Edgar Filing: RENT A CENTER INC DE

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 20, 2002

REGISTRATION NO. 333-87752
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2

FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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RENT-A-CENTER, INC.
(Exact Name of Registrant as Specified in Its Charter)

DELAWARE 48-1024367
(State or other jurisdiction of incorporation (I.R.S. Employer Identification Number)
or organization)

5700 TENNYSON PARKWAY, THIRD FLOOR
PLANO, TEXAS 75024
(972) 801-1100

(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)

MARK E. SPEESE
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
5700 TENNYSON PARKWAY, THIRD FLOOR
PLANO, TEXAS 75024
(972) 801-1100

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)

COPIES TO:

THOMAS W. HUGHES, ESQ. BRUCE K. DALLAS, ESQ.
JAMES R. GRIFFIN, ESQ. DAVIS POLK & WARDWELL
WINSTEAD SECHREST & MINICK P.C. 1600 EL CAMINO REAL
5400 RENAISSANCE TOWER MENLO PARK, CA 94025
1201 ELM STREET (650) 752-2000
DALLAS, TEXAS 75270
(214) 745-5400

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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The information in this prospectus is not complete and may be changed. These
securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and offers to buy these securities are not being
solicited in any state where the offer or sale is not permitted.

PROSPECTUS (Subject to Completion)

Issued May 20, 2002

3,120,000 Shares

[RENT-A-CENTER LOGO]

COMMON STOCK

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THE SELLING STOCKHOLDERS NAMED IN THIS PROSPECTUS ARE OFFERING 3,120,000 SHARES
OF OUR COMMON STOCK. WE WILL NOT RECEIVE ANY PROCEEDS FROM THE SALE OF THE
COMMON STOCK IN THIS OFFERING.

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OUR COMMON STOCK IS QUOTED ON THE NASDAQ NATIONAL MARKET UNDER THE SYMBOL
"RCII." ON MAY 17, 2002, THE REPORTED LAST SALE PRICE OF OUR COMMON STOCK ON THE
NASDAQ NATIONAL MARKET WAS $61.95 PER SHARE.

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INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 6.

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PRICE $ A SHARE

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UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND SELLING
PUBLIC COMMISSIONS STOCKHOLDERS
-------- ------------- ------------

Per Share.............................................. $ $ $
Total.................................................. $ $ $

The selling stockholders have granted the underwriters the right to purchase up
to an additional 468,000 shares of common stock to cover over-allotments.

The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.

Morgan Stanley & Co. Incorporated expects to deliver the shares to purchasers on
, 2002.

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MORGAN STANLEY LEHMAN BROTHERS
BEAR, STEARNS & CO. INC.
SUNTRUST ROBINSON HUMPHREY
WACHOVIA SECURITIES

, 2002

EDGAR Description of Artwork:

The inside front cover of the prospectus depicts two pictures with
text, one of which is a picture of the outside of a Rent-A-Center store and the
other of which depicts the inside of a Rent-A-Center store.

The picture of the outside of a Rent-A-Center store is offset at the
top of the page, with text to its immediate right. The text reads as follows:
"We are the largest rent-to-own operator in the United States with an
approximate 29% market share based on store count."

The picture of the inside of the Rent-A-Center store is offset at the
bottom of the page, with text to its immediate left. The text reads as follows:
"Our stores offer high quality, durable products such as home electronics,
appliances, computers and furniture and accessories under flexible rental
purchase agreements that allow the customer to obtain ownership of the
merchandise at the conclusion of an agreed-upon rental period."

The inside back cover of the prospectus depicts a graphic of the United
States and Puerto Rico. There is a blue and red bar on the top of the page. The
bar contains text, which reads as follows: "Rent-A-Center(R) Nationwide
Locations."

The map of the United States depicts locations of company-owned stores
in yellow and franchise stores in red.

TABLE OF CONTENTS

PAGE
----

Prospectus Summary.......................................... 1
Risk Factors................................................ 6
Special Note Regarding Forward-Looking Statements........... 10
Use of Proceeds............................................. 11
Dividend Policy............................................. 11
Common Stock Price Range.................................... 12
Capitalization.............................................. 13
Selected Consolidated Financial and Operating Data.......... 14
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 16
Business.................................................... 32
Management.................................................. 44
Selling Stockholders........................................ 48
Description of Capital Stock................................ 49
Shares Eligible for Future Sale............................. 54
Underwriters................................................ 55
Legal Matters............................................... 57
Experts..................................................... 57
Where You Can Find More Information......................... 58
Index to Financial Statements............................... F-1

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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION DIFFERENT FROM THAT CONTAINED IN OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS. THE SELLING STOCKHOLDERS ARE OFFERING TO SELL SHARES OF COMMON
STOCK AND SEEKING OFFERS TO BUY SHARES OF COMMON STOCK ONLY IN JURISDICTIONS
WHERE OFFERS AND SALES ARE PERMITTED. THE INFORMATION CONTAINED IN THIS
PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE
TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK.

PROSPECTUS SUMMARY

You should read this summary together with the more detailed information
regarding us and the common stock being sold in this offering and our financial
statements and related notes appearing elsewhere or incorporated by reference in
this prospectus. Unless otherwise indicated, "we," "us" and "our" means
Rent-A-Center, Inc. and our wholly-owned subsidiaries. Except as otherwise
indicated, the information in this prospectus assumes that the underwriters'
over-allotment option is not exercised and does not reflect dividends accrued on
the Series A preferred stock after March 31, 2002.

RENT-A-CENTER

OUR BUSINESS

Our stores offer high quality, durable products such as home electronics,
appliances, computers, and furniture and accessories under flexible rental
purchase agreements that typically allow the customer to obtain ownership of the
merchandise at the conclusion of an agreed upon rental period. These rental
purchase agreements are designed to appeal to a wide variety of customers by
allowing them to obtain merchandise that they might otherwise be unable to
obtain due to insufficient cash resources or a lack of access to credit. These
agreements also cater to customers who only have a temporary need, or who simply
desire to rent rather than purchase the merchandise. We estimate that
approximately 62% of our business is from repeat customers. We offer well known
brands such as Philips, Sony, JVC, Toshiba and Mitsubishi home electronics,
Whirlpool appliances, Dell, Compaq and Hewlett Packard computers and Ashley,
England and Benchcraft furniture. For the year ended December 31, 2001, home
electronics merchandise generated 41% of our store rental revenue, 32% was
derived from furniture and home furnishing accessories, 17% from appliances and
10% from computers.

We have demonstrated a strong track record of growth, expanding from 717
owned or franchised stores at December 31, 1996 to 2,622 at March 31, 2002,
primarily through acquisitions. Over that same period, we experienced a
compounded annual growth rate in sales of approximately 48% and a compounded
annual growth rate in earnings per share before non-recurring items of
approximately 32%. In 2001, we had total revenues of $1.81 billion, 12.9% growth
over 2000, driven primarily by same store sales gains of 8.0%. For the three
months ended March 31, 2002, we had total revenues of $498.6 million and 13.4%
growth over the same period in 2001, driven primarily by same store sales gains
of 7.7%. We have incurred significant amounts of debt secured by substantially
all of our assets and subordinated debt in connection with our acquisition
program. These debt agreements restrict our ability to pay dividends.
Immediately following the Thorn Americas and Central Rents acquisitions in 1998,
our outstanding debt was $895.9 million, while our preferred stock and
stockholders' equity were $259.5 million and $136.2 million, respectively. At
March 31, 2002, our outstanding debt was $702.5 million, while our preferred
stock and stockholders' equity were $294.7 million and $424.7 million,
respectively. As of March 31, 2002, we had cash on hand of $167.3 million.

INDUSTRY BACKGROUND

According to industry sources and our estimates, the rent-to-own industry
consists of approximately 8,000 stores and provides approximately 7.0 million
products to over 3.0 million households each year. We estimate the six largest
rent-to-own industry participants account for 4,700 of the total number of
stores, and the majority of the remainder of the industry consists of operations
with fewer than 20 stores. The rent-to-own industry is highly fragmented and,
due primarily to the decreased availability of traditional financing sources,
has experienced, and we believe will continue to experience, consolidation.

STRATEGY

Our strategy includes:

-- ENHANCING STORE OPERATIONS--We continually seek to improve store
performance through strategies intended to produce gains in operating
efficiency and profitability. We have refocused our efforts to
control and improve store-level expenses as well as enhance store
revenues.

-- OPENING NEW STORES AND ACQUIRING EXISTING RENT-TO-OWN STORES--We
intend to expand our business both by opening new stores in targeted
markets and by acquiring existing rent-to-own stores.

-- BUILDING OUR NATIONAL BRAND--We have implemented a strategy to
increase our name recognition and enhance our national brand. As a
part of a national branding strategy, in April 2000 we launched a
national advertising campaign featuring John Madden as our national
advertising spokesperson.

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We were incorporated as a Delaware corporation on September 16, 1986. Our
principal executive offices are located at 5700 Tennyson Parkway, Third Floor,
Plano, Texas 75024, telephone (972) 801-1100.

THE OFFERING

Common Stock offered by:
Apollo Investment Fund IV, L.P. ................. 2,847,378 shares
Apollo Overseas Partners IV, L.P. ............... 152,777 shares
Bear Stearns MB 1998-1999 Pre-Fund, LLC.......... 119,845 shares
----------
Total......................................... 3,120,000 shares
Over-allotment option offered by ==========
the selling stockholders........................... 468,000 shares
==========
Common Stock to be outstanding
after this offering................................ 27,265,962 shares
==========
Use of Proceeds.................................... We will not receive any
proceeds from the sale
of the shares in this
offering.

Nasdaq National Market symbol.... RCII

The above information regarding shares outstanding is as of March 31, 2002.
As of that date, there were 295,198 shares of Series A preferred stock
outstanding. The shares of our Series A preferred stock are convertible at any
time into the number of shares of common stock equal to the liquidation
preference, which is $1,000 per share of Series A preferred stock plus all
accrued but unpaid dividends to the date of conversion, divided by the
conversion price, which is currently $27.935 per share. As of March 31, 2002,
the liquidation preference was $297,958,775. Accordingly, the Series A preferred
stock was convertible on March 31, 2002 into 10,666,145 shares of common stock.
The information above regarding shares offered by the selling stockholders and
shares outstanding assumes the conversion of 86,355 shares of our Series A
preferred stock into the 3,120,000 shares of common stock being sold in this
offering, but excludes 7,546,145 shares of common stock issuable upon conversion
of the remaining shares of our Series A preferred stock outstanding after this
offering, and excludes 3,738,305 shares of common stock issuable upon the
exercise of stock options, with a weighted average exercise price of $29.18,
issued pursuant to our Long-Term Incentive Plan. The Series A preferred stock
accrues dividends until the date of conversion. Through May 1, 2002, accrued but
unpaid dividends from March 31, 2002 amounted to approximately 918 shares of
Series A preferred stock.

SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA

The data following for the three years ended December 31, 2001 have been
derived from the audited consolidated financial statements included elsewhere in
this prospectus. The data provided as of and for the three months ended March
31, 2001 and 2002 have been derived from our unaudited consolidated financial
statements which were prepared on the same basis as our audited financial
statements and include, in our opinion, all adjustments necessary to present
fairly the information presented for the interim periods. Interim period results
are not necessarily indicative of results that will be obtained for the full
year.

THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------- ---------------------
1999 2000 2001 2001 2002
---------- ---------- ---------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

CONSOLIDATED STATEMENTS OF EARNINGS:
Revenues
Store
Rentals and fees.................... $1,270,885 $1,459,664 $1,650,851 $393,123 $443,705
Merchandise sales................... 88,516 81,166 94,733 30,759 39,605
Other............................... 2,177 3,018 3,476 1,330 614
Franchise
Merchandise sales................... 49,696 51,769 53,584 13,027 13,253
Royalty income and fees............. 5,893 5,997 5,884 1,463 1,433
---------- ---------- ---------- -------- --------
Total revenues................. 1,417,167 1,601,614 1,808,528 439,702 498,610
Operating expenses
Direct store expenses
Depreciation of rental
merchandise....................... 265,486 299,298 343,197 80,812 92,223
Cost of merchandise sold............ 74,027 65,332 72,539 21,555 26,982
Salaries and other expenses......... 770,572 866,234 1,019,402 242,219 262,619
Franchise cost of merchandise sold.... 47,914 49,724 51,251 12,494 12,653
---------- ---------- ---------- -------- --------
1,157,999 1,280,588 1,486,389 357,080 394,477
General and administrative expenses... 42,029 48,093 55,359 12,869 15,117
Amortization of intangibles........... 27,116 28,303 30,194 7,268 720
Class action litigation settlements... -- (22,383)(1) 52,000(2) -- --
---------- ---------- ---------- -------- --------
Total operating expenses....... 1,227,144 1,334,601 1,623,942 377,217 410,314
---------- ---------- ---------- -------- --------
Operating profit............... 190,023 267,013 184,586 62,485 88,296
Interest expense........................ 75,673 74,324 60,874 16,510 15,798
Interest income......................... (904) (1,706) (1,094) (361) (723)
---------- ---------- ---------- -------- --------
Earnings before income taxes... 115,254 194,395 124,806 46,336 73,221
Income tax expense...................... 55,899 91,368 58,589 21,338 29,658
---------- ---------- ---------- -------- --------
Net earnings................... 59,355 103,027 66,217 24,998 43,563
Preferred dividends..................... 10,039 10,420 15,408 4,325 4,992
---------- ---------- ---------- -------- --------
Net earnings allocable to
common stockholders.......... $ 49,316 $ 92,607 $ 50,809 $ 20,673 $ 38,571
========== ========== ========== ======== ========
Basic earnings per common share......... $2.04 $3.79 $1.97 $.83 $1.57
Diluted earnings per common share....... $1.74 $2.96 $1.79 $.69 $1.20
Basic weighted average shares........... 24,229 24,432 25,846 24,959 24,515
Diluted weighted average shares......... 34,131 34,812 37,079 36,375 36,321

AS OF MARCH 31, 2002
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ACTUAL PRO FORMA(3)
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(UNAUDITED)
(IN THOUSANDS)

CONSOLIDATED BALANCE SHEET DATA:
Total assets.............................................. $1,677,036 $1,677,036
Total debt................................................ 702,525 702,525
Total liabilities......................................... 957,630 957,630
Redeemable convertible voting preferred stock, net........ 294,674 207,671
Stockholders' equity...................................... 424,732 511,735

YEAR ENDED DECEMBER 31,
------------------------------ THREE MONTHS ENDED
1999 2000 2001 MARCH 31, 2002
-------- -------- -------- ------------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)

OPERATING DATA:
Stores open at end of period.................... 2,075 2,158 2,281 2,284
Comparable store revenue growth(4).............. 7.7% 12.6% 8.0% 7.7%
Franchise stores open at end of period.......... 365 364 342 338
EBITDA(5)....................................... $248,452 $306,077 $304,690 $98,482
EBITDA margin................................... 17.5% 19.1% 16.8% 19.8%
Capital expenditures............................ $36,211 $37,937 $57,532 $8,100

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(1) Includes the effects of a pre-tax, non-recurring refund of $22.4 million for
unlocated class members associated with the coordinated settlement of three
class action lawsuits in the state of New Jersey.

(2) Includes the effects of a pre-tax legal settlement of $52.0 million
associated with the 2001 settlement of gender discrimination lawsuits
pending in the states of Missouri, Illinois and Tennessee.

(3) Gives effect to the conversion of Series A preferred stock into the
3,120,000 shares of common stock offered by the selling stockholders and
does not include estimated offering expenses of $500,000 related to the
offering to be paid by us.

(4) Comparable store revenue for each period presented includes revenues only of
stores open and operated by us throughout the full period and the comparable
prior period.

(5) EBITDA is defined as operating profit plus depreciation (exclusive of
depreciation of rental merchandise), amortization of intangibles and
non-recurring litigation settlements. EBITDA should not be considered as a
substitute for income from operations, net income or cash flow from
operating activities (as determined in accordance with generally accepted
accounting principles) for the purpose of analyzing operating performance,
financial position and cash flows.

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
or incorporated by reference in this prospectus, including our financial
statements and related notes.

WE MAY NOT BE ABLE TO SUCCESSFULLY IMPLEMENT OUR GROWTH STRATEGY, WHICH COULD
CAUSE OUR FUTURE EARNINGS TO GROW MORE SLOWLY OR EVEN DECREASE.

As part of our growth strategy, we intend to increase our total number of
stores in both existing markets and new markets through a combination of new
store openings and store acquisitions. We increased our store base by 83 stores
in 2000, 123 stores in 2001 and currently intend to increase our store base by
5% to 10% in 2002. Our growth strategy could place a significant demand on our
management and our financial and operational resources. This growth strategy is
subject to various risks, including uncertainties regarding the ability to open
new stores and our ability to acquire additional stores on favorable terms. We
may not be able to continue to identify profitable new store locations or
underperforming competitors as we currently anticipate. If we are unable to
implement our growth strategy, our earnings may grow more slowly or even
decrease.

Our continued growth also depends on our ability to increase sales in our
existing stores. Our same store sales increased by 12.6% and 8.0% for 2000 and
2001, respectively, and 7.7% in the first quarter ended March 31, 2002. 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
sale increases in future periods may be lower than historical levels.

IF WE FAIL TO EFFECTIVELY MANAGE OUR GROWTH AND INTEGRATE NEW STORES, OUR
FINANCIAL RESULTS MAY BE ADVERSELY AFFECTED.

The benefits we anticipate from our growth strategy may not be realized.
The addition of new stores, both through store openings and through
acquisitions, requires the integration of our management philosophies and
personnel, standardization of training programs, realization of operating
efficiencies and effective coordination of sales and marketing and financial
reporting efforts. In addition, acquisitions in general are subject to a number
of special risks, including adverse short-term effects on our reported operating
results, diversion of management's attention and unanticipated problems or legal
liabilities. Further, a newly opened store generally does not attain positive
cash flow during its first year of operations.

THERE ARE LEGAL PROCEEDINGS PENDING AGAINST US SEEKING 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.

Some lawsuits against us involve claims that our rental agreements
constitute installment sales contracts, violate state usury laws or violate
other state laws enacted to protect consumers. We are also defending class
action lawsuits alleging we violated the securities laws and have entered into a
proposed settlement covering claims associated with three alleged class actions
asserting gender discrimination in our employment practices. Because of the
uncertainties associated with litigation, we cannot estimate for you our
ultimate liability for these matters, if any. The failure to pay any judgment
would be a default under our senior credit facilities and the indenture
governing our outstanding subordinated notes.

OUR DEBT AGREEMENTS 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 and the indenture governing
our outstanding subordinated notes restrict our ability to pay dividends, engage
in various operational matters as well as require us to maintain specified
financial ratios and satisfy specified financial tests. Our ability to meet
these financial ratios and tests 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 and our
other lenders could declare immediately due and payable all amounts borrowed
under other instruments that contain certain provisions for cross-acceleration
or cross-default. 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. Our senior credit facilities also contain
provisions prohibiting the modification of our outstanding subordinated notes,
as well as limiting our ability to refinance such notes.

A CHANGE OF CONTROL COULD ACCELERATE OUR OBLIGATION TO PAY OUR OUTSTANDING
INDEBTEDNESS, AND WE MAY NOT HAVE SUFFICIENT LIQUID ASSETS TO REPAY THESE
AMOUNTS.

Under our senior credit facilities, an event of default would result if
Apollo Management IV, L.P. and its affiliates cease to own at least 4,474,673
shares of our common stock on an as converted basis. As of March 31, 2002 and
after giving effect to this offering, Apollo and its affiliates will continue to
own 7,256,278 shares of our common stock, or 6,806,255 if the underwriters'
over-allotment is exercised in full, on an as converted basis. An event of
default would also result under the senior credit facilities if a third party
became the beneficial owner of 33.33% or more of our voting stock at a time when
certain permitted investors owned less than the third party or Apollo owned less
than 35% of the voting stock owned by the permitted investors. As of March 31,
2002, we are required to pay under our senior credit facilities $1.9 million in
each of 2002 and 2003, $26.4 million in 2004, $100.0 million in 2005 and $297.8
million after 2005. These payments reduce our operating cash flow. If the
lenders under our debt instruments accelerate these obligations, we may not have
sufficient liquid assets to repay amounts outstanding under these agreements.

Under the indenture governing our outstanding subordinated notes, in the
event that a change in control occurs, we may be required to offer to purchase
all of our outstanding subordinated notes at 101% of their original aggregate
principal amount, plus accrued interest to the date of repurchase. A change in
control also would result in an event of default under our senior credit
facilities, which could then be accelerated by our lenders, and would require us
to offer to redeem our Series A preferred stock.

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 specifically in our case regulations regarding
rent-to-own transactions. There are currently 47 states that have passed laws
regulating rental purchase transactions and another state that has a retail
installment sales statute
7

that excludes rent-to-own transactions from its coverage if certain criteria are
met. These 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 terminated.
The rental purchase laws of nine states limit the total amount of rentals that
may be charged over the life of a rental purchase agreement. Several states also
effectively regulate rental purchase transactions under other consumer
protection statutes. We are currently subject to outstanding judgments and other
litigation alleging that we have violated some of these statutory provisions.

Although there is no comprehensive federal legislation regulating
rental-purchase transactions, adverse federal legislation may be enacted in the
future. From time to time, legislation has been introduced in Congress seeking
to regulate our business. 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.

OUR BUSINESS DEPENDS ON A LIMITED NUMBER OF KEY PERSONNEL, WITH WHOM WE DO NOT
HAVE EMPLOYMENT AGREEMENTS. THE LOSS OF ANY ONE OF THESE INDIVIDUALS COULD
DISRUPT OUR BUSINESS.

Our continued success is highly dependent upon the personal efforts and
abilities of our senior management, including Mark E. Speese, our Chairman of
the Board and Chief Executive Officer, Mitchell E. Fadel, our President, and
Dana F. Goble and David A. Kraemer, our Executive Vice-Presidents of Operations.
We do not have employment contracts with or maintain key-person insurance on the
lives of any of these officers and the loss of any one of them could disrupt our
business.

A SMALL GROUP OF OUR DIRECTORS AND THEIR AFFILIATES HAVE SIGNIFICANT INFLUENCE
ON ALL STOCKHOLDER VOTES. AS A RESULT, THEY WILL CONTINUE TO HAVE THE ABILITY TO
EXERCISE EFFECTIVE CONTROL OVER THE OUTCOME OF ACTIONS REQUIRING THE APPROVAL OF
OUR STOCKHOLDERS, INCLUDING POTENTIAL ACQUISITIONS, ELECTIONS OF OUR BOARD OF
DIRECTORS AND SALES OR CHANGES IN CONTROL.

Mr. Speese, our Chairman and Chief Executive Officer, Apollo Investment
Fund IV, L.P. and Apollo Overseas Partners IV, L.P. are parties to a
stockholders agreement relating to the voting of our securities held by them at
meetings of our stockholders. As of March 31, 2002 and after giving effect to
this offering, approximately 23.2% of our voting stock, or 22.0% if the
underwriters' over-allotment is exercised in full, assuming the conversion of
our Series A preferred stock and all outstanding options, is controlled by Mr.
Speese and Apollo.

OUR ORGANIZATIONAL DOCUMENTS, SERIES A PREFERRED STOCK AND DEBT INSTRUMENTS
CONTAIN PROVISIONS THAT MAY PREVENT OR DETER ANOTHER GROUP FROM PAYING A PREMIUM
OVER THE MARKET PRICE TO OUR STOCKHOLDERS TO ACQUIRE OUR STOCK.

Our organizational documents contain provisions that classify our board of
directors, authorize our board of directors to issue blank check preferred stock
and establish advance notice requirements on our stockholders for director
nominations and actions to be taken at annual meetings of the stockholders. In
addition, as a Delaware corporation, we are subject to Section 203 of the
Delaware General Corporation Law relating to business combinations. Our senior
credit facilities, the indenture governing our subordinated notes and our Series
A preferred stock certificate of designations each contain various 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 our common stock that some or a majority of our stockholders
might consider to be in their best interests.

OUR STOCK PRICE IS VOLATILE, AND YOU MAY NOT BE ABLE TO RECOVER YOUR INVESTMENT
IF OUR STOCK PRICE DECLINES.

The stock 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 and when
and how many stores we acquire or open;

-- quarterly variations in our competitors' results of operations;

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

-- the stock price performance of comparable companies; and

-- general market conditions or market conditions specific to particular
industries.

OUR STOCK PRICE MAY DECLINE IF EXISTING STOCKHOLDERS SELL ADDITIONAL SHARES.

As of March 31, 2002 and assuming the conversion of our Series A preferred
stock and all outstanding options, upon completion of this offering,
approximately 75.0% of our common stock on a fully diluted basis will be held by
the public, approximately 1.8% will be held by members of our management, other
than Mr. Speese, approximately 3.6% will be held by Mr. Speese and approximately
19.6%, or 18.4% if the underwriters exercise their over-allotment option in
full, will be held by Apollo Investment Fund IV, L.P., Apollo Overseas Partners
IV, L.P. and their affiliates and Bear Stearns MB Fund. If these stockholders
sell shares of our common stock in the public market, the market price of our
common stock could fall. These sales might make it more difficult for us to sell
equity or equity-related securities in the future at a time and place that we
deem appropriate.

We, our directors and executive officers, and the selling stockholders have
each entered into certain lock-up restrictions in which each agrees that, in
general, without the prior written consent of Morgan Stanley & Co. Incorporated
on behalf of the underwriters, each will not, during the period ending 90 days
after the date of this prospectus, sell or agree to sell, any shares of common
stock or any securities convertible into or exercisable or exchangeable for
common stock. Following the expiration of these lock-up restrictions, all of the
shares held by those persons will be eligible for immediate sale in the public
market, subject in some cases to compliance with the volume and manner of sale
requirements of Rule 144 under the Securities Act of 1933, and in the case of
Mr. Speese, to a stockholders agreement he has entered into with Apollo and us.
Under the registration rights agreements we have entered into, Apollo and its
affiliates have the right to request that their shares be registered, subject to
a reduction in the number of shares upon the advice of a managing underwriter in
the related offering.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

-- uncertainties regarding the ability to open new stores;

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

-- our ability to enhance the performance of these acquired stores;

-- our ability to control store level costs and implement our margin
enhancement initiatives;

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

-- the results of our litigation;

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

-- interest rates;

-- our ability to collect on our rental purchase agreements;

-- our ability to effectively hedge interest rates on our outstanding
debt;

-- changes in our effective tax rate; and

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

Additional factors that could cause our actual results to differ materially
from our expectations are discussed under the section entitled "Risk Factors"
and elsewhere in this prospectus. You should not unduly rely on these
forward-looking statements, which speak only as of the date of this prospectus.
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 prospectus or to reflect the occurrence of
unanticipated events.

USE OF PROCEEDS

We will not receive any proceeds from the sale of common stock in this
offering by the selling stockholders.

DIVIDEND POLICY

We have not paid any cash dividends since the time of our initial public
offering. Our senior credit facility currently prohibits the payment of cash
dividends on our common stock and preferred stock and the indenture governing
our subordinated notes places restrictions on our ability to do so. We do not
anticipate paying cash dividends on our common stock in the foreseeable future.

We have not paid any cash dividends on our Series A preferred stock to
date. Under the terms of the certificate of designations governing our Series A
preferred stock, we may pay dividends on our Series A preferred stock, at our
option, in cash or additional shares of Series A preferred stock until August
2003, after which time the dividends are payable in cash. Since the time of the
issuance of our Series A preferred stock, we have paid the required dividends in
additional shares of Series A preferred stock. These additional shares are
issued under the same terms and with the same conversion ratio as were the
shares of our Series A preferred stock issued in August 1998. Accordingly, the
shares of Series A preferred stock issued as a dividend are convertible into our
common stock at a conversion price of $27.935. Based on a liquidation preference
of $297,958,775 as of March 31, 2002, the Series A preferred stock is
convertible into 10,666,145 shares of common stock, 3,120,000 of which are being
sold by the selling stockholders in this offering. Our senior credit facilities
agreement allows us to pay cash dividends on our Series A preferred stock
beginning in August 2003 so long as we are not in default under that agreement.
Cash dividend payments are also subject to the restrictions in the indenture
governing our subordinated notes. These restrictions in the indenture would not
currently prohibit the payment of cash dividends.

Any change in our dividend policy, including our dividend policy on our
Series A preferred stock, will be made at the discretion of our Board of
Directors and will depend on a number of factors, including future earnings,
capital requirements, contractual restrictions, financial condition, future
prospects and any other factors our Board of Directors may deem relevant. You
should read the section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources"
discussed later in this report.

COMMON STOCK PRICE RANGE

Our common stock is quoted on the Nasdaq National Market under the symbol
"RCII". The following table sets forth, for the period indicated, the high and
low sale prices per share of our common stock as reported on the Nasdaq National
Market.

HIGH LOW
------- -------

YEAR ENDED DECEMBER 31, 2000
First Quarter.......................................... $24.000 $13.625
Second Quarter......................................... 25.875 14.938
Third Quarter.......................................... 36.188 21.438
Fourth Quarter......................................... 35.000 22.000
YEAR ENDED DECEMBER 31, 2001
First Quarter.......................................... $47.438 $30.625
Second Quarter......................................... 53.850 33.063
Third Quarter.......................................... 53.050 21.250
Fourth Quarter......................................... 34.300 18.970
YEAR ENDED DECEMBER 31, 2002
First Quarter.......................................... $52.000 $30.750
Second Quarter (through May 17, 2002).................. 63.870 48.510

On May 17, 2002, the reported last sale price for our common stock on the
Nasdaq National Market was $61.95. As of May 17, 2002, there were approximately
45 record holders of our common stock.

CAPITALIZATION

The following table sets forth our cash and cash equivalents and
capitalization as of March 31, 2002 on an actual basis and pro forma to reflect
the conversion of Series A preferred stock into 3,120,000 shares of common stock
in this offering, excluding estimated offering expenses of $500,000 payable by
us. This table should be read in conjunction with our financial statements and
related notes and the other financial information contained in or incorporated
by reference in this prospectus.

AS OF MARCH 31, 2002
-----------------------
ACTUAL PRO FORMA
---------- ----------
(IN THOUSANDS, EXCEPT
SHARE DATA)

Cash and cash equivalents................................... $ 167,264 $ 167,264
========== ==========
Debt:
Senior debt............................................... $ 428,000 $ 428,000
Subordinated notes payable, net of discount............... 274,525 274,525
---------- ----------
Total debt........................................ 702,525 702,525

Preferred stock:
Redeemable convertible voting preferred stock, net of
placement costs, $.01 par value; 5,000,000 shares
authorized; 295,198 shares issued and outstanding
(actual), 208,843 shares issued and outstanding (pro
forma)................................................. 294,674 208,472
Stockholders' equity:
Common stock, $.01 par value; 125,000,000 shares
authorized; 28,084,227 shares issued, 24,145,962 shares
outstanding (actual); 31,204,227 shares issued,
27,265,962 shares outstanding (pro forma).............. 281 312
Additional paid-in capital................................ 203,490 289,661
Accumulated comprehensive loss............................ (4,539) (4,539)
Retained earnings......................................... 310,224 310,224
Treasury stock, 3,938,265 shares at cost.................. (84,724) (84,724)
---------- ----------
Total stockholders' equity........................ 424,732 510,934
---------- ----------
Total capitalization.............................. $1,421,931 $1,421,931
========== ==========

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

The selected financial data presented below for the five years ended
December 31, 2001 have been derived from our consolidated financial statements
as audited by Grant Thornton LLP, independent certified public accountants. Our
selected financial and operating data as of and for the three months ended March
31, 2001 and 2002 have been derived from our unaudited consolidated financial
statements which were prepared on the same basis as our audited financial
statements and include, in our opinion, all adjustments necessary to present
fairly the information presented for the interim periods. Interim period results
are not necessarily indicative of results that will be obtained for the full
year. The historical financial data are qualified in their entirety by, and
should be read in conjunction with, the financial statements and the notes
thereto, the section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and other financial information included
elsewhere or incorporated in this prospectus.

In May and August 1998, we completed the acquisitions of Central Rents and
Thorn Americas, respectively, both of which affect the comparability between the
historical financial and operating data for the periods presented.

THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------------ --------------------
1997 1998 1999 2000 2001 2001 2002
-------- -------- ---------- ---------- ---------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE DATA)

CONSOLIDATED STATEMENTS OF EARNINGS:
Revenues
Store
Rentals and fees............ $275,344 $711,443 $1,270,885 $1,459,664 $1,650,851 $393,123 $443,705
Merchandise sales........... 14,125 41,456 88,516 81,166 94,733 30,759 39,605
Other....................... 679 7,282 2,177 3,018 3,476 1,330 614
Franchise
Merchandise sales........... 37,385 44,365 49,696 51,769 53,584 13,027 13,253
Royalty income and fees..... 4,008 5,170 5,893 5,997 5,884 1,463 1,433
-------- -------- ---------- ---------- ---------- -------- --------
Total revenues.......... 331,541 809,716 1,417,167 1,601,614 1,808,528 439,702 498,610
Operating expenses
Direct store expenses
Depreciation of rental
merchandise............... 57,223 164,651 265,486 299,298 343,197 80,812 92,223
Cost of merchandise sold.... 11,365 32,056 74,027 65,332 72,539 21,555 26,982
Salaries and other
expenses.................. 162,458 423,750 770,572 866,234 1,019,402 242,219 262,619
Franchise cost of merchandise
sold........................ 35,841 42,886 47,914 49,724 51,251 12,494 12,653
-------- -------- ---------- ---------- ---------- -------- --------
266,887 663,343 1,157,999 1,280,588 1,486,389 357,080 394,477
General and administrative
expenses.................... 13,304 28,715 42,029 48,093 55,359 12,869 15,117
Amortization of intangibles... 5,412 15,345 27,116 28,303 30,194 7,268 720
Class action litigation
settlements................. -- 11,500 -- (22,383)(1) 52,000(2) -- --
-------- -------- ---------- ---------- ---------- -------- --------
Total operating
expenses.............. 285,603 718,903 1,227,144 1,334,601 1,623,942 377,217 410,314
-------- -------- ---------- ---------- ---------- -------- --------
Operating profit........ 45,938 90,813 190,023 267,013 184,586 62,485 88,296
Non-recurring financing costs... -- 5,018 -- -- -- -- --
Interest expense................ 2,194 39,144 75,673 74,324 60,874 16,510 15,798
Interest income................. (304) (2,004) (904) (1,706) (1,094) (361) (723)
-------- -------- ---------- ---------- ---------- -------- --------
Earnings before income
taxes................. 44,048 48,655 115,254 194,395 124,806 46,336 73,221
Income tax expense.............. 18,170 23,897 55,899 91,368 58,589 21,338 29,658
-------- -------- ---------- ---------- ---------- -------- --------
Net earnings............ 25,878 24,758 59,355 103,027 66,217 24,998 43,563
Preferred dividends............. -- 3,954 10,039 10,420 15,408 4,325 4,992
-------- -------- ---------- ---------- ---------- -------- --------
Net earnings allocable
to common
stockholders.......... $ 25,878 $ 20,804 $ 49,316 $ 92,607 $ 50,809 $ 20,673 $ 38,571
======== ======== ========== ========== ========== ======== ========
Basic earnings per common
share......................... $1.04 $.84 $2.04 $3.79 $1.97 $.83 $1.57
Diluted earnings per common
share......................... $1.03 $.83 $1.74 $2.96 $1.79 $.69 $1.20
Basic weighted average shares... 24,844 24,698 24,229 24,432 25,846 24,959 24,515
Diluted weighted average
shares........................ 25,194 25,103 34,131 34,812 37,079 36,375 36,321

AS OF
AS OF DECEMBER 31, MARCH 31,
------------------------------------------------------------ -----------
1997 1998 1999 2000 2001 2002
-------- ---------- ---------- ---------- ---------- -----------
(IN THOUSANDS) (UNAUDITED)

CONSOLIDATED BALANCE SHEET DATA:
Rental merchandise, net................... $112,759 $408,806 $531,223 $587,232 $653,701 $656,544
Intangible assets, net.................... 61,183 727,976 707,324 708,328 711,096 712,764
Total assets.............................. 208,868 1,502,989 1,485,000 1,486,910 1,619,920 1,677,036
Total debt................................ 26,280 805,700 847,160 741,051 702,506 702,525
Total liabilities......................... 56,115 1,088,600 1,007,408 896,307 922,632 957,630
Redeemable convertible voting preferred
stock, net.............................. -- 259,476 270,902 281,232 291,910 294,674
Stockholders' equity...................... 152,753 154,913 206,690 309,371 405,378 424,732

THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------------- ------------
1997 1998 1999 2000 2001 2002
------- -------- -------- -------- -------- ------------
(IN THOUSANDS) (UNAUDITED)

OPERATING DATA:
Stores open at end of period........... 504 2,126 2,075 2,158 2,281 2,284
Comparable store revenue growth(3)..... 8.1% 8.1% 7.7% 12.6% 8.0% 7.7%
Weighted average number of stores...... 479 1,222 2,089 2,103 2,235 2,282
Franchise stores open at end of
period............................... 262 324 365 364 342 338
EBITDA(4).............................. $56,951 $135,140 $248,452 $306,077 $304,690 $98,482
EBITDA margin.......................... 17.2% 16.7% 17.5% 19.1% 16.8% 19.8%
Capital expenditures................... $10,446 $21,860 $36,211 $37,937 $57,532 $8,100

------------

(3) Comparable store revenue for each period presented includes revenues only of
stores open throughout the full period and the comparable prior period.

(4) EBITDA is defined as operating profit plus depreciation (exclusive of
depreciation of rental merchandise), amortization of intangibles and
non-recurring litigation settlements. EBITDA should not be considered as a
substitute for income from operations, net income or cash flow from
operating activities (as determined in accordance with generally accepted
accounting principles) for the purpose of analyzing operating performance,
financial position and cash flows.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

OVERVIEW

We are the largest rent-to-own operator in the United States with an
approximate 29% market share based on store count. At March 31, 2002, we
operated 2,284 company-owned stores in 50 states, the District of Columbia and
Puerto Rico. Our subsidiary, ColorTyme, is a national franchisor of rent-to-own
stores. At March 31, 2002, ColorTyme had 338 franchised stores in 42 states, 326
of which operated under the ColorTyme name and 12 stores of which operated under
the Rent-A-Center name. Our stores offer high quality durable products such as
home electronics, appliances, computers, and furniture and accessories under
flexible rental purchase agreements that allow the customer to obtain ownership
of the merchandise at the conclusion of an agreed-upon rental period. These
rental purchase agreements are designed to appeal to a wide variety of customers
by allowing them to obtain merchandise that they might otherwise be unable to
obtain due to insufficient cash resources or a lack of access to credit. These
agreements also cater to customers who only have a temporary need, or who simply
desire to rent rather than purchase the merchandise.

We have pursued an aggressive growth strategy since 1989. We have sought to
acquire underperforming stores to which we could apply our operating model as
well as open new stores. As a result, the acquired stores have generally
experienced more significant revenue growth during the initial periods following
their acquisition than in subsequent periods. Because of significant growth
since our formation, particularly due to the Thorn Americas acquisition, our
historical results of operations and period-to-period comparisons of such
results and other financial data, including the rate of earnings growth, may not
be meaningful or indicative of future results.

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

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

If a change in control occurs, we may be required to offer to repurchase
all of our outstanding senior subordinated notes at 101% of their principal
amount, plus accrued interest to the date of repurchase. Our senior credit
facilities restrict our ability to repurchase our senior subordinated notes,
including in the event of a change in control. In addition, a change in control
would result in an event of default under our senior credit facilities, which
could then be accelerated by our lenders, and would require us to offer to
redeem our Series A preferred stock. In the event a change in control occurs, we
cannot be sure that we would have enough funds to immediately pay our
accelerated senior credit facility obligations, pay all of our senior
subordinated notes and redeem all of our Series A preferred stock, or that we
would be able to obtain financing to do so on favorable terms, if at all.

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

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

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

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

Based on an assessment of our accounting policies and the underlying
judgments and uncertainties affecting the application of those policies, we
believe that our consolidated financial statements provide a meaningful and fair
perspective of our company. However, we do not suggest that other general risk
factors, such as those discussed elsewhere in this prospectus 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.

OTHER SIGNIFICANT ACCOUNTING POLICIES

Our significant accounting policies are summarized below and in Note A to
our consolidated financial statements included elsewhere herein.

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

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

Depreciation of Rental Merchandise. We depreciate our rental merchandise
using the income forecasting method. The income forecasting method of
depreciation we use does not consider salvage value and does not allow the
depreciation of rental merchandise during periods when it is not generating
rental revenue. The objective of this method of depreciation is to provide for
consistent depreciation expense while the merchandise is on rent.

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

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

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

Amortization of Intangibles. Amortization of intangibles consists
primarily of the amortization of the excess of purchase price over the fair
market value of acquired assets and liabilities. In July 2001, the Financial
Accounting Standards Board issued SFAS 142, Goodwill and Intangible Assets,
which revised the accounting for purchased goodwill and intangible assets. Under
SFAS 142, goodwill and intangible assets with indefinite lives acquired after
June 30, 2001 were not amortized. Effective January 1, 2002, all previously
recognized goodwill and intangible assets with indefinite lives are no longer
subject to amortization. SFAS 142 requires an impairment test be conducted
annually and a transitional impairment test be conducted by June 30, 2002. We
completed our transitional impairment test as of March 31, 2002 and no
impairment existed at that date.

Preferred Dividends. Dividends on Series A preferred stock are payable at
an annual rate of 3.75%. Shares of Series A preferred stock distributed as
dividends in-kind are accounted for at the greater of the stated value or the
value of the common stock obtainable upon conversion on the payment date.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, historical
Consolidated Statements of Earnings data as a percentage of total store and
franchise revenues.

THREE THREE
MONTHS MONTHS
YEAR ENDED ENDED YEAR ENDED ENDED
DECEMBER 31, MARCH 31, DECEMBER 31, MARCH 31,
--------------------- ------------- --------------------- -------------
(COMPANY-OWNED STORES ONLY) (FRANCHISE OPERATIONS ONLY)
------------------------------------- -------------------------------------
1999 2000 2001 2001 2002 1999 2000 2001 2001 2002
----- ----- ----- ----- ----- ----- ----- ----- ----- -----

REVENUES:
Rentals and fees............ 93.3% 94.5% 94.4% 92.5% 91.7%
Merchandise sales........... 6.5 5.3 5.4 7.2 8.2
Other....................... .2 .2 .2 .3 .1
----- ----- ----- ----- -----
100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
FRANCHISE REVENUES:
Merchandise sales........... 89.4% 89.6% 90.1% 89.9% 90.2%
Royalty income and fees..... 10.6 10.4 9.9 10.1 9.8
----- ----- ----- ----- -----
100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
OPERATING EXPENSES:
Direct store expenses
Depreciation of rental
merchandise............. 19.5% 19.4% 19.6% 19.0% 19.1% -- -- -- -- --
Cost of merchandise
sold.................... 5.4 4.2 4.1 5.1 5.6 86.2% 86.1% 86.2% 86.2% 86.2%
Salaries and other
expenses................ 56.6 56.1 58.3 57.0 54.3 -- -- -- -- --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
81.5 79.7 82.0 81.1 79.0 86.2 86.1 86.2 86.2 86.2
General and administrative
expenses.................. 2.9 2.9 3.2 2.9 3.1 5.1 4.4 4.5 4.0 4.7
Amortization of
intangibles............... 2.0 1.8 1.7 1.7 .1 .6 .6 .6 .6 .5
Class action litigation
settlements............... -- (1.4) 3.0 -- -- -- -- -- -- --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total operating
expenses......... 86.4 83.0 89.9 85.7 82.2 91.9 91.1 91.3 90.8 91.4
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Operating profit............ 13.6 17.0 10.1 14.3 17.8 8.1 8.9 8.7 9.2 8.6
Interest expense/(income)... 5.5 4.8 3.4 3.8 3.1 (0.8) (1.0) (1.1) (1.1) (1.2)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Earnings before income
taxes..................... 8.1% 12.2% 6.7% 10.5% 14.7% 8.9% 9.9% 9.8% 10.3% 9.8%
===== ===== ===== ===== ===== ===== ===== ===== ===== =====

THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO THREE MONTHS ENDED MARCH 31,
2001

Store Revenue. Total store revenue increased by $58.7 million, or 13.8%,
to $483.9 million for the three months ended March 31, 2002 from $425.2 million
for the three months ended March 31, 2001. The increase in total store revenue
is primarily attributable to growth in same store revenues and incremental
revenues in new and acquired stores, as well as an increase in the amount of
merchandise sales over the same period in 2001.

Same store revenues represent those revenues earned in stores that were
operated by us for each of the entire three month periods ending March 31, 2002
and 2001. Same store revenues increased by $30.1 million, or 7.7%, to $423.1
million for the three months ended March 31, 2002 from $393.0 million in 2001.
The increase in same store revenues was primarily attributable to an increase in
the number of customers served (approximately 404 per store for 2002 vs.
approximately 395 per store for 2001 in same stores open), the number of
agreements on rent (approximately 624 per store for 2002 vs. approximately 610
per store for 2001 in same stores open), as well as revenue earned per agreement
on rent (approximately $96 per month per agreement for 2002 vs. approximately
$94 per agreement for 2001). Merchandise sales increased $8.8 million,

or 28.8%, to $39.6 million for 2002 from $30.8 million in 2001. The increase in
merchandise sales was primarily attributable to an increase in the number of
items sold in the first quarter of 2002 (approximately 258,000) from the number
of items sold in 2001 (approximately 210,000). This increase in the number of
items sold in 2002 versus the same period in 2001 was primarily the result of an
increase in the amount of customers exercising their early purchase options as a
result of in-store promotions made during the third quarter of 2001, which
included a reduction in the rates and terms on certain rental agreements.

Franchise Revenue. Total franchise revenue increased by $196,000, or 1.4%,
to $14.7 million for the three months ended March 31, 2002 from $14.5 million in
2001. This increase was primarily attributable to an increase in merchandise
sales to franchise locations, partially offset by a decrease in the number of
franchised locations in the first quarter of 2002 as compared to the first
quarter of 2001.

Depreciation of Rental Merchandise. Depreciation of rental merchandise
increased by $11.4 million, or 14.1%, to $92.2 million for the three months
ended March 31, 2002 from $80.8 million in 2001. This increase was primarily
attributable to an increase in rental and fee revenue. Depreciation of rental
merchandise expressed as a percent of store rentals and fees revenue increased
to 20.8% in 2002 from 20.6% for the same period in 2001. This slight increase is
primarily a result of in-store promotions made during the third quarter of 2001,
which included a reduction in the rates and terms on certain rental agreements.
These in-store promotions caused depreciation to be a greater percentage of
store rentals and fees revenue on those promotional items rented.

Cost of Merchandise Sold. Cost of merchandise sold increased by $5.4
million, or 25.2%, to $27.0 million for the three months ended March 31, 2002
from $21.6 million in 2001. This increase was primarily a result of an increase
in the number of items sold during the first three months of 2002 as compared to
the first three months of 2001.

Salaries and Other Expenses. Salaries and other expenses expressed as a
percentage of total store revenue decreased to 54.3% for the three months ended
March 31, 2002 from 57.0% for the three months ended March 31, 2001. This
decrease was primarily attributable to an increase in store revenues in the
first quarter of 2002 as compared to 2001 coupled with the realization of our
margin enhancement initiatives and reductions in store level costs.

Franchise Cost of Merchandise Sold. Franchise cost of merchandise sold
increased by $159,000, or 1.3%, to $12.7 million for the three months ended
March 31, 2002 from $12.5 million in 2001. This increase was primarily
attributable to an increase in merchandise sales to franchise locations,
partially offset by a decrease in the number of franchised locations in the
first quarter of 2002 as compared to the first quarter of 2001.

General and Administrative Expenses. General and administrative expenses
expressed as a percent of total revenue remained relatively constant at 3.0% and
2.9% for the three months ending March 31, 2002 and 2001, respectively.

Amortization of Intangibles. Amortization of intangibles decreased by $6.5
million, or 90.1%, to $720,000 for the three months ended March 31, 2002 from
$7.3 million for the three months ended March 31, 2001. This decrease was
directly attributable to the implementation of SFAS 142, which requires that
goodwill no longer be amortized.

Operating Profit. Operating profit increased by $25.8 million, or 41.3%,
to $88.3 million for the three months ended March 31, 2002 from $62.5 million in
2001. Operating profit as a percentage of total revenue increased to 17.7% for
the three months ended March 31, 2002, from 14.2% in 2001. This increase was
primarily attributable to an increase in store revenues in the first quarter of
2002 as compared to 2001 coupled with the realization of our margin enhancement
initiatives, reduction of store level costs and the reduction of intangible
amortization expense as discussed above. After adjusting reported results for
the first quarter of 2001 to exclude the effects of goodwill amortization,
operating profit increased by $18.7 million, or 26.9% on a comparable basis.

Net Earnings. Net earnings increased by $18.6 million, or 74.3%, to $43.6
million for the three months ended March 31, 2002 from $25.0 million in 2001.
This increase is primarily attributable to growth in total revenues, reduced
interest expenses resulting from a reduction in outstanding debt and a reduction
in the expenses associated with the amortization of intangibles. After adjusting
reported results for the first quarter of 2001 to exclude the effects of
goodwill amortization, net earnings increased by $12.4 million, or 39.8% on a
comparable basis.

Preferred Dividends. Dividends on our Series A preferred stock are payable
quarterly at an annual rate of 3.75%. We account for shares of preferred stock
distributed as dividends in-kind at the greater of the stated value or the value
of the common stock obtainable upon conversion on the payment date. Preferred
dividends increased by $667,500, or 15.4%, to $5.0 million for the three months
ended March 31, 2002 as compared to $4.3 million in 2001. This increase is a
result of more shares of Series A Preferred stock outstanding for the three
months ended March 31, 2002 as compared to the three months ended March 31,
2001.

YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

Store Revenue. Total store revenue increased by $205.2 million, or 13.3%,
to $1,749.1 million for 2001 from $1,543.9 million for 2000. The increase in
total store revenue was primarily attributable to growth in same store revenues
during 2001 as well as incremental revenues from the opening of 76 stores and
the acquisition of 95 stores in 2001. Same store revenues represent those
revenues earned in stores that were operated by us for the entire years ending
December 31, 2001 and 2000. Same store revenues increased by $111.6 million, or
8.0%, to $1,501.7 million for 2001 from $1,390.1 million in 2000. This
improvement was primarily attributable to an increase in the number of customers
served (approximately 407 per store as of December 31, 2001 vs. approximately
391 per store as of December 31, 2000 in same stores open), the number of
agreements on rent (approximately 624 per store as of December 31, 2001 vs.
approximately 597 per store as of December 31, 2000 in same stores open), as
well as revenue earned per agreement on rent (approximately $95 per month per
agreement for 2001 vs. approximately $92 per month per agreement for 2000). This
increase in revenue was partially offset by loss of revenues associated with the
divestiture or consolidation of 48 stores in 2001.

Franchise Revenue. Total franchise revenue increased by $1.7 million, or
2.9%, to $59.5 million for 2001 from $57.8 million in 2000. This increase was
primarily attributable to an increase in merchandise sales to franchise
locations during 2001 as compared to 2000, partially offset by a decrease in the
number of franchised locations in 2001 as compared to 2000.

Depreciation of Rental Merchandise. Depreciation of rental merchandise
increased by $43.9 million, or 14.7%, to $343.2 million for 2001 from $299.3
million for 2000. This increase was primarily attributable to an increase in
rental and fee revenue of $191.2 million, or 13.1%, to $1,650.9 million for 2001
from $1,459.7 million for 2000. Depreciation of rental merchandise expressed as
a percentage of store rentals and fees revenue increased to 20.8% in 2001 from
20.5% in 2000. This increase is a result of an increase in the number of stores
acquired in 2001 of 95 from 74 in 2000, and in-store promotions made during the
third quarter of 2001, which included a reduction in the rates and terms on
certain rental agreements. These in-store promotions caused depreciation to be a
greater percentage of store rentals and fees revenue on those promotional items
rented.

Cost of Merchandise Sold. Cost of merchandise sold increased by $7.2
million, or 11.0%, to $72.5 million for 2001 from $65.3 million in 2000. This
increase was a result of an increase in the number of items sold in 2001,
primarily in the third and fourth quarters, as compared to 2000, resulting from
a reduction in the rates and terms on certain rental agreements beginning in the
third quarter of 2001.

Salaries and Other Expenses. Salaries and other expenses expressed as a
percentage of total store revenue increased to 58.3% for 2001 from 56.1% for
2000. This increase was primarily attributable to the infrastructure expenses
and costs associated with the opening of new stores under our store growth
initiatives, such as labor and recruiting costs for training centers as well as
additional middle and senior management personnel, and increases in advertising,
store level labor, insurance, and other operating expenses in 2001 over 2000.
21

Franchise Cost of Merchandise Sold. Franchise cost of merchandise sold
increased by $1.5 million, or 3.1%, to $51.2 million for 2001 from $49.7 in
2000. This increase is a direct result of an increase in merchandise sales to
franchise locations in 2001 as compared to 2000.

General and Administrative Expenses. General and administrative expenses
expressed as a percent of total revenue increased slightly to 3.1% in 2001 from
3.0% in 2000. This increase is primarily attributable to an increase in home
office labor and other overhead expenses for 2001 as compared to 2000.

Amortization of Intangibles. Amortization of intangibles increased by $1.9
million, or 6.7%, to $30.2 million for 2001 from $28.3 million in 2000. This
increase was primarily attributable to the amortization of additional goodwill
associated with the acquisition of 95 stores acquired in 2001. Under SFAS 142
discussed later, amortization of goodwill ceased effective January 1, 2002.
Amortization expense for other intangible assets, however, is expected to be
approximately $2.2 million for 2002, based on intangible assets other than
goodwill as of December 31, 2001.

Operating Profit. Operating profit decreased by $82.4 million, or 30.9%,
to $184.6 million for 2001 from $267.0 million for 2000. Excluding the pre-tax
effect of the class action litigation settlements of $16.0 million recorded in
the third quarter of 2001 and $36.0 million recorded in the fourth quarter of
2001, as well as the class action litigation settlement refund of $22.4 million
received in the second quarter of 2000, operating profit decreased by $8.0
million, or 3.3%, to $236.6 million for the year ended December 31, 2001 from
$244.6 million for the year ended December 31, 2000. Operating profit as a
percentage of total revenue decreased to 13.1% for the year ended December 31,
2001 before the pre-tax class action litigation settlement charges of $52.0
million, from 15.3% for the year ended December 31, 2000 before the pre-tax
class action litigation settlement refund of $22.4 million. The decrease in
operating profit before the effects of the class action litigation as a
percentage of total revenue is primarily attributable to costs incurred with the
opening of 76 new stores in 2001 and losses incurred for those stores in their
initial months of operations, increases in advertising, store level labor,
insurance, utility, and other operating expenses in 2001 as compared to 2000,
and lower gross profit margins in the third and fourth quarter of 2001 resulting
from in store promotions whereby rates and terms were reduced on certain rental
agreements. These costs were partially offset by an increase in overall store
revenue for 2001 and the implementation of expense management efforts in the
fourth quarter of 2001.

Net Earnings. Net earnings were $66.2 million for the year ended December
31, 2001, and $103.0 million for the year ended December 31, 2000. Before the
after-tax effect of the $52.0 million class action litigation settlement charges
recorded in 2001 and the $22.4 million class action litigation settlement refund
received in the second quarter of 2000, net earnings increased by $6.2 million,
or 6.8%, to $97.5 million for the year ended December 31, 2001, from $91.3
million for the year ended December 31, 2000. This increase, excluding the after
tax effect of the class action litigation settlement adjustments, is primarily
attributable to growth in total revenues and reduced interest expenses resulting
from a reduction in outstanding debt from our May 2001 equity offering and
December 2001 debt offering, partially offset by the increased expenses incurred
in connection with the opening of 76 new stores in 2001, increases in operating
expenses and lower gross profit margins in the third and fourth quarters of
2001.

Preferred Dividends. Dividends on our Series A preferred stock are payable
quarterly at an annual rate of 3.75%. We account for shares of preferred stock
distributed as dividends in-kind at the greater of the stated value or the value
of the common stock obtainable upon conversion on the payment date. Preferred
dividends increased by $5.0 million, or 47.9%, to $15.4 million for the year
ended December 31, 2001 as compared to $10.4 million for the year ended December
31, 2000. This increase is a result of more shares of Series A preferred stock
outstanding in 2001 as compared to 2000.

YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999

Store Revenue. Total store revenue increased by $182.3 million, or 13.4%,
to $1,543.9 million for 2000 from $1,361.6 million for 1999. The increase in
total store revenue is directly attributable to the success of our efforts on
improving store operations through:

-- increasing the average price per agreement on rent by upgrading our
rental merchandise, primarily at newly acquired stores;

-- increasing the number of agreements on rent;

-- increasing the customer base; and

-- incremental revenues through acquisitions.

Same store revenues increased by $161.2 million, or 12.6%, to $1,444.1
million for 2000 from $1,282.9 million in 1999. Same store revenues represent
those revenues earned in stores that were operated by us for the entire years
ending December 31, 2000 and 1999. This improvement was primarily attributable
to an increase in the number of customers served, the number of agreements on
rent, as well as revenue earned per agreement on rent.

Franchise Revenue. Total franchise revenue increased by $2.2 million, or
3.9%, to $57.8 million for 2000 from $55.6 million in 1999. This increase was
primarily attributable to an increase in the sale of rental merchandise to
franchisees resulting from growth in the franchise store operations.

Depreciation of Rental Merchandise. Depreciation of rental merchandise
increased by $33.8 million, or 12.7%, to $299.3 million for 2000 from $265.5
million for 1999. Depreciation of rental merchandise expressed as a percentage
of store rentals and fees revenue decreased from 20.9% in 1999 to 20.5% in 2000.
This decrease is primarily attributable to the successful implementation of our
pricing strategies and inventory management practices in newly acquired stores.

Cost of Merchandise Sold. Cost of merchandise sold decreased by $8.7
million, or 11.7%, to $65.3 million for 2000 from $74.0 million in 1999. This
decrease was a direct result of fewer cash sales of product in 2000 as compared
to 1999. During 1999, we focused our efforts on increasing the amount of
merchandise sales to reduce certain items acquired in the Thorn Americas and
Central Rents acquisitions that were not components of our normal merchandise
strategy.

Salaries and Other Expenses. Salaries and other expenses expressed as a
percentage of total store revenue decreased to 56.1% for 2000 from 56.6% for
1999. This decrease is a result of the leveraging of our fixed and semi-fixed
costs such as labor, advertising and occupancy over a larger revenue base.
Expenses included in the salaries and other category are items such as labor,
delivery, service, utility, advertising, and occupancy costs.

Franchise Cost of Merchandise Sold. Franchise cost of merchandise sold
increased by $1.8 million, or 3.8%, to $49.7 million for 2000 from $47.9 in
1999. This increase is a direct result of an increase in merchandise sold to
franchisees in 2000 as compared to 1999.

General and Administrative Expenses. General and administrative expenses
expressed as a percent of total revenue remained level at 3.0% in 2000 from 3.0%
in 1999. In the future, we expect general and administrative expenses to remain
relatively stable at 3.0% of total revenue.

Amortization of Intangibles. Amortization of intangibles increased by $1.2
million, or 4.4%, to $28.3 million for 2000 from $27.1 million in 1999. This
increase was primarily attributable to the additional goodwill amortization
associated with the acquisition of 74 stores acquired in 2000.

Operating Profit. Operating profit increased by $77.0 million, or 40.5%,
to $267.0 million for 2000 from $190.0 million for 1999. In the second quarter
of 2000, we received a pre-tax class action litigation settlement refund of
$22.4 million associated with the settlement of three class action lawsuits in
the state of New Jersey. Operating profit stated before the effects of this
settlement refund increased by $54.6 million, or 28.7%. Operating profit as a
percentage of total revenue increased to 15.3% in 2000 from 13.4% in 1999,
calculated
23

before the effects of the non-recurring settlement refund. This increase is
attributable to our efforts in improving the efficiency and profitability of our
stores.

Net Earnings. Net earnings increased by $43.7 million, or 73.6%, to $103.0
million in 2000 from $59.3 million in 1999. Excluding the effects of the
settlement refund discussed above, net earnings increased by $31.8 million, or
53.6%.

Preferred Dividends. Dividends on our Series A preferred stock are payable
quarterly at an annual rate of 3.75%. Dividends can be paid at our option in
cash or in additional shares of Series A preferred stock. Preferred dividends
increased by $381,000, or 3.8%, to $10.4 million for 2000 as compared to $10.0
million in 1999. This increase is a result of more shares of Series A preferred
stock outstanding in 2000 as compared to 1999.

QUARTERLY RESULTS

The following table contains certain unaudited historical financial
information for the quarters indicated.

1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

YEAR-ENDED DECEMBER 31, 2002
Revenues...................... $498,610
Operating profit.............. 88,296
Net earnings.................. 43,563
Basic earnings per common
share...................... $ 1.57
Diluted earnings per common
share...................... $ 1.20
YEAR-ENDED DECEMBER 31, 2001(1)
Revenues...................... $439,702 $442,759 $447,074 $478,993
Operating profit.............. 62,485 66,640 32,372 23,089
Net earnings.................. 24,998 27,545 9,974 3,700
Basic earnings per common
share...................... $ .83 $ .88 $ .27 $ .01
Diluted earnings per common
share...................... $ .69 $ .74 $ .26 $ .10
YEAR-ENDED DECEMBER 31, 2000(2)
Revenues...................... $392,526 $392,245 $404,968 $411,875
Operating profit.............. 58,552 84,184 63,720 60,557
Net earnings.................. 20,889 34,621 23,901 23,616
Basic earnings per common
share...................... $ .75 $ 1.32 $ .87 $ .85
Diluted earnings per common
share...................... $ .61 $ 1.00 $ .68 $ .67

1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
(AS A PERCENTAGE OF REVENUES)

YEAR-ENDED DECEMBER 31, 2002
Revenues...................... 100.0%
Operating profit.............. 17.7
Net earnings.................. 8.7
YEAR-ENDED DECEMBER 31, 2001(1)
Revenues...................... 100.0% 100.0% 100.0% 100.0%
Operating profit.............. 14.2 15.1 7.2 4.8
Net earnings.................. 5.7 6.2 2.2 0.8
YEAR-ENDED DECEMBER 31, 2000(2)
Revenues...................... 100.0% 100.0% 100.0% 100.0%
Operating profit.............. 14.9 21.4 15.7 14.7
Net earnings.................. 5.3 8.8 5.9 5.7

------------

(1) Includes the effects of a pre-tax legal settlement of $16.0 million in the
third quarter and $36.0 million in the fourth quarter of 2001 associated
with the settlement of gender discrimination lawsuits pending in the states
of Missouri, Illinois, and Tennessee.

(2) Includes the effects of a pre-tax legal reversion of $22.4 million
associated with the settlement of three class action lawsuits in the state
of New Jersey.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operating activities increased by $64.3 million to $96.3
million for the three months ending March 31, 2002 from $32.0 million in 2001.
This increase resulted primarily from an increase in net earnings and
depreciation of rental merchandise, as well as a decrease in the amount of
rental merchandise purchased during the first three months of 2002 compared to
2001.

Cash used in investing activities decreased by $2.9 million to $11.3
million during the three month period ending March 31, 2002 from $14.2 million
in 2001. This decrease is primarily attributable to the acquisition and opening
of fewer new stores during the first three months of 2002 as compared to 2001 as
well as a decrease in capital expenditures.

Cash used in financing activities decreased by $1.0 million to $25.8
million during the three month period ending March 31, 2002 from $26.8 million
in 2001. This decrease is a result of the difference between our purchase of
$34.7 million in treasury stock in the first quarter of 2002 as compared to debt
repayments of $37.9 million during the first quarter of 2001, offset by fewer
proceeds from options exercised in 2002 as compared to 2001. During the second
quarter of 2002, we have prepaid $37.1 million of our senior debt.

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

We believe that cash flow generated from operations, together with amounts
available under our senior credit facilities, will be sufficient to fund our
debt service requirements, rental merchandise purchases, capital expenditures,
litigation and our store expansion intentions during 2002. At April 30, 2002, we
had $154.5 million in cash. 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.

Rental Merchandise Purchases. We purchased $137.9 million and $151.8
million of rental merchandise during the three month periods ending March 31,
2002 and 2001, respectively.

Capital Expenditures. We make capital expenditures in order to maintain
our existing operations as well as for new capital assets in new and acquired
stores. We spent $8.1 million and $11.8 million on capital expenditures during
the three month periods ending March 31, 2002 and 2001, respectively, and expect
to spend approximately $36.9 million for the remainder of 2002.

Acquisitions and New Store Openings. For the first three months of 2002,
we spent approximately $3.5 million on acquisitions. For the entire year ending
December 31, 2002, we intend to add approximately 5% to 10% to our store base by
opening between 60 and 80 new store locations as well as continuing to pursue
opportunistic acquisitions.

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

Borrowings. The table below shows the scheduled maturity dates of our
senior debt outstanding at March 31, 2002.

YEAR ENDING DECEMBER 31,
------------------------ (IN THOUSANDS)

April 1 to December 31, 2002................................ $ 1,849
2003........................................................ 1,849
2004........................................................ 26,379
2005........................................................ 100,000
2006........................................................ 177,078
Thereafter.................................................. 120,845
--------
$428,000
========

Since March 31, 2002, we have prepaid approximately $37.1 million of our
senior debt during the second quarter, $19.0 million of which has been paid
since April 30, 2002.

Under our senior credit facilities, we are required to use 25% of the net
proceeds from any equity offering to repay our term loans. As we are not selling
any shares in this offering, we will not be required to make any prepayments on
our term loans as a result of this offering. We intend to continue to make
prepayments of debt under our senior credit facilities or repurchase some of our
senior subordinated notes to the extent we have available cash that is not
necessary for store openings or acquisitions. Our senior credit facilities
currently limit our ability to repurchase our senior subordinated notes in
excess of $54.0 million. We cannot, however, assure you that we will have excess
cash available for these purposes.

Senior Credit Facilities. The senior credit facilities are provided by a
syndicate of banks and other financial institutions led by JP Morgan Chase Bank,
as administrative agent. At March 31, 2002, we had a total of $428.0 million
outstanding under these facilities, all of which was under our term loans. At
March 31, 2002, we had $56.4 million of availability under this revolving credit
facility.

Borrowings under the senior credit facilities bear interest at varying
rates equal to 1.50% to 3.0% over LIBOR, which was 1.91% at March 31, 2002. We
also have a prime rate option under the facilities, but have not exercised it to
date. At March 31, 2002, the average rate on outstanding senior debt borrowings
was 8.69%.

On May 3, 2002, we amended and restated our senior credit facility to
provide for a new Tranche D LC Facility in an aggregate amount at closing equal
to $80.0 million to support our outstanding letters of credit, which currently
amount to approximately $63.5 million. Under this new LC Facility, in the event
that a letter of credit is drawn upon, we have the right to either repay the LC
lenders the amount withdrawn or request a loan in that amount. Interest on any
requested LC loan accrues at an adjusted prime rate plus 1.75% or, at our
option, at the Eurodollar base rate plus 2.75%, with the entire amount of the LC
Facility due on December 31, 2007. As a result of this amendment, our letters of
credit will be issued under the new LC

Facility which will increase the amount available to us under our revolving
credit facility, thereby enabling us to achieve more flexibility and liquidity
within our capital structure. At May 17, 2002, our revolving credit facilities
provide us with revolving loans in an aggregate principal amount of $130.0
million, all of which was available.

During 1998, we entered into interest rate protection agreements with two
banks, one of which expired in 2001. Under the terms of the current interest
rate protection agreements, the LIBOR rate used to calculate the interest rate
charged on $250.0 million of the outstanding senior term debt has been fixed at
an average rate of 5.60%. The protection on the $250.0 million expires in 2003.

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

The senior credit facilities contain covenants that limit our ability to:

-- incur additional debt (including subordinated debt) in excess of $25
million;

-- repurchase our capital stock and senior subordinated notes;

-- incur liens or other encumbrances;

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

-- sell assets, other than inventory;

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

-- make capital expenditures; or

-- enter into a new line of business.

The senior credit facilities require us to comply with several financial
covenants, including a maximum leverage ratio, a minimum interest coverage ratio
and a minimum fixed charge coverage ratio. At March 31, 2002, the maximum
leverage ratio was 3.75:1, the minimum interest coverage ratio was 3.00:1, and
the minimum fixed charge coverage ratio was 1.30:1. On that date, our actual
ratios were 2.12:1, 5.53:1 and 2.25:1, respectively.

Events of default under the senior credit facilities include customary
events, such as a cross-acceleration provision in the event that we default on
other debt. In addition, an event of default under the senior credit facilities
would occur if we undergo a change of control. This is defined to include the
case where Apollo ceases to own at least 4,474,673 shares of our common stock on
an as converted basis, or a third party becomes the beneficial owner of 33.33%
or more of our voting stock at a time when certain permitted investors own less
than the third party or Apollo entities own less than 35% of the voting stock
owned by the permitted investors. As of March 31, 2002 and after giving effect
to this offering, Apollo and its affiliates will continue to own 7,256,278
shares of our common stock on an as converted basis. We do not have the ability
to prevent Apollo from selling its stock, and therefore would be subject to an
event of default if Apollo did so and its sales were not agreed to by the
lenders under the senior credit facilities. This could result in the
acceleration of the maturity of our debt under the senior credit facilities, as
well as under the subordinated notes through their cross-acceleration provision.

Senior Subordinated Notes. In August 1998, we issued $175.0 million of
senior subordinated notes, maturing on August 15, 2008, under an indenture dated
as of August 18, 1998 among us, our subsidiary guarantors and the trustee, which
is now The Bank of New York, as successor to IBJ Schroder Bank & Trust Company.
In December 2001, we issued an additional $100.0 million of 11% senior
subordinated notes, maturing on August 15, 2008, under a separate indenture
dated as of December 19, 2001 among us, our subsidiary guarantors and The Bank
of New York, as trustee. On May 2, 2002, we closed an exchange offer for, among
other things, all of the notes issued by us under the 1998 indenture, such that
all of our senior subordinated notes are now governed by the terms of the 2001
indenture.

The 2001 indenture contains covenants that limit our ability to:

-- incur additional debt;

-- sell assets or our subsidiaries;

-- grant liens to third parties;

-- pay dividends or repurchase stock; and

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

Events of default under the 2001 indenture include customary events, such
as a cross-acceleration provision in the event that we default in the payment of
other debt due at maturity or upon acceleration for default in an amount
exceeding $25 million.

We may redeem the notes after August 15, 2003, at our option, in whole or
in part, at a premium declining from 105.5%.

The subordinated notes also require that upon the occurrence of a change of
control (as defined in the 2001 indenture), the holders of the notes have the
right to require us to repurchase the notes at a price equal to 101% of the
original aggregate principal amount, together with accrued and unpaid interest,
if any, to the date of repurchase. If we did not comply with this repurchase
obligation, this would trigger an event of default under our senior credit
facilities.

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

ColorTyme Guarantee. ColorTyme is a party to an agreement with Textron
Financial Corporation, who provides financing to qualifying franchisees of
ColorTyme. Under this agreement, in the event of default by the franchisee under
agreements governing this financing and upon the occurrence of certain events,
Textron may assign the loans and the collateral securing such loans to
ColorTyme, with ColorTyme then succeeding to the rights of Textron under the
debt agreements, including the rights to foreclose on the collateral. We
guarantee the obligations of ColorTyme under this agreement up to a maximum
amount of $50.0 million, of which $37.7 million was outstanding as of March 31,
2002.

Litigation. In 1998, we recorded an accrual of approximately $125.0
million for estimated probable losses on litigation assumed in connection with
the Thorn Americas acquisition. As of March 31, 2002, we have paid approximately
$123.7 million of this accrual in settlement of most of these matters and legal
fees. These settlements were funded primarily from amounts available under our
senior credit facilities, including the revolving credit facility and the
multidraw facility, as well as from cash flow from operations.

On November 1, 2001, we announced that we reached an agreement in principle
for the settlement of the Margaret Bunch, et al. v. Rent-A-Center, Inc. matter
pending in federal court in Kansas City, Missouri, which is subject to court
approval. Under the terms of the proposed settlement, while not admitting
liability, we would pay an aggregate of $12.25 million to the agreed upon class,
plus plaintiff's attorneys' fees as determined by the court and costs to
administer the settlement process. Accordingly, to account for the
aforementioned costs, as well as our own attorneys' fees, we recorded a
non-recurring charge of $16.0 million in the third quarter of 2001.

In early March 2002, we reached an agreement in principle with the
plaintiffs attorneys in the Wilfong matter pending in St. Louis, Missouri and
the EEOC to resolve the Wilfong suit and an EEOC action in Tennessee. Under the
terms of the proposed settlement, while not admitting any liability, we would
pay an aggregate of $47.0 million to female employees and certain female
applicants who were employed by or applied for employment with us for a period
commencing no later than April 19, 1998 through the future date of the notice to
the applicable class, plus up to $375,000 in settlement administrative costs.
The class members in Wilfong include all of the Bunch class members. The $47.0
million payment includes the $12.25 million payment discussed in connection with
the Bunch settlement and attorney fees for class counsel in Wilfong.

Members of the class who do not wish to participate in the settlement would be
given the opportunity to opt out of the settlement.

The proposed settlement contemplates the settlement would be subject to a
four-year consent decree, which could be extended by the court for an additional
one year upon a showing of good cause. Also, under the proposed settlement, we
agreed to augment our human resources department and our internal employee
complaint procedures; enhance our gender anti-discrimination training for all
employees; hire a consultant mutually acceptable to the parties for two years to
advise us on employment matters; provide certain reports to the EEOC during the
period of the consent decree; seek qualified female representation on our board
of directors; publicize our desire to recruit, hire and promote qualified women;
offer to fill job vacancies within our regional markets with qualified class
members who reside in those markets and express an interest in employment by us
to the extent of 10% of our job vacancies in such markets over a fifteen month
period; and to take certain other steps to improve opportunities for women. We
initiated many of the above programs prior to entering into the proposed
settlement. Under the proposed agreement, we have the right to terminate the
settlement under certain circumstances, including in the event that more than 60
class members elect to opt out of the settlement.

The proposed settlement contemplates that the Bunch case will be dismissed
with prejudice once such settlement becomes final. At the parties' request, the
court in the Bunch case stayed the proceedings in that case, including
postponing the fairness hearing previously scheduled for March 6, 2002.

The terms of the proposed settlement are subject to the parties entering
into a definitive settlement agreement and court approval. While we believe the
proposed settlement is fair, we cannot assure you that the settlement will be
approved by the court in its present form.

To account for the aforementioned costs, as well as our own attorney's
fees, we recorded an additional non-recurring charge of $36.0 million in the
fourth quarter of 2001 in connection with the Wilfong matter for a total
non-recurring charge of $52.0 million.

Additional settlements or judgments against us on our existing litigation
could affect our liquidity. Please refer to Note J or our consolidated financial
statements elsewhere in this prospectus.

Sales of Equity Securities. On May 31, 2001, we completed an offering of
3,680,000 shares of our common stock at an offering price of $42.50 per share.
In that offering, 1,150,000 shares were offered by us and 2,530,000 shares were
offered by some of our stockholders. Net proceeds to us were approximately $45.6
million.

During 1998, we issued 260,000 shares of our Series A preferred stock at
$1,000 per share, resulting in aggregate proceeds of $260.0 million. Dividends
on our Series A preferred stock accrue on a quarterly basis, at the rate of
$37.50 per annum, per share, and are currently paid in additional shares of
Series A preferred stock because of restrictive provisions in our senior credit
facilities. Beginning in 2003, we will be required to pay the dividends in cash
and may do so under our senior credit facilities so long as we are not in
default.

The Series A preferred stock is not redeemable until August 2002, after
which time we may, at our option, redeem the shares at 105% of the $1,000 per
share liquidation preference plus accrued and unpaid dividends.

Contractual Cash Commitments. The table below summarizes debt, lease and
other minimum cash obligations outstanding as of March 31, 2002:

PAYMENTS DUE BY YEAR
------------------------------------------------------------
2005 AND
CONTRACTUAL CASH OBLIGATIONS(1) TOTAL 2002 2003 2004 THEREAFTER
--------------------------------- -------- ------- ------- ------- -------------------
(IN THOUSANDS)

Senior Credit Facilities
(including current portion).... $428,000 $ 1,849 $ 1,849 $26,379 $397,923
11% Senior Subordinated
Notes(2)....................... 471,625 15,125 30,250 30,250 396,000
Series A Preferred Stock(3)...... 49,942 -- 1,275 8,330 40,337
Operating Leases................. 307,046 70,935 85,656 71,647 78,808

------------

(1) Excludes obligations under the ColorTyme guarantee, the change in control
and acceleration provisions under the senior credit facilities, and the
optional redemption, change in control and acceleration provisions under the
indenture governing our subordinated notes.

(2) Includes interest payments of $15.13 million on each of February 15 and
August 15 of each year.

(3) Represents cash dividends required to be paid on the Series A preferred
stock from August 5, 2003 through August 5, 2009 and gives effect to the
conversion of 86,355 shares of Series A preferred stock in this offering,
but excludes the obligations related to change in control and redemption,
and assumes that the internal rate of return threshold allowing us to cease
paying dividends on the Series A preferred stock is not met.

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

Our senior credit facilities contain covenants that generally limit our
ability to repurchase our capital stock. In addition, the indenture governing
our subordinated notes contain covenants limiting our ability to repurchase our
capital stock. Under these agreements, we had the ability to effect the
repurchases of our common stock from Mr. Talley. However, as a result of those
repurchases, our ability to make further repurchases of our common stock,
including pursuant to our common stock repurchase program, is limited.

Common Stock Repurchase Program. In April 2000, we announced that our
board of directors had authorized a program to repurchase in the open market up
to an aggregate of $25 million of our common stock. To date, no shares of common
stock have been purchased by us under this share repurchase program. We have
suspended this share repurchase program pending the consummation of this
offering. However, we may begin repurchasing shares of our common stock at any
time, subject to the limitations in our senior credit facilities and the
indenture governing our senior subordinated notes.

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

Seasonality. Our revenue mix is moderately seasonal, with the first
quarter of each fiscal year generally providing higher merchandise sales than
any other quarter during a fiscal year, primarily related to federal income tax
refunds. Generally, our customers will more frequently exercise their early
purchase option on their existing rental purchase agreements or purchase
pre-leased merchandise off the showroom floor during the first quarter of each
fiscal year. We expect this trend to continue in future periods. Furthermore, we
tend to experience slower growth in the number of rental purchase agreements on
rent in the third quarter of each

fiscal year when compared to other quarters throughout the year. As a result, we
would expect revenues for the third quarter of each fiscal year to remain
relatively flat with the prior quarter. We expect this trend to continue in
future periods unless we add significantly to our store base during the third
quarter of future fiscal years as a result of new store openings or
opportunistic acquisitions.

EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS

SFAS 142. In July 2001, the Financial Accounting Standards Board issued
SFAS No. 142, Goodwill and Intangible Assets which revised the accounting for
purchased goodwill and intangible assets. Under SFAS 142, goodwill and
intangible assets with indefinite lives acquired after June 30, 2001 were not
amortized. Effective January 1, 2002, all previously recognized goodwill and
intangible assets with indefinite lives are no longer subject to amortization.
SFAS 142 requires an impairment test be conducted annually and a transitional
impairment test be conducted by June 30, 2002. We completed our transitional
impairment test during our first quarter ended March 31, 2002 and no impairment
existed. As a result of implementation of SFAS 142, no goodwill amortization is
recorded for the three months ended March 31, 2002. On a comparative basis for
the quarter ended March 31, 2001, net income would have been $6.2 million higher
if goodwill had not been amortized.

SFAS 143. In June 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 143, Accounting for Asset
Retirement Obligations. SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. This statement is effective
for fiscal years beginning after June 15, 2002. The Company does not believe
that the implementation of this standard will have a material effect on its
financial position, results of operations, or cash flows.

BUSINESS

OVERVIEW

We are the largest operator in the United States rent-to-own industry with
an approximate 29% market share based on store count. At March 31, 2002, we
operated 2,284 company-owned stores in 50 states, the District of Columbia and
Puerto Rico. Our subsidiary, ColorTyme, is a national franchisor of rent-to-own
stores. At March 31, 2002, ColorTyme had 338 franchised stores in 42 states, 326
of which operated under the ColorTyme name and 12 stores of which operated under
the Rent-A-Center name. These franchise stores represent a further 4% market
share based on store count.

INDUSTRY BACKGROUND

According to industry sources and our estimates, the rent-to-own industry
consists of approximately 8,000 stores, and provides approximately 7.0 million
products to over 3.0 million households each year. We estimate the six largest
rent-to-own industry participants account for 4,700 of the total number of
stores, and the majority of the remainder of the industry consists of operations
with fewer than 20 stores. The rent-to-own industry is highly fragmented and,
due primarily to the decreased availability of traditional financing sources,
has experienced, and we believe will continue to experience, increasing
consolidation. We believe this consolidation trend in the industry presents
opportunities for us to continue to acquire additional stores on favorable
terms.

The rent-to-own industry serves a highly diverse customer base. According
to the Association of Progressive Rental Organizations, 92% of rent-to-own
customers have incomes between $15,000 and $50,000 per year. Many of the
customers served by the industry do not have access to conventional forms of
credit and are typically cash constrained. For these customers, the rent-to-own
industry provides access to brand name products that they would not normally be
able to obtain. The Association of Progressive Rental Organizations also
estimates that 93% of customers have high school diplomas. According to a
Federal Trade Commission study, 75% of rent-to-own customers were satisfied with
their experience with rent-to-own transactions. The study noted that customers
gave a wide variety of reasons for their satisfaction, "including the ability to
obtain merchandise they otherwise could not, the low payments, the lack of a
credit check, the convenience and flexibility of the transaction, the quality of
the merchandise, the quality of the maintenance, delivery, and other services,
the friendliness and flexibility of the store employees, and the lack of any
problems or hassles."

STRATEGY

We are currently focusing our strategic efforts on:

-- enhancing the operations and profitability in our store locations;

-- opening new stores and acquiring existing rent-to-own stores; and

-- building our national brand.
32

Enhancing Store Operations. We continually seek to improve store
performance through strategies intended to produce gains in operating efficiency
and profitability. For example, we have implemented programs to refocus our
operational personnel to prioritize store profit growth, including the effective
pricing of rental merchandise and the management of store level operating
expenses. Similarly, we have instituted a transitional duty program to maintain
store level productivity as well as to minimize costs related to the workers
compensation component of our insurance programs.

We believe we will achieve further gains in revenues and operating margins
in both existing and newly acquired stores by continuing to:

-- use focused advertising to increase store traffic;

-- expand the offering of upscale, higher margin products, such as
Philips, Sony, JVC, Toshiba and Mitsubishi electronics, Ashley,
England and Benchcraft furniture, Dell, Compaq and Hewlett Packard
computers and Whirlpool appliances, to increase the number of product
rentals;

-- employ strict store-level cost control;

-- closely monitor each store's performance through the use of our
management information system to ensure each store's adherence to
established operating guidelines; and

-- use a revenue and profit based incentive pay plan.

Opening New Stores and Acquiring Existing Rent-To-Own Stores. We intend to
expand our business both by opening new stores in targeted markets and by
acquiring existing rent-to-own stores. We will focus new market penetration in
adjacent areas or regions that we believe are underserved by the rent-to-own
industry, which we believe represents a significant opportunity for us. In
addition, we intend to pursue our acquisition strategy of targeting
under-performing and under-capitalized chains of rent-to-own stores. We have
gained significant experience in the acquisition and integration of other
rent-to-own operators and believe the fragmented nature of the rent-to-own
industry will result in ongoing consolidation opportunities. Acquired stores
benefit from our administrative network, improved product mix, sophisticated
management information system and purchasing power. In addition, we have access
to an expanding number of our franchise locations, which we have the right of
first refusal to purchase.

Since March 1993, our company-owned store base has grown from 27 to 2,284
at March 31, 2002, primarily through acquisitions. During this period, we
acquired over 2,000 company-owned stores and over 350 franchised stores in more
than 70 separate transactions, including six transactions where we acquired in
excess of 70 stores. In May 1998, we acquired substantially all of the assets of
Central Rents, which operated 176 stores, for approximately $100 million in
cash. In August 1998, we acquired Thorn Americas for approximately $900 million
in cash, including the repayment of certain debt of Thorn Americas. Prior to
this acquisition, Thorn Americas was our largest competitor, operating 1,409
company-owned stores and franchising 65 stores in 49 states and the District of
Columbia.

In the second half of 2000, having successfully integrated the Thorn
Americas and Central Rents acquisitions, we resumed our strategy of increasing
our store base. For the year ended December 31, 2001, we opened 76 new stores,
acquired 95 stores, purchased accounts from 90 competitors' locations and closed
48 existing stores. Of the 48 stores closed, 42 were merged with existing stores
and six were sold. The 95 acquired stores and acquired accounts were the result
of 52 separate transactions for an aggregate purchase price of approximately
$49.8 million in cash. During the first quarter of 2002, we acquired three
stores and accounts from 19 locations for approximately $3.5 million in cash in
16 separate transactions and opened an additional six new stores. We also closed
six stores, merging three with existing stores and selling three stores,
resulting in a total store count of 2,284 at March 31, 2002.

We continue to believe there are attractive opportunities to expand our
presence in the rent-to-own industry. We intend to increase the number of stores
in which we operate by an average of approximately 5% to 10% per year over the
next several years. We plan to accomplish our future growth through both
selective and opportunistic acquisitions and new store development.

Building Our National Brand. We have implemented a strategy to increase
our name recognition and enhance our national brand. As a part of a branding
strategy, in April 2000 we launched a national advertising campaign featuring
John Madden as our advertising spokesperson. Mr. Madden appears in our
advertising media used in the campaign, including television and radio
commercials, print, direct response and in-store signage. We believe Mr. Madden
possesses a unique balance of multi-cultural appeal, a strong image
identification among both men and women, and a personality that people of all
ages enjoy. We believe that as the Rent-A-Center name gains in familiarity and
national recognition through our advertising efforts, we will continue to
educate the consumer about the rent-to-own alternative to merchandise purchases
as well as solidify our reputation as a leading provider of high quality branded
merchandise.

OUR STORES

At March 31, 2002, we operated 2,284 stores in 50 states, Puerto Rico and
the District of Columbia. In addition, our subsidiary ColorTyme franchised 338
stores in 42 states. This information is illustrated by the following table:

NUMBER OF STORES
--------------------
COMPANY
LOCATION OWNED FRANCHISED
-------- ------- ----------

Alabama................... 44 --
Alaska.................... 3 --
Arizona................... 51 7
Arkansas.................. 22 3
California................ 143 8
Colorado.................. 29 3
Connecticut............... 19 6
Delaware.................. 15 1
District of Columbia...... 4 --
Florida................... 133 11
Georgia................... 92 13
Hawaii.................... 11 2
Idaho..................... 6 4
Illinois.................. 116 5
Indiana................... 91 17
Iowa...................... 19 --
Kansas.................... 27 18
Kentucky.................. 39 6
Louisiana................. 34 6
Maine..................... 18 9
Maryland.................. 50 6
Massachusetts............. 48 8
Michigan.................. 93 16
Minnesota................. 4 --
Mississippi............... 17 4
Missouri.................. 53 8
Montana................... 1 4

NUMBER OF STORES
--------------------
COMPANY
LOCATION OWNED FRANCHISED
-------- ------- ----------

Nebraska.................. 4 --
Nevada.................... 16 5
New Hampshire............. 14 2
New Jersey................ 40 8
New Mexico................ 11 9
New York.................. 124 14
North Carolina............ 88 15
North Dakota.............. 1 --
Ohio...................... 156 5
Oklahoma.................. 36 13
Oregon.................... 19 8
Pennsylvania.............. 84 6
Puerto Rico............... 21 --
Rhode Island.............. 12 1
South Carolina............ 33 5
South Dakota.............. 2 --
Tennessee................. 77 5
Texas..................... 225 57
Utah...................... 14 2
Vermont................... 7 --
Virginia.................. 41 7
Washington................ 37 8
West Virginia............. 12 2
Wisconsin................. 26 1
Wyoming................... 2 --
----- ---
Total................... 2,284 338
===== ===

Our stores average approximately 4,300 square feet and are located
primarily in strip malls. Because we receive merchandise shipments directly from
vendors, we are able to dedicate approximately 80% of the store space to
showroom floor, and also eliminate warehousing costs.

RENT-A-CENTER STORE OPERATIONS

Product Selection. Our stores offer merchandise from four basic product
categories: home electronics, appliances, computers, and furniture and
accessories. Our stores typically have available at any one time approximately
100 of the 150 different items we offer. Although we seek to ensure our stores
maintain sufficient inventory to offer customers a wide variety of models,
styles and brands, we generally limit inventory to prescribed levels to ensure
strict inventory controls. We seek to provide a wide variety of high quality
merchandise to our customers, and we emphasize high-end products from brand-name
manufacturers. For the year ended December 31, 2001, home electronic products
accounted for approximately 41% of our store rental revenue, furniture and
accessories for 32%, appliances for 17% and computers for 10%. Customers may
request either new merchandise or previously rented merchandise. Previously
rented merchandise is offered at the same weekly or monthly rental rate as is
offered for new merchandise, but with an opportunity to obtain ownership of the
merchandise after fewer rental payments.

Home electronic products offered by our stores include televisions, DVD
players, home entertainment centers, video cassette recorders and stereos from
top brand manufacturers such as Philips, Sony, JVC, Toshiba and Mitsubishi. We
rent major appliances manufactured by Whirlpool, including refrigerators,
washing machines, dryers, microwave ovens, freezers and ranges. We offer
personal computers from Dell, Compaq and Hewlett Packard. We rent a variety of
furniture products, including dining room, living room and bedroom furniture
featuring a number of styles, materials and colors. We offer furniture made by
Ashley, England and Benchcraft and other top brand manufacturers. Accessories
include pictures, plants, lamps and tables and are typically rented as part of a
package of items, such as a complete room of furniture. Showroom displays enable
customers to visualize how the product will look in their homes and provide a
showcase for accessories.

Rental Purchase Agreements. Our customers generally enter into weekly or
monthly rental purchase agreements, which renew automatically upon receipt of
each payment. We retain title to the merchandise during the term of the rental
purchase agreement. Ownership of the merchandise generally transfers to the
customer if the customer has continuously renewed the rental purchase agreement
for a period of 12 to 36 months, depending upon the product type, or exercises a
specified early purchase option. Although we do not conduct a formal credit
investigation of each customer, a potential customer must provide store
management with sufficient personal information to allow us to verify their
residence and sources of income. References listed by the customer are contacted
to verify the information contained in the customer's rental purchase order
form. Rental payments are generally made in cash, by money order or debit card.
Approximately 85% of our customers pay in the store on a weekly basis. Depending
on state regulatory requirements, we charge for the reinstatement of terminated
accounts or collect a delinquent account fee, and collect loss/damage waiver
fees from customers desiring product protection in case of theft or certain
natural disasters. These fees are standard in the industry and may be subject to
government-specified limits. Please read the section entitled "--Government
Regulation."

Product Turnover. A minimum rental term of 18 months is generally required
to obtain ownership of new merchandise. We believe that only approximately 25%
of our initial rental purchase agreements are taken to the full term of the
agreement, although the average total life for each product is approximately 22
months, which includes the initial rental period, all re-rental periods and idle
time in our system. Turnover varies significantly based on the type of
merchandise rented, with certain consumer electronics products, such as
camcorders and video cassette recorders, generally rented for shorter periods,
while appliances and furniture are generally rented for longer periods. To cover
the relatively high operating expenses generated by greater product turnover,
rental purchase agreements require higher aggregate payments than are generally
charged under other types of purchase plans, such as installment purchase or
credit plans.

Customer Service. We offer same day or 24-hour delivery and installation
of our merchandise at no additional cost to the customer. We provide any
required service or repair without additional charge, except for damage in
excess of normal wear and tear. Repair services are provided through our
national network of 22 service centers, the cost of which may be reimbursed by
the vendor if the item is still under factory warranty. If the product cannot be
repaired at the customer's residence, we provide a temporary replacement

while the product is being repaired. The customer is fully liable for damage,
loss or destruction of the merchandise, unless the customer purchases an
optional loss/damage waiver. Most of the products we offer are covered by a
manufacturer's warranty for varying periods, which, subject to the terms of the
warranty, is transferred to the customer in the event that the customer obtains
ownership.

Collections. Store managers use our computerized management information
system to track collections on a daily basis. If a customer fails to make a
rental payment when due, store personnel will attempt to contact the customer to
obtain payment and reinstate the agreement, or will terminate the account and
arrange to regain possession of the merchandise. We attempt to recover the
rental items as soon as possible following termination or default of a rental
purchase agreement, generally by the seventh to tenth day. Collection efforts
are enhanced by the numerous personal and job-related references required of
first-time customers, the personal nature of the relationships between the
stores' employees and customers and the fact that, following a period in which a
customer is temporarily unable to make payments on a piece of rental
merchandise, that customer generally may re-rent a piece of merchandise of
similar type and age on the terms the customer enjoyed prior to that period.
Charge-offs due to lost or stolen merchandise, expressed as a percentage of
store revenues, were approximately 2.5% for the first three months of 2002,
fiscal 2001 and fiscal 2000.

MANAGEMENT

We organize our network of stores geographically with multiple levels of
management. At the individual store level, each store manager is responsible for
customer and credit relations, delivery and collection of merchandise, inventory
management, staffing, training store personnel and certain marketing efforts.
Three times each week, the store manager is required to audit the idle inventory
on hand and compare the audit to our computer report, with the market manager
performing a similar audit at least once a month. In addition, our individual
store managers track their daily store performance for revenue collected as
compared to the projected performance of their store. Each store manager reports
to a market manager within close proximity who typically oversees six to eight
stores. Typically, a market manager focuses on developing the personnel in his
or her market and on ensuring that all stores meet our quality, cleanliness and
service standards. In addition, a market manager routinely audits numerous areas
of the stores operations, including gross profit per rental agreement, petty
cash, and customer order forms. A significant portion of a market manager's and
store manager's compensation is dependent upon store revenues and profits, which
are monitored by our management reporting system and our tight control over
inventory afforded by our direct shipment practice.

At March 31, 2002, we had 323 market managers who, in turn, reported to 55
regional directors. Regional directors monitor the results of their entire
region, with an emphasis on developing and supervising the market managers in
their region. Similar to the market managers, regional directors are responsible
for ensuring that store managers are following the operational guidelines,
particularly those involving store presentation, collections, inventory levels,
and order verification. The regional directors report to nine senior vice
presidents at our headquarters. The regional directors receive a significant
amount of their compensation based on the profits the stores under their
management generate.

Our executive management team at the home office directs and coordinates
purchasing, financial planning and controls, employee training, personnel
matters and new store site selection. Our executive management team also
evaluates the performance of each region, market and store, including the use of
on-site reviews. All members of our executive management team receive a
significant amount of their total compensation based on the profits generated by
the entire company. As a result, our business strategy emphasizes strict cost
containment.

MANAGEMENT INFORMATION SYSTEMS

Through a licensing agreement with High Touch, Inc., we utilize an
integrated computerized management information and control system. Each store is
equipped with a computer system utilizing point of sale software developed by
High Touch. This system tracks individual components of revenue, each item in
idle and rented inventory, total items on rent, delinquent accounts and other
account information. We electronically gather each day's activity report, which
provides our executive management with access to all operating

and financial information about any of our stores, markets or regions and
generates management reports on a daily, weekly, month-to-date and year-to-date
basis for each store and for every rental purchase transaction. The system
enables us to track each of our approximately 2.3 million units of merchandise
and each of our approximately 1.4 million rental purchase agreements, which
often include more than one item of merchandise. In addition, the system
performs a daily sweep of available funds from our stores' depository accounts
into our central operating account based on the balances reported by each store.
Our system also includes extensive management software and report-generating
capabilities. The reports for all stores are reviewed on a daily basis by
executive management and unusual items are typically addressed the following
business day. Utilizing the management information system, our executive
management, regional directors, market managers and store managers closely
monitor the productivity of stores under their supervision according to our
prescribed guidelines.

The integration of the management information system developed by High
Touch with our accounting system, developed by Lawson Software, Inc.,
facilitates the production of our financial statements. These financial
statements are distributed monthly to all stores, markets, regions and our
executive management team for their review.

PURCHASING AND DISTRIBUTION

Our executive management determines the general product mix in our stores
based on analyses of customer rental patterns and the introduction of new
products on a test basis. Individual store managers are responsible for
determining the particular product selection for their store from the list of
products approved by executive management. Store and market managers make
specific purchasing decisions for the stores, subject to review by executive
management. All merchandise is shipped by vendors directly to each store, where
it is held for rental. We do not maintain any warehouse space. These practices
allow us to retain tight control over our inventory and, along with our
selection of products for which consistent historical demand has been shown,
reduces the number of obsolete items in our stores.

We purchase the majority of our merchandise from manufacturers, who ship
directly to each store. Our largest suppliers include Ashley, Whirlpool and
Philips, who accounted for approximately 16.4%, 14.3%, and 9.2%, respectively,
of merchandise purchased during the first three months of 2002 and 15.2%, 13.4%,
and 11.5%, respectively, of merchandise purchased in 2001. No other supplier
accounted for more than 10.0% of merchandise purchased during this period. We do
not generally enter into written contracts with our suppliers. Although we
expect to continue relationships with our existing suppliers, we believe that
there are numerous sources of products available, and we do not believe that the
success of our operations is dependent on any one or more of our present
suppliers.

MARKETING

We promote the products and services in our stores through direct mail
advertising, radio, television and secondary print media advertisements. Our
advertisements emphasize such features as product and brand-name selection,
prompt delivery and the absence of initial deposits, credit investigations or
long-term obligations. Advertising expense as a percentage of store revenue for
the first three months of 2002 was approximately 3.2%, and for each of the years
ended December 31, 2001 and 2000, was approximately 4.0%. As we obtain new
stores in our existing market areas, the advertising expenses of each store in
the market can be reduced by listing all stores in the same market-wide
advertisement.

Mr. John Madden serves as our national advertising spokesman for the
advertising campaign we launched in April 2000. Mr. Madden appears in our
advertising media used in the campaign, including television and radio
commercials, print, direct response and in-store signage. We believe his
involvement in this campaign assists us in capturing new customers and
establishes a stronger national identity for Rent-A-Center. Mr. Madden's
agreement with us expires on March 31, 2003.

COMPETITION

The rent-to-own industry is highly competitive. According to industry
sources and our estimates, the six largest industry participants account for
approximately 4,700 of the 8,000 rent-to-own stores in the United States. We are
the largest operator in the rent-to-own industry with 2,284 stores and 338
franchised locations as of March 31, 2002. Our stores compete with other
national and regional rent-to-own businesses, as well as with rental stores that
do not offer their customers a purchase option. With respect to customers
desiring to purchase merchandise for cash or on credit, we also compete with
department stores, credit card companies and discount stores. Competition is
based primarily on store location, product selection and availability, customer
service and rental rates and terms.

COLORTYME OPERATIONS

ColorTyme is our nationwide franchisor of rent-to-own stores. At March 31,
2002, ColorTyme franchised 338 rent-to-own stores in 42 states. These
rent-to-own stores offer high quality durable products such as home electronics,
appliances, computers, and furniture and accessories. For the first three months
of 2002, three new franchise locations were added, five were sold, all of which
we purchased and two were closed. During 2001, 31 new locations were added, 48
were sold, including 45 that we purchased, and five were closed. During that
same period, the number of new franchisees operating stores under the ColorTyme
name increased by six.

All but 12 of the ColorTyme franchised stores use ColorTyme's tradenames,
service marks, trademarks, logos, emblems and indicia of origin. These 12 stores
are franchises acquired in the Thorn Americas acquisition and continue to use
the Rent-A-Center name. All stores operate under distinctive operating
procedures and standards. 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. As franchisor,
ColorTyme receives royalties of 2.0% to 4.0% of the franchisees' monthly gross
revenue and, generally, an initial fee of between $7,500 per location for
existing franchisees and up to $25,000 per location for new franchisees.

The ColorTyme franchise agreement generally requires the franchised stores
to utilize specific computer hardware and software for the purpose of recording
rentals, sales and other record keeping and central functions. ColorTyme retains
the right to upload and download data, troubleshoot, and retrieve data and
information from the franchised stores' computer systems.

The franchise agreement also requires the franchised stores to exclusively
offer for rent or sale only those brands, types, and models of products that
ColorTyme has approved. The franchised stores are required to maintain an
adequate mix of inventory that consists of approved products for rent as
dictated by ColorTyme policy manuals, and must maintain on display such products
as specified by ColorTyme. ColorTyme negotiates purchase arrangements with
various suppliers it has approved. ColorTyme's largest supplier is Whirlpool,
which accounted for approximately 14.9% of merchandise purchased by ColorTyme
during the first three months of 2002 and 12.8% of merchandise purchased by
ColorTyme in 2001.

ColorTyme is a party to an agreement with Textron Financial Corporation,
who provides financing to qualifying franchisees of ColorTyme. Under this
agreement, in the event of default by the franchisee under agreements governing
this financing and upon the occurrence of certain events, Textron may assign the
loans and collateral securing such loans to ColorTyme, with ColorTyme then
succeeding to the rights of Textron under the debt agreements, including the
rights to foreclose on the collateral. We guarantee the obligations of ColorTyme
under this agreement.

ColorTyme has established a national advertising fund for the franchised
stores, whereby ColorTyme has the right to collect up to 3% of the monthly gross
revenue from each franchisee as contributions to the fund. Currently, ColorTyme
has set the monthly franchisee contribution at $250 per store per month.
ColorTyme directs the advertising programs of the fund, generally consisting of
advertising in print, television and radio. The franchisees also are required to
expend 3% of their monthly gross revenue on local advertising.

ColorTyme licenses the use of its trademarks to the franchisees under the
franchise agreement. ColorTyme owns the registered trademarks ColorTyme(R),
ColorTyme-What's Right for You(R), and FlexTyme(R), along with certain design
and service marks.

Some of ColorTyme's franchisees may be in locations where they directly
compete with our company-owned stores, which could negatively impact the
business, financial condition and operating results of our company-owned store.

The ColorTyme franchise agreement provides us a right of first refusal to
purchase the franchise location of a ColorTyme franchisee wishing to exit the
business.

TRADEMARKS

We own various registered trademarks, including Rent-A-Center(R), Renters
Choice(R) and Remco(R). The products held for rent also bear trademarks and
service marks held by their respective manufacturers.

EMPLOYEES

As of March 31, 2002, we had approximately 12,750 employees, of whom
approximately 240 were assigned to our headquarters and the remainder of whom
were directly involved in the management and operation of our stores. As of the
same date, we had approximately 19 employees dedicated to ColorTyme, all of whom
were employed full-time. The employees of the ColorTyme franchisees are not
employed by us. None of our employees, including ColorTyme employees, are
covered by a collective bargaining agreement. However, in June 2001 the
employees of six of our stores in New York, New York elected to be represented
by the Teamsters union. We believe relationships with our employees and
ColorTyme's relationships with its employees are generally good.

PROPERTIES

We lease space for all of our stores, as well as our corporate and regional
offices, under operating leases expiring at various times through 2010. Most of
these leases contain renewal options for additional periods ranging from three
to five years at rental rates adjusted according to agreed-upon formulas. Both
our headquarters and ColorTyme's headquarters are located at 5700 Tennyson
Parkway, Plano, Texas, and consist of approximately 77,158 and 5,116 square feet
devoted to our operations and ColorTyme's operations, respectively. Store sizes
range from approximately 1,400 to 17,000 square feet, and average approximately
4,300 square feet. Approximately 80% of each store's space is generally used for
showroom space and 20% for offices and storage space.

We believe that suitable store space generally is available for lease, and
we would be able to relocate any of our stores without significant difficulty
should we be unable to renew a particular lease. We also expect additional space
is readily available at competitive rates to open new stores. Under various
federal and state laws, lessees may be liable for environmental problems at
leased sites even if they did not create, contribute to, or know of the problem.
We are not aware of and have not been notified of any violations of federal,
state or local environmental protection or health and safety laws, but cannot
guarantee that we will not incur material costs or liabilities under these laws
in the future.

GOVERNMENT REGULATION

State Regulation. Currently 47 states and Puerto Rico have legislation
regulating rental purchase transactions. We believe this existing legislation is
generally favorable to us, as it defines and clarifies the various disclosures,
procedures and transaction structures related to the rent-to-own business with
which we must comply. With some variations in individual states, most related
state legislation requires the lessor to make prescribed disclosures to
customers about the rental purchase agreement and transaction, and provides time
periods during which customers may reinstate agreements despite having failed to
make a timely payment. Some state rental purchase laws prescribe grace periods
for non-payment, prohibit or limit certain types of collection or other
practices, and limit certain fees that may be charged. Nine states limit the
total

rental payments that can be charged. These limitations, however, do not become
applicable in general unless the total rental payments required under agreements
exceed 2.0 times to 2.4 times of the disclosed cash price or the retail value.

Minnesota, which has a rental purchase statute, and Wisconsin and New
Jersey, which do not have rental purchase statutes, have had court decisions
which treat rental purchase transactions as credit sales subject to consumer
lending restrictions. In response, we have developed and utilize separate rental
agreements which do not provide customers with an option to purchase rented
merchandise in Minnesota. In Wisconsin, customers are provided an opportunity to
purchase the rented merchandise in a separate transaction. In New Jersey, we
have provided increased disclosures and longer grace periods. We operate four
stores in Minnesota, 26 stores in Wisconsin and 40 stores in New Jersey. See the
section entitled "--Legal Proceedings."

North Carolina has no rental purchase legislation. However, the retail
installment sales statute in North Carolina recognizes that rental purchase
transactions which provide for more than a nominal purchase price at the end of
the agreed rental period are not credit sales under the statute. We operate 86
stores in North Carolina.

The District of Columbia recently passed rental purchase legislation, which
became effective in April 2002. We operate four stores in the District of
Columbia.

There can be no assurance that new or revised rental purchase laws will not
be enacted or, if enacted, that the laws would not have a material and adverse
effect on us.

Federal Legislation. No comprehensive federal legislation has been enacted
regulating or otherwise impacting the rental purchase transaction. We do,
however, comply with the Federal Trade Commission recommendations for disclosure
in rental purchase transactions. From time to time, legislation has been
introduced in Congress that would regulate the rental purchase transaction,
including legislation that would subject the rental purchase transaction to
interest rate, finance charge and fee limitations, as well as the Federal Truth
in Lending Act. Any adverse federal legislation, if enacted, could have a
material and adverse effect on us.

LEGAL PROCEEDINGS

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

Colon v. Thorn Americas, Inc. The plaintiffs filed this class action in
November 1997 in New York state court. This matter was assumed by us in
connection with the Thorn Americas acquisition, and appropriate purchase
accounting adjustments were made for such contingent liabilities. The plaintiffs
acknowledge that rent-to-own transactions in New York are subject to the
provisions of New York's Rental Purchase Statute but contend the Rental Purchase
Statute does not provide Thorn Americas immunity from suit for other statutory
violations. Plaintiffs allege Thorn Americas has a duty to disclose effective
interest under New York consumer protection laws, and seek damages and
injunctive relief for Thorn Americas' failure to do so. This suit also alleges
violations relating to excessive and unconscionable pricing, late fees,
harassment, undisclosed charges, and the ease of use and accuracy of its payment
records. In their prayers for relief, the plaintiffs have requested the
following:

-- class certification;

-- injunctive relief requiring Thorn Americas to (A) cease certain
marketing practices, (B) price their rental purchase contracts in
certain ways, and (C) disclose effective interest;

-- unspecified compensatory and punitive damages;

-- rescission of the class members contracts;

-- an order placing in trust all moneys received by Thorn Americas in
connection with the rental of merchandise during the class period;

-- treble damages, attorney's fees, filing fees and costs of suit;

-- pre- and post-judgment interest; and

-- any further relief granted by the court.

The plaintiffs have not alleged a specific monetary amount with respect to
their request for damages.

The proposed class originally included all New York residents who were
party to Thorn Americas' rent-to-own contracts from November 26, 1991 through
November 26, 1997. In her class certification briefing, Plaintiff acknowledged
her claims under the General Business Law in New York are subject to a three
year statute of limitations, and is now requesting a class of all persons in New
York who paid for rental merchandise from us since November 26, 1994. In
November 2000, following interlocutory appeal by both parties from the denial of
cross-motions for summary judgement, we obtained a favorable ruling from the
Appellate Division of the State of New York, dismissing Plaintiff's claims based
on the alleged failure to disclose an effective interest rate. Plaintiff's other
claims were not dismissed. Plaintiff moved to certify a state-wide class in
December 2000. Plaintiff's class certification motion was heard by the court on
November 7, 2001, at which time the court took the motion under advisement. We
are vigorously defending this action and opposing class certification. Although
there can be no assurance that our position will prevail, or that we will be
found not to have any liability, we believe the decision by the Appellate
Division regarding interest rate disclosure to be a significant and favorable
development in this matter.

Wisconsin Attorney General Proceeding. On August 4, 1999, the Wisconsin
Attorney General filed suit against us and our subsidiary ColorTyme in the
Circuit Court of Milwaukee County, Wisconsin, alleging that our rent-to-rent
transaction, coupled with the opportunity afforded our rental customers to
purchase the rented merchandise under what we believe is a separate transaction,
is a disguised credit sale subject to the Wisconsin Consumer Act. Accordingly,
the Attorney General alleges that we have failed to disclose credit terms,
misrepresented the terms of the transaction and engaged in unconscionable
practices. We currently operate 26 stores in Wisconsin.

The Attorney General seeks injunctive relief, restoration of any losses
suffered by any Wisconsin consumer harmed and civil forfeitures and penalties in
amounts ranging from $50 to $10,000 per violation. If the Attorney General's
theory on damages prevails, the Attorney General's claim for monetary penalties
would apply to at least 18,772 transactions through March 31, 2002. On October
31, 2001, the Attorney General filed a motion for summary judgment on several
counts in the complaint, including the principal claim that our rent-to-rent
transaction is governed by the Wisconsin Consumer Act. Our response was filed on
December 17, 2001. A pre-trial conference and hearing on the motion for summary
judgment took place on January 22, 2002, at which time the court ruled in favor
of the Attorney General's motion for summary judgment on the liability issues
and set the case for trial on damages for February 2003.

Since the filing of this suit, we have attempted to negotiate a mutually
satisfactory resolution of these claims with the Wisconsin Attorney General's
office, including the consideration of possible changes in our business
practices in Wisconsin. To date, we have not been successful, but our efforts
are ongoing. If we are unable to negotiate a settlement with the Attorney
General, we intend to litigate the suit. We cannot assure you, however, that the
outcome of this matter will not have a material adverse impact on our financial
position, results of operations or cash flows.

Gender Discrimination Actions. We are subject to three class action
lawsuits claiming gender discrimination. As described below, we have settled in
principle all of the claims covered by these three actions.

In September 1999, an action was filed against us in federal court in the
Western District of Tennessee by the U.S. Equal Employment Opportunity
Commission, alleging that we engaged in gender discrimination with respect to
four named females and other unnamed female employees and applicants within our
Tennessee and Arkansas region. The allegations underlying this EEOC action
involve charges of wrongful termination and denial of promotion, disparate
impact and failure to hire. The group of individuals on whose behalf EEOC seeks
relief is approximately seventy individuals.

In August 2000, a putative nationwide class action was filed against us in
federal court in East St. Louis, Illinois by Claudine Wilfong and eighteen other
plaintiffs, alleging that we engaged in class-wide gender discrimination
following our acquisition of Thorn Americas. The allegations underlying Wilfong
involve charges of wrongful termination, constructive discharge, disparate
treatment and disparate impact. In addition, the EEOC filed a motion to
intervene on behalf of the plaintiffs, which the court granted on May 14, 2001.
On December 27, 2001, the court granted the plaintiff's motion for class
certification.

In December 2000, similar suits filed by Margaret Bunch and Tracy Levings
in federal court in the Western District of Missouri were amended to allege
class action claims similar to those in Wilfong. In November 2001, we announced
that we had reached an agreement in principle for the settlement of the Bunch
matter, which is subject to court approval. Under the terms of the proposed
settlement, we agreed to pay an aggregate of $12.25 million to the agreed upon
class, plus plaintiffs' attorneys fees as determined by the court and costs to
administer the settlement subject to an aggregate cap of $3.15 million. On
November 29, 2001, the court in Bunch granted preliminary approval of the
settlement and set a fairness hearing on such settlement for March 6, 2002.

In early March 2002, we reached an agreement in principle with the
plaintiffs attorneys in Wilfong and the EEOC to resolve the Wilfong suit and the
Tennessee EEOC action. Under the terms of the proposed settlement, while not
admitting any liability, we would pay an aggregate of $47.0 million to
approximately 5,300 female employees and a yet to be determined number of female
applicants who were employed by or applied for employment with us for a period
commencing no later than April 19, 1998 through the future date of the notice to
the applicable class, plus up to $375,000 in settlement administrative costs.
The $47.0 million payment includes the $12.25 million payment discussed in
connection with the Bunch settlement. Attorney fees for class counsel in Wilfong
would be paid out of the $47.0 million settlement fund in an amount to be
determined by the court. Members of the class who do not wish to participate in
the settlement would be given the opportunity to opt out of the settlement.

The proposed agreement contemplates the settlement would be subject to a
four-year consent decree, which could be extended by the court for an additional
one year upon a showing of good cause. Also, under the proposed settlement, we
agreed to augment our human resources department and our internal employee
complaint procedures; enhance our gender anti-discrimination training for all
employees; hire a consultant mutually acceptable to the parties for two years to
advise us on employment matters; provide certain reports to the EEOC during the
period of the consent decree; seek qualified female representation on our board
of directors; publicize our desire to recruit, hire and promote qualified women;
offer to fill job vacancies within our regional markets with qualified class
members who reside in those markets and express an interest in employment by us
to the extent of 10% of our job vacancies in such markets over a fifteen month
period; and to take certain other steps to improve opportunities for women. We
initiated many of the above programs prior to entering into the proposed
settlement.

Under the proposed agreement, we have the right to terminate the settlement
under certain circumstances, including in the event that more than 60 class
members elect to opt out of the settlement.

Terry Walker, et. al. v. Rent-A-Center, Inc., et. al.; Chaim Klein, et. al.
v. Rent-A-Center, Inc., et. al.; John Farrar, et. al. v. Rent-A-Center, Inc.,
et. al. On January 4, 2002, a putative class action was filed against us and
certain of our current and former officers and directors by Terry Walker in
federal court in Texarkana, Texas. The complaint alleges that the defendants
violated Sections 10(b) and/or Section 20(a) of the

Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by issuing
false and misleading statements and omitting material facts regarding our
financial performance and prospects for the third and fourth quarters of 2001.
The complaint purports to be brought on behalf of all purchasers of our common
stock from April 25, 2001 through October 8, 2001 and seeks damages in
unspecified amounts. We anticipate that the similar complaints filed by Chaim
Klein and John Farrar will be consolidated by the court with the Walker matter.
We believe that these claims are without merit and intend to vigorously defend
ourselves. However, we cannot assure you that we will be found to have no
liability in this matter.

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of Rent-A-Center, and their respective
ages and positions as of May 17, 2002, are as follows:

NAME AGE POSITION
---- --- --------

Mark E. Speese(1)..................... 44 Chairman of the Board of Directors and
Chief Executive Officer
Mitchell E. Fadel..................... 44 President, Director
Dana F. Goble......................... 36 Executive Vice President--Operations
David A. Kraemer...................... 40 Executive Vice President--Operations
Robert D. Davis....................... 30 Senior Vice President--Finance, Chief
Financial Officer and Treasurer
Steven M. Arendt...................... 45 Chief Executive Officer and President
of ColorTyme, Inc.
Christopher A. Korst.................. 42 Senior Vice President--General Counsel
Anthony M. Doll....................... 33 Senior Vice President
C. Edward Ford, III................... 35 Senior Vice President
John H. Whitehead..................... 52 Senior Vice President
William C. Nutt....................... 45 Senior Vice President
Timothy J. Stough..................... 46 Senior Vice President
Mark S. Connelly...................... 40 Senior Vice President
David G. Ewbank....................... 45 Senior Vice President
David R. Reed......................... 48 Senior Vice President
Richard S. Lillard.................... 34 Senior Vice President
David M. Glasgow...................... 33 Corporate Secretary
L. Dowell Arnette..................... 54 Director
Laurence M. Berg(2)(3)................ 36 Director
Peter P. Copses(1)(2)(3).............. 43 Director
Andrew S. Jhawar...................... 30 Director
J.V. Lentell(1)(2)(3)................. 63 Director

------------

(1) Member of Finance Committee

(2) Member of Audit Committee

(3) Member of Compensation Committee

Mark E. Speese has served as our Chairman of the Board and Chief Executive
Officer since October 2001 and has served as one of our directors since 1990.
Mr. Speese previously served as our Vice Chairman from September 1999 until
December 2000. From 1990 until April 1999, Mr. Speese served as our President.
Mr. Speese also served as our Chief Operating Officer from November 1994 until
March 1999. From our inception in 1986 until 1990, Mr. Speese served as a Vice
President responsible for our New Jersey operations. Prior to joining us, Mr.
Speese was a regional manager for Thorn Americas from 1979 until 1986. Mr.
Speese has been nominated for re-election as a Class II director for a term to
expire at our 2005 annual stockholders meeting.

Mitchell E. Fadel has served as our President since July 2000 and as a
director since December 2000. From November 1992 until July 2000, Mr. Fadel
served as President and Chief Executive Officer of ColorTyme. We acquired
ColorTyme in May 1996. From 1983 to 1991, Mr. Fadel was a regional manager for
Thorn Americas and its affiliates. Mr. Fadel's term as a Class I director
expires at our 2004 annual stockholders meeting.

Dana F. Goble has served as Executive Vice President--Operations since July
2001 and has served as an Executive Vice President since March 1999. From March
2000 until June 2001, Mr. Goble also served as our

Chief Operating Officer. From December 1996 until March 1999, Mr. Goble served
as one of our Senior Vice Presidents, and from May 1995 until December 1996, Mr.
Goble served as one of our Regional Vice Presidents. From April 1993 until May
1995, Mr. Goble served as our regional manager for the Detroit, Michigan area.

David A. Kraemer has served as Executive Vice President--Operations since
July 2001 and has served as an Executive Vice President since May 2001. From
September 1998 until April 2001, Mr. Kraemer served as one of our Senior Vice
Presidents. From December 1995 until September 1998, Mr. Kraemer served as one
of our Regional Vice Presidents. Mr. Kraemer served as a Divisional Vice
President for MRTO Holdings from November 1990 until September 1995, when we
acquired MRTO Holdings.

Robert D. Davis has served as our Senior Vice President--Finance since
September 1999, our Chief Financial Officer since March 1999 and our Treasurer
since January 1997. From September 1998 until September 1999, Mr. Davis served
as our Vice President--Finance and Treasurer. From June 1997 until September
1998, Mr. Davis served as our Treasurer. From January 1997 until June 1997, Mr.
Davis served as our Assistant Secretary and Treasurer. From June 1995 until
January 1997, Mr. Davis served as our Payroll Supervisor and from June 1993
until June 1995 served as an accountant for us. Mr. Davis is a licensed
certified public accountant in the State of Texas.

Steven M. Arendt has served as President and Chief Executive Officer of
ColorTyme since July 2000. From January 1999 until July 2000, Mr. Arendt served
as Chief Operation Officer of ColorTyme. From January 1997 until December 1998,
Mr. Arendt served as Vice President of Operations for Cash America, a pawn-shop
chain based in Fort Worth, Texas. From July 1996 until December 1996, Mr. Arendt
served as Vice President of Special Projects for Thorn Americas. From March 1995
until July 1996, Mr. Arendt served as Vice President of Remco.

Christopher A. Korst has served as our Senior Vice President--General
Counsel since May 2001. From January 2000 until May 2001, Mr. Korst owned and
operated AdvantEdge Quality Cars, which he acquired in a management buyout. From
December 1997 until October 1999, Mr. Korst served as Chief Operating Officer of
AdvantEdge Quality Cars. From November 1996 until November 1997, Mr. Korst
served as Vice President of Thorn Auto, a division of Thorn Americas. During
1996, Mr. Korst served as Vice President--Business Development of Thorn
Americas. From 1992 until 1996, Mr. Korst served as Vice President--Assistant
General Counsel of Thorn Americas.

Anthony M. Doll has served as one of our Senior Vice Presidents since
September 1998. From September 1996 until September 1998, Mr. Doll served as one
of our Regional Vice Presidents. Between May 1995 and September 1996, Mr. Doll
served as our regional manager for the Detroit, Michigan area.

C. Edward Ford, III has served as one of our Senior Vice Presidents since
September 1998. From January 1997 until September 1998, Mr. Ford served as a one
of our Regional Vice Presidents. From November 1994 until January 1997, Mr. Ford
served as our regional manager for the Tennessee region. From July 1993 until
November 1994, Mr. Ford served as one of our store managers.

John H. Whitehead has served as one of our Senior Vice Presidents since
September 1997. From May 1995 until September 1997, Mr. Whitehead served as one
of our Regional Vice Presidents. From July 1993 until May 1995, Mr. Whitehead
served as our regional manager for the Atlanta, Georgia area.

William C. Nutt has served as one of our Senior Vice Presidents since May
1998. From December 1995 until May 1998, Mr. Nutt served as one of our Regional
Vice Presidents. From December 1992 until December 1995, Mr. Nutt served as our
regional manager for the Northeast Ohio area.

Timothy J. Stough has served as one of our Senior Vice Presidents since
February 2000. From September 1998 until February 2000, Mr. Stough served as one
of our Regional Directors. From January 1998 until September 1998, Mr. Stough
served as a Regional Director of Thorn Americas, overseeing stores from South
Carolina to Vermont. From 1987 until 1998, Mr. Stough served as a Market Manager
for Thorn Americas in North Carolina, South Carolina and Tennessee.

Mark S. Connelly has served as one of our Senior Vice Presidents since
September 1999. From June 1998 until September 1999, Mr. Connelly served as one
of our Regional Vice Presidents. From February 1998 until May 1998, Mr. Connelly
served as a Division Manager of Central Rents. From October 1997 until February
1998, Mr. Connelly acted as Director of Operations/Acquisitions of Spin Cycle, a
start-up chain of coin-operated laundromats. From April 1997 until October 1997,
Mr. Connelly was a group manager with Rent Mart, a rent-to-own subsidiary of The
Associates. From June 1996 until March 1997, Mr. Connelly was the Vice
President-Operations of Trans Texas Capital, a franchisee of ColorTyme. From
January 1995 until May 1996, Mr. Connelly served as the Midwest area manager of
Remco America.

David G. Ewbank has served as one of our Senior Vice Presidents since
August 2000. From August 1999 until August 2000, Mr. Ewbank served as one of our
Regional Directors. From October 1997 until August 1999, Mr. Ewbank served as
one of our Market Managers. From August 1996 until October 1997, Mr. Ewbank
served as one of our store managers. Prior to joining us in August 1996, Mr.
Ewbank served as a store manager for First Cash Pawn.

David R. Reed has served as one of our Senior Vice Presidents since May
2001. From August 1998 until May 2001, Mr. Reed served as one of our Regional
Directors. From November 1996 until August 1998, Mr. Reed served as one of our
Market Managers. From October 1996 until November 1996, Mr. Reed served as one
of our store managers. From July 1996 until October 1996, Mr. Reed served as a
store manager for Central Rents. From May 1983 until July 1996, Mr. Reed served
as a store manager for Remco.

Richard S. Lillard has served as one of our Senior Vice Presidents since
May 2001. From December 1998 until May 2001, Mr. Lillard served as one of our
Regional Directors. From October 1997 until December 1998, Mr. Lillard served as
one of our Market Managers. From October 1996 until October 1997, Mr. Lillard
served as one of our store managers. From December 1995 until October 1996, Mr.
Lillard served as an assistant manager in various capacities in one of our
stores.

David M. Glasgow has served as our Corporate Secretary since June 1995.
From June 1995 until June 1997, Mr. Glasgow also served as our Treasurer. From
March 1995 until June 1995, Mr. Glasgow served as our accounting operations
supervisor, and from June 1993 until March 1995, Mr. Glasgow served as one of
our accountants.

L. Dowell Arnette has served as a director since May 1999. From July 2000
until October 2001, Mr. Arnette served as our Executive Vice President--Growth.
Mr. Arnette served as our President from April 1999 until July 2000. From March
1999 until March 2000, Mr. Arnette also served as our Chief Operating Officer.
From September 1996 until March 1999, Mr. Arnette served as our Executive Vice
President. From May 1995 to September 1996, Mr. Arnette served as one of our
Senior Vice Presidents. From November 1994 to May 1995, Mr. Arnette served as
one of our Regional Vice Presidents. From 1993 to November 1994, he served as
our regional manager responsible for the southeastern region. From 1975 until
1993, Mr. Arnette was an Executive Vice President of DEF Investments, Inc., an
operator of rent-to-own stores. We acquired substantially all of the assets of
DEF and its subsidiaries in April 1993. Mr. Arnette is the brother of Joe T.
Arnette, our Vice President--Training & Personnel. Mr. Arnette's term as a
director expires at our 2002 annual stockholders meeting. Mr. Arnette has
advised us that he does not intend to stand for re-election.

Laurence M. Berg has served as one of our directors since August 1998. Mr.
Berg is a partner of Apollo Management, L.P., where he has worked since 1992.
Prior to joining Apollo, Mr. Berg was a member of the Mergers and Acquisition
Group at Drexel Burnham Lambert. Mr. Berg is also a director of Sylvan Learning
Systems, a provider of personalized instruction services, and AMC Entertainment,
an operator of movie theaters. Mr. Berg serves as one of the two directors
elected by the holders of our Series A preferred stock. Mr. Berg has been
nominated for re-election as a Class II director for a term to expire at our
2005 annual stockholders meeting.

Peter P. Copses has served as one of our directors since August 1998. Mr.
Copses is a partner of Apollo Management, L.P., where he has worked since 1990.
Prior to joining Apollo, Mr. Copses was an investment banker at Drexel Burnham
Lambert, and subsequently at Donaldson, Lufkin & Jenrette Securities, primarily
concentrating on the structuring, financing, and negotiation of mergers and
acquisitions. Mr. Copses is also a

director of Zale Corporation, an operator of specialty retail jewelry stores.
Mr. Copses serves as one of the two directors elected by the holders of our
Series A preferred stock. Mr. Copses' term as a Class I director expires at our
2004 annual stockholders meeting.

Andrew S. Jhawar has served as one of our directors since October 2001. Mr.
Jhawar has been associated with Apollo Management, L.P. since February 2000.
Prior to joining Apollo, Mr. Jhawar was an investment banker at Donaldson,
Lufkin, & Jenrette Securities from August 1999 until January 2000, and from July
1993 until December 1997, at Jefferies & Company, Inc., primarily concentrating
on the structuring and execution of high yield and equity financing
transactions. From January 1998 until July 1999, Mr. Jhawar attended Harvard
Business School where he received his MBA degree. Mr. Jhawar serves as the
director nominated by Apollo under the stockholders agreement between Apollo,
Mr. Speese and us. Mr. Jhawar's term as a Class III director expires at our 2003
annual stockholders meeting.

J. V. Lentell has served as one of our directors since February 1995. Mr.
Lentell was employed by Kansas State Bank & Trust Co., Wichita, Kansas, from
1966 until July 1993, serving as Chairman of the Board from 1981 until July
1993. Since July 1993, he has served as a director and Vice Chairman of the
board of directors of Intrust Bank, N.A., successor by merger to Kansas State
Bank & Trust Co. Mr. Lentell's term as a Class III director expires at our 2003
annual stockholders meeting.

Mr. Arnette currently serves as one of our Class II directors with a term
that expires at this year's annual stockholders meeting. Mr. Arnette has advised
us that he does not intend to stand for re-election. Accordingly, our Board has
fixed the number of directors constituting our entire Board at seven including
one vacant Class I position, such change to take effect upon the election of the
two Class II director positions at this year's annual stockholders meeting. As a
result, only two Class II director positions are available and being elected at
this year's annual meeting.

SELLING STOCKHOLDERS

In this prospectus, we refer to the entities listed below as selling
stockholders. The following table sets forth certain information as of March 31,
2002 with respect to each selling stockholder:

SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
BEFORE OFFERING AFTER OFFERING
-------------------- SHARES OFFERED -------------------
NAMES OF SELLING STOCKHOLDER NUMBER PERCENT HEREBY NUMBER PERCENT
---------------------------- ---------- ------- -------------- --------- -------

Apollo Investment Fund IV,
L.P.(1)......................... 10,666,145(2) 30.6% 2,847,378 7,546,145(2) 21.7%
Apollo Overseas Partners IV,
L.P.(1)......................... 10,666,145(2) 30.6% 152,777 7,546,145(2) 21.7%
Bear Stearns MB 1998-1999 Pre-
Fund, LLC(3).................... 409,713(4) 1.7% 119,845 286,868(4) 1.0%

------------

(1) For a description of the relationship between us and Apollo, please refer to
the section entitled "Management."

(2) Apollo Investment Fund IV and Apollo Overseas Partners IV, L.P. are
affiliates and each is deemed to beneficially own the securities held by the
other. The 10,666,145 and 7,546,145 shares of common stock represent the
shares of common stock into which the Series A preferred stock was
convertible on March 31, 2002 based on a liquidation preference amount of
$297,958,775. Apollo Investment Fund IV, L.P. owns 269,404 shares of Series
A preferred stock, Apollo Overseas Partners IV, L.P. owns 14,455 shares of
Series A preferred stock and the Apollo entities also have the right to vote
Bear Stearns MB Fund's 11,339 shares of Series A preferred stock. Apollo
disclaims any beneficial ownership except to the extent of their pecuniary
interests.

(3) Bear Stearns MB 1998-1999 Pre-Fund, LLC (as successor to or assignee of RC
Acquisition Corp.) is an affiliate of Bear, Stearns & Co. Inc. Bear, Stearns
& Co. Inc. is a co-manager in this offering. From time to time, Bear,
Stearns & Co. Inc. has provided, and may continue to provide, investment
banking services to us.

(4) The 409,713 and 286,868 shares of common stock represent the shares of
common stock into which the Series A preferred stock is convertible.

DESCRIPTION OF CAPITAL STOCK

GENERAL

The following description of our capital stock and certain provisions of
our certificate of incorporation and bylaws is a summary and is qualified in its
entirety by the provisions of our certificate of incorporation and bylaws.

Under our certificate of incorporation, we are authorized to issue
125,000,000 shares of common stock, par value $.01 per share, and 5,000,000
shares of preferred stock, each with a par value $.01 per share. As of March 31,
2002, 24,145,962 shares of common stock were outstanding and 295,198 shares of
Series A preferred stock were outstanding. No other series of preferred stock is
outstanding.

COMMON STOCK

The holders of common stock are entitled to one vote per share on all
matters submitted to a vote of the stockholders, and a majority vote is required
for most actions by stockholders. Cumulative voting of shares of common stock is
prohibited. The holders of common stock are entitled to receive ratably such
dividends, if any, as may be declared from time to time by our board of
directors out of assets legally available therefor, subject to the payment of
any preferential dividends and the setting aside of sinking funds or redemption
accounts, if any, with respect to any preferred stock that from time to time may
be outstanding. In the event of our liquidation, dissolution or winding up, the
holders of common stock are entitled to share ratably in all assets remaining
after payment of liabilities, subject to prior distribution rights of the
holders of any outstanding preferred stock. The holders of common stock have no
preemptive or conversion rights or other subscription rights, and there are no
redemption or sinking fund provisions applicable to the common stock. All of the
outstanding shares of common stock are fully paid and nonassessable.

PREFERRED STOCK

Our certificate of incorporation authorizes our board of directors, without
further action by the stockholders, to issue up to 5,000,000 shares of preferred
stock in one or more series and to fix and determine as to any series any and
all of the relative rights and preferences of shares in that series, including,
without limitation, preferences, limitations or relative rights with respect to
redemption rights, conversion rights, voting rights, dividend rights and
preferences on liquidation.

SERIES A PREFERRED STOCK

To finance a portion of the cost of our acquisition of Thorn Americas, we
issued to certain affiliates of Apollo Management IV, L.P., a total of 250,000
shares of preferred stock, consisting of 134,414 shares of Series A preferred
stock and consisting of 115,586 shares of Series B preferred stock, at $1,000
per share, resulting in aggregate proceeds to us of $250 million. In addition,
we issued to an affiliate of Bear, Stearns & Co. Inc. a total of 10,000 shares
of preferred stock, consisting of 5,377 shares of Series A preferred stock and
consisting of 4,623 shares of Series B preferred stock, at $1,000 per share in
August 1998, resulting in aggregate proceeds to us of $10 million. In October
1998, all of the shares of Series B preferred stock were converted into Series A
preferred stock and no shares of Series B are outstanding. The terms of the
Series A preferred stock are summarized below.

Liquidation Preference. Our Series A preferred stock has a liquidation
preference of $1,000 per share, plus all accrued and unpaid dividends. No
distributions may be made to holders of our common stock until the holders of
our Series A preferred stock have received the liquidation preference.

Dividends. Holders of Series A preferred stock are entitled to receive
quarterly dividends at the rate of $37.50 per annum per share of Series A
preferred stock. Until August 5, 2003, dividends on the Series A preferred stock
may be paid, at our option, in cash or in additional shares of Series A
preferred stock. We currently pay our dividends in additional shares of Series A
preferred stock because of restrictive provisions of our senior credit
facilities. Our senior credit facilities agreement will allow us to pay cash
dividends on our

Series A preferred stock beginning in August 2003 so long as we are not in
default under that agreement. Cash dividend payments are also subject to the
restrictions in the indenture governing our subordinated notes. These
restrictions in the indenture would not currently prohibit the payment of cash
dividends. For each quarter after September 30, 2001, dividends shall not be
paid or accrued on any share of Series A preferred stock in any quarter in which
the average stock price for the 15 consecutive trading days immediately
preceding the payment date is equal to or greater than $27.935, accumulated
forward to the payment date at a compound annual growth rate of 25% per annum,
compounded quarterly.

Conversion Price. Holders of our Series A preferred stock may convert
their shares of Series A preferred stock at any time into shares of our common
stock at a conversion price equal to $27.935 per share. The conversion price is
adjusted downward in certain situations, including if we do any of the
following, in each case other than through the conversion of Series A preferred
stock or under one of our benefits plans:

-- issue additional common stock at less than the average stock price
for the 15 consecutive trading days immediately preceding the pricing
date for the common stock;

-- issue or sell warrants or other rights to the holders of our common
stock if the consideration paid by the holders is less than the
average stock price for the 15 consecutive trading days immediately
preceding the date of issue or sale; and

-- issue securities convertible into our common stock if the
consideration paid by the holders for the underlying common stock is
less than the average stock price for the 15 consecutive trading days
immediately preceding the date of issue.

If the conversion price is adjusted downward, it becomes effectively
cheaper for the Series A preferred stockholders to convert their Series A
preferred stock into our common stock, and more shares of common stock would be
issued upon conversion which would result in dilution for all holders of common
stock.

Optional Redemption. The Series A preferred stock is not redeemable until
August 5, 2002. Thereafter, we may redeem all but one share of the Series A
preferred stock at any time at 105% of the liquidation preference of the Series
A preferred stock. Certain affiliates of Apollo Management IV, L.P. may reserve
from redemption one share of Series A preferred stock until such time as it and
its permitted transferees own less than 83,333 shares of Series A preferred
stock, or, if they have converted their shares into common stock, less than
2,982,817 shares of common stock.

Mandatory Redemption. Holders of our Series A preferred stock have the
right to require us to redeem their Series A preferred stock on the earliest of
a change of control, the date upon which our common stock is not listed for
trading on a United States national securities exchange or the Nasdaq National
Market or August 5, 2009, at a price equal to the liquidation preference of the
Series A preferred stock.

Board Representation. Holders of our Series A preferred stock are entitled
to designate and elect two individuals to our board of directors. Each of our
board's audit committee, compensation committee and finance committee must have
one director elected by the holders of our Series A preferred stock.

Voting Rights. Holders of our Series A preferred stock are entitled to
vote on all matters presented to the holders of common stock. The number of
votes per share of Series A preferred stock shall be equal to the number of
votes associated with the underlying voting common stock into which the Series A
preferred stock is convertible.

Negative Covenants. As long as shares of Series A preferred stock are
outstanding, we are not permitted, without the consent of the holders of our
Series A preferred stock, to:

-- increase the number of shares of Series A preferred stock or issue
any shares of Series A preferred stock;

-- issue any new class or series of equity security;

-- amend the designations, preferences and relative rights and
limitations and restrictions of the Series A preferred stock;

-- amend our certificate of incorporation or bylaws in a manner that
negatively impacts the holders of our Series A preferred stock;

-- redeem or otherwise acquire for value any shares of common stock or
declare or pay any dividend or make any distribution on shares of
common stock;

-- increase the number of directors on our board of directors to a
number greater than eight;

-- enter into any agreement with or for the benefit of any of our
affiliates with a value in excess of $5 million;

-- voluntarily liquidate, dissolve or wind up our affairs;

-- sell substantially all of our assets; or

-- merge, consolidate or enter into any other business combination other
than with a wholly-owned subsidiary.

As long as shares of our Series A preferred stock are outstanding, we are
not permitted, without the consent of the finance committee of our board of
directors, to issue debt or equity securities with a value in excess of $10
million. Further, the issuance of equity securities with a value in excess of
$10 million requires the unanimous written consent of the finance committee of
our board of directors while any of the shares of our Series A preferred stock
are outstanding, unless the issuance is for:

-- a common stock offering after August 5, 2001 in which the selling
price is equal to or greater than the price that would imply a 25% or
greater internal rate of return, compounded quarterly, on the
conversion price; or

-- an issuance of equity in connection with an acquisition if the
issuance is equal to or less than 10% of our outstanding common
stock, calculated on post-issuance of the shares of common stock.

If the issuance of equity securities meets any of the requirements described
above, only the affirmative vote of the finance committee is required.

REGISTRATION RIGHTS AGREEMENTS

In connection with the issuance of our Series A preferred stock, we entered
into registration rights agreements with the Apollo entities and an affiliate of
Bear, Stearns & Co. Inc. The registration rights agreement with the Apollo
entities grants the Apollo entities two rights to request that their shares be
registered, subject to our right, upon the advice of our managing underwriter,
to reduce the number of shares proposed to be registered by the demanding
holders and other holders. The Apollo entities are using one of their two rights
to request that their shares be registered to effect this offering. The
registration rights agreements with the Apollo entities and Bear Stearns MB Fund
grant the holders of our Series A preferred stock the unlimited right to request
that their shares be included in any company-initiated registration of shares
other than registrations relating primarily to employee benefit plans, exchange
offers or rights offerings to existing stockholders. In subsequent
registrations, the underwriters may, if in their opinion inclusion of the shares
would materially and adversely affect the success of the registration, exclude
all or part of the shares requested to be registered by the holders of these
registration rights. In addition, we must pay for legal expenses incurred by the
holders of our Series A preferred stock in exercising their registration rights
under the registration rights agreements.

CERTAIN ANTI-TAKEOVER MATTERS

Advance Notice Requirements. Our bylaws require that, to be considered at
the annual meeting, notice of stockholder proposals relating to the nomination
of candidates for election of directors must be timely delivered to us in
writing not less than 90 days prior to the anniversary date of the immediately
preceding annual meeting of stockholders. The notice must also contain certain
information specified in our bylaws. The advance notice requirements, by
prescribing the types of business that could be presented to stockholders

during annual meetings, could discourage takeover bids initiated by hostile
tender offer, proxy contest or the removal of the existing board of directors
and management.

Authorized but Unissued or Undesignated Capital Stock. We are authorized
to issue 5,000,000 shares of preferred stock, of which 295,198 were outstanding
as of March 31, 2002. Our certificate of incorporation grants our board of
directors broad power to establish the rights, preferences and privileges of
authorized and unissued shares of preferred stock and to issue the shares in one
or more transactions. The issuance of shares of preferred stock under the board
of directors' authority described above may have the effect of delaying,
deferring or preventing a change in control of our company and could decrease
the amount of earnings and assets available for distribution to the holders of
our common stock. In addition, the issuance of large blocks of common stock may
have the effect of delaying, deferring or preventing a change in control of our
company. Our board of directors does not currently intend to seek stockholder
approval prior to any issuance of common stock or preferred stock, unless
otherwise required by law.

Change in Control Provisions. Some of our material agreements contain
change in control provisions which, in the event of a change in control, would
result in events of default, accelerate payment obligations, or require
redemptions. These agreements include:

-- our certificate of designations governing our Series A preferred
stock, which would require us to redeem the outstanding shares of
Series A preferred stock in the event of a change in control;

-- our senior credit facilities, which state that a change in control
constitutes an event of default and would permit the applicable
lenders to accelerate our then outstanding indebtedness; and

-- our indenture governing our subordinated notes, which would require
us to offer to redeem all of the outstanding notes at 101% of their
principal amount, plus accrued interest to the date of repurchase in
the event of a change in control.

The change in control provisions in these material agreements may
discourage, delay, defer or prevent a change in control of our company.

Delaware Anti-Takeover Statute. We are a Delaware corporation subject to
Section 203 of the Delaware General Corporation Law. In general, Section 203
prohibits a publicly held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless

-- prior to that date, the corporation's board of directors approved
either the business combination or the transaction which resulted in
the person becoming an interested stockholder; or

-- upon consummation of the transaction which resulted in the person
becoming an interested stockholder, the interested stockholder owned
at least 85% of the corporation's voting stock outstanding at the
time the transaction commenced (excluding shares owned by persons who
are directors and also officers and employee stock plans in which
employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer); or

-- on or subsequent to that date, the business combination is approved
by our board of directors and authorized at an annual or special
meeting of stockholders by the affirmative vote of at least 66 2/3%
of the outstanding voting stock which is not owned by the interested
stockholder.

For purposes of Section 203, "business combination" includes a merger, asset
sale or other transaction resulting in a financial benefit to the interested
stockholder and an "interested stockholder" is a person who, together with
affiliates and associates, beneficially owns 15% or more of the corporation's
outstanding voting stock.

Limitation of Director Liability. Our certificate of incorporation limits
the liability of directors (in their capacity as directors but not in their
capacity as officers) to us and our stockholders to the fullest extent

permitted by Delaware law. Specifically, directors will not be personally liable
for monetary damages for breach of his or her fiduciary duty as a director,
except for liability for:

-- any breach of the director's duty of loyalty to us or our
stockholders;

-- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;

-- violations under Section 174 of the Delaware General Corporation Law,
which relates to unlawful payments of dividends or unlawful stock
repurchases or redemptions; or

-- any transaction from which the director derived an improper personal
benefit.

These provisions in our certificate of incorporation may have the effect of
reducing the likelihood of derivative litigation against our directors and may
discourage or deter stockholders or management from bringing a lawsuit against
our directors for breach of their duty of care, even though the action, if
successful, might otherwise have benefited us and our stockholders. These
provisions do not limit or affect a stockholder's ability to seek and obtain
relief under the federal securities laws.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock and Series A
preferred stock is Mellon Investor Services LLC.

SHARES ELIGIBLE FOR FUTURE SALE

The 3,120,000 shares of our common stock sold in this offering will be
freely tradable without restriction under the Securities Act of 1933, as
amended, except for any such shares which may be acquired by an "affiliate" of
ours as that term is defined in Rule 144 promulgated under the Securities Act,
which shares will remain subject to the resale limitations of Rule 144.

The shares of our common stock that will continue to be held by our
affiliates, including Apollo, after the offering constitute "restricted
securities" or "control securities" within the meaning of Rule 144, and will be
eligible for sale by them in the open market after the offering, subject to
certain contractual lockup provisions and the applicable requirements of Rule
144, both of which are described below. We have previously granted certain
registration rights to the holders of our Series A preferred stock.

Generally, Rule 144 provides that a person who has beneficially owned
"restricted" shares for at least one year will be entitled to sell on the open
market in brokers' transactions within any three month period a number of shares
that does not exceed the greater of:

-- 1% of the then outstanding shares of common stock; and

-- the average weekly trading volume in the common stock on the open
market during the four calendar weeks preceding the sale.

Sales under Rule 144 are also subject to post-sale notice requirements and
the availability of current public information about the company.

In the event that any person who is deemed to be an affiliate for Rule 144
purposes purchases shares of our common stock pursuant to the offering or
acquires shares of our common stock pursuant to an employee benefit plan of
ours, the shares held by such person are required under Rule 144 to be sold in
brokers' transactions, subject to the volume limitations described above. Shares
properly sold in reliance upon Rule 144 to persons who are not affiliates are
thereafter freely tradable without restriction.

Sales of substantial amounts of our common stock in the open market, or the
availability of such shares for sale, could adversely affect the price of our
common stock. Any shares distributed by Apollo will be eligible for immediate
resale in the public market without restrictions by persons other than our
affiliates for Rule 144 purposes. Our affiliates would be subject to the
restrictions of Rule 144 described above other than the one-year holding period
requirement.

Our directors, officers and certain of our 5% stockholders have agreed
that, without the prior written consent of Morgan Stanley & Co. Incorporated on
behalf of the underwriters, they will not, during the period ending 90 days
after the date of this prospectus, sell or otherwise dispose of any shares of
our common stock, subject to certain exceptions.

An aggregate of 7,900,000 shares of our common stock are reserved for
issuance under the Amended and Restated Rent-A-Center, Inc. Long-Term Incentive
Plan. We have filed registration statements on Form S-8 covering the issuance of
shares of our common stock pursuant to our Long-Term Incentive Plan.
Accordingly, the shares issued under our Long-Term Incentive Plan will be freely
tradable, subject to the restrictions on resale by affiliates under Rule 144.

We have previously entered into registration rights agreements with Apollo
Investment Fund IV, L.P., Apollo Overseas Partners IV, L.P. and Bear Stearns MB
Fund, an affiliate of Bear, Stearns & Co. Inc. These agreements provide the
Apollo entities and Bear Stearns MB Fund with the right, subject to certain
exceptions, to include our common stock in any registration of common stock made
by us for our own account or for the account of our other stockholders. We
currently do not have any other registration rights outstanding.

UNDERWRITERS

Under the terms and subject to the conditions contained in the underwriting
agreement dated the date of this prospectus, the underwriters named below, for
whom Morgan Stanley & Co. Incorporated, Lehman Brothers Inc., Bear, Stearns &
Co. Inc., SunTrust Capital Markets, Inc. and First Union Securities, Inc. are
acting as representatives, have severally agreed to purchase, and the selling
stockholders have severally agreed to sell to them, the number of shares of our
common stock indicated.

NAME NUMBER OF SHARES
---- ----------------

Morgan Stanley & Co. Incorporated...........................
Lehman Brothers Inc. .......................................
Bear, Stearns & Co. Inc. ...................................
SunTrust Capital Markets, Inc. .............................
First Union Securities, Inc. ...............................

---------
Total............................................. 3,120,000
=========

The underwriters are offering the shares of common stock subject to their
acceptance of the shares from the selling stockholders and subject to prior
sale. The underwriting agreement provides that the obligations of the several
underwriters to pay for and accept delivery of the shares of common stock are
subject to the delivery of legal opinions by their counsel as well as other
conditions. The underwriters are obligated to take and pay for all of the shares
of common stock offered by this prospectus if any shares are taken. However, the
underwriters are not required to take or pay for the shares covered by the
over-allotment option described below.

The underwriters initially propose to offer part of the shares of common
stock directly to the public at the public offering price set forth on the cover
page of this prospectus and part to certain dealers at a price that represents a
concession not in excess of $ a share under the public offering price.
No underwriter will allow, and no dealer will reallow, a concession to other
underwriters or to dealers. After the initial offering of the shares of common
stock, the offering price and other selling terms may from time to time be
varied by the representatives of the underwriters.

The selling stockholders have granted to the underwriters an option,
exercisable for 30 days from the date of this prospectus, to purchase up to an
aggregate of 468,000 additional shares of common stock at the public offering
price listed on the cover page of this prospectus, less underwriting discounts
and commissions. The underwriters may exercise this option in whole or from time
to time in part solely for the purpose of covering over-allotments, if any, made
in connection with this offering. To the extent the option is exercised, each
underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of the additional shares of common stock as
the number listed next to the underwriter's name in the preceding table bears to
the total number of shares of common stock listed next to the names of all
underwriters in the preceding table. If the underwriters' over-allotment option
is exercised in full, the total price to the public would be $ , the
total underwriters' discounts and commissions would be $ and the total
proceeds to the selling stockholders would be $ . We will be paying
estimated offering expenses of $500,000.

We, our directors and executive officers and the selling stockholders have
each agreed, without the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of the underwriters, during the period ending 90 days
after the date of this prospectus, subject to certain exceptions, not to,
directly or indirectly:

-- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, distribute to members or partners
or otherwise transfer or dispose of directly or indirectly, any
shares of common stock or any securities

convertible into or exercisable or exchangeable for common stock
(whether such shares or any such securities are then owned by such
person or thereafter acquired directly from us); or

-- enter into any swap or other arrangement that transfers to another,
in whole or in part, any of the economic consequences of ownership of
the common stock;

whether any transaction described above is to be settled by delivery of common
stock or such other securities, in cash or otherwise.

The foregoing restrictions do not apply to:

-- the sale of shares to the underwriters;

-- bona fide gifts, provided the recipient agrees to be bound to the
foregoing restrictions;

-- transactions relating to shares of our common stock or other
securities acquired in open market transactions after the completion
of this offering;

-- the issuance of the common stock issuable upon conversion of our
Series A preferred stock;

-- options granted or stock issued upon the exercise of outstanding
stock options or otherwise pursuant to our stock incentive or
employee stock purchase plans;

-- the sale or transfer of shares of securities, in connection with a
sale of the company pursuant to an offer made on substantially the
same terms to all stockholders and of which the underwriters have
been notified in writing; or

-- with the consent of Morgan Stanley & Co. Incorporated, securities
issued by us in connection with the acquisition of a business or
assets.

In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may sell more shares
than they are obligated to purchase under the underwriting agreement, creating a
short position. A short sale is covered if the short position is no greater than
the number of shares available for purchase by the underwriters under the
over-allotment option. The underwriters can close out a covered short sale by
exercising the over-allotment option or purchasing shares in the open market. In
determining the source of shares to close out a covered short sale, the
underwriters will consider, among other things, the open market price of shares
compared to the price available under the over-allotment option. The
underwriters may also sell shares in excess of the over-allotment option,
creating a naked short position. The underwriters must close out any naked short
position by purchasing shares in the open market. A naked short position is more
likely to be created if the underwriters are concerned that there may be
downward pressure on the price of the common stock in the open market after
pricing that could adversely affect investors who purchase in the offering. As
an additional means of facilitating the offering, the underwriters may bid for,
and purchase, shares of common stock in the open market to stabilize the price
of the common stock. The underwriting syndicate may also reclaim selling
concessions allowed to an underwriter or a dealer for distributing the common
stock in the offering, if the syndicate repurchases previously distributed
common stock to cover syndicate short positions or to stabilize the price of the
common stock. These activities may raise or maintain the market price of the
common stock above independent market levels or prevent or retard a decline in
the market price of the common stock. The underwriters are not required to
engage in these activities, and may end any of these activities at any time.

From time to time, certain of the underwriters have provided, and may
continue to provide, investment banking services to us. In August 1998, we
issued to an affiliate of Bear, Stearns & Co. Inc., a member of the underwriting
syndicate and a selling stockholder in this offering, 5,377 shares of Series A
preferred stock and 4,623 shares of Series B preferred stock (since converted
into Series A preferred stock), at $1,000 per share, resulting in aggregate
proceeds to us of $10 million.

We, the selling stockholders and the underwriters have agreed to indemnify
each other against certain liabilities, including liabilities under the
Securities Act.

LEGAL MATTERS

The validity of the issuance of the shares of common stock offered by this
prospectus will be passed upon for us by Winstead Sechrest & Minick P.C.,
Dallas, Texas. Davis Polk & Wardwell, Menlo Park, California, is representing
the underwriters.

EXPERTS

The financial statements as of December 31, 2000 and 2001, and for each of
the three years in the period ended December 31, 2001, included in this
prospectus have been so included and incorporated in reliance on the report of
Grant Thornton LLP, independent certified public accountants, given on the
authority of such firm as experts in accounting and auditing.

Grant Thornton has advised us that from December 28, 1998 through March 27,
2000, a benefit plan managed by a third-party brokerage firm for the benefit of
Grant Thornton LLP's employees owned up to 120 shares of our common stock.
Accordingly, this has raised an issue as to Grant Thornton's independence. Grant
Thornton has disclosed the situation to the SEC. Grant Thornton has also advised
us that, notwithstanding the benefit plan's investment in our common stock,
Grant Thornton intends to sign audit opinions and consents to incorporation by
reference as necessary in connection with documents filed by us with the SEC and
other third parties.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission, or SEC. You may read
this information at the SEC's public reference room at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549.

Please call the SEC at 1-800-SEC-0330 for further information on its
regional public reference rooms. You may also obtain copies of this information
by mail from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, at prescribed rates. Our SEC filings are also
available to the public at the SEC's web site at http://www.sec.gov. You may
also inspect reports, proxy statements and other information about us at the
offices of The Nasdaq Stock Market, Inc. National Market System, 1735 K Street,
N.W., Washington, D.C. 20006-1500.

The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference in
this prospectus is considered to be part of this prospectus, and later
information filed with the SEC or contained in this prospectus updates and
supersedes this information. We incorporate by reference the documents listed
below and any future filings made with the SEC under Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 until our offering is completed:

-- Our Annual Report on Form 10-K for the fiscal year ended December 31,
2001;

-- Our Quarterly Report on Form 10-Q for the quarter ended March 31,
2002; and

-- The description of the common stock contained in our Form 8-A (file
no. 0-25370), with the SEC pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as updated in any amendment or
report filed for such purpose.

You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:

Rent-A-Center, Inc.
Attention: Corporate Secretary
5700 Tennyson Parkway
Third Floor
Plano, Texas 75024
Telephone: (972) 801-1100

INDEX TO FINANCIAL STATEMENTS

PAGE
----

RENT-A-CENTER, INC. AND SUBSIDIARIES
Report of Independent Certified Public Accountants.......... F-2
Consolidated Financial Statements
Balance Sheets............................................ F-3
Statements of Earnings.................................... F-4
Statement of Stockholders' Equity......................... F-5
Statements of Cash Flows.................................. F-6
Notes to Consolidated Financial Statements.................. F-7

F-1

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Stockholders
Rent-A-Center, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of
Rent-A-Center, Inc. and Subsidiaries as of December 31, 2001 and 2000, and the
related consolidated statements of earnings, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 2001. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Rent-A-Center,
Inc. and Subsidiaries as of December 31, 2001 and 2000, and the consolidated
results of their operations and their consolidated cash flows for each of the
three years in the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States of America.

GRANT THORNTON LLP

Dallas, Texas
February 11, 2002

F-2

RENT-A-CENTER, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31,
----------------------- MARCH 31,
2000 2001 2002
---------- ---------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)

ASSETS:

Cash and cash equivalents.............................. $ 36,495 $ 107,958 $ 167,264
Accounts receivable--trade............................. 3,254 1,664 2,808
Prepaid expenses and other assets...................... 31,805 29,846 32,499
Rental merchandise, net
On rent.............................................. 477,095 531,627 544,471
Held for rent........................................ 110,137 122,074 112,073
Property assets, net................................... 87,168 106,883 105,157
Deferred income taxes.................................. 32,628 8,772 --
Intangible assets, net................................. 708,328 711,096 712,764
---------- ---------- ----------
$1,486,910 $1,619,920 $1,677,036
========== ========== ==========

LIABILITIES:

Accounts payable--trade................................ $ 65,696 $ 49,930 $ 65,398
Accrued liabilities.................................... 89,560 170,196 186,403
Deferred income tax liability.......................... -- -- 3,304
Senior debt............................................ 566,051 428,000 428,000
Subordinated notes payable, net of discount............ 175,000 274,506 274,525
---------- ---------- ----------
896,307 922,632 957,630
Commitments and contingencies.......................... -- -- --
Preferred stock
Redeemable convertible voting preferred stock, net of
placement costs, $.01 par value; 5,000,000 shares
authorized; 281,756 and 292,434 shares issued and
outstanding in 2000 and 2001, respectively and
295,198 shares at March 31, 2002.................. 281,232 291,910 294,674

STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; 50,000,000 and
125,000,000 shares authorized; 25,700,058 and
27,726,092 shares issued in 2000 and 2001,
respectively, and 28,084,227 shares at March 31,
2002.............................................. 257 277 281
Additional paid-in capital........................... 115,607 191,438 203,490
Accumulated comprehensive loss....................... -- (6,319) (4,539)
Retained earnings.................................... 218,507 269,982 310,224
---------- ---------- ----------
Treasury stock, 990,099 and 2,224,179 shares at cost
in 2000 and 2001, respectively and 3,938,265
shares at March 31, 2002.......................... (25,000) (50,000) (84,724)
---------- ---------- ----------
309,371 405,378 424,732
---------- ---------- ----------
$1,486,910 $1,619,920 $1,677,036
========== ========== ==========

The accompanying notes are an integral part of these financial statements.
F-3

RENT-A-CENTER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------ --------------------
1999 2000 2001 2001 2002
---------- ---------- ---------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Revenues:
Store
Rentals and fees................. $1,270,885 $1,459,664 $1,650,851 $393,123 $443,705
Merchandise sales................ 88,516 81,166 94,733 30,759 39,605
Other............................ 2,177 3,018 3,476 1,330 614
Franchise
Merchandise sales................ 49,696 51,769 53,584 13,027 13,253
Royalty income and fees.......... 5,893 5,997 5,884 1,463 1,433
---------- ---------- ---------- -------- --------
1,417,167 1,601,614 1,808,528 439,702 498,610
Operating expenses:
Direct store expenses
Depreciation of rental
merchandise.................... 265,486 299,298 343,197 80,812 92,223
Cost of merchandise sold......... 74,027 65,332 72,539 21,555 26,982
Salaries and other expenses...... 770,572 866,234 1,019,402 242,219 262,619
Franchise cost of merchandise
sold............................. 47,914 49,724 51,251 12,494 12,653
---------- ---------- ---------- -------- --------
1,157,999 1,280,588 1,486,389 357,080 394,477
General and administrative
expenses......................... 42,029 48,093 55,359 12,869 15,117
Amortization of intangibles......... 27,116 28,303 30,194 7,268 720
Class action litigation
settlements...................... -- (22,383) 52,000 -- --
---------- ---------- ---------- -------- --------
Total operating expenses.... 1,227,144 1,334,601 1,623,942 377,217 410,314
Operating profit............ 190,023 267,013 184,586 62,485 88,296
Interest expense...................... 75,673 74,324 60,874 16,510 15,798
Interest income....................... (904) (1,706) (1,094) (361) (723)
---------- ---------- ---------- -------- --------
Earnings before income
taxes..................... 115,254 194,395 124,806 46,336 73,221
Income tax expense.................... 55,899 91,368 58,589 21,338 29,658
---------- ---------- ---------- -------- --------
Net earnings................ 59,355 103,027 66,217 24,998 43,563
Preferred dividends................... 10,039 10,420 15,408 4,325 4,992
---------- ---------- ---------- -------- --------
Net earnings allocable to common
stockholders........................ $ 49,316 $ 92,607 $ 50,809 $ 20,673 $ 38,571
========== ========== ========== ======== ========
Basic earnings per common share....... $ 2.04 $ 3.79 $ 1.97 $ .83 $ 1.57
========== ========== ========== ======== ========
Diluted earnings per common share..... $ 1.74 $ 2.96 $ 1.79 $ .69 $ 1.20
========== ========== ========== ======== ========

The accompanying notes are an integral part of these financial statements.
F-4

RENT-A-CENTER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 2001 AND
THE THREE MONTHS ENDED MARCH 31, 2002 (UNAUDITED)

COMMON STOCK ADDITIONAL ACCUMULATED
--------------- PAID-IN RETAINED TREASURY COMPREHENSIVE
SHARES AMOUNT CAPITAL EARNINGS STOCK INCOME (LOSS) TOTAL
------ ------ ---------- -------- -------- ------------- --------
(IN THOUSANDS)

Balance at January 1, 1999........... 25,074 $251 $101,781 $ 77,881 $(25,000) $ -- $154,913
Net earnings....................... -- -- -- 59,355 -- -- 59,355
Preferred dividends................ -- -- -- (11,426) -- -- (11,426)
Exercise of stock options.......... 223 2 3,318 -- -- -- 3,320
Tax benefits related to exercise of
stock options.................... -- -- 528 -- -- -- 528
------ ---- -------- -------- -------- -------- --------
Balance at December 31, 1999......... 25,297 253 105,627 125,810 (25,000) -- 206,690
Net earnings....................... -- -- -- 103,027 -- -- 103,027
Preferred dividends................ -- -- -- (10,330) -- -- (10,330)
Issuance of stock options for
services......................... -- -- 65 -- -- -- 65
Exercise of stock options.......... 403 4 8,430 -- -- -- 8,434
Tax benefits related to exercise of
stock options.................... -- -- 1,485 -- -- -- 1,485
------ ---- -------- -------- -------- -------- --------
Balance at December 31, 2000......... 25,700 257 115,607 218,507 (25,000) -- 309,371
Net earnings....................... -- -- -- 66,217 -- -- 66,217
Other comprehensive income (loss):
Cumulative effect of adoption of
SFAS 133....................... -- -- -- -- -- 1,378 1,378
Losses on interest rate swaps,
net of tax..................... -- -- -- -- -- (11,556) (11,556)
Reclassification adjustment for
losses included in net
earnings, net of tax........... -- -- -- -- -- 3,859 3,859
-------- --------
Other comprehensive loss....... -- -- -- -- -- (6,319) (6,319)
-------- --------
Comprehensive income............. -- -- -- -- -- -- 59,898
Purchase of treasury stock (1,234
shares).......................... -- -- -- -- (25,000) -- (25,000)
Issuance of common stock in public
offering, net of issuance costs
of $3,253........................ 1,150 12 45,610 -- -- -- 45,622
Preferred dividends................ -- -- 4,064 (14,742) -- -- (10,678)
Issuance of stock options for
services......................... -- -- 111 -- -- -- 111
Exercise of stock options.......... 876 8 20,309 -- -- -- 20,317
Tax benefits related to exercise of
stock options.................... -- -- 5,737 -- -- -- 5,737
------ ---- -------- -------- -------- -------- --------
Balance at December 31, 2001......... 27,726 277 191,438 269,982 (50,000) (6,319) 405,378
Net earnings....................... -- -- -- 43,563 -- -- 43,563
Other comprehensive income (loss):
Gains on interest rate swaps, net
of tax......................... -- -- -- -- -- 4,010 4,010
Reclassification adjustment for
losses included in net
earnings, net of tax........... -- -- -- -- -- (2,230) (2,230)
-------- --------
Other comprehensive income..... -- -- -- -- -- 1,780 1,780
-------- --------
Comprehensive income............. -- -- -- -- -- -- 45,343
Purchase of treasury stock (1,714
shares).......................... -- -- -- -- (34,724) -- (34,724)
Preferred dividends................ -- -- 557 (3,321) -- -- (2,764)
Issuance of stock options for
services......................... -- -- 28 -- -- -- 28
Exercise of stock options.......... 358 4 8,970 -- -- -- 8,974
Tax benefits related to exercise of
stock options.................... -- -- 2,497 -- -- -- 2,497
------ ---- -------- -------- -------- -------- --------
Balance at March 31, 2002............ 28,084 $281 $203,490 $310,224 $(84,724) $ (4,539) $424,732
====== ==== ======== ======== ======== ======== ========

The accompanying notes are an integral part of this financial statement.
F-5

RENT-A-CENTER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------- --------------------
1999 2000 2001 2001 2002
--------- --------- --------- --------- --------
(UNAUDITED)
(IN THOUSANDS)

Cash flows from operating activities
Net earnings................................ $ 59,355 $ 103,027 $ 66,217 $ 24,998 $ 43,563
Adjustments to reconcile net earnings to net
cash provided by (used in) operating
activities
Depreciation of rental merchandise....... 265,486 299,298 343,197 80,812 92,223
Depreciation of property assets.......... 31,313 33,144 37,910 8,805 9,466
Amortization of intangibles.............. 27,116 28,303 30,194 7,268 720
Amortization of financing fees........... 2,608 2,705 2,760 690 690
Changes in operating assets and liabilities,
net of effects of acquisitions
Rental merchandise....................... (387,903) (342,233) (391,932) (118,461) (93,826)
Accounts receivable--trade............... (587) 629 1,590 (400) (1,144)
Prepaid expenses and other assets........ 6,522 (6,624) (1,709) (6,250) (3,435)
Deferred income taxes.................... 64,231 77,738 23,856 10,709 12,076
Accounts payable--trade.................. 9,584 12,197 (15,766) 11,636 15,468
Accrued liabilities...................... (106,975) (16,621) 79,413 12,239 20,530
--------- --------- --------- --------- --------
Net cash provided by (used in)
operating activities.............. (29,250) 191,563 175,730 32,046 96,331
Cash flows from investing activities
Purchase of property assets................. (36,211) (37,937) (57,532) (11,846) (8,100)
Proceeds from sale of property assets....... 8,563 1,403 706 524 374
Acquisitions of businesses, net of cash
acquired................................. -- (42,538) (49,835) (2,835) (3,549)
--------- --------- --------- --------- --------
Net cash used in investing
activities........................ (27,648) (79,072) (106,661) (14,157) (11,275)
--------- --------- --------- --------- --------
Cash flows from financing activities
Purchase of treasury stock.................. -- -- (25,000) -- (34,724)
Proceeds from issuance of common stock, net
of issuance costs........................ -- -- 45,622 -- --
Exercise of stock options................... 3,320 8,434 20,317 11,073 8,974
Proceeds from debt.......................... 320,815 242,975 99,506 -- --
Repayments of debt.......................... (279,355) (349,084) (138,051) (37,916) --
--------- --------- --------- --------- --------
Net cash provided by (used in)
financing activities.............. 44,780 (97,675) 2,394 (26,843) (25,750)
--------- --------- --------- --------- --------
Net increase (decrease) in cash and
cash equivalents.................. (12,118) 14,816 71,463 (8,954) 59,306
Cash and cash equivalents at beginning of
year........................................ 33,797 21,679 36,495 36,495 107,958
--------- --------- --------- --------- --------
Cash and cash equivalents at end of year...... $ 21,679 $ 36,495 $ 107,958 $ 27,541 $167,264
========= ========= ========= ========= ========
Supplemental cash flow information
Cash paid during the year for:
Interest................................. $ 76,653 $ 75,956 $ 56,306 $ 19,676 $ 18,585
Income taxes............................. 4,631 9,520 21,526 750 2,018
Supplemental schedule of non-cash investing
and financing activities
Fair value of assets acquired................. $ -- $ 42,538 $ 49,835 $ 2,835 $ 3,549
Cash paid..................................... -- 42,538 49,835 2,835 3,549

During 2000 and 2001, the Company paid Series A preferred dividends of
approximately $10.3 million and $10.7 million by issuing 10,330 and 10,678
shares of Series A preferred stock, respectively. During the three months ended
March 31, 2001 and 2002, the Company paid dividends on its Series A preferred
stock of approximately $2.7 million and $2.8 million by issuing 2,656 and 2,764
shares of Series A preferred stock, respectively.
The accompanying notes are an integral part of these financial statements.
F-6

RENT-A-CENTER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A--SUMMARY OF ACCOUNTING POLICIES AND NATURE OF OPERATIONS

A summary of the significant accounting policies consistently applied in
the preparation of the accompanying consolidated financial statements follows:

Principles of Consolidation and Nature of Operations

The accompanying financial statements include the accounts of
Rent-A-Center, Inc. ("Rent-A-Center"), and its wholly-owned subsidiaries
(collectively, the "Company"). All significant intercompany accounts and
transactions have been eliminated. Rent-A-Center's sole operating segment
consists of leasing household durable goods to customers on a rent-to-own basis.
At December 31, 2001, Rent-A-Center operated 2,281 stores which were located
throughout the 50 United States, the District of Columbia and the Commonwealth
of Puerto Rico.

ColorTyme, Inc. ("ColorTyme"), Rent-A-Center's only subsidiary with
substantive operations, is a nationwide franchisor of 342 franchised rent-to-own
stores operating in 42 states. These rent-to-own stores offer high quality
durable products such as home electronics, appliances, computers, and furniture
and accessories. ColorTyme's primary source of revenues is the sale of rental
merchandise to its franchisees, who, in turn, offer the merchandise to the
general public for rent or purchase under a rent-to-own program. The balance of
ColorTyme's revenues are generated primarily from royalties based on
franchisees' monthly gross revenues.

Rental Merchandise

Rental merchandise is carried at cost, net of accumulated depreciation.
Depreciation is provided using the income forecasting method, which is intended
to match as closely as practicable the recognition of depreciation expense with
the consumption of the rental merchandise, and assumes no salvage value. The
consumption of rental merchandise occurs during periods of rental and directly
coincides with the receipt of rental revenue over the rental-purchase agreement
period, generally 12 to 36 months. 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.

Rental merchandise which is damaged and inoperable, or not returned by the
customer after becoming delinquent on payments, is written-off when such
impairment occurs.

Cash Equivalents

For purposes of reporting cash flows, cash equivalents include all highly
liquid investments with an original maturity of three months or less.

Rental Revenue and Fees

Merchandise is rented to customers pursuant to rental-purchase agreements
which provide for weekly 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. No revenue is accrued because the
customer can cancel the rental contract at any time and Rent-A-Center cannot
enforce collection for non-payment of rents.

ColorTyme's revenue from the sale of rental merchandise is recognized upon
shipment of the merchandise to the franchisee.

F-7

RENT-A-CENTER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Property Assets and Related Depreciation

Furniture, equipment and vehicles are stated at cost less accumulated
depreciation. Depreciation is provided over the estimated useful lives of the
respective assets (generally five years) by the straight-line method. Leasehold
improvements are amortized over the term of the applicable leases by the
straight-line method.

Intangible Assets and Amortization

Intangible assets are stated at cost less accumulated amortization
calculated by the straight-line method.

Accounting for Impairment of Long-Lived Assets

The Company evaluates all long-lived assets, including all intangible
assets and rental merchandise, for impairment whenever events or changes in
circumstances indicate that the carrying amounts may not be recoverable.
Impairment is recognized when the carrying amounts of such assets cannot be
recovered by the undiscounted net cash flows they will generate.

Income Taxes

The Company provides deferred taxes for temporary differences between the
tax and financial reporting bases of assets and liabilities at the rate expected
to be in effect when taxes become payable.

Earnings Per Common Share

Basic earnings per common share are based upon the weighted average number
of common shares outstanding during each period presented. Diluted earnings per
common share are based upon the weighted average number of common shares
outstanding during the period, plus, if dilutive, the assumed exercise of stock
options and the assumed conversion of convertible securities at the beginning of
the year, or for the period outstanding during the year for current year
issuances.

Advertising Costs

Costs incurred for producing and communicating advertising are expensed
when incurred. Advertising expense was $55.8 million, $61.2 million and $69.1
million in 1999, 2000 and 2001, respectively.

Stock-Based Compensation

The Company has chosen to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and related Interpretations.
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the quoted market price of the Company's stock at the date of the grant
over the amount an employee must pay to acquire that stock. Option grants to
non-employees are expensed over the service period.

Use of Estimates

In preparing financial statements in conformity with accounting principles
generally accepted in the United States of America, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and revenues during the reporting period. Actual
results could differ from those estimates.

F-8

RENT-A-CENTER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Other Comprehensive Income

Other comprehensive income refers to revenues, expenses, gains and losses
that under generally accepted accounting principles are included in
comprehensive income but are excluded from net income as these amounts are
recorded directly as an adjustment to stockholders' equity. The Company's other
comprehensive income is attributed to changes in the fair value of interest rate
protection agreements, net of tax. See Note E for further discussion of
accounting for interest rate swap agreements.

Interim Financial Statements

In the opinion of management, the unaudited interim consolidated financial
statements as of March 31, 2002 and for the three months ended March 31, 2001
and 2002 include all adjustments, consisting only of those of a normal recurring
nature, necessary to present fairly the Company's consolidated financial
position as of March 31, 2002 and the results of their consolidated operations
and cash flows for the three-month periods ended March 31, 2001 and 2002. The
results of operations for the three months ended March 31, 2002 are not
necessarily indicative of the results to be expected for the full year.

New Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board issued SFAS No. 141,
Business Combinations and SFAS No. 142, Goodwill and Intangible Assets. SFAS No.
141 is effective for all business combinations completed after June 30, 2001.
SFAS No. 142 is effective for fiscal years beginning after December 15, 2001.
Certain provisions of this statement, however, applied to goodwill and other
intangible assets acquired between July 1, 2001 and December 31, 2001.

Major provisions of these statements and their effective dates are as
follows:

-- all business combinations initiated after June 30, 2001 must use the
purchase method of accounting;

-- intangible assets acquired in a business combination must be recorded
separately from goodwill if they arise from contractual or other
legal rights or are separable from the acquired entity and can be
sold, transferred, licensed, rented or exchanged, either individually
or as part of a related contract, asset or liability;

-- goodwill, as well as intangible assets with indefinite lives,
acquired after June 30, 2001, will not be amortized;

-- effective January 1, 2002, all previously recognized goodwill and
intangible assets with indefinite lives will no longer be subject to
amortization;

-- effective January 1, 2002, goodwill and intangible assets with
indefinite lives will be tested for impairment annually and whenever
there is an impairment indicator; and

-- all acquired goodwill must be assigned to reporting units for
purposes of impairment testing and segment reporting.

The Company amortized goodwill and intangible assets acquired prior to July
1, 2001 until December 31, 2001. Beginning January 1, 2002, annual goodwill
amortization of approximately $28.4 million will no longer be recognized. The
Company intends to complete a transitional impairment test of all intangible
assets by March 31, 2002 and a transitional fair value based impairment test of
goodwill as of January 1, 2002 by June 30, 2002. Impairment losses, if any,
resulting from the transitional testing will be recognized in the quarter ended
March 31, 2002, as a cumulative effect of a change in accounting principle.

In June 2001, the Financial Accounting Standards Board issued SFAS No. 143,
Accounting for Asset Retirement Obligations. SFAS No. 143 addresses financial
accounting and reporting for obligations associated

F-9

RENT-A-CENTER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

with the retirement of tangible long-lived assets and the associated asset
retirement costs. This statement is effective for fiscal years beginning after
June 15, 2002. The Company does not believe that the implementation of this
standard will have a material effect on its financial position, results of
operations, or cash flows.

NOTE B--RENTAL MERCHANDISE

DECEMBER 31,
-------------------
2000 2001
-------- --------
(IN THOUSANDS)

On rent
Cost...................................................... $768,590 $885,015
Less accumulated depreciation............................. 291,495 353,388
-------- --------
$477,095 $531,627
======== ========
Held for rent
Cost...................................................... $136,850 $156,013
Less accumulated depreciation............................. 26,713 33,939
-------- --------
$110,137 $122,074
======== ========

NOTE C--PROPERTY ASSETS

DECEMBER 31,
-------------------
2000 2001
-------- --------
(IN THOUSANDS)

Furniture and equipment..................................... $ 71,024 $ 94,689
Transportation equipment.................................... 29,500 27,384
Building and leasehold improvements......................... 61,439 85,699
Construction in progress.................................... 3,300 6,083
-------- --------
165,263 213,855
Less accumulated depreciation............................... 78,095 106,972
-------- --------
$ 87,168 $106,883
======== ========

F-10

RENT-A-CENTER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE D--INTANGIBLE ASSETS

DECEMBER 31, 2000 DECEMBER 31, 2001 MARCH 31, 2002
----------------------- ----------------------- -----------------------
AVG. GROSS GROSS GROSS
LIFE CARRYING ACCUMULATED CARRYING ACCUMULATED CARRYING ACCUMULATED
(YEARS) AMOUNT AMORTIZATION AMOUNT AMORTIZATION AMOUNT AMORTIZATION
------- -------- ------------ -------- ------------ -------- ------------
(UNAUDITED)

Amortizable intangible
assets
Franchise network..... 10 $ 3,000 $ 1,350 $ 3,000 $ 1,650 $ 3,000 $ 1,725
Non-compete
agreements......... 5 5,152 4,557 1,677 $ 1,405 1,500 1,302
Customer contracts.... 1.5 1,899 781 3,994 1,882 4,250 2,407
Intangible assets not
subject to
amortization
Goodwill.............. 775,797 70,832 806,524 99,162 808,610 99,162
-------- ------- -------- -------- -------- --------
Total intangibles....... $785,848 $77,520 $815,195 $104,099 $817,360 $104,596
======== ======= ======== ======== ======== ========

Aggregate amortization expense
Year ended December 31,
1999................................................... $27,116
2000................................................... $28,303
2001................................................... $30,194
Three months ended March 31, (unaudited)
2001................................................... $ 7,268
2002................................................... $ 720

Supplemental information regarding intangible assets and
amortization -- unaudited

Estimated amortization expense is as follows:

ESTIMATED
AMORTIZATION EXPENSE
YEAR ENDING DECEMBER 31, --------------------

2002................................................... $2,553
2003................................................... 734
2004................................................... 300
2005................................................... 300
2006................................................... 149
------
Total.................................................. $4,036
======

Changes in the carrying amount of goodwill for the three months ended March
31, 2002 are as follows (in thousands):

Balance as of January 1, 2002............................... $707,362
Acquisitions during first quarter......................... 2,086
--------
Balance as of March 31, 2002................................ $709,448
========

The Company amortized goodwill and intangible assets recognized prior to
July 1, 2001 through December 31, 2001 after which time all amortization ceased
on goodwill. The Company completed the transitional impairment tests during the
first quarter ended March 31, 2002 and determined that no impairment existed. As
a result, there was no effect on the financial statements or operating results
for the quarter ended March 31, 2002 from the implementation of SFAS 142.

F-11

RENT-A-CENTER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Below is a schedule showing the pro forma effect of SFAS 142 for the three
months ended March 31, 2001 in comparison to the three months ended March 31,
2002.

THREE MONTHS
ENDED MARCH 31,
----------------------
2001 2002
-------- --------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)

Net earnings................................................ $24,998 $43,563
Goodwill amortization, net of tax........................... 6,160 --
------- -------
Adjusted net earnings....................................... $31,158 $43,563
======= =======
Diluted weighted average shares outstanding................. 36,375 36,321
======= =======
Diluted earnings per common share before goodwill
amortization.............................................. $ .86 $ 1.20
======= =======

NOTE E--SENIOR DEBT

The Company has a Senior Credit Facility (the "Facility") with a syndicate
of banks. The Company also has other debt facilities. These facilities consist
of the following:

DECEMBER 31, 2000 DECEMBER 31, 2001
---------------------------------- ----------------------------------
FACILITY MAXIMUM AMOUNT AMOUNT MAXIMUM AMOUNT AMOUNT
MATURITY FACILITY OUTSTANDING AVAILABLE FACILITY OUTSTANDING AVAILABLE
-------- -------- ----------- --------- -------- ----------- ---------
(IN THOUSANDS)

Senior Credit Facility:
Term Loan "B"........... 2006 $203,300 $203,300 $ -- $148,850 $148,850 $ --
Term Loan "C"........... 2007 248,815 248,815 -- 192,754 192,754 --
Term Loan "D"(2)........ 2007 113,936 113,936 -- 86,396 86,396 --
Revolver(1)............. 2004 120,000 -- 76,272 120,000 -- 56,425
-------- -------- ------- -------- -------- -------
686,051 566,051 76,272 548,000 428,000 56,425
Other Indebtedness:
Line of credit.......... 5,000 -- 5,000 10,000 -- 10,000
-------- -------- ------- -------- -------- -------
Total Debt Facilities..... $691,051 $566,051 $81,272 $558,000 $428,000 $66,425
======== ======== ======= ======== ======== =======

------------

(1) At December 31, 2000 and 2001, the amounts available under the Company's
revolving facility were reduced by approximately $43.7 million and $63.6
million, respectively, for outstanding letters of credit used to support the
Company's insurance obligations.

(2) On June 29, 2000, the Company refinanced a portion of the Facility by adding
a new $125 million Term tranche. No significant mandatory principal
repayments are required on the Term D facility until the tranche becomes due
in 2007.

Borrowings under the Facility bear interest at varying rates equal to 0.50%
to 2.00% over the designated prime rate (4.75% per annum at December 31, 2001)
or 1.50% to 3.0% over LIBOR (1.88% at December 31, 2001) at the Company's
option, and are subject to quarterly adjustments based on certain leverage
ratios. At December 31, 2001, the average rate on outstanding borrowings was
8.15%, before considering the interest rate swap agreements as described below,
and 8.76% after giving effect to the interest rate swap agreements in effect at
December 31, 2001. A commitment fee equal to 0.25% to 0.50% of the unused
portion of the Facility is payable quarterly.

The Facility is collateralized by substantially all of the Company's
tangible and intangible assets, and is unconditionally guaranteed by each of the
Company's subsidiaries. In addition, the Facility contains several financial
covenants as defined therein, including a maximum leverage ratio, a minimum
interest coverage

F-12

RENT-A-CENTER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

ratio, and a minimum fixed charge coverage ratio, as well as restrictions on
capital expenditures, additional indebtedness, and the disposition of assets not
in the ordinary course of business.

The following are scheduled maturities of senior debt at December 31, 2001:

YEAR ENDING DECEMBER 31, (IN THOUSANDS)
------------------------ --------------

2002........................................................ $ 1,849
2003........................................................ 1,849
2004........................................................ 26,379
2005........................................................ 100,000
2006........................................................ 177,078
Thereafter.................................................. 120,845
--------
$428,000
========

Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and
Hedging Activities and SFAS No. 138, Accounting for Certain Derivative
Instruments and Certain Hedging Activities, an amendment of FASB Statement No.
133. These Standards establish accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts and hedging activities. All derivatives, whether designated in hedging
relationships or not, are required to be recorded on the balance sheet at fair
value. If the derivative is designated as a fair value hedge, the changes in the
fair value of the derivative and of the hedged item attributable to the hedged
risk are recognized in earnings. If the derivative is designated as a cash flow
hedge, the effective portions of changes in the fair value of the derivative are
recorded in other comprehensive income and are recognized in the income
statement when the hedged item affects earnings. Ineffective portions of changes
in the fair value of cash flow hedges are recognized in earnings. The Company
has designated its interest rate swap agreements as a cash flow hedge.

The adoption of SFAS No. 133 on January 1, 2001 resulted in the recognition
of approximately $2.6 million, or $1.4 million after taxes, of derivative assets
on the Company's consolidated balance sheet and $1.4 million of hedging gains
included in accumulated other comprehensive income as the cumulative effect of a
change in accounting principle. During the year ended December 31, 2001, the
Company recognized $3.9 million, net of tax, in additional interest expense
attributable to the difference in the variable interest on the debt and fixed
interest under the interest rate protection agreements. No gain or loss from
hedge ineffectiveness was required to be recognized. At December 31, 2001, the
fair value of the interest rate protection agreements was a cumulative loss of
$6.3 million, net of tax.

At December 31, 2001, the Company had two interest rate swap agreements to
limit the effect of increases in interest rates. These agreements both expire in
2003, and have an aggregate notional principal amount of $250.0 million. The
effect of these agreements is to limit the Company's interest rate exposure by
fixing the LIBOR rate at 5.60%. The Company had another $250.0 million interest
rate swap agreement which expired in September 2001. The agreements had no cost
to the Company.

NOTE F--SUBORDINATED NOTES PAYABLE

Rent-A-Center has $275.0 million of subordinated notes outstanding,
maturing on August 15, 2008, including $100.0 million which were issued in
December 2001 at 99.5% of par. The notes require semi-annual interest-only
payments at 11%, and are guaranteed by Rent-A-Center's two principal
subsidiaries. The notes are redeemable at Rent-A-Center's option, at any time on
or after August 15, 2003, at a set redemption price that varies depending upon
the proximity of the redemption date to final maturity. Upon a change of
control, the holders of the subordinated notes have the right to require
Rent-A-Center to redeem the notes.

F-13

RENT-A-CENTER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

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

Rent-A-Center's direct and wholly-owned subsidiaries, consisting of
ColorTyme and Advantage Companies, Inc. (collectively, the "Guarantors"), have
fully, jointly and severally, and unconditionally guaranteed the obligations of
Rent-A-Center with respect to these notes. The only direct or indirect
subsidiaries of Rent-A-Center that are not Guarantors are inconsequential
subsidiaries. There are no restrictions on the ability of any of the Guarantors
to transfer funds to Rent-A-Center in the form of loans, advances or dividends,
except as provided by applicable law.

Set forth below is certain condensed consolidating financial information as
of December 31, 2000 and 2001 and March 31, 2002, and for each of the three
years in the period ended December 31, 2001 and for the three months ended March
31, 2001 and 2002. The financial information includes the Guarantors from the
dates they were acquired or formed by Rent-A-Center and is presented using the
push-down basis of accounting.

F-14

RENT-A-CENTER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

CONDENSED CONSOLIDATING BALANCE SHEETS

PARENT SUBSIDIARY CONSOLIDATING
COMPANY GUARANTORS ADJUSTMENTS TOTAL
---------- ---------- ------------- ----------
(IN THOUSANDS)

DECEMBER 31, 2000
Rental merchandise, net..................... $ 587,232 $ -- $ -- $ 587,232
Intangible assets, net...................... 351,498 356,830 -- 708,328
Other assets................................ 531,992 13,754 (354,396) 191,350
---------- -------- --------- ----------
Total assets...................... $1,470,722 $370,584 $(354,396) $1,486,910
========== ======== ========= ==========
Senior Debt................................. $ 566,051 $ -- $ -- $ 566,051
Other liabilities........................... 325,995 4,261 -- 330,256
Preferred stock............................. 281,232 -- -- 281,232
Stockholder's equity........................ 297,444 366,323 (354,396) 309,371
---------- -------- --------- ----------
Total liabilities and equity...... $1,470,722 $370,584 $(354,396) $1,486,910
========== ======== ========= ==========
DECEMBER 31, 2001
Rental merchandise, net..................... $ 653,701 $ -- $ -- $ 653,701
Intangible assets, net...................... 367,271 343,825 -- 711,096
Other assets................................ 578,077 18,788 (341,742) 255,123
---------- -------- --------- ----------
Total assets...................... $1,599,049 $362,613 $(341,742) $1,619,920
========== ======== ========= ==========
Senior Debt................................. $ 428,000 $ -- $ -- $ 428,000
Other liabilities........................... 489,174 5,458 -- 494,632
Preferred stock............................. 291,910 -- -- 291,910
Stockholder's equity........................ 389,965 357,155 (341,742) 405,378
---------- -------- --------- ----------
Total liabilities and equity...... $1,599,049 $362,613 $(341,742) $1,619,920
========== ======== ========= ==========
MARCH 31, 2002 (UNAUDITED)
Rental merchandise, net..................... $ 656,544 $ -- $ -- $ 656,544
Intangible assets, net...................... 369,014 343,750 -- 712,764
Other assets................................ 628,547 20,923 (341,742) 307,728
---------- -------- --------- ----------
Total assets...................... $1,654,105 $364,673 $(341,742) $1,677,036
========== ======== ========= ==========
Senior Debt................................. $ 428,000 $ -- $ -- $ 428,000
Other liabilities........................... 522,977 6,653 -- 529,630
Preferred stock............................. 294,674 -- -- 294,674
Stockholder's equity........................ 408,454 358,020 (341,742) 424,732
---------- -------- --------- ----------
Total liabilities and equity...... $1,654,105 $364,673 $(341,742) $1,677,036
========== ======== ========= ==========

F-15

RENT-A-CENTER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

PARENT SUBSIDIARY
COMPANY GUARANTORS TOTAL
---------- ---------- ----------
(IN THOUSANDS)

YEAR ENDED DECEMBER 31, 1999
Total revenues.................................. $1,361,578 $55,589 $1,417,167
Direct store expenses........................... 1,110,085 -- 1,110,085
Other........................................... 187,156 60,571 247,727
---------- ------- ----------
Net earnings (loss)............................. $ 64,337 $(4,982) $ 59,355
========== ======= ==========
YEAR ENDED DECEMBER 31, 2000
Total revenues.................................. $1,543,848 $57,766 $1,601,614
Direct store expenses........................... 1,230,864 -- 1,230,864
Other........................................... 205,342 62,381 267,723
---------- ------- ----------
Net earnings (loss)............................. $ 107,642 $(4,615) $ 103,027
========== ======= ==========
YEAR ENDED DECEMBER 31, 2001
Total revenues.................................. $1,749,060 $59,468 $1,808,528
Direct store expenses........................... 1,435,138 -- 1,435,138
Other........................................... 243,266 63,907 307,173
---------- ------- ----------
Net earnings (loss)............................. $ 70,656 $(4,439) $ 66,217
========== ======= ==========
THREE MONTHS ENDED MARCH 31, 2001 (UNAUDITED)
Total revenues.................................. $ 425,212 $14,490 $ 439,702
Direct store expenses........................... 344,586 -- 344,586
Other........................................... 54,459 15,659 70,118
---------- ------- ----------
Net earnings (loss)............................. $ 26,167 $(1,169) $ 24,998
========== ======= ==========
THREE MONTHS ENDED MARCH 31, 2002 (UNAUDITED)
Total revenues.................................. $ 483,924 $14,686 $ 498,610
Direct store expenses........................... 381,824 -- 381,824
Other........................................... 60,570 12,653 73,223
---------- ------- ----------
Net earnings (loss)............................. $ 41,530 $ 2,033 $ 43,563
========== ======= ==========

F-16

RENT-A-CENTER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

PARENT SUBSIDIARY
COMPANY GUARANTORS TOTAL
--------- ---------- ---------
(IN THOUSANDS)

YEAR ENDED DECEMBER 31, 1999
Net cash provided by (used in) operating
activities..................................... $ (34,426) $ 5,176 $ (29,250)
--------- ------- ---------
Cash flows from investing activities
Purchase of property assets.................... (35,979) (232) (36,211)
Proceeds from sale of property assets.......... 8,563 -- 8,563
--------- ------- ---------
Net cash used in investing activities............ (27,416) (232) (27,648)
Cash flows from financing activities
Proceeds from debt............................. 320,815 -- 320,815
Repayments of debt............................. (279,355) -- (279,355)
Intercompany advances.......................... 4,944 (4,944) --
Other.......................................... 3,320 -- 3,320
--------- ------- ---------
Net cash provided by (used in) financing
activities..................................... 49,724 (4,944) 44,780
--------- ------- ---------
Net decrease in cash and cash equivalents........ (12,118) -- (12,118)
Cash and cash equivalents at beginning of year... 33,797 -- 33,797
--------- ------- ---------
Cash and cash equivalents at end of year......... $ 21,679 $ -- $ 21,679
========= ======= =========
YEAR ENDED DECEMBER 31, 2000
Net cash provided by operating activities........ $ 185,719 $ 5,844 $ 191,563
--------- ------- ---------
Cash flows from investing activities
Purchase of property assets.................... (37,843) (94) (37,937)
Acquisitions of businesses, net of cash
acquired.................................... (42,538) -- (42,538)
Other.......................................... 1,403 -- 1,403
--------- ------- ---------
Net cash used in investing activities............ (78,978) (94) (79,072)
Cash flows from financing activities
Proceeds from debt............................. 242,975 -- 242,975
Repayments of debt............................. (349,084) -- (349,084)
Intercompany advances.......................... 5,750 (5,750) --
Other.......................................... 8,434 -- 8,434
--------- ------- ---------
Net cash used in financing activities............ (91,925) (5,750) (97,675)
--------- ------- ---------
Net increase in cash and cash equivalents........ 14,816 -- 14,816
Cash and cash equivalents at beginning of year... 21,679 -- 21,679
--------- ------- ---------
Cash and cash equivalents at end of year......... $ 36,495 $ -- $ 36,495
========= ======= =========

F-17

RENT-A-CENTER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

PARENT SUBSIDIARY
COMPANY GUARANTORS TOTAL
--------- ---------- ---------
(IN THOUSANDS)

YEAR ENDED DECEMBER 31, 2001
Net cash provided by operating activities........ $ 169,178 $ 6,552 $ 175,730
--------- ------- ---------
Cash flows from investing activities
Purchase of property assets.................... (57,477) (55) (57,532)
Acquisitions of businesses, net of cash
acquired.................................... (49,835) -- (49,835)
Other.......................................... 706 -- 706
--------- ------- ---------
Net cash used in investing activities............ (106,606) (55) (106,661)
Cash flows from financing activities
Purchase of treasury stock..................... (25,000) -- (25,000)
Exercise of stock options...................... 20,317 -- 20,317
Repayments of debt............................. (138,051) -- (138,051)
Proceeds from debt............................. 99,506 -- 99,506
Proceeds from issuance of common stock......... 45,622 -- 45,622
Intercompany advances.......................... 6,497 (6,497) --
--------- ------- ---------
Net cash provided by (used in) financing
activities..................................... 8,891 (6,497) 2,394
--------- ------- ---------
Net increase in cash and cash equivalents........ 71,463 -- 71,463
Cash and cash equivalents at beginning of year... 36,495 -- 36,495
--------- ------- ---------
Cash and cash equivalents at end of year......... $ 107,958 $ -- $ 107,958
========= ======= =========
THREE MONTHS ENDED MARCH 31, 2001 (UNAUDITED)
Net cash provided by operating activities........ $ 31,226 $ 820 $ 32,046
Cash flows from investing activities
Purchase of property assets.................... (11,836) (10) (11,846)
Acquisitions of businesses, net of cash
acquired.................................... (2,835) -- (2,835)
Other.......................................... 524 -- 524
--------- ------- ---------
Net cash used in investing activities............ (14,147) (10) (14,157)
Cash flows from financing activities
Exercise of stock options...................... 11,073 -- 11,073
Repayments of debt............................. (37,916) -- (37,916)
Intercompany advances.......................... 810 (810) --
--------- ------- ---------
Net cash used in financing activities............ (26,033) (810) (26,843)
--------- ------- ---------
Net increase in cash and cash equivalents........ (8,954) -- (8,954)
Cash and cash equivalents at beginning of
period......................................... 36,495 -- 36,495
--------- ------- ---------
Cash and cash equivalents at end of period....... $ 27,541 $ -- $ 27,541
========= ======= =========

F-18

RENT-A-CENTER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

PARENT SUBSIDIARY
COMPANY GUARANTORS TOTAL
--------- ---------- ---------
(IN THOUSANDS)

THREE MONTHS ENDED MARCH 31, 2002 (UNAUDITED)
Net cash provided by operating activities........ $ 96,052 $ 279 $ 96,331
Cash flows from investing activities
Purchase of property assets.................... (8,811) 711 (8,100)
Acquisitions of businesses, net of cash
acquired.................................... (3,549) -- (3,549)
Other.......................................... 374 -- 374
--------- ------- ---------
Net cash used in investing activities............ (11,986) 711 (11,275)
Cash flows from financing activities
Purchase of treasury stock..................... (34,724) -- (34,724)
Exercise of stock options...................... 8,974 -- 8,974
Intercompany advances.......................... 990 (990) --
--------- ------- ---------
Net cash used in financing activities............ (24,760) (990) (25,750)
--------- ------- ---------
Net increase in cash and cash equivalents........ 59,306 -- 59,306
--------- ------- ---------
Cash and cash equivalents at beginning of
period......................................... 107,958 -- 107,958
--------- ------- ---------
Cash and cash equivalents at end of period....... $ 167,264 $ -- $ 167,264
========= ======= =========

NOTE G--ACCRUED LIABILITIES

DECEMBER 31,
------------------
2000 2001
------- --------
(IN THOUSANDS)

Taxes other than income..................................... $20,306 $ 19,071
Income taxes payable........................................ 2,788 7,081
Accrued litigation costs.................................... 14,753 59,044
Accrued insurance costs..................................... 28,929 36,634
Accrued interest payable.................................... 8,198 10,618
Accrued compensation and other.............................. 14,586 37,748
------- --------
$89,560 $170,196
======= ========

Included in the $59.0 million of accrued litigation costs is approximately
$52.0 million related to the gender discrimination class action litigation
settlements as more fully described in Note J.

NOTE H--REDEEMABLE CONVERTIBLE VOTING PREFERRED STOCK

Rent-A-Center's Series A preferred stock is convertible, at any time, into
shares of Rent-A-Center's common stock at a conversion price equal to $27.935
per share, and has a liquidation preference of $1,000 per share, plus all
accrued and unpaid dividends. No distributions may be made to holders of common
stock until the holders of the Series A preferred stock have received the
liquidation preference. Dividends accrue on a quarterly basis, at the rate of
$37.50 per annum, per share. A restriction under the Facility requires
Rent-A-Center to pay the dividends with additional shares of Series A preferred
stock until August 2003, after which Rent-A-Center must pay the dividends in
cash. During 2000 and 2001, Rent-A-Center paid approximately $10.3 million and
$10.7 million in Series A preferred dividends by issuing 10,330 and 10,678
shares of Series A preferred stock, respectively. At December 31, 2000 and 2001,
Rent-A-Center had 281,756 and 292,434 shares, respectively, of its Series A
preferred stock outstanding.

F-19

RENT-A-CENTER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The Series A preferred stock is not redeemable until August 2002, after
which time Rent-A-Center may, at its option, redeem the shares at 105% of the
liquidation preference plus accrued and unpaid dividends. Holders of the Series
A preferred stock have the right to require Rent-A-Center to redeem the Series A
preferred stock upon a change of control, if Rent-A-Center ceases to be listed
on a United States national securities exchange or the Nasdaq National Market
System, or upon the eleventh anniversary of the issuance of the Series A
preferred stock, at a price equal to the liquidation preference value.

Holders of the Series A preferred stock are entitled to two seats on
Rent-A-Center's Board of Directors, and are entitled to vote on all matters
presented to the holders of Rent-A-Center's common stock. The number of votes
per Series A preferred share is equal to the number of votes associated with the
underlying voting common stock into which the Series A preferred stock is
convertible.

NOTE I--INCOME TAXES

The income tax provision reconciled to the tax computed at the statutory
Federal rate is:

YEAR ENDED
DECEMBER 31,
-------------------
1999 2000 2001
---- ---- ----

Tax at statutory rate....................................... 35.0% 35.0% 35.0%
State income taxes, net of federal benefit.................. 5.5% 5.5% 5.7%
Effect of foreign operations, net of foreign tax credits.... 0.3% 0.2% 0.8%
Goodwill amortization....................................... 6.4% 5.0% 5.8%
Other, net.................................................. 1.3% 1.3% (0.4)%
---- ---- ----
Total....................................................... 48.5% 47.0% 46.9%
==== ==== ====

The components of the income tax provision are as follows:

YEAR ENDED DECEMBER 31,
-----------------------------
1999 2000 2001
-------- ------- --------
(IN THOUSANDS)

Current expense (benefit)
Federal............................................. $(10,770) $ 6,099 $ 24,073
State............................................... 815 5,637 8,795
Foreign............................................. 1,623 1,894 1,865
-------- ------- --------
Total current............................... (8,332) 13,630 34,733
-------- ------- --------
Deferred expense
Federal............................................. 57,342 68,406 22,400
State............................................... 6,889 9,332 1,456
-------- ------- --------
Total deferred.............................. 64,231 77,738 23,856
-------- ------- --------
Total....................................... $ 55,899 $91,368 $ 58,589
======== ======= ========

F-20

RENT-A-CENTER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Deferred tax assets and liabilities consist of the following:

DECEMBER 31,
-------------------
2000 2001
-------- --------
(IN THOUSANDS)

Deferred tax assets
Net operating loss carryforwards.......................... $ 41,515 $ 2,656
Accrued expenses.......................................... 25,667 49,187
Intangible assets......................................... 22,119 17,561
Property assets........................................... 18,644 23,393
Other tax credit carryforwards............................ 5,436 5,862
Unrealized loss on interest rate swap agreements.......... -- 3,872
-------- --------
113,381 102,531
Deferred tax liability
Rental merchandise........................................ (80,753) (93,759)
-------- --------
Net deferred tax asset............................ $ 32,628 $ 8,772
======== ========

The Company has alternative minimum tax credit carryforwards of
approximately $5.8 million and various state net operating loss carryforwards.

During 1999, the Company completed its analysis of the tax bases of assets
and liabilities acquired in the Thorn Americas, Inc. acquisition in 1998,
resulting in a decrease in its deferred tax asset of $3.8 million and a
corresponding increase in goodwill.

NOTE J--COMMITMENTS AND CONTINGENCIES

Rent-A-Center leases its office and store facilities and most delivery
vehicles. Rental expense was $96.8 million, $105.6 million and $127.6 million
for 1999, 2000 and 2001, respectively. Future minimum rental payments under
operating leases with remaining noncancelable lease terms in excess of one year
at December 31, 2001 are as follows:

YEAR ENDING DECEMBER 31, (IN THOUSANDS)
------------------------ --------------

2002........................................................ $107,142
2003........................................................ 95,208
2004........................................................ 77,999
2005........................................................ 53,164
2006........................................................ 21,317
Thereafter.................................................. 5,438
--------
$360,268
========

From time to time, Rent-A-Center, along with its subsidiaries, is party to
various legal proceedings arising in the ordinary course of business.
Rent-A-Center is currently a party to the following material litigation:

Colon v. Thorn Americas, Inc. In November 1997, the plaintiffs filed this
statutory compliance class action lawsuit in New York alleging various statutory
violations of New York consumer protection laws. The plaintiffs are seeking
damages compensatory, punitive damages, interest, attorney's fees and certain
injunctive relief. Although Rent-A-Center intends to vigorously defend itself in
this action, the ultimate outcome cannot presently be determined, and there can
be no assurance that Rent-A-Center will prevail without liability.

F-21

RENT-A-CENTER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Wisconsin Attorney General Proceeding. In August 1999, the Wisconsin
Attorney General filed suit against Rent-A-Center and its subsidiary ColorTyme
in Wisconsin, alleging that its rent-to-rent transaction violates the Wisconsin
Consumer Act and the Wisconsin Deceptive Advertising Statute. The Attorney
General seeks injunctive relief, restoration of any losses suffered by any
Wisconsin consumer harmed and civil forfeitures and penalties. In January 2002,
the court granted summary judgment in favor of the Wisconsin Attorney General on
the liability issues and set the case for trial on damages for February 2003.
Rent-A-Center intends to vigorously defend itself in this matter. However, there
can be no assurance that the outcome of this matter will not have a material
adverse effect on Rent-A-Center's financial position, results of operations or
cash flows.

Walker, et. al. v. Rent-A-Center, Inc. In January 2002, a putative class
action was filed against Rent-A-Center and certain of its current and former
officers alleging that the defendants violated Section 10(b) and/or Section
20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder by issuing false and misleading statements and omitting material
facts regarding Rent-A-Center's financial performance and prospects for the
third and fourth quarters of 2001. The complaint purports to be brought on
behalf of all purchasers of Rent-A-Center's common stock from April 25, 2001
through October 8, 2001 and seeks damages in unspecified amounts. Rent-A-Center
intends to vigorously defend itself in this matter. However, there can be no
assurance that Rent-A-Center will prevail without liability.

An adverse ruling in one or more of the aforementioned cases could have a
material and adverse effect on the Company's consolidated financial statements.

Wilfong, et. al. v. Rent-A-Center, Inc./Margaret Bunch, et. al. v.
Rent-A-Center, Inc. In August 2000, a putative nationwide class action was
filed against Rent-A-Center in federal court in East St. Louis, Illinois by
Claudine Wilfong and sixteen plaintiffs, alleging that it engaged in class-wide
gender discrimination following its acquisition of Thorn Americas. In December
2000, a similar suit filed by Margaret Bunch in federal court in the Western
District of Missouri was amended to allege similar class action claims. The
allegations underlying these matters involve charges of wrongful termination,
constructive discharge, disparate treatment and disparate impact.

In November 2001, Rent-A-Center announced that it had reached an agreement
in principle to settle the Bunch matter for an aggregate of $12.25 million, plus
attorneys fees and costs to administer the settlement. Accordingly,
Rent-A-Center recorded a charge of $16.0 million related to the proposed
settlement of Bunch in the third quarter of 2001. On March 7, 2002,
Rent-A-Center announced an agreement in principle to settle the Wilfong matter,
the Bunch matter, as well as an EEOC action in Tennessee for approximately $47.0
million. Accordingly, Rent-A-Center recorded an additional charge of $36.0
million in the fourth quarter of 2001 to reflect the total settlement of these
matters. The terms of the proposed settlement are subject to the parties
entering into a definitive settlement agreement and court approval.

During 1999, Rent-A-Center funded the $11.5 million settlement of its two
class action lawsuits in New Jersey, together with the $48.5 million settlement
of Robinson v. Thorn Americas, Inc. The settlement of Rent-A-Center's existing
litigation resulted in a charge to earnings in 1998, classified as class action
legal settlements. In addition, Rent-A-Center settled and funded Anslono v.
Thorn Americas, Inc. during 2000. Both the Robinson and Anslono cases were
acquired in the Thorn Americas acquisition, and Rent-A-Center made appropriate
purchase accounting adjustments for liabilities associated with this litigation.
During 2000, Rent-A-Center received refunds of approximately $22.4 million for
unlocated class members which are presented as class action litigation
settlements.

In addition, Fogie v. Thorn Americas, Inc. was acquired in the Thorn
Americas acquisition; however, Rent-A-Center received full indemnification from
the seller for any incurred losses. In December 1991, the plaintiffs filed this
class action in Minnesota alleging that Thorn's rent-to-own contracts violated
Minnesota's Consumer Credit Sales Act and the Minnesota General Usury Statute.
In April 1998, the court entered a final

F-22

RENT-A-CENTER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

judgment against Thorn Americas for approximately $30.0 million. Following an
unsuccessful appeal in August 1999, Thorn plc deposited the judgment amount in
an escrow account supervised by plaintiff's counsel and the court in October
1999.

The Company is also involved in various other legal proceedings, claims and
litigation arising in the ordinary course of business. Although occasional
adverse decisions or settlements may occur, the Company believes that the final
disposition of such matters will not have a material adverse effect on the
financial position or results of operations of the Company.

ColorTyme is a party to an agreement with a lender, who provides financing
to qualifying franchisees of ColorTyme. Under this agreement, in the event of
default by the franchisee under agreements governing this financing and upon the
occurrence of certain events the lender may assign the loans and the collateral
securing such loans to ColorTyme, with ColorTyme then succeeding to the rights
of the lender under the debt agreements, including the rights to foreclose on
the collateral. Rent-A-Center guarantees the obligations of ColorTyme under this
agreement.

NOTE K--STOCK BASED COMPENSATION

Rent-A-Center's long-term incentive plan (the "Plan") for the benefit of
certain key employees, consultants and directors provides the Board of Directors
broad discretion in creating equity incentives. Under the plan, 7,900,000 shares
of Rent-A-Center's common stock are reserved for issuance under stock options,
stock appreciation rights or restricted stock grants. Options granted to
employees under the Plan become exercisable over a period of one to five years
from the date of grant and may be exercised up to a maximum of 10 years from
date of grant. Options granted to directors are exercisable immediately. There
have been no grants of stock appreciation rights and all options have been
granted with fixed prices. At December 31, 2001, there were approximately
2,095,814 shares available for issuance under the Plan.

Information with respect to stock option activity is as follows:

1999 2000 2001
--------------------- --------------------- ---------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
---------- -------- ---------- -------- ---------- --------

Outstanding at beginning of
year............................ 3,493,763 $23.96 3,590,038 $23.57 3,790,275 $24.32
Granted........................... 2,042,250 24.42 1,782,500 24.40 2,219,000 33.83
Exercised......................... (173,875) 12.05 (427,700) 21.34 (852,309) 23.10
Forfeited......................... (1,772,100) 24.81 (1,154,563) 23.60 (1,199,026) 29.20
---------- ---------- ----------
Outstanding at end of year........ 3,590,038 $23.57 3,790,275 $24.32 3,957,940 $28.43
========== ========== ==========
Options exercisable at end of
year............................ 819,739 $20.78 1,097,961 $23.04 954,812 $24.14

F-23

RENT-A-CENTER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The weighted average fair value per share of options granted during 1999,
2000 and 2001 was $14.38, $14.97 and $20.34, respectively, all of which were
granted at market value. Information about stock options outstanding at December
31, 2001 is summarized as follows:

OPTIONS OUTSTANDING
-------------------------------------------------
WEIGHTED AVERAGE
NUMBER REMAINING WEIGHTED AVERAGE
RANGE OF EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE
------------------------ ----------- ---------------- ----------------

$3.34 to $6.67.................... 57,000 3.35 years $ 6.44
$6.68 to $18.50................... 362,235 7.35 years $16.38
$18.51 to $28.50.................. 2,169,230 8.34 years $24.62
$28.51 to $33.88.................. 741,475 8.57 years $32.79
$33.89 to $49.05.................. 628,000 9.44 years $45.41
---------
3,957,940
=========

OPTIONS EXERCISABLE
------------------------------
NUMBER WEIGHTED AVERAGE
RANGE OF EXERCISE PRICES EXERCISABLE EXERCISE PRICE
------------------------ ----------- ----------------

$3.34 to $6.67....................................... 57,000 $ 6.44
$6.68 to $18.50...................................... 148,421 $16.36
$18.51 to $28.50..................................... 582,479 $25.50
$28.51 to $33.88..................................... 166,912 $32.38
-------
954,812
=======

During 2000 and 2001, Rent-A-Center issued 25,000 and 12,500 options,
respectively, to a non-employee for services. The options are valued at $65,000
and $168,378, respectively. The expense related to these option agreements is
recognized over the service period.

The Company has adopted only the disclosure provisions of SFAS 123 for
employee stock options and continues to apply APB 25 for stock options granted
under the Plan. Accordingly, compensation cost for stock options is measured as
the excess, if any, of the quoted market price of Rent-A-Center's common stock
at the date of grant over the amount an employee must pay to acquire the common
stock. Compensation costs for all other stock-based compensation is accounted
for under SFAS 123. If Rent-A-Center had elected to recognize compensation
expense based upon the fair value at the grant date for options under the Plan
consistent with

F-24

RENT-A-CENTER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

the methodology prescribed by SFAS 123, the Company's 1999, 2000 and 2001 net
earnings and earnings per common share would be reduced to the pro forma amounts
indicated as follows:

YEAR ENDED DECEMBER 31,
-----------------------------
1999 2000 2001
------- ------- -------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)

Net earnings allocable to common stockholders
As reported............................................ $49,316 $92,607 $50,809
Pro forma.............................................. $41,011 $82,335 $43,429
Basic earnings per common share
As reported............................................ $ 2.04 $ 3.79 $ 1.97
Pro forma.............................................. $ 1.69 $ 3.37 $ 1.68
Diluted earnings per common share
As reported............................................ $ 1.74 $ 2.96 $ 1.79
Pro forma.............................................. $ 1.50 $ 2.67 $ 1.59

The fair value of these options was estimated at the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions: expected volatility of 53% to 57%; risk-free interest rates of
5.55%, 6.50% and 4.2% to 5.3% in 1999, 2000 and 2001, respectively; no dividend
yield; and expected lives of seven years.

NOTE L--ACQUISITIONS

For the year ending December 31, 2000, Rent-A-Center acquired 74 stores.
The 74 acquired stores were the result of 19 separate transactions for an
aggregate of approximately $42.5 million in cash.

For the year ending December 31, 2001, Rent-A-Center acquired 95 stores.
The acquired stores were the result of 21 separate transactions for an aggregate
of approximately $43.1 million in cash. One of the transactions, which took
place in June 2001, consisted of 54 stores, for approximately $21.0 million in
cash. All acquisitions have been accounted for as purchases, and the operating
results of the acquired businesses have been included in the financial
statements since their date of acquisition.

NOTE M--EMPLOYEE BENEFIT PLAN

Rent-A-Center sponsors a defined contribution pension plan under Section
401(k) of the Internal Revenue Code for all employees who have completed three
months of service. Employees may elect to contribute up to 20% of their eligible
compensation on a pre-tax basis, subject to limitations. Rent-A-Center may make
discretionary matching contributions to the 401(k) plan. During 1999, 2000 and
2001, Rent-A-Center made matching cash contributions of $2,283,575, $2,453,639
and $3,297,940, respectively, which represents 50% of the employees'
contributions to the 401(k) plan up to an amount not to exceed 4% of each
employee's respective compensation. As of March 15, 2000, employees may elect to
purchase Rent-A-Center common stock as part of their 401(k) plan. As of December
31, 2000 and 2001, respectively, 5.0% and 10.8% of the total plan assets
consisted of Rent-A-Center common stock.

NOTE N--FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments include cash and cash equivalents,
senior debt and subordinated notes payable. The carrying amount of cash and cash
equivalents approximates fair value at December 31, 2000 and 2001, because of
the short maturities of these instruments. The Company's senior debt is variable
rate debt that reprices 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

F-25

RENT-A-CENTER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

discounted cash flow analysis using interest rates currently offered for loans
with similar terms to borrowers of similar credit quality. At December 31, 2001,
the fair value of the subordinated notes was $277.1 million, which is $2.6
million above their carrying value of $274.5 million. Information relating to
the fair value of the Company's interest rate swap agreements is set forth in
Note E.

NOTE O--EARNINGS PER COMMON SHARE

Summarized basic and diluted earnings per common share were calculated as
follows:

NET EARNINGS SHARES PER SHARE
------------ ------ ---------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)

YEAR ENDED DECEMBER 31, 1999
Basic earnings per common share................... $ 49,316 24,229 $2.04
Effect of dilutive stock options.................. -- 319
Effect of preferred dividend...................... 10,039 9,583
-------- ------
Diluted earnings per common share................. $ 59,355 34,131 $1.74
======== ======
YEAR ENDED DECEMBER 31, 2000
Basic earnings per common share................... $ 92,607 24,432 $3.79
Effect of dilutive stock options.................. -- 433
Effect of preferred dividend...................... 10,420 9,947
-------- ------
Diluted earnings per common share................. $103,027 34,812 $2.96
======== ======
YEAR ENDED DECEMBER 31, 2001
Basic earnings per common share................... $ 50,809 25,846 $1.97
Effect of dilutive stock options.................. -- 908
Effect of preferred dividend...................... 15,408 10,325
-------- ------
Diluted earnings per common share................. $ 66,217 37,079 $1.79
======== ======
THREE MONTHS ENDED MARCH 31, 2001
Basic earnings per common share................... $ 20,673 24,959 $0.83
Effect of dilutive stock options.................. -- 1,235
Effect of preferred dividend...................... 4,325 10,181
-------- ------
Diluted earnings per common share................. $ 24,998 36,375 $0.69
======== ======
THREE MONTHS ENDED MARCH 31, 2002
Basic earnings per common share................... $ 38,571 24,515 $1.57
Effect of dilutive stock options.................. -- 1,239
Effect of preferred dividend...................... 4,992 10,567
-------- ------
Diluted earnings per common share................. $ 43,563 36,321 $1.20
======== ======

For 1999, 2000 and 2001, 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 1,707,947, 1,485,118 and 628,000,
respectively.

F-26

RENT-A-CENTER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE P--UNAUDITED QUARTERLY DATA

Summarized quarterly financial data for 2000 and 2001 is as follows:

1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

YEAR ENDED DECEMBER 31, 2000(1)
Revenues................................ $392,526 $392,245 $404,968 $411,875
Operating profit........................ 58,552 84,184 63,720 60,557
Net earnings............................ 20,889 34,621 23,901 23,616
Basic earnings per common share......... 0.75 1.32 0.87 0.85
Diluted earnings per common share....... 0.61 1.00 0.68 0.67

1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

YEAR ENDED DECEMBER 31, 2001(2)
Revenues................................ $439,702 $442,759 $447,074 $478,993
Operating profit........................ 62,485 66,640 32,372 23,089
Net earnings............................ 24,998 27,545 9,974 3,700
Basic earnings per common share......... 0.83 0.88 0.27 0.01
Diluted earnings per common share....... 0.69 0.74 0.26 0.10

------------

(1) Includes the effects of a pre-tax legal reversion of $22.4 million
associated with the 1999 settlement of three class action lawsuits in the
state of New Jersey.

(2) Includes the effects of a pre-tax legal settlement of $52.0 million
associated with a 2001 settlement of a class action lawsuit in the state of
Missouri, Illinois and Tennessee.

NOTE Q--RELATED PARTY TRANSACTIONS

On October 8, 2001, Rent-A-Center announced the retirement of J. Ernest
Talley as its Chairman and Chief Executive Officer, and the appointment of Mark
E. Speese as its new Chairman and Chief Executive Officer. In connection with
Mr. Talley's retirement, Rent-A-Center's Board of Directors approved the
repurchase of $25.0 million worth of shares of its common stock held by Mr.
Talley at a purchase price equal to the average closing price of its common
stock over the 10 trading days beginning October 9, 2001, subject to a maximum
of $27.00 per share and a minimum of $20.00 per share. Under this formula, the
purchase price for the repurchase was calculated at $20.258 per share.
Accordingly, on October 23, 2001 Rent-A-Center repurchased 493,632 shares of its
common stock from Mr. Talley at $20.258 per share for a total purchase price of
$10.0 million and on November 30, 2001, repurchased an additional 740,448 shares
of its common stock from Mr. Talley at $20.258 per share, for a total purchase
price of an additional $15.0 million. Rent-A-Center also had the option to
repurchase all of the remaining 1,714,086 shares of its common stock held by Mr.
Talley at $20.258 per share for $34.7 million by February 5, 2002. Rent-A-Center
exercised this option on January 25, 2002 and repurchased the remaining shares
on January 30, 2002.

One of Rent-A-Center's directors serves as Vice Chairman of the Board of
Directors of Intrust Bank, N.A., one of Rent-A-Center's lenders. Intrust Bank,
N.A. was a $10.4 million participant in Rent-A-Center's senior credit facility
as of December 31, 2001. Rent-A-Center also maintains a $10.0 million revolving
line of credit with Intrust Bank, N.A. Although from time to time Rent-A-Center
may draw funds from the revolving line of credit, no funds were advanced as of
December 31, 2001. In addition, Intrust Bank, N.A. serves as trustee of
Rent-A-Center's 401(k) plan.

In June 2000, Rent-A-Center purchased stores from Portland II RAC, Inc. and
Wilson Enterprises of Maine, Inc., each of which were ColorTyme franchisees, for
$19.4 million in cash based upon a purchase

F-27

RENT-A-CENTER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

formula established at the time of the Thorn Americas acquisition.
Rent-A-Center's current president held approximately 15% of the stock of each of
the franchisees and received $1,833,046 in cash as a result of the purchase. In
July 2000, partners of Rent-A-Center's President purchased his 33 1/3% interest
in CTME, LLC, another of the ColorTyme's franchisees, for $37,500.
Rent-A-Center's President no longer owns an interest in any ColorTyme
franchisees.

On August 5, 1998, affiliates of Apollo Management IV, L.P. ("Apollo")
purchased $250.0 million of Rent-A-Center's Series A preferred stock. Under the
terms of the Series A preferred stock, the holders of the Series A preferred
stock have the right to elect two members of Rent-A-Center's Board of Directors.
Apollo has voting control over 100% of the issued and outstanding Series A
preferred stock. In addition, pursuant to the terms of a stockholders agreement
entered into between Apollo, Rent-A-Center and Mark E. Speese, Apollo has the
right to nominate a third person to Rent-A-Center's Board of Directors.

F-28

[RENT-A-CENTER, INC. LOGO]

PART II: INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following is a statement of estimated expenses we have incurred in
connection with this offering, other than underwriting discounts and
commissions.

AMOUNT
--------

SEC registration fee........................................ $ 20,358
NASD filing fee............................................. 22,628
Printing and engraving fees and expenses.................... 110,000
Legal fees and expenses..................................... 250,000
Accounting fees and expenses................................ 35,000
Blue Sky fees and expenses.................................. 7,500
Nasdaq National Market listing fee.......................... 22,500
Miscellaneous............................................... 32,014
--------
Total..................................................... $500,000
========

ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.

DELAWARE GENERAL CORPORATION LAW ("DGCL")

Subsection (a) of Section 145 of the Delaware General Corporation Law, or
DGCL, empowers a corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.

Subsection (b) of Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by right of the corporation to
procure a judgment in its favor by reason of the fact that such person acted in
any of the capacities set forth above, against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification may be made in respect to any claim,
issue or matter as to which such person shall have been adjudged to be liable to
the corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.

Section 145 further provides that to the extent a director or officer of a
corporation has been successful on the merits or otherwise in the defense of any
such action, suit or proceeding referred to in subsections (a) and (b) of
Section 145 or in the defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith; that the indemnification provided for
by Section 145 shall not be deemed exclusive of any other rights which the
indemnified party may be entitled; that indemnification provided by Section 145
shall, unless otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of such person's heirs, executors and administrators; and
empowers the corporation to purchase and maintain insurance on behalf of a
director or officer of the corporation against any
II-1

liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the corporation would have the
power to indemnify him against such liabilities under Section 145.

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

Our certificate of incorporation provides that our directors shall not be
personally liable to us or our stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability:

-- for any breach of the director's duty of loyalty to us or our
stockholders,

-- for acts or occasions not in good faith or which involve intentional
misconduct or a knowing violation of law,

-- in respect of certain unlawful dividend payments or stock purchases
or redemptions; or

-- for any transaction from which the director derived an improper
personal benefit.

If the DGCL is amended to authorize the further elimination or limitation
of the liability of directors, then the liability of our directors, in addition
to the limitation on personal liability provided in our certificate of
incorporation, will be limited to the fullest extent permitted by the DGCL.
Further, if such provision of our certificate of incorporation is repealed or
modified by our stockholders, such repeal or modification will be prospective
only, and will not adversely affect any limitation on the personal liability of
our directors arising from an act or omission occurring prior to the time of
such repeal or modification.

AMENDED AND RESTATED BYLAWS

Our bylaws provide that we shall indemnify and hold harmless our directors
threatened to be or made a party to any threatened, pending or completed action,
suit or proceeding by reason of the fact that such person is or was our
director, whether the basis of such a proceeding is alleged action in such
person's official capacity or in another capacity while holding such office, to
the fullest extent authorized by the DGCL or any other applicable law, against
all expense, liability and loss actually and reasonably incurred or suffered by
such person in connection with such proceeding, so long as a majority of a
quorum of disinterested directors, the stockholders or legal counsel through a
written opinion determines that such person acted in good faith and in a manner
he reasonably believed to be in or not opposed to our best interests, and in the
case of a criminal proceeding, such person had no reasonable cause to believe
his conduct was unlawful. Such indemnification shall continue as to a person who
has ceased to serve in the capacity which initially entitled such person to
indemnity thereunder and shall inure to the benefit of his or her heirs,
executors and administrators. Our bylaws also contain certain provisions
designed to facilitate receipt of such benefits by any such persons, including
the prepayment of any such benefit.

INSURANCE

We have obtained a directors' and officers' liability insurance policy
insuring our directors and officers against certain losses resulting from
wrongful acts committed by them as our directors and officers, including
liabilities arising under the Securities Act.

II-2

ITEM 16. EXHIBITS.

(1) Exhibits

EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------

1.1** -- Form of underwriting agreement.
4.1(1) -- Form of Certificate evidencing Common Stock
5.1* -- Form of opinion of Winstead Sechrest & Minick P.C. regarding
legality of the securities offered
23.1* -- Consent of Grant Thornton LLP
23.2** -- Consent of Winstead Sechrest & Minick P.C. (included in
Exhibit 5.1 hereto)
24.1** -- Power of Attorney

------------

* Filed herewith

** Previously filed as an exhibit to this Registration Statement

(1) Incorporated herein by reference to Exhibit 4.1 to the registrant's Form S-4
filed on January 19, 1999.

ITEM 17. UNDERTAKINGS.

(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim of indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

(i) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective; and

(ii) For purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offering therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.

II-3

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused Amendment No. 2 to this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Plano, State of Texas, on May 20, 2002.

RENT-A-CENTER, INC.

By: /s/ MARK E. SPEESE
------------------------------------
Mark E. Speese
Chairman of the Board and
Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, Amendment No. 2
to this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

SIGNATURE TITLE DATE
--------- ----- ----

/s/ MARK E. SPEESE Chairman of the Board and Chief May 20, 2002
------------------------------------------------ Executive Officer
Mark E. Speese (Principal Executive Officer)

* Director May 20, 2002
------------------------------------------------
Mitchell E. Fadel

/s/ ROBERT D. DAVIS Senior Vice President--Finance, May 20, 2002
------------------------------------------------ Treasurer and Chief Financial
Robert D. Davis Officer (Principal Financial and
Accounting Officer)

* Director May 20, 2002
------------------------------------------------
L. Dowell Arnette

* Director May 20, 2002
------------------------------------------------
Laurence M. Berg

* Director May 20, 2002
------------------------------------------------
Peter P. Copses

* Director May 20, 2002
------------------------------------------------
Andrew S. Jhawar

* Director May 20, 2002
------------------------------------------------
J.V. Lentell

*By: /s/ ROBERT D. DAVIS
------------------------------------------
Power of Attorney

II-4

EXHIBIT INDEX

EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------

------------

* Filed herewith

** Previously filed as an exhibit to this Registration Statement

(1) Incorporated herein by reference to Exhibit 4.1 to the registrant's Form S-4
filed on January 19, 1999.