I am cautiously optimistic about 2006. Though the potential impact of continued rising fuel and energy costs remains a concern, we also believe we have reached a trough in the impact on our operations from the evolution of low end consumer electronics
Mark E. Speese, Chairman and CEO

Rent-A-Center (RCII) announced revenues and net earnings for the quarter and year ended December 31, 2005 of $583.2 million, a $2.1 million decrease from $585.3 million for the same period in the prior year. This decrease of 0.4% in revenues was primarily driven by a decrease in same store sales of 0.2% plus the closing and merging of 114 stores with existing Rent-A-Center stores and the sale of 35 stores as part of the previously announced 162 store consolidation plan, offset by an increase in incremental revenues generated in new and acquired stores.

Net earnings for the quarter ended December 31, 2005 were $33.6 million, or $0.48 per diluted share, when excluding the expenses for restructuring and the impact of the hurricanes as well as the credit for the state tax reserve adjustment discussed below, representing a decrease of 12.7% from the $0.55 per diluted share, or net earnings of $41.7 million for the same period in the prior year, when excluding the one-time other income item discussed below. The decrease in net earnings per diluted share is primarily attributable to the decrease in same store sales as well as increases in operating expenses related to new store openings, acquisitions and normal operating costs such as utility and fuel costs, offset by a reduction in the number of the Company's outstanding shares.

Reported net earnings for the quarter ended December 31, 2005 were $35.1 million, or $0.50 per diluted share, when including the $0.02 effect of restructuring expenses, the $0.01 impact of the hurricane expenses and the $0.05 benefit from the credit for the state tax reserve adjustment, representing a decrease of 18.0% from the $0.61 per diluted share, or reported net earnings of $46.9 million for the same period in the prior year, when including the one-time other income item discussed below.

"We are pleased with the results for the fourth quarter, where we saw improvement in our same store sales trend and exceeded the high end of our expectations for diluted earnings per share," commented Mark E. Speese, the Company's Chairman and Chief Executive Officer. "In addition, we continue to generate significant cash flow from operations that we intend to utilize to enhance stockholder value by, among other things, adding approximately 5% annually to our rent-to-own store base, opening financial services centers in existing rent-to-own stores and repurchasing our outstanding common shares," Speese added.

Year End December 31, 2005 Results
Total reported revenues for the twelve months ended December 31, 2005 increased to $2.339 billion, a 1.1% increase from $2.313 billion for the same period in the prior year. Same store revenues for the twelve month period ending December 31, 2005 decreased 2.3%, compared to a decrease of 3.6% for the twelve month period ending December 31, 2004.

Net earnings for the twelve months ended December 31, 2005 were $141.9 million, or $1.91 per diluted share, when excluding the expenses for restructuring and the impact of the hurricanes as well as the credits for the state tax reserve adjustment, federal tax audit reserve, and litigation reversion discussed below, representing a decrease of 16.2% from the $2.28 per diluted share, or net earnings of $182.7 million for the same period in the prior year, when excluding the one-time other income item and litigation and finance charges discussed below.

Reported net earnings for the twelve months ended December 31, 2005 were $135.7 million, or $1.83 per diluted share, when including the $0.14 effect of restructuring expenses and the $0.09 impact of the hurricane expenses as well as $0.05 for the state tax reserve adjustment credit, $0.03 for the federal tax audit reserve credit, and $0.07 for the litigation reversion credit, representing a decrease of 5.7% from the $1.94 per diluted share, or reported net earnings of $155.9 million for the same period in the prior year, when including the one-time other income item and litigation and finance charges discussed below.

"Our 2005 earnings were negatively affected by the weakness in our same store sales, which we believe reflects, among other things, higher fuel and energy costs that ultimately suppressed customer demand, and also believe that product evolution, particularly in low end consumer electronics, placed additional pressure on our business," stated Mr. Speese. Mr. Speese added, "I am cautiously optimistic about 2006. Though the potential impact of continued rising fuel and energy costs remains a concern, we also believe we have reached a trough in the impact on our operations from the evolution of low end consumer electronics," Speese continued. "We will continue to focus on improving our store operations, including using our resources prudently and focusing on driving more customer traffic from our advertising initiatives."

Through the twelve month period ended December 31, 2005, the Company generated cash flow from operations of approximately $187.9 million, while ending the quarter with $57.6 million of cash on hand. On August 22, 2005, the Company announced that its Board of Directors increased the authorization for stock repurchases under the Company's common stock repurchase program to $400 million. During the twelve month period ended December 31, 2005, the Company repurchased 5,900,700 shares for $118.4 million in cash under the program and has utilized a total of $356.1 million of the total amount authorized by its Board of Directors since the inception of the plan.

Operations Highlights
During the fourth quarter of 2005, the Company opened 28 new rent-to-own store locations, acquired five stores as well as accounts from four additional locations, consolidated 18 stores into existing locations, sold 37 stores and closed five stores, for a net reduction of 27 stores. During the fourth quarter of 2005, the Company added financial services to 13 existing rent-to-own store locations, consolidated one store with financial services into an existing location and ended the year with a total of 40 stores providing these services.

Through the twelve month period ending December 31, 2005, the Company opened 67 new rent-to-own store locations, acquired 44 stores as well as accounts from 39 additional locations, consolidated 170 stores into existing locations, sold 43 stores and closed 13 stores, for a net reduction of 115 stores. Since January 1, 2006, the Company has opened four new rent-to-own store locations, acquired two stores as well as accounts from three additional locations, consolidated five stores into existing locations and sold one store. The Company has added financial services to three existing rent-to-own store locations since January 1, 2006.

2005 Store Consolidation Plan Expenses
 

During the fourth quarter of 2005, the Company recorded a pre-tax restructuring expense of approximately $2.1 million as part of the store consolidation plan announced on September 6, 2005. The costs with respect to these store closings relate primarily to lease terminations of approximately $2.8 million, fixed asset disposals of approximately $1.5 million and the proceeds from the sale of stores net of inventory costs of $2.3 million. This restructuring expense reduced diluted earnings per share in the fourth quarter of 2005 by $0.02.

For the third and fourth quarter of 2005 combined, the Company recorded pre-tax restructuring expenses of approximately $15.2 million as part of the store consolidation plan. The costs with respect to these store closings relate primarily to lease terminations of approximately $9.3 million, goodwill impairment of approximately $4.5 million, fixed asset disposals of approximately $3.3 million and the proceeds from the sale of stores net of inventory costs of $2.3 million. This restructuring expense reduced diluted earnings per share for the twelve month period ended December 31, 2005 by $0.14.

2005 Hurricane Related Expenses
During the fourth quarter of 2005, the Company recorded a pre-tax expense of approximately $1.1 million related to the damage caused by Hurricanes Katrina, Rita and Wilma. These costs relate primarily to inventory losses. This expense reduced diluted earnings per share in the fourth quarter of 2005 by $0.01.

For the third and fourth quarter of 2005 combined, the Company recorded pre-tax expenses of approximately $8.9 million related to the damage caused by Hurricanes Katrina, Rita and Wilma. These costs relate primarily to inventory losses of approximately $4.5 million and goodwill impairment of approximately $3.7 million. These expenses reduced diluted earnings per share for the twelve month period ended December 31, 2005 by $0.09.

FIRST QUARTER 2006 GUIDANCE:

Revenues

-- The Company expects total revenues to be in the range of $591 million to $599 million.

-- Store rental and fee revenues are expected to be between $509 million and $515 million.

-- Total store revenues are expected to be in the range of $579 million to $587 million.

-- Same store sales are expected to be flat to slightly positive.

-- The Company expects to open 5-15 new rent-to-own store locations.

-- The Company expects to add financial services to 10-15 rent-to-own store locations.

Expenses

-- The Company expects cost of rental and fees to be between 21.6% and 22.0% of store rental and fee revenue and cost of goods merchandise sales to be between 65% and 70% of store merchandise sales.

-- Store salaries and other expenses are expected to be in the range of 57.3% to 58.8% of total store revenue.

-- General and administrative expenses are expected to be between 3.5% and 3.7% of total revenue.

-- Net interest expense is expected to be approximately $12.0 million, depreciation of property assets to be approximately $13.0 million and amortization of intangibles is expected to be approximately $1.0 million.

-- The effective tax rate is expected to be approximately 37.0% of pre-tax income.

-- Diluted earnings per share are estimated to be in the range of $0.48 to $0.52, including stock option expense.

-- Diluted shares outstanding are estimated to be between 69.7 million and 70.7 million.

FISCAL 2006 GUIDANCE:

Revenues

-- The Company expects total revenues to be in the range of $2.33 billion and $2.36 billion.

-- Store rental and fee revenues are expected to be between $2.080 billion and $2.105 billion.

-- Total store revenues are expected to be in the range of $2.294 billion and $2.324 billion.

-- Same store sales are expected to be flat to slightly positive.

-- The Company expects to open 60-80 new store locations.

-- The Company expects to add financial services to 100-160 rent-to-own store locations.

Expenses

-- The Company expects cost of rental and fees to be between 21.5% and 21.9% of store rental and fee revenue and cost of goods merchandise sales to be between 70% and 75% of store merchandise sales.

-- Store salaries and other expenses are expected to be in the range of 58.0% to 59.5% of total store revenue.

-- General and administrative expenses are expected to be between 3.6% and 3.8% of total revenue.

-- Net interest expense is expected to be between $42.0 million and $47.0 million, depreciation of property assets is expected to be between $52.0 million and $57.0 million and amortization of intangibles is expected to be approximately $3.5 million.

-- The effective tax rate is expected to be approximately 37.0% of pre-tax income.

-- Diluted earnings per share are estimated to be in the range of $2.00 to $2.10, including stock option expense.

-- Diluted shares outstanding are estimated to be between 70.0 million and 71.5 million.