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

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

 

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

5501 Headquarters Drive
Plano, Texas 75024
(Address, including zip code of registrant’s
principal executive offices)

Registrant’s telephone number, including area code: 972-801-1100

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 þ      NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES o      NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer   o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES o      NO þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of July 28, 2009:

Class		Outstanding
Common stock, $.01 par value per share		66,041,081

 

 

TABLE OF CONTENTS

		Page No.
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Statements of Earnings for the three months ended June 30, 2009 and 2008			1
Consolidated Statements of Earnings for the six months ended June 30, 2009 and 2008			2
Consolidated Balance Sheets as of June 30, 2009 and December 31, 2008			3
Consolidated Statements of Cash Flows for the six months ended June 30, 2009 and 2008			4
Notes to Consolidated Financial Statements			5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			10
Item 3. Quantitative and Qualitative Disclosures About Market Risk			23
Item 4. Controls and Procedures			23
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			24
Item 1A. Risk Factors			24
Item 4. Submission of Matters to a Vote of Security Holders			27
Item 6. Exhibits			27
SIGNATURES
EX-31.1
EX-31.2
EX-32.1
EX-32.2

The accompanying notes are an integral part of these statements.

RENT-A-CENTER, INC. AND SUBSIDIARIES

Item 1.		Financial Statements.

CONSOLIDATED STATEMENTS OF EARNINGS

		Three months ended June 30,
(In thousands, except per share data)		2009				2008
		Unaudited
Revenues
Store
Rentals and fees		$	589,468			$	634,618
Merchandise sales			56,959				55,703
Installment sales			12,290				9,246
Other			13,443				10,589
Franchise
Merchandise sales			6,251				7,650
Royalty income and fees			1,198				1,225
			679,609				719,031
Operating expenses
Direct store expenses
Cost of rentals and fees			132,956				145,511
Cost of merchandise sold			41,997				45,167
Cost of installment sales			4,259				3,790
Salaries and other expenses			384,910				406,572
Franchise cost of merchandise sold			5,975				7,234
			570,097				608,274
General and administrative expenses			34,592				32,676
Amortization and write-down of intangibles			1,506				3,662
Litigation expense (credit)			(1,869	)			—
Restructuring charge			—				(15	)
Total operating expenses			604,326				644,597
Operating profit			75,283				74,434
Interest expense			8,045				16,739
Interest income			(267	)			(2,289	)
Earnings before income taxes			67,505				59,984
Income tax expense			25,560				22,243
NET EARNINGS		$	41,945			$	37,741
Basic earnings per common share		$	0.64			$	0.57
Diluted earnings per common share		$	0.63			$	0.56

See accompanying notes to consolidated financial statements.

RENT-A-CENTER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

		Six months ended June 30,
(In thousands, except per share data)		2009				2008
		Unaudited
Revenues
Store
Rentals and fees		$	1,187,075			$	1,275,304
Merchandise sales			152,741				141,042
Installment sales			24,716				19,131
Other			26,582				20,208
Franchise
Merchandise sales			14,209				17,417
Royalty income and fees			2,469				2,565
			1,407,792				1,475,667
Operating expenses
Direct store expenses
Cost of rentals and fees			268,095				291,673
Cost of merchandise sold			107,764				108,492
Cost of installment sales			8,690				7,810
Salaries and other expenses			786,418				823,986
Franchise cost of merchandise sold			13,609				16,630
			1,184,576				1,248,591
General and administrative expenses			68,867				63,625
Amortization and write-down of intangibles			1,843				8,592
Litigation expense (credit)			(4,869	)			—
Restructuring charge			—				2,885
Total operating expenses			1,250,417				1,323,693
Operating profit			157,375				151,974
Interest expense			17,277				37,666
Interest income			(536	)			(4,153	)
Earnings before income taxes			140,634				118,461
Income tax expense			53,313				44,362
NET EARNINGS		$	87,321			$	74,099
Basic earnings per common share		$	1.32			$	1.11
Diluted earnings per common share		$	1.31			$	1.10

See accompanying notes to consolidated financial statements.

		June 30,				December 31,
(In thousands, except share and par value data)		2009				2008
		Unaudited
ASSETS
Cash and cash equivalents		$	95,595			$	87,382
Receivables, net of allowance for doubtful accounts of $8,110 in 2009 and $7,256 in 2008			56,660				51,766
Prepaid expenses and other assets			52,252				59,217
Rental merchandise, net
On rent			571,902				634,946
Held for rent			179,857				184,108
Merchandise held for installment sale			4,147				3,433
Property assets, net			199,148				208,897
Goodwill, net			1,267,035				1,265,249
Other intangible assets, net			1,148				1,704
		$	2,427,744			$	2,496,702
LIABILITIES
Accounts payable — trade		$	94,962			$	93,496
Accrued liabilities			276,921				289,701
Deferred income taxes			108,736				87,216
Senior debt			700,769				721,712
Subordinated notes payable			75,375				225,375
			1,256,763				1,417,500
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Common stock, $.01 par value; 250,000,000 shares authorized; 104,832,958 and 104,769,382 shares issued in 2009 and 2008, respectively			1,048				1,047
Additional paid-in capital			683,999				681,067
Retained earnings			1,296,855				1,208,009
Treasury stock, 38,787,849 shares at cost in 2009 and 2008			(810,921	)			(810,921	)
			1,170,981				1,079,202
		$	2,427,744			$	2,496,702

See accompanying notes to consolidated financial statements.

RENT-A-CENTER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

		Six months ended June 30,
(In thousands)		2009				2008
		Unaudited
Cash flows from operating activities
Net earnings		$	87,321			$	74,099
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation of rental merchandise			262,553				285,796
Bad debt expense			7,244				4,214
Stock-based compensation expense			2,117				1,841
Depreciation of property assets			34,133				36,378
Loss (gain) on sale or disposal of property assets			4,396				(3,361	)
Amortization of intangibles			635				7,084
Amortization of financing fees			1,243				1,100
Deferred income taxes			21,521				43,457
Tax benefit related to stock option exercises			(189	)			(258	)
Restructuring charge			—				2,885
Changes in operating assets and liabilities, net of effects of acquisitions
Rental merchandise			(195,123	)			(227,470	)
Accounts receivable			(12,032	)			(8,599	)
Prepaid expenses and other assets			5,818				1,022
Accounts payable — trade			1,466				(1,755	)
Accrued liabilities			(9,793	)			(3,325	)
Net cash provided by operating activities			211,310				213,108
Cash flows from investing activities
Purchase of property assets			(29,525	)			(29,299	)
Proceeds from sale of property assets			1,954				5,371
Acquisitions of businesses, net of cash acquired			(4,137	)			(5,842	)
Net cash used in investing activities			(31,708	)			(29,770	)
Cash flows from financing activities
Purchase of treasury stock			—				(3,111	)
Exercise of stock options			626				1,176
Tax benefit related to stock option exercises			189				258
Payments on capital leases			(1,261	)			(2,987	)
Proceeds from debt			15,195				183,775
Repayments of debt			(36,138	)			(355,099	)
Repurchase of subordinated notes			(150,000	)			(29,625	)
Net cash used in financing activities			(171,389	)			(205,613	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			8,213				(22,275	)
Cash and cash equivalents at beginning of period			87,382				97,375
Cash and cash equivalents at end of period		$	95,595			$	75,100

See accompanying notes to consolidated financial statements.

RENT-A-CENTER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.

Significant Accounting Policies and Nature of Operations.

		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 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, 2008. 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.
		Principles of Consolidation and Nature of Operations. These financial statements include the accounts of Rent-A-Center, Inc. and its direct and indirect subsidiaries. All intercompany accounts and transactions have been eliminated. 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.
		Our primary operating segment consists of leasing household durable goods to customers on a rent-to-own basis. We also offer merchandise on an installment sales basis in certain of our stores. At June 30, 2009, we operated 3,021 company-owned stores nationwide and in Canada and Puerto Rico, including 35 retail installment sales stores under the names “Get It Now” and “Home Choice” and 13 rent-to-own stores in Canada under the names “Rent-A-Centre” and “Better Living.”
		We also offer an array of financial services in certain of our existing rent-to-own stores under the names “RAC Financial Services” and “Cash AdvantEdge.” The financial services we offer include, but are not limited to, short term secured and unsecured loans, debit cards, check cashing and money transfer services. As of June 30, 2009, we offered financial services in 350 of our existing rent-to-own stores in 18 states.
		ColorTyme, Inc., an indirect wholly-owned subsidiary of Rent-A-Center, is a nationwide franchisor of rent-to-own stores. At June 30, 2009, ColorTyme had 218 franchised stores operating in 33 states. ColorTyme’s primary source of revenue 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 revenue is generated primarily from royalties based on franchisees’ monthly gross revenues.
		New Accounting Pronouncements. In June 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (“SFAS 168”). SFAS 168 will become the single source of authoritative nongovernmental U.S. generally accepted accounting principles (“GAAP”), superseding existing FASB, American Institute of Certified Public Accountants (“AICPA”), Emerging Issues Task Force (“EITF”), and related accounting literature. SFAS 168 reorganizes the thousands of GAAP pronouncements into roughly 90 accounting topics and displays them using a consistent structure. Also included is relevant Securities and Exchange Commission guidance organized using the same topical structure in separate sections. SFAS 168 will be effective for financial statements issued for reporting periods that end after September 15, 2009. All future references to authoritative accounting literature in our financial statements issued for reporting periods that end after September 15, 2009 will be referenced in accordance with SFAS 168.
		In May 2009, the FASB issued Statement of Financial Accounting Standards No. 165, Subsequent Events (“SFAS 165”). SFAS 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS 165 applies prospectively to both interim and annual financial periods ending after June 15, 2009. The adoption of SFAS 165 did not result in any material change to our policies.

RENT-A-CENTER, INC. AND SUBSIDIARIES

		In April 2009, the FASB issued FSP No. 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (“FSP 107-1”). FSP 107-1 amends FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, and Accounting Principles Board Opinion No. 28, Interim Financial Reporting, to require disclosures about fair value of financial instruments for interim periods of publicly traded companies as well as in annual financial statements. FSP 107-1 is effective for interim reporting periods ending after June 15, 2009. The adoption of FSP 107-1 had no material effect on our disclosures in our financial statements.
		From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that we adopt as of the specified effective date. Unless otherwise discussed in these financial statements and notes or in our financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2008, we believe the impact of any other recently issued standards that are not yet effective are either not applicable to us at this time or will not have a material impact on our consolidated financial statements upon adoption.

2.

Intangible Assets and Acquisitions.

Intangibles consist of the following (in thousands):

						June 30, 2009								December 31, 2008
		Avg.				Gross								Gross
		Life				Carrying				Accumulated				Carrying				Accumulated
		(years)				Amount				Amortization				Amount				Amortization
Amortizable intangible assets
Non-compete agreements			3			$	6,088			$	5,995			$	6,281			$	5,957
Customer relationships			2				62,396				61,435				62,110				60,950
Other intangibles			3				3,264				3,170				3,264				3,044
Total							71,748				70,600				71,655				69,951
Intangible assets not subject to amortization
Goodwill							1,366,187				99,152				1,364,401				99,152
Total intangibles						$	1,437,935			$	169,752			$	1,436,056			$	169,103

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

		Estimated
		Amortization Expense
		(In thousands)
2009		$	611
2010			481
2011			56
Total		$	1,148

Changes in the net carrying amount of goodwill are as follows:

		At June 30,				At December 31,
		2009				2008
		(In thousands)
Balance as of January 1,		$	1,265,249			$	1,255,163
Additions from acquisitions			2,769				9,692
Write-down of goodwill related to stores sold			(1,208	)			(4,048	)
Post purchase price allocation adjustments			225				4,442
Balance as of the end of the period		$	1,267,035			$	1,265,249

The post purchase price allocation adjustments in 2008 were primarily attributable to inventory charge-offs for unrentable or missing merchandise acquired and other items.

Tax deductible goodwill due to acquisitions in the first six months of 2009 totaled $2.0 million.

3.

Restructuring. On December 3, 2007, we announced our plan to close approximately 280 stores. The decision to close these stores was based on our analysis and evaluation of every market in which we operated based on operating results, competitive positioning, and growth potential. As a result, we initially identified 283 stores that we intended to close or merge. As of June 30, 2009, we closed or merged 282 stores.

We estimated we would incur restructuring expenses related to the store consolidation plan and other restructuring items in the range of $36.0 million to $43.0 million, substantially all of which would be recorded in the fourth quarter of 2007, based on the closing date of the stores. We recorded restructuring expenses in the amount of $146,000 and $4.5 million for the six months ended June 30, 2009 and for the twelve months ended December 31, 2008, respectively. The following table presents the range of estimated charges as of December 31, 2007 and the total store consolidation plan charges and other restructuring items recorded through June 30, 2009.

		Closing Plan Estimate												Expenses Recognized				Estimated Remaining
		As of December 31, 2007												Through 2009				Charges as of June 30, 2009
		(In thousands)
Lease obligations		$	26,061				–			$	29,223			$	25,826			$	235				–			$	3,397
Fixed asset disposals			11,006				–				11,516				11,476				0				–				40
Other costs			2,468				–				6,704				6,054				0				–				650
Total		$	39,535				–			$	47,443			$	43,356			$	235				–			$	4,087

Changes in the accrual balance, which relate to lease obligations, from December 31, 2008 to June 30, 2009 for the store consolidation plan are as follows:

		(In thousands)
Balance as of December 31, 2008		$	7,357
Charges to expense			146
Cash payments			(3,457	)
Balance as of June 30, 2009		$	4,046

The total amount of cash used in the store consolidation plan through June 30, 2009 was approximately $20.4 million. We expect to use approximately $4.0 million of cash on hand for future payments to satisfy the lease obligations at the stores. We expect the lease obligations will be totally completed no later than the second quarter of 2013.

4.

Subordinated Notes Payable. In May 2009, we repurchased $150.0 million of our subordinated notes at a redemption price equal to 100% of the principal amount outstanding, plus accrued interest to the redemption date.

On June 10, 2009, we announced that we provided notice to the indenture trustee of our election to redeem all of our outstanding 71/2% senior subordinated notes due May 2010, in the aggregate principal amount of $75.4 million at a redemption price equal to 100% of the principal amount outstanding, plus accrued interest to the redemption date. The notes were redeemed in accordance with their terms on July 28, 2009. On that date, the redemption price was paid in full and interest on the redeemed notes ceased to accrue. All of our 71/2% senior subordinated notes due May 2010 are now paid in full.

5.

Income Taxes. We are subject to federal, state, local and foreign income taxes. We are no longer subject to U.S. federal, state, foreign and local income tax examinations by tax authorities for years before 2001. The appeals process related to the IRS audit for the taxable years 2001 through 2003 has been completed. We have agreed with the results of the appeals process with the exception of one issue with respect to the 2003 tax year. This disputed issue arises also in our 2004 and 2005 tax years, the examination of which is currently in the appeals process as discussed below. We believe the position and supporting case law applied by the IRS are incorrectly applied to our situation and that our fact pattern is distinguishable from the IRS’ position. We intend to vigorously defend our position on the issue and, accordingly, on April 3, 2009 we filed a petition for the issue to be heard in the United States Tax Court. The IRS has concluded its examination of our income tax returns for 2004 and 2005. We have requested a conference with the IRS Appeals Office to discuss the 2004 and 2005 proposed adjustments related to the disputed issue from our 2003 examination. The

RENT-A-CENTER, INC. AND SUBSIDIARIES

remaining 2001 through 2003, as well as the 2004 and 2005 contested adjustments have been resolved. We do not anticipate that adjustments, if any, regarding the 2003, 2004 and 2005 disputed issue will result in a material change to our consolidated statement of earnings, financial condition, statement of cash flows or earnings per share. The IRS has begun the field audit of our 2006 and 2007 taxable years.

In determining the quarterly provision for income taxes, we use an estimated annual effective tax rate based on forecasted annual income, permanent items, statutory tax rates and tax planning opportunities in the various jurisdictions in which we operate. Significant factors that could impact the annual effective tax rate include management’s assessment of certain tax matters and the composition of taxable income between the various jurisdictions in which we operate. We recognize the impact of significant discrete items separately in the quarter in which they occur.

We provide for uncertain tax positions and related interest and penalties and adjust our unrecognized tax benefits, accrued interest and penalties in the normal course of our business. At June 30, 2009, our unrecognized tax benefits are unchanged from December 31, 2008.

6.

Fair Value of Financial Instruments. Our financial instruments include cash and cash equivalents, receivables, payables, senior debt, and subordinated notes payable. The carrying amount of cash and cash equivalents, receivables and payables approximates fair value at June 30, 2009 and December 31, 2008, because of the short maturities of these instruments. Our senior debt is variable rate debt that re-prices frequently and entails no significant change in credit risk and, as a result, fair value approximates carrying value. The fair value of the subordinated notes payable is estimated based on discounted cash flow analysis using interest rates currently offered for loans with similar terms to borrowers of similar credit quality using unobservable inputs based on management’s own assumptions. At June 30, 2009, the fair value of the subordinated notes was $75.2 million, which was $200,000 below their carrying value of $75.4 million. At December 31, 2008, the fair value of the subordinated notes was $206.2 million, which was $19.2 million below their carrying value of $225.4 million.

7.

Earnings Per Share.

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

		Three months ended June 30, 2009
						Weighted
(In thousands, except per share data)		Net Earnings				Average Shares			Per Share
Basic earnings per common share		$	41,945				66,028			$	0.64
Effect of dilutive stock options			—				619
Diluted earnings per common share		$	41,945				66,647			$	0.63

		Three months ended June 30, 2008
						Weighted
		Net Earnings				Average Shares				Per Share
Basic earnings per common share		$	37,741				66,684			$	0.57
Effect of dilutive stock options			—				676
Diluted earnings per common share		$	37,741				67,360			$	0.56

RENT-A-CENTER, INC. AND SUBSIDIARIES

		Six months ended June 30, 2009
						Weighted
(In thousands, except per share data)		Net Earnings				Average Shares				Per Share
Basic earnings per common share		$	87,321				66,012			$	1.32
Effect of dilutive stock options			—				559
Diluted earnings per common share		$	87,321				66,571			$	1.31

		Six months ended June 30, 2008
						Weighted
		Net Earnings				Average Shares				Per Share
Basic earnings per common share		$	74,099				66,697			$	1.11
Effect of dilutive stock options			—				570
Diluted earnings per common share		$	74,099				67,267			$	1.10

For the three months ended June 30, 2009 and 2008, 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 the common stock, and therefore anti-dilutive, was 2,899,246 and 3,067,137, respectively.

For the six months ended June 30, 2009 and 2008, 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 the common stock, and therefore anti-dilutive, was 3,168,008 and 3,447,177, respectively.

8.

Subsequent Events. We have evaluated events occurring subsequent to the date of our financial statements through July 31, 2009, which is the date our financial statements were issued. We have recognized the effects of all subsequent events that provide additional evidence about conditions that existed at our balance sheet date of June 30, 2009, including estimates inherent in the process of preparing our financial statements. There were no nonrecognized subsequent events to be disclosed in our financial statements.

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 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:

•

uncertainties regarding the ability to open new rent-to-own stores;

•

our ability to acquire additional rent-to-own stores or customer accounts on favorable terms;

•

our ability to control costs and increase profitability;

•

our ability to successfully add financial services locations within our existing rent-to-own stores;

•

our ability to identify and successfully enter new lines of business offering products and services that appeal to our customer demographic, including our financial services products;

•

our ability to enhance the performance of acquired stores;

•

our ability to retain the revenue associated with acquired customer accounts;

•

our ability to identify and successfully market products and services that appeal to our customer demographic;

•

our ability to enter into new and collect on our rental purchase agreements;

•

our ability to enter into new and collect on our short term loans;

•

the passage of legislation adversely affecting the rent-to-own or financial services industries;

•

our failure to comply with statutes or regulations governing the rent-to-own or financial services industries;

•

interest rates;

•

increases in the unemployment rate;

•

economic pressures, such as high fuel and utility costs, affecting the disposable income available to our targeted consumers;

•

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

•

changes in estimates relating to self-insurance liabilities and income tax and litigation reserves;

•

changes in our effective tax rate;

•

our ability to maintain an effective system of internal controls;

•

changes in the number of share-based compensation grants, methods used to value future share-based payments and changes in estimated forfeiture rates with respect to share-based compensation;

•

the resolution of any material litigation; and

•

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

RENT-A-CENTER, INC. AND SUBSIDIARIES

Additional important factors that could cause our actual results to differ materially from our expectations are discussed under “Risk Factors” later in this report as well as our Annual Report on Form 10-K for our fiscal year ended December 31, 2008. 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 operator in the United States rent-to-own industry with an approximate 36% market share based on store count. At June 30, 2009, we operated 3,021 company-owned stores nationwide and in Canada and Puerto Rico, including 35 retail installment sales stores under the names “Get It Now” and “Home Choice” and 13 rent-to-own stores located in Canada under the names “Rent-A-Centre” and “Better Living.” Our subsidiary, ColorTyme, is a national franchisor of rent-to-own stores. At June 30, 2009, ColorTyme had 218 franchised rent-to-own stores in 33 states. These franchise stores represent an additional 3% market share based on store count.

Our stores generally offer high quality durable products such as major consumer electronics, appliances, computers, and furniture and accessories under flexible rental purchase agreements that generally allow the customer to obtain ownership of the merchandise at the conclusion of an agreed-upon rental period. The rental purchase transaction is a flexible alternative for consumers to obtain use and enjoyment of brand name merchandise without incurring debt. Key features of the rental purchase transaction include:

•

convenient payment options — in-store, over the phone or online;

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no long-term obligations;

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right to terminate without penalty;

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no requirement of a credit history;

•

set-up and delivery included at no additional charge;

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product maintenance;

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lifetime reinstatement; and

•

flexible options to obtain ownership — 90 days same as cash, early purchase options, or payment through the term of the agreement.

Rental payments are made generally on a weekly basis and, together with applicable fees, constitute our primary revenue source.

Our expenses primarily relate to merchandise costs and the operations of our stores, including salaries and benefits for our employees, occupancy expense for our leased real estate, advertising expenses, lost, damaged, or stolen merchandise, fixed asset depreciation, and corporate and other expenses.

From 1993 to 2006, we pursued an aggressive growth strategy in which we sought to acquire underperforming rent-to-own 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. Typically, a newly opened rent-to-own 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 $500,000, with roughly 75% 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. Because of significant growth since our formation, our historical results of

RENT-A-CENTER, INC. AND SUBSIDIARIES

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.

In addition, we strategically open or acquire stores near market areas served by existing stores (“cannibalize”) to enhance service levels, gain incremental sales and increase market penetration. This planned cannibalization may negatively impact our same store revenue and cause us to grow at a slower rate. There can be no assurance that we will open any new rent-to-own stores in the future, or as to the number, location or profitability thereof.

We also offer financial services products, such as short term secured and unsecured loans, debit cards, check cashing, tax preparation and money transfer services, in some of our existing rent-to-own stores under the trade names “RAC Financial Services” and “Cash AdvantEdge.” As of June 30, 2009, we offered some or all of these financial services products in 350 Rent-A-Center store locations in 18 states. We intend to focus our resources on improving the operations in these existing financial services store locations and do not plan to add significantly to the number of Rent-A-Center store locations offering financial services at this time. There can be no assurance that we will be successful in our efforts to improve and expand our financial services operations or that such operations, should they be added, will prove to be profitable.

Recent Developments

On June 10, 2009, we announced that we provided notice to the indenture trustee of our election to redeem all of our outstanding 7¹/2% senior subordinated notes due May 2010, in the aggregate principal amount of $75.4 million at a redemption price equal to 100% of the principal amount outstanding, plus accrued interest to the redemption date. The notes were redeemed in accordance with their terms on July 28, 2009. On that date, the redemption price was paid in full and interest on the redeemed notes ceased to accrue. All of our 7¹/2% senior subordinated notes due May 2010 are now paid in full. The redemption price was funded primarily with cash flow generated from operations, together with amounts drawn under our senior credit facilities.

Critical Accounting Policies Involving Critical Estimates, Uncertainties or Assessments in Our Financial Statements

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent losses and liabilities at the date of the consolidated 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. 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. We believe the following are areas where the degree of judgment and complexity in determining amounts recorded in our consolidated financial statements make the accounting policies critical.

Self-Insurance Liabilities. We have self-insured retentions with respect to losses under our workers’ compensation, general liability and auto liability insurance policies. We establish reserves for our liabilities associated with these losses by obtaining forecasts for the ultimate expected losses and estimating amounts needed to pay losses within our self-insured retentions.

We continually institute procedures to manage our loss exposure and increases in health care costs associated with our insurance claims through a greater focus on the risk management function, a transitional duty program for injured workers, ongoing safety and accident prevention training, and various programs designed to minimize losses and improve our loss experience in our store locations. We make assumptions on our liabilities within our self-insured retentions using actuarial loss forecasts, company specific development factors, general industry loss development factors, and third party claim administrator loss estimates which are based on known facts surrounding individual claims. These assumptions incorporate expected increases in health care costs. Periodically, we reevaluate our estimate of liability within our self-insured retentions. At that time, we evaluate the adequacy of our accruals by comparing amounts accrued on our balance sheet for anticipated losses to our updated actuarial loss forecasts and third party claim administrator loss estimates, and make adjustments to our accruals as needed.

As of June 30, 2009, the amount accrued for losses within our self-insured retentions with respect to workers’ compensation, general liability and auto liability insurance was $124.6 million, as compared to $117.9 million at December 31, 2008 and $114.2 million at June 30, 2008. If any of the factors that contribute to the overall cost of insurance claims were to change, the actual amount incurred for our self-insurance liability would be directly affected. While we believe our loss prevention programs will reduce our total cost for self-insurance claims, our actual cost could be greater than the amounts currently accrued.

RENT-A-CENTER, INC. AND SUBSIDIARIES

Litigation Reserves. We are the subject of litigation in the ordinary course of our business. Historically, our litigation has involved lawsuits alleging various regulatory violations. In preparing our financial statements at a given point in time, we account for loss contingencies pursuant to the provisions of Statement of Financial Accounting Standards No. 5, Accounting for Contingencies (“SFAS No. 5”) and FASB Interpretation No. 14, Reasonable Estimation of the Amount of a Loss — An Interpretation of FASB Statement No. 5 (“FIN 14”), which require that we accrue for losses that are both probable and reasonably estimable.

Each quarter, we make estimates of our probable losses, if reasonably estimable, and record such amounts in our consolidated financial statements. These amounts 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 reflect current facts and circumstances. We expense legal fees and expenses incurred in connection with the defense of all of our litigation at the time such amounts are invoiced or otherwise made known to us.

Our accruals relating to probable losses for our outstanding litigation follow:

		At June 30,				At June 30,
		2009				2008
		(In millions)
Shafer/Johnson Matter		$	—			$	11.0
California Attorney General Settlement			—				9.6
Other Litigation			—				4.6
Total Accrual		$	—			$	25.2

As with most litigation, the ultimate outcome of our pending litigation is uncertain. Additional developments in our litigation or other adverse or positive developments or rulings in our litigation could affect our assumptions and, thus, our accrual. Our estimates with respect to accrual for our litigation expenses reflect our judgment as to the appropriate accounting charge at the end of a period under SFAS No. 5 and FIN 14. Factors that we consider in evaluating our litigation reserves include:

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the procedural status of the matter;

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our views and the views of our counsel as to the probability of a loss in the matter;

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the relative strength of the parties’ arguments with respect to liability and damages in the matter;

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settlement discussions, if any, between the parties;

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how we intend to defend ourselves in the matter; and

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our experience.

Significant factors that may cause us to increase or decrease our accrual with respect to a matter include:

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judgments or finding of liability against us in the matter by a trial court;

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the granting of, or declining to grant, a motion for class certification in the matter;

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definitive decisions by appellate courts in the requisite jurisdiction interpreting or otherwise providing guidance as to applicable law;

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favorable or unfavorable decisions as the matter progresses;

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settlements agreed to in principle by the parties in the matter, subject to court approval; and

RENT-A-CENTER, INC. AND SUBSIDIARIES

•

final settlement of the matter.

Income Taxes. Our annual tax rate is affected by many factors, including the mix of our earnings, legislation and acquisitions, and is based on our income, statutory tax rates and tax planning opportunities available to us in the jurisdictions in which we operate. Tax laws are complex and subject to differing interpretations between the taxpayer and the taxing authorities. Significant judgment is required in determining our tax expense, evaluating our tax positions and evaluating uncertainties under FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109 (“FIN 48”). As required by FIN 48, we recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon the ultimate settlement with the relevant tax authority. We review our tax positions quarterly and adjust the balance as new information becomes available.

If we make changes to our accruals with respect to our self-insurance liabilities, or litigation or income tax reserves in accordance with the policies described above, these changes would impact our earnings. Increases to our accruals would reduce earnings and, similarly, reductions to our accruals would increase our earnings. A pre-tax change of $1.1 million in our estimates would result in a corresponding $0.01 change in our earnings per common share.

Stock-Based Compensation Expense. We account for stock-based compensation expense under Statement of Financial Accounting Standards No. 123, Share-Based Payment (“SFAS 123R”) and recognize share-based payment awards to our employees and directors at the estimated fair value on the grant date. Determining the fair value of any share-based awards requires information about several variables including, but not limited to, expected stock volatility over the terms of the awards, expected dividend yields and the predicted employee exercise behavior. We base expected life on historical exercise and post-vesting employment-termination experience, and expected volatility on historical realized volatility trends. In addition, all stock-based compensation expense is recorded net of an estimated forfeiture rate. The forfeiture rate is based upon historical activity and is analyzed at least quarterly as actual forfeitures occur. Stock options granted during the six months ended June 30, 2009 were valued using the binomial method pricing model with the following assumptions for employee options: expected volatility of 45.30% to 66.50%, a risk-free interest rate of 0.40% to 1.59%, no dividend yield, and an expected life of 5.34 years. During the six months ended June 30, 2009, we recognized $2.1 million in pre-tax compensation expense related to stock options and restricted stock units granted.

Based on an assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, we believe 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 later in this report and in our Annual Report on Form 10-K for our fiscal year ended December 31, 2008 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.

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. Merchandise is rented to customers pursuant to rental purchase agreements which provide for weekly, semi-monthly or monthly rental terms with non-refundable rental payments. Generally, the customer has the right to acquire title either through a purchase option or through payment of all required rentals. Rental revenue and fees are recognized over the rental term and merchandise sales revenue is recognized when the customer exercises the purchase option and pays the cash price due. Cash received prior to the period in which it should be recognized is deferred and recognized according to the rental term. Revenue is accrued for uncollected amounts due based on historical collection experience. However, the total amount of the rental purchase agreement is not accrued because the customer can terminate the rental agreement at any time and we cannot enforce collection for non-payment of future rents.

Revenue from the sale of merchandise in our retail installment stores is recognized when the installment note is signed, the customer has taken possession of the merchandise and collectability is reasonably assured.

RENT-A-CENTER, INC. AND SUBSIDIARIES

The revenue from our financial services is recognized depending on the type of transaction. Fees collected on loans are recognized ratably over the term of the loan. For money orders, wire transfers, check cashing and other customer service type transactions, fee revenue is recognized at the time the service is performed.

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. Depreciation of rental merchandise is included in the cost of rentals and fees on our statement of earnings. We depreciate our rental merchandise using the income forecasting method. Under the income forecasting method, merchandise held for rent is not depreciated and merchandise on rent is depreciated in the proportion of rents received to total rents provided in the rental contract, which is an activity-based method similar to the units of production method. On computers that are 24 months old or older and which have become idle, depreciation is recognized using the straight-line method for a period of at least six months, generally not to exceed an aggregate depreciation period of 30 months.

Cost of Merchandise Sold. Cost of merchandise sold represents the net book value of rental merchandise at time of sale. Cost of merchandise sold also includes the cost of services offered by us, such as prepaid telephone and electric services.

Salaries and Other Expenses. Salaries and other expenses include all salaries and wages paid to store level employees, together with district 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, delivery, 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.

Results of Operations

Six Months Ended June 30, 2009 compared to Six Months Ended June 30, 2008

Store Revenue. Total store revenue decreased by $64.6 million, or 4.4%, to $1,391.1 million for the six months ended June 30, 2009 as compared to $1,455.7 million for the six months ended June 30, 2008. The decrease in total store revenue was primarily attributable to a decrease in same store sales of 3.6% and the anticipated revenue attrition from approximately 375 stores that received customer agreements from stores closed in the 2007 restructuring plan.

Same store revenues represent those revenues earned in 2,359 stores that were operated by us for each of the entire six month periods ended June 30, 2009 and 2008. Same store revenues decreased by $38.5 million, or 3.6%, to $1,042.0 million for the six months ended June 30, 2009 as compared to $1,080.5 million in 2008. This decrease in same store revenues was primarily attributable to a decrease in the number of units on rent in the first six months of 2009 as compared to 2008.

Franchise Revenue. Total franchise revenue decreased by $3.3 million, or 16.5%, to $16.7 million for the six months ended June 30, 2009 as compared to $20.0 million in 2008. This decrease was primarily attributable to a decrease in the number of products sold to franchisees in the first six months of 2009 as compared to the first six months of 2008 due to fewer franchise stores in 2009.

Cost of Rentals and Fees. Cost of rentals and fees consists of depreciation of rental merchandise and the costs associated with our membership programs. Cost of rentals and fees for the six months ended June 30, 2009 decreased by $23.6 million, or 8.1%, to $268.1 million as compared to $291.7 million in 2008. The decrease in cost of rentals and fees is primarily attributable to a decrease in the number of units on rent in the first six months of 2009 as compared to 2008. Cost of rentals and fees expressed as a percentage of store rentals and fees revenue decreased slightly to 22.6% for the six months ended June 30, 2009 as compared to 22.9% in 2008.

Cost of Merchandise Sold. Cost of merchandise sold decreased by approximately $700,000, or 0.7%, to $107.8 million for the six months ended June 30, 2009 from $108.5 million in 2008. The gross margin percent of merchandise sales increased

RENT-A-CENTER, INC. AND SUBSIDIARIES

to 29.4% for the six months ended June 30, 2009 from 23.1% in 2008. This percentage increase was primarily attributable to a higher margin on early purchase option transactions during the 2009 period.

Salaries and Other Expenses. Salaries and other expenses decreased by $37.6 million, or 4.6%, to $786.4 million for the six months ended June 30, 2009 as compared to $824.0 million in 2008. This decrease was primarily attributable to a decrease in store level expenses due to our cost control initiatives such as improvements in management of labor expense, delivery costs and inventory losses. Charge offs in our rental stores due to customer stolen merchandise, expressed as a percentage of rental store revenues, were approximately 2.2% for the six months ended June 30, 2009 as compared to 2.5% in 2008. Salaries and other expenses expressed as a percentage of total store revenue decreased slightly to 56.5% for the six months ended June 30, 2009 from 56.6% in 2008.

Franchise Cost of Merchandise Sold. Franchise cost of merchandise sold decreased by $3.0 million, or 18.2%, to $13.6 million for the six months ended June 30, 2009 as compared to $16.6 million in 2008. This decrease was primarily attributable to a decrease in the number of products sold to franchisees in the first six months of 2009 as compared to 2008.

General and Administrative Expenses. General and administrative expenses increased by $5.3 million, or 8.2%, to $68.9 million for the six months ended June 30, 2009 as compared to $63.6 million in 2008. General and administrative expenses expressed as a percentage of total revenue increased to 4.9% for the six months ended June 30, 2009 from 4.3% in 2008. These increases are primarily attributable to additional personnel and related expansion at our corporate office to support our strategic initiatives.

Amortization and Write-Down of Intangibles. Amortization of intangibles decreased by $6.8 million, or 78.5%, to $1.8 million for the six months ended June 30, 2009 from $8.6 million in 2008. This decrease was due to intangible assets associated with the acquisition of Rent-Way that were fully amortized in 2009 as compared to 2008.

Operating Profit. Operating profit increased by $5.4 million, or 3.6%, to $157.4 million for the six months ended June 30, 2009 as compared to $152.0 million in 2008. Operating profit as a percentage of total revenue increased to 11.2% for the six months ended June 30, 2009 from 10.3% for 2008. This increase was primarily attributable to an improvement in margins and a reduction in expenses offset by lower revenue in the 2009 period as compared to 2008.

Interest Expense. Interest expense decreased by $20.4 million, or 54.1%, to $17.3 million for the six months ended June 30, 2009 as compared to $37.7 million in 2008. This decrease was primarily attributable to a decrease in our outstanding indebtedness in 2009 as compared to 2008, as well as a decrease in our weighted average interest rate to 3.88% during the first six months of 2009 as compared to 6.68% during the first six months of 2008 due to a decrease in the Eurodollar rate in 2009 as compared to 2008.

Net Earnings. Net earnings increased by $13.2 million, or 17.8%, to $87.3 million for the six months ended June 30, 2009 as compared to $74.1 million in 2008. This increase was primarily attributable to an increase in operating profit and a decrease in interest expense, offset by an increase in income tax expense in 2009 as compared to 2008.

Three Months Ended June 30, 2009 compared to Three Months Ended June 30, 2008

Store Revenue. Total store revenue decreased by $38.0 million, or 5.4%, to $672.2 million for the three months ended June 30, 2009 as compared to $710.2 million for the three months ended June 30, 2008. The decrease in total store revenue was primarily the result of a decrease in same store sales of 6.2%, partially attributable to the anticipated revenue attrition from approximately 375 stores that received customer agreements from stores closed in the 2007 restructuring plan.

Same store revenues represent those revenues earned in 2,736 stores that were operated by us for each of the entire three month periods ended June 30, 2009 and 2008. Same store revenues decreased by $38.6 million, or 6.2%, to $589.4 million for the three months ended June 30, 2009 as compared to $628.0 million in 2008. This decrease in same store revenues was primarily attributable to a decrease in the number of units on rent in the second quarter of 2009 as compared to 2008.

Franchise Revenue. Total franchise revenue decreased by $1.5 million, or 16.1%, to $7.4 million for the three months ended June 30, 2009 as compared to $8.9 million in 2008. This decrease was primarily attributable to a decrease in the number of products sold to franchisees in the second quarter of 2009 as compared to the second quarter of 2008 due to fewer franchise stores in the second quarter of 2009.

RENT-A-CENTER, INC. AND SUBSIDIARIES

Cost of Rentals and Fees. Cost of rentals and fees consists of depreciation of rental merchandise and the costs associated with our membership programs. Cost of rentals and fees for the three months ended June 30, 2009 decreased by $12.5 million, or 8.6%, to $133.0 million as compared to $145.5 million in 2008. The decrease in cost of rentals and fees is primarily attributable to a decrease in the number of units on rent in the second quarter of 2009 as compared to 2008. Cost of rentals and fees expressed as a percentage of store rentals and fees revenue decreased slightly to 22.6% for the three months ended June 30, 2009 as compared to 22.9% in 2008.

Cost of Merchandise Sold. Cost of merchandise sold decreased by $3.2 million, or 7.0%, to $42.0 million for the three months ended June 30, 2009 from $45.2 million in 2008. The gross margin percent of merchandise sales increased to 26.3% for the three months ended June 30, 2009 from 18.9% in 2008. This percentage increase was primarily attributable to a higher margin on early purchase option transactions during the 2009 period.

Salaries and Other Expenses. Salaries and other expenses decreased by $21.7 million, or 5.3%, to $384.9 million for the three months ended June 30, 2009 as compared to $406.6 million in 2008. This decrease was primarily attributable to a decrease in store level expenses due to our cost control initiatives such as improvements in management of labor expense, delivery costs and inventory losses. Charge offs in our rental stores due to customer stolen merchandise, expressed as a percentage of rental store revenues, were approximately 2.2% for the three months ended June 30, 2009 as compared to 2.3% in 2008. Salaries and other expenses expressed as a percentage of total store revenue was 57.3% for the three months ended June 30, 2009 and 2008.

Franchise Cost of Merchandise Sold. Franchise cost of merchandise sold decreased by $1.2 million, or 17.4%, to $6.0 million for the three months ended June 30, 2009 as compared to $7.2 million in 2008. This decrease was primarily attributable to a decrease in the number of products sold to franchisees in the second quarter of 2009 as compared to 2008.

General and Administrative Expenses. General and administrative expenses increased by $1.9 million, or 5.9%, to $34.6 million for the three months ended June 30, 2009 as compared to $32.7 million in 2008. General and administrative expenses expressed as a percentage of total revenue increased to 5.1% for the three months ended June 30, 2009 from 4.5% in 2008. These increases are primarily attributable to additional personnel and related expansion at our corporate office to support our strategic initiatives.

Amortization and Write-Down of Intangibles. Amortization of intangibles decreased by $2.2 million, or 58.9%, to $1.5 million for the three months ended June 30, 2009 from $3.7 million in 2008. This decrease was due to intangible assets associated with the acquisition of Rent-Way that were fully amortized in 2009 as compared to 2008.

Operating Profit. Operating profit increased by approximately $900,000, or 1.1%, to $75.3 million for the three months ended June 30, 2009 as compared to $74.4 million in 2008. Operating profit as a percentage of total revenue increased to 11.1% for the three months ended June 30, 2009 from 10.4% for 2008.

Interest Expense. Interest expense decreased by $8.7 million, or 51.9%, to $8.0 million for the three months ended June 30, 2009 as compared to $16.7 million in 2008. This decrease was primarily attributable to a decrease in our outstanding indebtedness in 2009 as compared to 2008, as well as a decrease in our weighted average interest rate to 3.74% during the second quarter of 2009 as compared to 6.15% during the second quarter of 2008 due to a decrease in the Eurodollar rate in 2009 as compared to 2008.

Net Earnings. Net earnings increased by $4.2 million, or 11.1%, to $41.9 million for the three months ended June 30, 2009 as compared to $37.7 million in 2008. This increase was primarily attributable to a decrease in interest expense, offset by an increase in income tax expense in 2009 as compared to 2008.

Liquidity and Capital Resources

Cash provided by operating activities decreased by $1.8 million to $211.3 million for the six months ended June 30, 2009 from $213.1 million in 2008.

Cash used in investing activities increased by $1.9 million to $31.7 million for the six months ended June 30, 2009 from $29.8 million in 2008.

RENT-A-CENTER, INC. AND SUBSIDIARIES

Cash used in financing activities decreased by $34.2 million to $171.4 million for the six months ended June 30, 2009 from $205.6 million in 2008. This decrease in 2009 as compared to 2008 is primarily related to the payments on our senior debt in 2008, offset by the repurchase of our subordinated notes in 2009.

Liquidity Requirements. Our primary liquidity requirements are for debt service, rental merchandise purchases, capital expenditures, litigation expenses, including settlements or judgments, and implementation of our growth strategies, including investment in our financial services business. Our primary sources of liquidity have been cash provided by operations and borrowings. In the future, 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-term 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 relate to our financial condition and performance, and some of which are beyond our control, such as prevailing interest rates and general financing and economic conditions. The global financial markets continue to experience adverse conditions and such volatility in the capital markets may affect our ability to access additional sources of financing. There can be no assurance that additional financing will be available, or if available, that it will be on terms we find acceptable.

On June 10, 2009, we announced that we provided notice to the indenture trustee of our election to redeem all of our outstanding 7¹/2% senior subordinated notes due May 2010, in the aggregate principal amount of $75.4 million at a redemption price equal to 100% of the principal amount outstanding, plus accrued interest to the redemption date. The notes were redeemed in accordance with their terms on July 28, 2009. On that date, the redemption price was paid in full and interest on the redeemed notes ceased to accrue. All of our 7¹/2% senior subordinated notes due May 2010 are now paid in full. The redemption price was funded primarily with cash flow generated from operations, together with amounts drawn under our senior credit facilities.

We believe the cash flow generated from operations, together with amounts available under our senior credit facilities, will be sufficient to fund our liquidity requirements as discussed above (including mandatory principal payments) during the next twelve months. Our revolving credit facilities, including our $20.0 million line of credit at Intrust Bank, provide us with revolving loans in an aggregate principal amount not exceeding $420.0 million, of which $284.7 million was available at July 28, 2009. At July 28, 2009, we had $41.0 million in cash. To the extent we have available cash that is not necessary to fund the items listed above, we intend to make additional payments to service our existing debt, and may repurchase additional shares of our common stock. 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.

A change in control would result in an event of default under our senior credit facilities, which would allow our lenders to accelerate the indebtedness owed to them. In the event a change in control occurs, we cannot be sure we would have enough funds to immediately pay our accelerated senior credit facility obligations or that we would be able to obtain financing to do so on favorable terms, if at all.

Litigation. In our history, we have defended class action lawsuits alleging various regulatory violations and have paid material amounts to settle such claims. Significant settlement amounts or final judgments could materially and adversely affect our liquidity. Please refer to “Legal Proceedings” later in this report.

Deferred Taxes. The 2008 Stimulus Act provided for accelerated depreciation by allowing a bonus first-year depreciation deduction of 50% of the adjusted basis of qualified property placed in service during 2008. Accordingly, our cash flow benefited in 2008 from having a lower cash tax obligation which, in turn, provided additional cash flow from operations. We estimate that our 2008 operating cash flow increased by approximately $75.0 million as a result of the 2008 Stimulus Act with the associated deferral expected to begin to reverse over a three year period beginning in 2009. However, on February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (the “2009 Recovery Act”) which extends the bonus depreciation provision of the 2008 Stimulus Act by continuing the bonus first-year depreciation deduction of 50% of the adjusted basis of qualified property placed in service during 2009. We estimate the cash tax benefit of the 2009 Recovery Act to be approximately $75.0 million, of which $55.0 million will offset the 2008 deferral that reverses in 2009, and the remaining $20.0 million will increase our 2009 operating cash flow. We estimate that at December 31, 2009 the remaining tax deferral associated with the 2008 Stimulus Act and the 2009 Recovery Act will be approximately $95.0 million of which approximately 78% will reverse in 2010 and the remainder will reverse between 2011 and 2012.

RENT-A-CENTER, INC. AND SUBSIDIARIES

Rental Merchandise. A reconciliation of rental merchandise, which includes purchases, follows:

		Three months ended				Three months ended
		June 30, 2009				June 30, 2008
		(In thousands)
Beginning merchandise value		$	775,217			$	918,948
Inventory additions through acquisitions			334				1,261
Purchases			170,754				170,805
Depreciation of rental merchandise			(130,228	)			(142,606	)
Cost of goods sold			(36,605	)			(38,433	)
Skips and stolens			(14,078	)			(16,419	)
Other inventory deletions(1)			(9,488	)			(9,956	)
Ending merchandise value		$	755,906			$	883,600

		Six months ended				Six months ended
		June 30, 2009				June 30, 2008
		(In thousands)
Beginning merchandise value		$	822,487			$	940,304
Inventory additions through acquisitions			990				1,742
Purchases			341,381				386,256
Depreciation of rental merchandise			(262,553	)			(285,796	)
Cost of goods sold			(97,870	)			(100,504	)
Skips and stolens			(29,852	)			(35,613	)
Other inventory deletions(1)			(18,677	)			(22,789	)
Ending merchandise value		$	755,906			$	883,600

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 $29.5 million and $29.3 million on capital expenditures during the six month periods ended June 30, 2009 and 2008, respectively, and expect to spend approximately $30.5 million for the remainder of 2009.

Acquisitions and New Store Openings. During the first six months of 2009, we acquired accounts from 12 locations, opened 18 new stores, consolidated 32 stores into existing locations and sold two stores. Additionally, during the first six months of 2009, we added financial services to two existing rent-to-own store locations, acquired accounts from one location and consolidated three stores with financial services into existing locations, ending the second quarter of 2009 with a total of 350 stores providing these services. The acquired stores and accounts were the result of 12 separate transactions with an aggregate purchase price of approximately $3.3 million.

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 of the increasing maturity of our store base, in order for us to show improvements in our profitability, it is important for us to increase revenue in our existing stores. We intend to accomplish such revenue growth by offering new products and services, such as our financial services products, in our existing rent-to-own stores, and by acquiring customer accounts on favorable terms. There can be no assurance that we will be successful in adding financial services products to our existing rent-to-own stores, or that such operations will be as profitable as we expect, or at all. We also cannot assure you that we will be able to acquire customer accounts on favorable terms, or at all, or that we will be able to maintain the revenue from any such acquired customer accounts at the rates we expect, or at all.

RENT-A-CENTER, INC. AND SUBSIDIARIES

Senior Credit Facilities. Our $1,322.5 million senior credit facility consists of a $197.5 million five-year term loan, with the loans thereunder being referred to by us as the “tranche A term loans,” a $725.0 million six-year term loan, with the loans thereunder being referred to by us as the “tranche B term loans,” and a $400.0 million five-year revolving credit facility. The tranche A term loans are payable in 19 consecutive quarterly installments equal to $2.5 million from December 31, 2006 through June 30, 2009, $5.0 million from September 30, 2009 through June 30, 2010 and $37.5 million from September 30, 2010 through June 30, 2011. The tranche B term loans are repayable in 23 consecutive quarterly installments equal to approximately $1.8 million from December 31, 2006 through June 30, 2011 and approximately $172.6 million from September 30, 2011 through June 30, 2012.

The table below shows the scheduled maturity dates of our senior term loans outstanding at June 30, 2009.

Year Ending December 31,		(In thousands)
2009		$	13,378
2010			91,756
2011			274,728
2012			320,907
		$	700,769

The full amount of the revolving credit facility may be used for the issuance of letters of credit, of which $125.3 million had been utilized as of July 28, 2009. As of July 28, 2009, $274.7 million was available under our revolving facility. The revolving credit facility expires in July 2011.

Borrowings under our senior credit facilities bear interest at varying rates equal to the Eurodollar rate plus .75% to 1.75%, or the prime rate plus up to .75%, at our election. Interest periods range from seven days (for borrowings under the revolving credit facility only) to one, two, three or six months, at our election. The weighted average Eurodollar rate on our outstanding debt was 0.32% at June 30, 2009. The weighted average Eurodollar rate on our outstanding debt was 0.29% at July 28, 2009. The margins on the Eurodollar rate and on the prime rate, which are initially 1.75 and 0.75, respectively, may fluctuate dependent upon an increase or decrease in our consolidated leverage ratio as defined by a pricing grid included in the credit agreement. We have not entered into any interest rate protection agreements with respect to term loans under the senior credit facilities. A commitment fee equal to 0.15% to 0.50% of the unused portion of the revolving facility is payable quarterly, and fluctuates dependent upon an increase or decrease in our consolidated leverage ratio. The initial commitment fee is equal to 0.50% of the unused portion of the revolving facility.

Our senior credit facilities are secured by a security interest in substantially all of our tangible and intangible assets, including intellectual property. Our senior credit facilities are also secured by a pledge of the capital stock of our wholly-owned U.S. subsidiaries (other than certain specified subsidiaries).

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

•

incur additional debt in excess of $150.0 million at any one time outstanding;

•

repurchase our capital stock and pay cash dividends in the event the pro forma senior leverage ratio is greater than 2.50x;

•

incur liens or other encumbrances;

•

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

•

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

•

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

•

make capital expenditures; or

•

enter into an unrelated line of business.

Our senior credit facilities require us to comply with several financial covenants. The table below shows the required and actual ratios under our credit facilities calculated as of June 30, 2009:

		Required Ratio				Actual Ratio
Maximum consolidated leverage ratio		No greater than		3.25:1		2.02:1
Minimum fixed charge coverage ratio		No less than		1.35:1		1.96:1

These financial covenants, as well as the related components of their computation, are defined in the amended and restated credit agreement governing our senior credit facility, which is included as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2008. In accordance with the credit agreement, the maximum consolidated leverage ratio was calculated by dividing the consolidated funded debt outstanding at June 30, 2009 ($710.1 million) by consolidated EBITDA for the six month period ended June 30, 2009 ($352.2 million). For purposes of the covenant calculation, (i) “consolidated funded debt” is defined as outstanding indebtedness less cash in excess of $25 million, and (ii) “consolidated EBITDA” is generally defined as consolidated net income (a) plus the sum of income taxes, interest expense, depreciation and amortization expense, extraordinary non-cash expenses or losses, and other non-cash charges, and (b) minus the sum of interest income, extraordinary income or gains, and other non-cash income. Consolidated EBITDA is a non-GAAP financial measure that is presented not as a measure of operating results, but rather as a measure used to determine covenant compliance under our senior credit facilities.

The minimum fixed charge coverage ratio was calculated pursuant to the credit agreement by dividing consolidated EBITDA for the six month period ended June 30, 2009, as adjusted for certain capital expenditures ($475.6 million), by consolidated fixed charges for the six month period ended June 30, 2009 ($242.9 million). For purposes of the covenant calculation, “consolidated fixed charges” is defined as the sum of interest expense, lease expense, and mandatory debt repayments.

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 facility would occur if a change of control occurs. 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 Rent-A-Center’s Board of Directors occurs. An event of default would also occur if one or more judgments were entered against us of $30.0 million or more and such judgments were not satisfied or bonded pending appeal within 30 days after entry.

We utilize our revolving credit facility for the issuance of letters of credit, as well as to manage normal fluctuations in operational cash flow caused by the timing of cash receipts. In that regard, we may from time to time draw funds under the revolving credit facility for general corporate purposes. The funds drawn on individual occasions have varied in amounts of up to $98.0 million, with total amounts outstanding ranging from $2.0 million up to $108.0 million. The amounts drawn are generally outstanding for a short period of time and are generally paid down as cash is received from our operating activities.

Lehman Brothers Holdings Inc. (“Lehman”) is one of the lenders participating in our revolving credit facility. Lehman’s commitment under the $400.0 million revolving credit facility is approximately $37.3 million, all of which is unfunded. On September 15, 2008, Lehman filed for protection under Chapter 11 of the Federal Bankruptcy Code in the United States Bankruptcy Court in the Southern District of New York. We cannot be certain that Lehman will participate in any requests by us for funding under our revolving credit facility or whether another lender might assume Lehman’s commitment. We do not believe the Lehman bankruptcy will have a material adverse effect on our liquidity.

7¹/2% Senior Subordinated Notes. On June 10, 2009, we announced that we provided notice to the indenture trustee of our election to redeem all of our outstanding 7¹/2% senior subordinated notes due May 2010, in the aggregate principal amount of $75.4 million at a redemption price equal to 100% of the principal amount outstanding, plus accrued interest to the redemption date. The notes were redeemed in accordance with their terms on July 28, 2009. On that date, the redemption price was paid in full and interest on the redeemed notes ceased to accrue. All of our 7¹/2% senior subordinated notes due May 2010 are now paid in full. The redemption price was funded primarily with cash flow generated from operations, together with amounts drawn under our senior credit facilities.

Store Leases. We lease space for substantially all of our stores and service center locations, as well as regional offices, under operating leases expiring at various times through 2019. Most of our store leases are five year leases and contain renewal options for additional periods ranging from three to five years at rental rates adjusted according to agreed-upon formulas.

RENT-A-CENTER, INC. AND SUBSIDIARIES

ColorTyme Guarantee. ColorTyme is a party to an agreement with Wells Fargo Foothill, Inc. (“Wells Fargo”), who provides $35.0 million in aggregate financing to qualifying franchisees of ColorTyme generally up to five times their average monthly revenues. Under the Wells Fargo agreement, upon an event of default by the franchisee under agreements governing this financing and upon the occurrence of certain other events, Wells Fargo can assign the loans and the collateral securing such loans to ColorTyme, with ColorTyme paying the outstanding debt to Wells Fargo and then succeeding to the rights of Wells Fargo under the debt agreements, including the right to foreclose on the collateral. The Wells Fargo agreement expires on September 30, 2010. An additional $20.0 million of financing is provided by Texas Capital Bank, National Association (“Texas Capital Bank”) under an agreement similar to the Wells Fargo financing. Rent-A-Center East, Inc., a subsidiary of Rent-A-Center, guarantees the obligations of ColorTyme under each of these agreements, excluding the effects of any amounts that could be recovered under collateralization provisions, up to a maximum amount of $55.0 million, of which $20.4 million was outstanding as of June 30, 2009.

Contractual Cash Commitments. The table below summarizes debt, lease and other minimum cash obligations outstanding as of June 30, 2009:

		Payments Due by Period
Contractual Cash Obligations		Total				2009				2010-2011				2012-2013				Thereafter
						(In thousands)
Senior Debt (including current portion)		$	700,769	(1)		$	13,378			$	366,484			$	320,907			$	—
71/2% Senior Subordinated Notes			76,741	(2)			76,741				—				—				—
Operating Leases			518,157				90,265				273,278				135,124				19,490
Capital Leases			4,460				1,263				2,894				303				—
Total(3)		$	1,300,127			$	181,647			$	642,656			$	456,334			$	19,490

Repurchases of Outstanding Securities. Our Board of Directors has authorized a common stock repurchase program, permitting us to purchase, from time to time, in the open market and privately negotiated transactions, up to an aggregate of $500.0 million of Rent-A-Center common stock. As of June 30, 2009, we had purchased a total of 19,412,750 shares of Rent-A-Center common stock for an aggregate of $457.8 million under this common stock repurchase 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. Fluctuations in our targeted customers’ monthly disposable income or high levels of unemployment could adversely impact our results of operations.

Restructuring. The total amount of cash used in the store consolidation plan and other restructuring items through June 30, 2009 was approximately $20.4 million, which primarily related to lease terminations. We expect to use approximately $4.0 million of cash on hand for future payments to satisfy the lease obligations at the stores. We expect the lease obligations will be totally completed no later than the second quarter of 2013. Please refer to Note 3, Restructuring, in the Notes to Consolidated Financial Statements on page 7 of this report for more information on our 2007 store consolidation plan.

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

RENT-A-CENTER, INC. AND SUBSIDIARIES

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 Disclosures About Market Risk.

Interest Rate Sensitivity

As of June 30, 2009, we had $75.4 million in subordinated notes outstanding at a fixed interest rate of 7¹/2% and $700.8 million in term loans outstanding at interest rates indexed to the Eurodollar rate. The fair value of the 7¹/2% subordinated notes, based on the closing price at June 30, 2009, was $75.2 million. Carrying value approximates fair value for all other indebtedness.

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 our 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. As a result of such assessment, we may enter into swap contracts or other interest rate protection agreements from time to time to mitigate this risk.

Interest Rate Risk

We hold long-term debt with variable interest rates indexed to prime or Eurodollar rates that exposes us to the risk of increased interest costs if interest rates rise. As of June 30, 2009, we have not entered into any interest rate swap agreements. The credit markets continue to experience adverse conditions, including wide fluctuations in rates. Such continued volatility in the credit markets may increase the costs associated with our existing long-term debt. Based on our overall interest rate exposure at June 30, 2009, a hypothetical 1.0% increase or decrease in interest rates would have the effect of causing a $7.1 million additional pre-tax charge or credit to our statement of earnings.

Item 4.		Controls and Procedures.

Evaluation of disclosure 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 defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this quarterly report. Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is (1) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (2) accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure. 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.

Changes in internal controls. For the quarter ended June 30, 2009, there have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

RENT-A-CENTER, INC. AND SUBSIDIARIES

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. In our history, we have defended class action lawsuits alleging various regulatory violations and have paid material amounts to settle such claims. We account for our litigation contingencies pursuant to the provisions of SFAS No. 5 and FIN 14, which require that we accrue for losses that are both probable and reasonably estimable. We expense legal fees and expenses incurred in connection with the defense of all of our litigation at the time such amounts are invoiced or otherwise made known to us. As of June 30, 2009, we had no accrual relating to probable losses for our outstanding litigation.

We continue to monitor our litigation exposure, and will review the adequacy of our legal reserves on a quarterly basis in accordance with applicable accounting rules. Please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies Involving Critical Estimates, Uncertainties or Assessments in Our Financial Statements” regarding our process for evaluating our litigation reserves. Based on our review, we have not established any reserves for our outstanding litigation.

Item 1A.		Risk Factors.

You should carefully consider the risks described below before making an investment decision. We believe these are all the material risks currently facing our business. Our business, financial condition or results of operations could be materially adversely affected by these risks. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment. You should also refer to the other information included in this report, including our financial statements and related notes.

We may not be able to successfully increase revenue in our rent-to-own stores, which could cause our future earnings to grow more slowly or even decrease.

Our continued growth depends on our ability to increase sales in our existing rent-to-own stores. For the six months ended June 30, 2009, our same store sales decreased by 3.6% compared to the six months ended June 30, 2008. Our same store sales increased by 2.3%, 2.1% and 1.9% for all of 2008, 2007 and 2006 respectively. As a result of new store openings in existing markets and because mature stores will represent an increasing proportion of our store base over time, our same store revenues in future periods may be lower than historical levels. If we are unable to increase revenue in our rent-to-own stores, our earnings may grow more slowly or even decrease.

If we fail to effectively manage the growth, integration and profitability of our financial services business, we may not realize the economic benefit of our financial investment in such operations.

We face risks associated with integrating our financial services business into our existing operations, including further development of information technology and financial reporting systems. In addition, a newly opened financial services location generally does not attain positive cash flow during its first year of operations. Also, the financial services industry is highly competitive and regulated by federal, state and local laws.

Our expansion into the financial services business could place a significant demand on our management and our financial and operational resources. If we are unable to effectively implement our financial services business, we may not realize the operational benefits of our investment in the financial services business that we currently expect.

Rent-to-own transactions are regulated by law in most states. Any adverse change in these laws or the passage of adverse new laws could expose us to litigation or require us to alter our business practices.

As is the case with most businesses, we are subject to various governmental regulations, including in our case, regulations specifically regarding rent-to-own transactions. Currently, 47 states, the District of Columbia and Puerto Rico have passed laws regulating rental purchase transactions. One additional state has a retail installment sales statute that excludes rent-to-own transactions from its coverage if certain criteria are met. The specific rental purchase laws generally require certain contractual and advertising disclosures. They also provide varying levels of substantive consumer protection, such as requiring a grace period for late fees and contract reinstatement rights in the event the rental purchase agreement is

RENT-A-CENTER, INC. AND SUBSIDIARIES

terminated. The rental purchase laws of nine states limit the total amount that may be charged over the life of a rental purchase agreement and the laws of four states limit the cash prices for which we may offer merchandise. Most states also regulate rental purchase transactions, as well as other consumer transactions, under various consumer protection statutes. In our history, we have been the subject of litigation alleging that we have violated some of these statutory provisions.

Although there is currently no comprehensive federal legislation regulating rental purchase transactions, adverse federal legislation may be enacted in the future. From time to time, both favorable and adverse legislation seeking to regulate our business has been introduced in Congress. In addition, various legislatures in the states where we currently do business may adopt new legislation or amend existing legislation that could require us to alter our business practices.

Financial services transactions are regulated by federal law as well as the laws of certain states. Any adverse changes in these laws or the passage of adverse new laws with respect to the financial services business could slow our growth opportunities, expose us to litigation or alter our business practices in a manner that we may deem to be unacceptable.

Our financial services business is subject to federal statutes and regulations such as the USA Patriot Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Gramm-Leach-Bliley Act, the Fair Debt Collection Practices Act, the Anti-Money Laundering Act, and similar state laws. In addition, we are subject to various state regulations regarding the terms of our short term consumer loans and our policies, procedures and operations relating to those loans, including the fees we may charge, as well as fees we may charge in connection with our other financial services products. The failure to comply with such regulations may result in the imposition of material fines, penalties, or injunctions. Congress and/or the various legislatures in the states where we currently operate or intend to offer financial services products may adopt new legislation or amend existing legislation with respect to our financial services business that could require us to alter our business practices in a manner that we may deem to be unacceptable, which could slow our growth opportunities.

We may be subject to legal proceedings from time to time which seek material damages. The costs we incur in defending ourselves or associated with settling any of these proceedings, as well as a material final judgment or decree against us, could materially adversely affect our financial condition by requiring the payment of the settlement amount, a judgment or the posting of a bond.

In our history, we have defended class action lawsuits alleging various regulatory violations and have paid material amounts to settle such claims. Significant settlement amounts or final judgments could materially and adversely affect our liquidity. The failure to pay any material judgment would be a default under our senior credit facilities.

Our senior credit facilities impose restrictions on us which may limit or prohibit us from engaging in certain transactions. If a default were to occur, our lenders could accelerate the amounts of debt outstanding, and holders of our secured indebtedness could force us to sell our assets to satisfy all or a part of what is owed.

Covenants under our senior credit facilities restrict our ability to pay dividends, engage in various operational matters, as well as require us to maintain specified financial ratios. Our ability to meet these financial ratios may be affected by events beyond our control. These restrictions could limit our ability to obtain future financing, make needed capital expenditures or other investments, repurchase our outstanding debt or equity, withstand a future downturn in our business or in the economy, dispose of operations, engage in mergers, acquire additional stores or otherwise conduct necessary corporate activities. Various transactions that we may view as important opportunities, such as specified acquisitions, are also subject to the consent of lenders under the senior credit facilities, which may be withheld or granted subject to conditions specified at the time that may affect the attractiveness or viability of the transaction.

If a default were to occur, the lenders under our senior credit facilities could accelerate the amounts outstanding under the credit facilities. In addition, the lenders under these agreements could terminate their commitments to lend to us. If the lenders under these agreements accelerate the repayment of borrowings, we may not have sufficient liquid assets at that time to repay the amounts then outstanding under our indebtedness or be able to find additional alternative financing. Even if we could obtain additional alternative financing, the terms of the financing may not be favorable or acceptable to us.

The existing indebtedness under our senior credit facilities is secured by substantially all of our assets. Should a default or acceleration of this indebtedness occur, the holders of this indebtedness could sell the assets to satisfy all or a part of what is owed.

RENT-A-CENTER, INC. AND SUBSIDIARIES

A change of control could accelerate our obligation to pay our outstanding indebtedness, and we may not have sufficient liquid assets at that time to repay these amounts.

Under our senior credit facilities, an event of default would result if a third party became the beneficial owner of 35.0% or more of our voting stock or upon certain changes in the constitution of Rent-A-Center’s Board of Directors. As of June 30, 2009, $700.8 million was outstanding under our senior debt. If the lenders under our senior credit facilities accelerate these obligations, we may not have sufficient liquid assets to repay amounts outstanding under these agreements.

Rent-A-Center’s organizational documents and our senior credit facilities contain provisions that may prevent or deter another group from paying a premium over the market price to Rent-A-Center’s stockholders to acquire its stock.

Rent-A-Center’s organizational documents contain provisions that classify its Board of Directors, authorize its Board of Directors to issue blank check preferred stock and establish advance notice requirements on its stockholders for director nominations and actions to be taken at meetings of the stockholders. In addition, as a Delaware corporation, Rent-A-Center is subject to Section 203 of the Delaware General Corporation Law relating to business combinations. Our senior credit facilities contain change of control provisions which, in the event of a change of control, would cause a default under those provisions. These provisions and arrangements could delay, deter or prevent a merger, consolidation, tender offer or other business combination or change of control involving us that could include a premium over the market price of Rent-A-Center’s common stock that some or a majority of Rent-A-Center’s stockholders might consider to be in their best interests.

Rent-A-Center is a holding company and is dependent on the operations and funds of its subsidiaries.

Rent-A-Center is a holding company, with no revenue generating operations and no assets other than its ownership interests in its direct and indirect subsidiaries. Accordingly, Rent-A-Center is dependent on the cash flow generated by its direct and indirect operating subsidiaries and must rely on dividends or other intercompany transfers from its operating subsidiaries to generate the funds necessary to meet its obligations, including the obligations under the senior credit facilities. The ability of Rent-A-Center’s subsidiaries to pay dividends or make other payments to it is subject to applicable state laws. Should one or more of Rent-A-Center’s subsidiaries be unable to pay dividends or make distributions, its ability to meet its ongoing obligations could be materially and adversely impacted.

Our stock price is volatile, and you may not be able to recover your investment if our stock price declines.

The price of our common stock has been volatile and can be expected to be significantly affected by factors such as:

•

quarterly variations in our results of operations, which may be impacted by, among other things, changes in same store sales, when and how many rent-to-own stores we acquire or open, and the rate at which we add financial services to our existing rent-to-own stores;

•

quarterly variations in our competitors’ results of operations;

•

changes in earnings estimates or buy/sell recommendations by financial analysts; and

•

the stock price performance of comparable companies.

In addition, the stock market as a whole has experienced extreme price and volume fluctuations that have affected the market price of many specialty retailers in ways that may have been unrelated to these companies’ operating performance.

Failure to achieve and maintain effective internal controls could have a material adverse effect on our business and stock price.

Effective internal controls are necessary for us to provide reliable financial reports. If we cannot provide reliable financial reports, our brand and operating results could be harmed. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

RENT-A-CENTER, INC. AND SUBSIDIARIES

While we continue to evaluate and improve our internal controls, we cannot be certain that these measures will ensure that we implement and maintain adequate controls over our financial processes and reporting in the future. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations.

If we fail to maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Failure to achieve and maintain an effective internal control environment could cause investors to lose confidence in our reported financial information, which could have a material adverse effect on our stock price.

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

Our Annual Meeting of Stockholders was held on May 14, 2009. At the meeting, our stockholders voted on two matters: (1) election of two Class III Directors, and (2) ratification of the Audit Committee’s appointment of Grant Thornton, LLP, registered independent accountants, as our independent auditors for the fiscal year ended December 31, 2009.

The individuals named below were re-elected to a three-year term as Class III Directors:

Nominee		Votes For				Votes Against				Abstentions
Michael J. Gade			60,489,491				219,731				8,328
J.V. Lentell			60,489,491				219,731				8,328

The following directors’ terms of office as a director continued after the Annual Meeting of Stockholders:

Mitchell E. Fadel
Jeffery M. Jackson
Kerney Laday
Leonard H. Roberts
Mark E. Speese
Paula Stern, Ph.D.

The appointment of Grant Thornton, LLP, registered independent accountants, as our independent auditors for the fiscal year ended December 31, 2009, was ratified with voting on the proposal as follows:

Votes For		Votes Against		Abstentions
60,212,779		491,031		7,740

Item 6.		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.

     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.

Date: July 31, 2009

Exhibit No.				Description
	3.1			Certificate of Incorporation of Rent-A-Center, Inc., as amended (Incorporated herein by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K dated as of December 31, 2002.)
	3.2			Certificate of Amendment to the Certificate of Incorporation of Rent-A-Center, Inc., dated May 19, 2004 (Incorporated herein by reference to Exhibit 3.2 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004.)
	3.3			Amended and Restated Bylaws of Rent-A-Center, Inc. (Incorporated herein by reference to Exhibit 3.(ii) to the registrant’s Current Report on Form 8-K dated as of September 20, 2005.)
	4.1			Form of Certificate evidencing Common Stock (Incorporated herein by reference to Exhibit 4.1 to the registrant’s Registration Statement on Form S-4/A filed on January 13, 1999.)
	10.1	†		Amended and Restated Rent-A-Center, Inc. Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.)
	10.2			Amended and Restated Guarantee and Collateral Agreement, dated as of May 28, 2003, as amended and restated as of July 14, 2004, made by Rent-A-Center, Inc. and certain of its Subsidiaries in favor of JPMorgan Chase Bank, as Administrative Agent (Incorporated herein by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K dated July 15, 2004.)
	10.3			Franchisee Financing Agreement, dated April 30, 2002, but effective as of June 28, 2002, by and between Texas Capital Bank, National Association, ColorTyme, Inc. and Rent-A-Center, Inc. (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.)
	10.4			Supplemental Letter Agreement to Franchisee Financing Agreement, dated May 26, 2003, by and between Texas Capital Bank, National Association, ColorTyme, Inc. and Rent-A-Center, Inc. (Incorporated herein by reference to Exhibit 10.23 to the registrant’s Registration Statement on Form S-4 filed July 11, 2003.)
	10.5			First Amendment to Franchisee Financing Agreement, dated August 30, 2005, by and among Texas Capital Bank, National Association, ColorTyme, Inc. and Rent-A-Center East, Inc. (Incorporated herein by reference to Exhibit 10.7 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005.)
	10.6			Amended and Restated Franchise Financing Agreement, dated October 1, 2003, by and among Wells Fargo Foothill, Inc., ColorTyme, Inc. and Rent-A-Center East, Inc. (Incorporated herein by reference to Exhibit 10.22 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.)
	10.7			First Amendment to Amended and Restated Franchisee Financing Agreement, dated December 15, 2003, by and among Wells Fargo Foothill, Inc., ColorTyme, Inc. and Rent-A-Center East, Inc. (Incorporated herein by reference to Exhibit 10.23 to the registrant’s Annual Report on Form 10-K/A for the year ended December 31, 2003.)
	10.8			Second Amendment to Amended and Restated Franchisee Financing Agreement, dated as of March 1, 2004, by and among Wells Fargo Foothill, Inc., ColorTyme, Inc. and Rent-A-Center East, Inc. (Incorporated herein by reference to Exhibit 10.24 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.)
	10.9			Third Amendment to Amended and Restated Franchisee Financing Agreement, dated as of September 29, 2006, by and among Wells Fargo Foothill, Inc., ColorTyme, Inc. and Rent-A-Center East, Inc. (Incorporated herein by reference to Exhibit 10.10 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.)
	10.10			Fourth Amendment to Amended and Restated Franchisee Financing Agreement, dated as of December 19, 2006, by and among Wells Fargo Foothill, Inc., ColorTyme, Inc. and Rent-A-Center East, Inc. (Incorporated herein by reference to Exhibit 10.10 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2006.)
	10.11	†		Form of Stock Option Agreement issuable to Directors pursuant to the Amended and Restated Rent-A-Center, Inc. Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.20 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2004.)

Exhibit No.				Description
	10.12†			Form of Stock Option Agreement issuable to management pursuant to the Amended and Restated Rent-A-Center, Inc. Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.21 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2004.)
	10.13†			Summary of Director Compensation (Incorporated herein by reference to Exhibit 10.13 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2008.)
	10.14†			Form of Stock Compensation Agreement issuable to management pursuant to the Amended and Restated Rent-A-Center, Inc. Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.15 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006.)
	10.15†			Form of Long-Term Incentive Cash Award issuable to management pursuant to the Amended and Restated Rent-A-Center, Inc. Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.16 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006.)
	10.16†			Form of Loyalty and Confidentiality Agreement entered into with management (Incorporated herein by reference to Exhibit 10.17 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006.)
	10.17†			Rent-A-Center, Inc. 2006 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.17 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.)
	10.18†			Form of Stock Option Agreement issuable to management pursuant to the Rent-A-Center, Inc. 2006 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.18 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.)
	10.19†			Form of Stock Compensation Agreement issuable to management pursuant to the Rent-A-Center, Inc. 2006 Equity Incentive Plan (Incorporated herein by reference to Exhibit 10.19 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2006.)
	10.20†			Form of Long-Term Incentive Cash Award issuable to management pursuant to the Rent-A-Center, Inc. 2006 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.20 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2006.)
	10.21†			Rent-A-Center, Inc. 2006 Equity Incentive Plan and Amendment (Incorporated herein by reference to Exhibit 4.5 to the registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on January 4, 2007)
	10.22†			Form of Stock Option Agreement issuable to management pursuant to the Rent-A-Center, Inc. 2006 Equity Incentive Plan (Incorporated herein by reference to Exhibit 10.22 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2006.)
	10.23†			Form of Stock Compensation Agreement issuable to management pursuant to the Rent-A-Center, Inc. 2006 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.23 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2006.)
	10.24†			Form of Stock Option Agreement issuable to Directors pursuant to the Rent-A-Center, Inc. 2006 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.24 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2006.)
	10.25†			Form of Deferred Stock Unit Award Agreement issuable to Directors pursuant to the Rent-A-Center, Inc. 2006 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.25 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2008.)
	10.26†			Form of Executive Transition Agreement entered into with management (Incorporated herein by reference to Exhibit 10.21 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.)
	10.27†			Employment Agreement, dated October 2, 2006, between Rent-A-Center, Inc. and Mark E. Speese (Incorporated herein by reference to Exhibit 10.22 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.)
	10.28†			Non-Qualified Stock Option Agreement, dated October 2, 2006, between Rent-A-Center, Inc. and Mark E. Speese (Incorporated herein by reference to Exhibit 10.23 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.)
	10.29†			Rent-A-Center, Inc. Non-Qualified Deferred Compensation Plan (Incorporated herein by reference to Exhibit 10.28 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007.)

Exhibit No.				Description
	10.30	†		Rent-A-Center, Inc. 401-K Plan (Incorporated herein by reference to Exhibit 10.30 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2008.)
	10.31			Third Amended and Restated Credit Agreement, dated as of November 15, 2006, among Rent-A-Center, Inc., the several banks and other financial institutions or entities from time to time parties thereto, Union Bank of California, N.A., as documentation agent, Lehman Commercial Paper Inc., as syndication agent, and JPMorgan Chase Bank, N.A., as administrative agent (Incorporated herein by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K dated November 15, 2006.)
	21.1			Subsidiaries of Rent-A-Center, Inc. (Incorporated herein by reference to Exhibit 21.1 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2008.)
	31.1	*		Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 implementing Section 302 of the Sarbanes-Oxley Act of 2002 by Mark E. Speese
	31.2	*		Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 implementing Section 302 of the Sarbanes-Oxley Act of 2002 by Robert D. Davis
	32.1	*		Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Mark E. Speese
	32.2	*		Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Robert D. Davis