 3.2 to the registrant's
Current Report on Form 8-K dated as of December 31, 2002

(10) Incorporated herein by reference to Exhibit 4.1 to the registrant's
Registration Statement on Form S-4 filed on January 11, 1999

(11) Incorporated herein by reference to Exhibit 3.1 to the registrant's
Current Report on Form 8-K dated as of December 31, 2002

(12) Incorporated herein by reference to Exhibit 4.5 to the registrant's
Registration Statement on Form S-4 filed on January 11, 1999

(13) Incorporated herein by reference to Exhibit 4.4 to the registrant's
Registration Statement on Form S-4 filed July 11, 2003

(14) Incorporated herein by reference to Exhibit 4.5 to the registrant's
Registration Statement on Form S-4 filed July 11, 2003

(15) Incorporated herein by reference to Exhibit 4.6 to the registrant's
Registration Statement on Form S-4 filed January 22, 2002

(16) Incorporated herein by reference to Exhibit 4.9 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2002

(17) Incorporated herein by reference to Exhibit 4.7 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2002

(18) Incorporated herein by reference to Exhibit 4.7 to the registrant's
Annual Report on Form 10-K for the year ended December 31, 2002

RENT-A-CENTER, INC. AND SUBSIDIARIES

(19) Incorporated herein by reference to Exhibit 4.9 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2003

(20) Incorporated herein by reference to Exhibit 4.11 to the registrant's
Registration Statement on Form S-4 filed July 11, 2003

(21) Incorporated herein by reference to Exhibit 99.1 to the registrant's
Post-Effective Amendment No. 1 to Form S-8 dated as of December 31, 2002

(22) Incorporated herein by reference to Exhibit 10.2 to the registrant's
Annual Report on Form 10-K for the year ended December 31, 2002

(23) Incorporated herein by reference to Exhibit 10.3 to the registrant's
Quarterly Report on form 10-Q for the quarter ended March 31, 2003

(24) Incorporated herein by reference to Exhibit 10.4 to the registrant's
Registration Statement on Form S-4 filed July 11, 2003

(25) Incorporated herein by reference to Exhibit 10.3 to the registrant's
Annual Report on Form 10-K for the year ended December 31, 2002

(26) Incorporated herein by reference to Exhibit 10.6 to the registrant's
Registration Statement on Form S-4 filed July 11, 2003

(27) Incorporated herein by reference to Exhibit 10.7 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2001

(28) Incorporated herein by reference to Exhibit 10.8 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2002

(29) Incorporated herein by reference to Exhibit 10.6 to the registrant's
Annual Report on Form 10-K for the year ended December 31, 2002

(30) Incorporated herein by reference to Exhibit 10.15 to the registrant's
Registration Statement on Form S-4 filed July 11, 2003

(31) Incorporated herein by reference to Exhibit 10.22 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998

(32) Incorporated herein by reference to Exhibit 10.10 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2002

(33) Incorporated herein by reference to Exhibit 10.9 to the registrant's
Annual Report on Form 10-K for the year ended December 31, 2002

(34) Incorporated herein by reference to Exhibit 10.10 to the registrant's
Registration Statement on Form S-4 filed July 11, 2003

(35) Incorporated herein by reference to Exhibit 10.19 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2003

(36) Incorporated herein by reference to Exhibit 10.9 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2001

(37) Incorporated herein by reference to Exhibit 10.9 to the registrant's
Registration Statement on Form S-4 filed on January 22, 2002

(38) Incorporated herein by reference to Exhibit 10.13 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2002

RENT-A-CENTER, INC. AND SUBSIDIARIES

(39) Incorporated herein by reference to Exhibit 10.14 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2002

(40) Incorporated herein by reference to Exhibit 10.15 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2002

(41) Incorporated herein by reference to Exhibit 10.14 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2002

(42) Incorporated herein by reference to Exhibit 10.16 to the registrant's
Annual Report on Form 10-K for the year ended December 31, 2002

(43) Incorporated herein by reference to Exhibit 10.23 to the registrant's
Registration Statement on Form S-4 filed July 11, 2003

(44) Incorporated herein by reference to Exhibit 10.18 to the registrant's
Quaterly Report on Form 10-Q for the quarter ended March 31, 2003

(45) Incorporated herein by reference to Exhibit 99(d)(1) to the registrant's
Schedule TO filed on April 28, 2003

(46) Incorporated herein by reference to Exhibit 21.1 to the registrant's
Annual Report on Form 10-K for the year ended December 31, 2002

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