Investor Presentation Second Quarter 2005

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1 Investor Presentation Second Quarter 2005 August 9, 2005

2 Key Investment Rationale Leading rent-to-own operator in the U.S. Proven business model Multiple growth drivers Predictable revenue stream Strong cash flow generation Solid balance sheet & strong credit statistics Strong internal controls and governance Experienced management team 1

3 Leading RTO Operator in U.S. Largest rent-to-own operator in the U.S. 35% market share based on 2,892 domestic store count as of 6/30/05 ColorTyme subsidiary represents an additional 3% market share Broad selection of high quality goods through flexible rental agreements Home electronics 35% of rental revenue Furniture and home accessories - 38% of rental revenue Appliances - 15% of rental revenue Personal computers 12% of rental revenue Primarily serves the underbanked consumer Generated $2.34 billion in LTM revenue and $359.7 million in LTM EBITDA as of June 30,

4 Leading Player in Fragmented Marketplace 8,300 Stores (1) Number of Stores 3,500 3,000 2,500 2,000 1,500 1,000 3, ,892 1, Largest Firms 61% 3,200+ Stores 39% Rent-A-Center / Aaron Rent-Way (4) Bestway (5) Buddy s Home American Rent One (5) ColorTyme (2) Rents (3) Furnishings (5) Rentals (5) Market Share (1) 38.2% 13.4% 9.5% 0.8% 0.8% 0.5% 0.4% Notes: (1) Based on Association of Progressive Rental Organization (APRO) estimates in 2004 Industry Survey of 8,300 total stores (2) Company data as of June 30, 2005 (3) Company earnings press release of July 27, 2005 (4) Company earnings press release of August 4, 2005 (5) Company website estimates as of August 9,

5 Leading National Footprint 2,886 domestic company-owned stores and 281 franchised stores 6 company-owned stores in Canada Company-owned New Store Openings 2004A 94 Q2 05YTD 2005E Acquisitions - Store Fronts 2004A Q2 05YTD 37 Acquisitions - Customer Accounts Get It Now A Q2 05YTD Favorable State Regulation Developing/Unfavorable State Regulation 4

6 Rent-to-Own is an Appealing Transaction No Long Term Obligation Lifetime Reinstatement Service Included 90 Days Same as Cash Flexible Rental Agreements Early Purchase Options Same Day Delivery 7 36 Months Term to Ownership No Traditional Credit Check No Down Payment 5

7 With Attractive Economics Monthly Revenue Stream Total Rental Revenues COGS Gross Margin Buy Upfront $ % Rent-To-Own $1, % Rent-To-Own (Average Contract Life) $1, % Months 6

8 and Consistent Industry Growth $ in billions $7 $6 $5 $4 $3 $3.8 $3.9 $4.1 $ % CAGR $4.7 $5.0 $5.3 $5.6 $6.0 $6.2 $2 $1 $ Source: APRO 2004 Industry Survey 7

9 Levers of Growth for Rent-to-Own Open new rent-to-own stores Acquire existing rent-to-own stores Storefronts Customer accounts Grow same store sales Merchandise mix Agreements per customer Customer growth 8

10 Serves the Underbanked Working Family 75% of customers in the industry have household incomes between $15,000 and $50,000 (1) 45 million households with household incomes between $15,000 and $50,000 (2) Industry is serving only 2.7 million of these households (3) Great market opportunity Note: (1) America s Research Group, August 2004 (2) U.S. Census Bureau (3) APRO 2004 Industry Survey 9

11 Proven Business Model Key Brands and Attractive Stores Systems Employee Training and Development Customer Relationship 10

12 Rent-A-Center Store Profitability vs. Peers $100,000 $80,000 $60,000 Monthly Revenue $56, % $66, % 80% 60% Gross Profit Margin 69.9% 470 bps 74.6% $40,000 40% $20,000 20% $0 Store Operating Margin 35% 30% 25% 20% 15% 10% 5% 16.6% 370 bps 20.3% 0% 25% 20% 15% 10% 5% EBITDA Margin 8.5% 800 bps 16.5% 0% Industry Average (1) 11 0% Average RCII Store (2) Notes: (1) Source: APRO 2004 Industry Survey. (2) Per LTM data for the period ended June 30, 2005 for Rent-A-Center stores (excludes Get It Now, ColorTyme, and Canada) (3) Store Operating Margin is before overhead allocation, EBITDA Margin is after overhead allocation

13 Easily Accessible, Highly Visible Sites Leased Sites Only 12

14 Spacious Showroom Interior No Warehouses - Vendors Ship Directly to the Stores 13

15 High Quality, Brand-Name Merchandise Electronics 35% of Rental Revenue Furniture 38% of Rental Revenue Appliances 15% of Rental Revenue Computers 12% of Rental Revenue Actual data for the twelve months ended June 30,

16 State-of-the-Art Systems Capabilities Inventory Inventory Analysis Analysis BOR BOR & Credit Credit Analysis Analysis Store Store Income Income Analysis Analysis Exceptions Exceptions Report Report Daily reports at all levels of organization from store manager to Chairman/CEO Manage by exception philosophy Systems help enforce strict inventory/cost control 15

17 Strategic Objectives Enhance store level operations and profitability Open new stores Acquire existing rent-to-own stores Enhance national brand Expand into new businesses that serve our customer demographic 16

18 Significant Domestic Market Opportunity 16,000 14,000 6,000 Number of Stores 12,000 10,000 8,000 6,000 4,000 3,173 1,897 Top 2 Competitors 3,230 Other Competitors New Store Opportunity 2,000 0 Current Landscape 17

19 Strong New Store Economics Start-up investment of approximately $500,000 (3/4 for inventory) Begin turning a monthly profit in approximately nine months Cumulative break even within months (1) Internal Rate of Return of approximately 50% Year 1 Year 2 Year 3 Year 4 Revenues $425,000 $675,000 $750,000 $800,000 EBITDA (1) ($50,000) $110,000 $140,000 $160,000 EBITDA Margin (1) (12%) 16% 19% 20% Note: (1) Before market and corporate allocation and income tax expense, terminal value of 6.5 x EBITDA in Year 4 18

20 Enhancing National Brand National and spot media Loyalty program NASCAR sponsorship with Ford Motor Company and the U.S. Air Force Strategic business relationships 19

21 Experienced Management Team Senior management team is the most experienced in RTO industry CEO Mark Speese has over 26 years of RTO experience President Mitch Fadel has over 22 years of RTO experience Senior executives average over 10 years of RTO experience Attracting the best personnel with industry-leading salary and incentive plans 20

22 Financial Overview

23 Strong, Consistent Sales Growth Combined Revenue ($MM) 2,400 2,200 2,000 1,800 1,600 1,400 $1,417 $1, % CAGR $1,809 $2,010 $2,228 $2,313 1,200 1, Store Revenue Franchise Revenue 22

24 Q2 05 Review ($MM) $800 $700 $600 $500 $400 $300 Revenue 1.3% $573.0 $580.6 ($MM) $600 $550 $500 $450 $400 $350 Gross Profit $ % $428.4 $200 ($MM) $160 Q2'04 EBITDA Q2'05 $300 ($MM) $80 Q2'04 Net Income Q2'05 $140 (16.0%) $70 (22.7%) $120 $100 $80 $105.2 $88.4 $60 $50 $40 $51.2 $39.6 $60 $30 $40 Q2'04 Q2'05 EBITDA Margin 18.4% 15.2% $20 Net Income Margin Q2'04 Q2'05 8.9% 6.8% 23

25 Current Capital Structure (in millions of dollars) Jun % of Book Capital Jun % of Book Capital Cash & Equivalents $86.2 N/A $25.1 N/A Senior Credit Facilities % % Subordinated Notes % % Total Debt % % Shareholder's Equity % % Total Capitalization $1, % $1, % Consolidated Leverage Ratio 1.95x (Q2 05) Consolidated Interest Coverage Ratio 8.26x (Q2 05) 24

26 Operating Cash Flow ($MM) $450 $400 $350 $300 $250 $200 $150 $100 $50 $0 $342.4 $331.0 $294.5 $191.6 $175.7 $ Q2'05 YTD 25

27 Schedule of Free Cash Flow 2005 Estimate EBITDA Net Cash Interest CapEx Net Investment in Rental Merchandise Taxes Free Cash Flow $325MM - $345MM ($40MM) ($60MM) ($10MM) ($115MM) $100MM - $120MM Free Cash Flow Yield of Approximately 7% 26

28 EBITDA and EBITDA Margin ($MM) $450 $400 $350 $300 $250 $200 $150 $100 $50 $0 $425.9 $ $ $306.1 $ $ Q2'05 YTD EBITDA (1) EBITDA Margin (%) Notes: (1) Excludes nonrecurring charges and credits 27

29 Key Credit Ratios Consolidated Interest Coverage (LTM EBITDA / LTM Net Interest Expense) Consolidated Leverage Ratio (Total Debt Cash / LTM EBITDA) 10.4x 8.3x 5.1x 6.4x 6.4x 2.26x 1.25x 1.52x 1.73x 1.95x (1) PF Q2' Q2'05 NOTE: (1) Pro forma for a full-year interest expense for the $100 million bonds issued December

30 Guidance (per July 25, 2005 press release) QUARTERLY Total Revenue Diluted EPS Q3'04A $569.6 MM $0.47 Q3'05P $572.0-$580.0 $580.0 MM $ $0.42 ANNUAL Total Revenue Diluted EPS 2004A $2.31 BN $2.28* 2005P $2.34-$2.36 $2.36 BN $1.90-$2.00** $2.00** * Excludes the effects of $47.0 million in pre-tax charges associated with the Griego/Carrillo litigation and $4.2 million in pre-tax charges associated with refinancing of the Company s senior credit facility. It also excludes the effects of $7.9 million in one-time other income associated with the sale of charged-off accounts. ** Excludes the effects of an $8.0 million in pre-tax credit in the first quarter associated with the Griego/Carrillo litigation. Also exludes the effects of a $2.0 million tax audit reserve credit associated with the examination and favorable resolution of the Company s 1998 & 1999 federal tax returns. 29

31 Key Investment Rationale Leading rent-to-own operator in the U.S. Proven business model Multiple growth drivers Predictable revenue stream Strong cash flow generation Strong balance sheet & strong credit statistics Strong internal controls and governance Experienced management team 30

32 Safe Harbor Statement This presentation contains forward-looking statements that involve risks and uncertainties. Such forward-looking statements generally can be identified by the use of forward-looking terminology such as may, will, expect, intend, could, estimate, should, anticipate, or believe, or the negative thereof or variations thereon or similar terminology. Although the Company believes that the expectations reflected in such forward-looking statements will prove to be correct, the Company can give no assurance that such expectations will prove to have been correct. The actual future performance of the Company 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 rent-to-own stores; the Company s ability to acquire additional rent-to-own stores on favorable terms; the Company s ability to enhance the performance of these acquired stores; the Company s ability to control store level costs; the Company s ability to identify and successfully market products and services that appeal to our customer demographic; the Company s ability to identify and successfully enter new lines of business offering products and services that appeal to our customer demographic; the results of the Company s litigation; the passage of legislation adversely affecting the rent-to-own industry; interest rates; the Company s ability to collect on its rental purchase agreements; the Company s ability to enter into new rental purchase agreements; economic pressures affecting the disposable income available to our targeted consumers, such as high fuel and utility costs; changes in the Company s effective tax rate; changes in the Company s stock price and the number of shares of common stock that the Company may or may not repurchase; and the other risks detailed from time to time in the Company s SEC filings, including but not limited to, its annual report on Form 10-K for the year ended December 31, 2004 and its quarterly reports on Form 10-Q for the quarter ended March 31, 2005 and the Form 10-Q for the six month period ended June 30, You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Except as required by law, the Company is not obligated to publicly release any revisions to these forward-looking statements to reflect the events or circumstances after the date of this presentation or to reflect the occurrence of unanticipated events. 31