ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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45-0491516
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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Large accelerated filer
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ý
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Accelerated filer
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¨
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Non-accelerated filer
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¨
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(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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Class
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Outstanding
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Common stock, $.01 par value per share
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58,841,033
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Page No.
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PART I.
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FINANCIAL INFORMATION
|
|
|
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Item 1.
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Consolidated Financial Statements
|
|
|
|
|
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Consolidated Statements of Earnings for the three and nine months ended September 30, 2012 and 2011
|
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Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2012 and 2011
|
|
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Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011
|
|
|
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|
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Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011
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Notes to Consolidated Financial Statements
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|
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Item 2.
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Management's Discussion and Analysis of Financial Condition and Results of Operations
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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Item 4.
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Controls and Procedures
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PART II.
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OTHER INFORMATION
|
|
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Item 1.
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Legal Proceedings
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Item 1A.
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Risk Factors
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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Item 6.
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Exhibits
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|
|
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SIGNATURES
|
|
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Three Months Ended September 30,
|
|
Nine Months Ended September 30,
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||||||||||||
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2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
(In thousands, except per share data)
|
Unaudited
|
|
Unaudited
|
||||||||||||
Revenues
|
|
|
|
|
|
||||||||||
Store
|
|
|
|
|
|
|
|
||||||||
Rentals and fees
|
$
|
652,059
|
|
|
$
|
622,474
|
|
|
$
|
1,989,027
|
|
|
$
|
1,850,698
|
|
Merchandise sales
|
58,854
|
|
|
52,802
|
|
|
242,335
|
|
|
203,041
|
|
||||
Installment sales
|
15,560
|
|
|
16,348
|
|
|
49,225
|
|
|
49,606
|
|
||||
Other
|
2,811
|
|
|
4,147
|
|
|
12,280
|
|
|
13,629
|
|
||||
Franchise
|
|
|
|
|
|
|
|
||||||||
Merchandise sales
|
8,697
|
|
|
7,250
|
|
|
27,332
|
|
|
23,921
|
|
||||
Royalty income and fees
|
1,333
|
|
|
1,250
|
|
|
4,067
|
|
|
3,807
|
|
||||
|
739,314
|
|
|
704,271
|
|
|
2,324,266
|
|
|
2,144,702
|
|
||||
Cost of revenues
|
|
|
|
|
|
|
|
||||||||
Store
|
|
|
|
|
|
|
|
||||||||
Cost of rentals and fees
|
158,805
|
|
|
142,796
|
|
|
481,954
|
|
|
417,740
|
|
||||
Cost of merchandise sold
|
47,497
|
|
|
43,170
|
|
|
192,038
|
|
|
151,259
|
|
||||
Cost of installment sales
|
5,376
|
|
|
5,655
|
|
|
17,402
|
|
|
17,601
|
|
||||
Franchise cost of merchandise sold
|
8,295
|
|
|
6,926
|
|
|
26,141
|
|
|
22,875
|
|
||||
|
219,973
|
|
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198,547
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|
|
717,535
|
|
|
609,475
|
|
||||
Gross profit
|
519,341
|
|
|
505,724
|
|
|
1,606,731
|
|
|
1,535,227
|
|
||||
Operating expenses
|
|
|
|
|
|
|
|
||||||||
Salaries and other expenses
|
412,567
|
|
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405,633
|
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1,255,405
|
|
|
1,197,922
|
|
||||
General and administrative expenses
|
36,214
|
|
|
33,448
|
|
|
106,889
|
|
|
100,048
|
|
||||
Amortization and write-down of intangibles
|
2,447
|
|
|
1,261
|
|
|
5,263
|
|
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3,251
|
|
||||
Restructuring charge
|
—
|
|
|
7,586
|
|
|
—
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|
|
12,519
|
|
||||
Impairment charge
|
—
|
|
|
—
|
|
|
—
|
|
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7,320
|
|
||||
Litigation expense
|
—
|
|
|
—
|
|
|
—
|
|
|
2,800
|
|
||||
|
451,228
|
|
|
447,928
|
|
|
1,367,557
|
|
|
1,323,860
|
|
||||
Operating profit
|
68,113
|
|
|
57,796
|
|
|
239,174
|
|
|
211,367
|
|
||||
Interest expense
|
8,096
|
|
|
8,811
|
|
|
25,416
|
|
|
28,184
|
|
||||
Interest income
|
(167
|
)
|
|
(91
|
)
|
|
(470
|
)
|
|
(482
|
)
|
||||
Earnings before income taxes
|
60,184
|
|
|
49,076
|
|
|
214,228
|
|
|
183,665
|
|
||||
Income tax expense
|
20,274
|
|
|
17,852
|
|
|
78,195
|
|
|
68,323
|
|
||||
NET EARNINGS
|
$
|
39,910
|
|
|
$
|
31,224
|
|
|
$
|
136,033
|
|
|
$
|
115,342
|
|
Basic earnings per common share
|
$
|
0.68
|
|
|
$
|
0.52
|
|
|
$
|
2.30
|
|
|
$
|
1.86
|
|
Diluted earnings per common share
|
$
|
0.67
|
|
|
$
|
0.52
|
|
|
$
|
2.28
|
|
|
$
|
1.84
|
|
Cash dividends paid per common share
|
$
|
0.16
|
|
|
$
|
0.16
|
|
|
$
|
0.48
|
|
|
$
|
0.28
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
(In thousands)
|
Unaudited
|
|
Unaudited
|
||||||||||||
Net earnings
|
$
|
39,910
|
|
|
$
|
31,224
|
|
|
$
|
136,033
|
|
|
$
|
115,342
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments
|
3,470
|
|
|
(3,647
|
)
|
|
3,439
|
|
|
(2,854
|
)
|
||||
Total other comprehensive income (loss)
|
3,470
|
|
|
(3,647
|
)
|
|
3,439
|
|
|
(2,854
|
)
|
||||
COMPREHENSIVE INCOME
|
$
|
43,380
|
|
|
$
|
27,577
|
|
|
$
|
139,472
|
|
|
$
|
112,488
|
|
|
September 30, 2012
|
|
December 31, 2011
|
||||
(In thousands, except share and par value data)
|
Unaudited
|
|
|
||||
ASSETS
|
|
|
|
||||
Cash and cash equivalents
|
$
|
81,800
|
|
|
$
|
88,065
|
|
Receivables, net of allowance for doubtful accounts of $7,570 in 2012 and $8,100 in 2011
|
44,284
|
|
|
48,221
|
|
||
Prepaid expenses and other assets
|
71,914
|
|
|
69,326
|
|
||
Rental merchandise, net
|
|
|
|
||||
On rent
|
733,724
|
|
|
766,425
|
|
||
Held for rent
|
214,158
|
|
|
186,768
|
|
||
Merchandise held for installment sale
|
4,150
|
|
|
4,097
|
|
||
Property assets, net
|
300,470
|
|
|
287,621
|
|
||
Goodwill, net
|
1,341,239
|
|
|
1,339,125
|
|
||
Other intangible assets, net
|
8,176
|
|
|
11,730
|
|
||
|
$
|
2,799,915
|
|
|
$
|
2,801,378
|
|
LIABILITIES
|
|
|
|
||||
Accounts payable – trade
|
$
|
142,591
|
|
|
$
|
105,064
|
|
Accrued liabilities
|
306,475
|
|
|
298,719
|
|
||
Deferred income taxes
|
296,751
|
|
|
297,711
|
|
||
Senior debt
|
293,300
|
|
|
440,675
|
|
||
Senior notes
|
300,000
|
|
|
300,000
|
|
||
|
1,339,117
|
|
|
1,442,169
|
|
||
|
|
|
|
||||
COMMITMENTS AND CONTINGENCIES
|
|
|
|
||||
|
|
|
|
||||
STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Common stock, $.01 par value; 250,000,000 shares authorized; 108,405,870 and 107,799,899 shares issued in 2012 and 2011, respectively
|
1,082
|
|
|
1,077
|
|
||
Additional paid-in capital
|
778,718
|
|
|
757,933
|
|
||
Retained earnings
|
1,776,853
|
|
|
1,669,389
|
|
||
Treasury stock at cost, 49,564,837 and 48,697,852 shares in 2012 and 2011, respectively
|
(1,098,547
|
)
|
|
(1,068,443
|
)
|
||
Accumulated other comprehensive income (loss)
|
2,692
|
|
|
(747
|
)
|
||
|
1,460,798
|
|
|
1,359,209
|
|
||
|
$
|
2,799,915
|
|
|
$
|
2,801,378
|
|
|
Nine Months Ended September 30,
|
||||||
|
2012
|
|
2011
|
||||
(In thousands)
|
Unaudited
|
||||||
Cash flows from operating activities
|
|
|
|
||||
Net earnings
|
$
|
136,033
|
|
|
$
|
115,342
|
|
Adjustments to reconcile net earnings to net cash provided by operating activities
|
|
|
|
||||
Depreciation of rental merchandise
|
464,560
|
|
|
407,775
|
|
||
Bad debt expense
|
2,543
|
|
|
2,452
|
|
||
Stock-based compensation expense
|
6,673
|
|
|
3,420
|
|
||
Depreciation of property assets
|
54,744
|
|
|
47,938
|
|
||
Loss on sale or disposal of property assets
|
1,833
|
|
|
1,783
|
|
||
Amortization of intangibles
|
4,042
|
|
|
3,022
|
|
||
Amortization of financing fees
|
2,074
|
|
|
1,652
|
|
||
Deferred income taxes
|
(960
|
)
|
|
53,848
|
|
||
Tax benefit related to stock awards
|
(2,860
|
)
|
|
(6,536
|
)
|
||
Restructuring charge
|
—
|
|
|
12,519
|
|
||
Impairment charge
|
—
|
|
|
7,320
|
|
||
Changes in operating assets and liabilities, net of effects of acquisitions
|
|
|
|
||||
Rental merchandise
|
(457,749
|
)
|
|
(452,490
|
)
|
||
Receivables
|
1,394
|
|
|
7,998
|
|
||
Prepaid expenses and other assets
|
(4,788
|
)
|
|
103,476
|
|
||
Accounts payable – trade
|
37,528
|
|
|
(29,662
|
)
|
||
Accrued liabilities
|
13,682
|
|
|
(13,148
|
)
|
||
Net cash provided by operating activities
|
258,749
|
|
|
266,709
|
|
||
Cash flows from investing activities
|
|
|
|
||||
Purchase of property assets
|
(73,103
|
)
|
|
(91,979
|
)
|
||
Proceeds from sale of property assets
|
4,898
|
|
|
159
|
|
||
Acquisitions of businesses, net of cash acquired
|
(5,249
|
)
|
|
(4,591
|
)
|
||
Net cash used in investing activities
|
(73,454
|
)
|
|
(96,411
|
)
|
||
Cash flows from financing activities
|
|
|
|
||||
Purchase of treasury stock
|
(30,121
|
)
|
|
(164,168
|
)
|
||
Exercise of stock options
|
11,275
|
|
|
26,006
|
|
||
Tax benefit related to stock awards
|
2,860
|
|
|
6,536
|
|
||
Payments on capital leases
|
(27
|
)
|
|
(261
|
)
|
||
Proceeds from debt
|
321,985
|
|
|
658,945
|
|
||
Repayments of debt
|
(469,360
|
)
|
|
(671,719
|
)
|
||
Dividends paid
|
(28,505
|
)
|
|
(17,485
|
)
|
||
Net cash used in financing activities
|
(191,893
|
)
|
|
(162,146
|
)
|
||
Effect of exchange rate changes on cash
|
333
|
|
|
(2,854
|
)
|
||
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
|
(6,265
|
)
|
|
5,298
|
|
||
Cash and cash equivalents at beginning of period
|
88,065
|
|
|
70,727
|
|
||
Cash and cash equivalents at end of period
|
$
|
81,800
|
|
|
$
|
76,025
|
|
|
|
|
September 30, 2012
|
|
December 31, 2011
|
||||||||||||
|
Avg.
Life
(years)
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
||||||||
Non-compete agreements
|
3
|
|
$
|
6,104
|
|
|
$
|
6,098
|
|
|
$
|
6,104
|
|
|
$
|
6,091
|
|
Customer relationships
|
2
|
|
71,147
|
|
|
69,521
|
|
|
70,648
|
|
|
65,901
|
|
||||
Vendor relationships
|
11
|
|
7,538
|
|
|
994
|
|
|
7,538
|
|
|
568
|
|
||||
Total
|
|
|
$
|
84,789
|
|
|
$
|
76,613
|
|
|
$
|
84,290
|
|
|
$
|
72,560
|
|
|
Estimated
Amortization Expense
|
||
2012
|
$
|
611
|
|
2013
|
1,640
|
|
|
2014
|
659
|
|
|
2015
|
568
|
|
|
2016
|
568
|
|
|
Thereafter
|
4,130
|
|
|
|
|
||
Total
|
$
|
8,176
|
|
|
September 30, 2012
|
|
December 31, 2011
|
||||
Balance as of January 1,
|
$
|
1,339,125
|
|
|
$
|
1,320,467
|
|
Additions from acquisitions
|
3,198
|
|
|
18,755
|
|
||
Store dispositions and impairment charges
|
(1,221
|
)
|
|
(390
|
)
|
||
Post purchase price allocation adjustments
|
137
|
|
|
293
|
|
||
Balance as of the end of the period
|
$
|
1,341,239
|
|
|
$
|
1,339,125
|
|
•
|
incur additional debt in excess of
$250.0 million
at any one time outstanding (other than subordinated debt, which is generally permitted if the maturity date is later than July 14, 2017);
|
•
|
repurchase our capital stock and 6
5
/
8
% notes and pay cash dividends in the event the pro forma senior leverage ratio is greater than
2.50
x;
|
•
|
incur liens or other encumbrances;
|
•
|
merge, consolidate or sell substantially all our property or business;
|
•
|
sell assets, other than inventory, in the ordinary course of business;
|
•
|
make investments or acquisitions unless we meet financial tests and other requirements;
|
•
|
make capital expenditures in the event the pro forma consolidated leverage ratio is greater than
2.75
x; or
|
•
|
enter into an unrelated line of business.
|
|
Required Ratio
|
|
Actual Ratio
|
||
Maximum consolidated leverage ratio
|
No greater than
|
|
3.25:1
|
|
1.31:1
|
Minimum fixed charge coverage ratio
|
No less than
|
|
1.35:1
|
|
1.66:1
|
•
|
incur additional debt;
|
•
|
sell assets or our subsidiaries;
|
•
|
grant liens to third parties;
|
•
|
pay cash dividends or repurchase stock; and
|
•
|
engage in a merger or sell substantially all of our assets.
|
|
Three Months Ended September 30, 2012
|
||||||||||||||||||
|
Core U.S.
|
|
RAC Acceptance
|
|
International
|
|
ColorTyme
|
|
Total
|
||||||||||
Revenue
|
$
|
634,575
|
|
|
$
|
83,838
|
|
|
$
|
10,871
|
|
|
$
|
10,030
|
|
|
$
|
739,314
|
|
Gross profit
|
460,353
|
|
|
49,737
|
|
|
7,516
|
|
|
1,735
|
|
|
519,341
|
|
|||||
Operating profit
|
69,544
|
|
|
7,259
|
|
|
(9,046
|
)
|
|
356
|
|
|
68,113
|
|
|||||
Depreciation of property assets
|
15,981
|
|
|
936
|
|
|
1,475
|
|
|
20
|
|
|
18,412
|
|
|||||
Amortization and write-down of intangibles
|
583
|
|
|
897
|
|
|
967
|
|
|
—
|
|
|
2,447
|
|
|||||
Capital expenditures
|
22,056
|
|
|
1,191
|
|
|
1,536
|
|
|
—
|
|
|
24,783
|
|
|
Three Months Ended September 30, 2011
|
||||||||||||||||||
|
Core U.S.
|
|
RAC Acceptance
|
|
International
|
|
ColorTyme
|
|
Total
|
||||||||||
Revenue
|
$
|
639,806
|
|
|
$
|
51,310
|
|
|
$
|
4,655
|
|
|
$
|
8,500
|
|
|
$
|
704,271
|
|
Gross profit
|
470,185
|
|
|
30,717
|
|
|
3,248
|
|
|
1,574
|
|
|
505,724
|
|
|||||
Operating profit
|
63,590
|
|
|
(3,356
|
)
|
|
(3,342
|
)
|
|
904
|
|
|
57,796
|
|
|||||
Depreciation of property assets
|
14,890
|
|
|
595
|
|
|
595
|
|
|
27
|
|
|
16,107
|
|
|||||
Amortization and write-down of intangibles
|
365
|
|
|
896
|
|
|
—
|
|
|
—
|
|
|
1,261
|
|
|||||
Capital expenditures
|
28,901
|
|
|
1,643
|
|
|
2,219
|
|
|
—
|
|
|
32,763
|
|
|
Nine Months Ended September 30, 2012
|
||||||||||||||||||
|
Core U.S.
|
|
RAC Acceptance
|
|
International
|
|
ColorTyme
|
|
Total
|
||||||||||
Revenue
|
$
|
2,016,761
|
|
|
$
|
248,626
|
|
|
$
|
27,480
|
|
|
$
|
31,399
|
|
|
$
|
2,324,266
|
|
Gross profit
|
1,444,824
|
|
|
137,524
|
|
|
19,125
|
|
|
5,258
|
|
|
1,606,731
|
|
|||||
Operating profit
|
244,215
|
|
|
17,024
|
|
|
(23,617
|
)
|
|
1,552
|
|
|
239,174
|
|
|||||
Depreciation of property assets
|
47,689
|
|
|
2,620
|
|
|
4,366
|
|
|
69
|
|
|
54,744
|
|
|||||
Amortization and write-down of intangibles
|
1,606
|
|
|
2,690
|
|
|
967
|
|
|
—
|
|
|
5,263
|
|
|||||
Capital expenditures
|
59,089
|
|
|
3,582
|
|
|
10,432
|
|
|
—
|
|
|
73,103
|
|
|
Nine Months Ended September 30, 2011
|
||||||||||||||||||
|
Core U.S.
|
|
RAC Acceptance
|
|
International
|
|
ColorTyme
|
|
Total
|
||||||||||
Revenue
|
$
|
1,973,465
|
|
|
$
|
130,615
|
|
|
$
|
12,894
|
|
|
$
|
27,728
|
|
|
$
|
2,144,702
|
|
Gross profit
|
1,443,518
|
|
|
77,761
|
|
|
9,095
|
|
|
4,853
|
|
|
1,535,227
|
|
|||||
Operating profit
|
228,206
|
|
|
(11,482
|
)
|
|
(7,721
|
)
|
|
2,364
|
|
|
211,367
|
|
|||||
Depreciation of property assets
|
44,942
|
|
|
1,520
|
|
|
1,370
|
|
|
106
|
|
|
47,938
|
|
|||||
Amortization and write-down of intangibles
|
565
|
|
|
2,686
|
|
|
—
|
|
|
—
|
|
|
3,251
|
|
|||||
Capital expenditures
|
77,168
|
|
|
4,362
|
|
|
10,449
|
|
|
—
|
|
|
91,979
|
|
|
Location Count at September 30,
|
|||||||||||||
|
Core U.S.
|
|
RAC Acceptance
|
|
International
|
|
ColorTyme
|
|
Total
|
|||||
2012
|
2,983
|
|
|
882
|
|
|
114
|
|
|
220
|
|
|
4,199
|
|
2011
|
2,958
|
|
|
721
|
|
|
44
|
|
|
213
|
|
|
3,936
|
|
|
December 31, 2011
|
||||||||||||||||||
|
Core U.S.
|
|
RAC Acceptance
|
|
International
|
|
ColorTyme
|
|
Total
|
||||||||||
Rental merchandise, net
|
|
|
|
|
|
|
|
|
|
||||||||||
On rent
|
$
|
619,189
|
|
|
$
|
139,340
|
|
|
$
|
7,896
|
|
|
$
|
—
|
|
|
$
|
766,425
|
|
Held for rent
|
177,625
|
|
|
1,274
|
|
|
7,869
|
|
|
—
|
|
|
186,768
|
|
|||||
Total assets
|
2,536,115
|
|
|
217,157
|
|
|
44,535
|
|
|
3,571
|
|
|
2,801,378
|
|
9
.
|
Earnings Per Share.
|
|
Three Months Ended September 30, 2012
|
|||||||||
|
Net Earnings
|
|
Weighted
Average Shares
|
|
Per Share
|
|||||
Basic earnings per common share
|
$
|
39,910
|
|
|
58,882
|
|
|
$
|
0.68
|
|
Effect of dilutive stock awards
|
—
|
|
|
430
|
|
|
|
|||
Diluted earnings per common share
|
$
|
39,910
|
|
|
59,312
|
|
|
$
|
0.67
|
|
|
Three Months Ended September 30, 2011
|
|||||||||
|
Net Earnings
|
|
Weighted
Average Shares
|
|
Per Share
|
|||||
Basic earnings per common share
|
$
|
31,224
|
|
|
60,030
|
|
|
$
|
0.52
|
|
Effect of dilutive stock awards
|
—
|
|
|
474
|
|
|
|
|||
Diluted earnings per common share
|
$
|
31,224
|
|
|
60,504
|
|
|
$
|
0.52
|
|
|
Nine Months Ended September 30, 2012
|
|||||||||
|
Net Earnings
|
|
Weighted
Average Shares
|
|
Per Share
|
|||||
Basic earnings per common share
|
$
|
136,033
|
|
|
59,098
|
|
|
$
|
2.30
|
|
Effect of dilutive stock awards
|
—
|
|
|
511
|
|
|
|
|||
Diluted earnings per common share
|
$
|
136,033
|
|
|
59,609
|
|
|
$
|
2.28
|
|
|
Nine Months Ended September 30, 2011
|
|||||||||
|
Net Earnings
|
|
Weighted
Average Shares
|
|
Per Share
|
|||||
Basic earnings per common share
|
$
|
115,342
|
|
|
61,944
|
|
|
$
|
1.86
|
|
Effect of dilutive stock awards
|
—
|
|
|
704
|
|
|
|
|||
Diluted earnings per common share
|
$
|
115,342
|
|
|
62,648
|
|
|
$
|
1.84
|
|
•
|
uncertainties regarding the ability to open new locations;
|
•
|
our ability to acquire additional stores or customer accounts on favorable terms;
|
•
|
our ability to control costs and increase profitability;
|
•
|
our ability to enhance the performance of acquired stores;
|
•
|
our ability to retain the revenue associated with acquired customer accounts;
|
•
|
our ability to identify and successfully market products and services that appeal to our customer demographic;
|
•
|
our ability to enter into new and collect on our rental or lease purchase agreements;
|
•
|
the passage of legislation adversely affecting the rent-to-own industry;
|
•
|
our failure to comply with applicable statutes or regulations governing our transactions;
|
•
|
changes in interest rates;
|
•
|
changes in the unemployment rate;
|
•
|
economic pressures, such as high fuel costs, affecting the disposable income available to our current and potential customers;
|
•
|
the general strength of the economy and other economic conditions affecting consumer preferences and spending;
|
•
|
changes in our stock price, the number of shares of common stock that we may or may not repurchase, and future dividends, if any;
|
•
|
changes in estimates relating to self-insurance liabilities and income tax and litigation reserves;
|
•
|
changes in our effective tax rate;
|
•
|
fluctuations in foreign currency exchange rates;
|
•
|
information security costs;
|
•
|
our ability to maintain an effective system of internal controls;
|
•
|
changes in the number of share-based compensation grants, methods used to value future share-based payments and changes in estimated forfeiture rates with respect to share-based compensation;
|
•
|
the resolution of our litigation; and
|
•
|
the other risks detailed from time to time in our SEC reports.
|
|
Three Months Ended September 30, 2012
|
|
Three Months Ended September 30, 2011
|
||||
|
(In thousands)
|
||||||
Beginning merchandise value
|
$
|
924,945
|
|
|
$
|
872,753
|
|
Inventory additions through acquisitions
|
1,472
|
|
|
871
|
|
||
Purchases
|
260,622
|
|
|
229,962
|
|
||
Depreciation of rental merchandise
|
(153,078
|
)
|
|
(139,406
|
)
|
||
Cost of goods sold
|
(52,872
|
)
|
|
(48,825
|
)
|
||
Skips and stolens
|
(22,497
|
)
|
|
(20,880
|
)
|
||
Other inventory deletions
(1)
|
(6,560
|
)
|
|
(12,196
|
)
|
||
Ending merchandise value
|
$
|
952,032
|
|
|
$
|
882,279
|
|
|
Nine Months Ended September 30, 2012
|
|
Nine Months Ended September 30, 2011
|
||||
|
(In thousands)
|
||||||
Beginning merchandise value
|
$
|
957,290
|
|
|
$
|
842,271
|
|
Inventory additions through acquisitions
|
1,553
|
|
|
4,384
|
|
||
Purchases
|
752,208
|
|
|
687,223
|
|
||
Depreciation of rental merchandise
|
(464,560
|
)
|
|
(407,775
|
)
|
||
Cost of goods sold
|
(209,439
|
)
|
|
(168,860
|
)
|
||
Skips and stolens
|
(63,278
|
)
|
|
(54,647
|
)
|
||
Other inventory deletions
(1)
|
(21,742
|
)
|
|
(20,317
|
)
|
||
Ending merchandise value
|
$
|
952,032
|
|
|
$
|
882,279
|
|
(1)
|
Other inventory deletions include loss/damage waiver claims and unrepairable and missing merchandise, as well as acquisition write-offs.
|
|
Nine Months Ended September 30, 2012
|
||||||||||||||||||
|
Core U.S.
|
|
RAC Acceptance
|
|
International
|
|
ColorTyme
|
|
Total
|
||||||||||
Locations at beginning of period
|
2,994
|
|
|
750
|
|
|
80
|
|
|
216
|
|
|
4,040
|
|
|||||
New location openings
|
23
|
|
|
222
|
|
|
36
|
|
|
11
|
|
|
292
|
|
|||||
Acquired locations remaining open
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|||||
Closed locations
|
|
|
|
|
|
|
|
|
|
||||||||||
Merged with existing locations
|
31
|
|
|
76
|
|
|
1
|
|
|
—
|
|
|
108
|
|
|||||
Sold or closed with no surviving location
|
5
|
|
|
14
|
|
|
1
|
|
|
7
|
|
|
27
|
|
|||||
Locations at end of period
|
2,983
|
|
|
882
|
|
|
114
|
|
|
220
|
|
|
4,199
|
|
|||||
Acquired locations closed and accounts merged with existing locations
|
15
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|||||
Total approximate purchase price
(in thousands)
|
$
|
5,249
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,249
|
|
Year Ending December 31,
|
(In thousands)
|
||
2012
|
$
|
6,250
|
|
2013
|
25,000
|
|
|
2014
|
25,000
|
|
|
2015
|
25,000
|
|
|
2016
|
137,500
|
|
|
|
|
||
|
$
|
218,750
|
|
|
|
•
|
incur additional debt in excess of $250.0 million at any one time outstanding (other than subordinated debt, which is generally permitted if the maturity date is later than July 14, 2017);
|
•
|
repurchase our capital stock and 6
5
/
8
% notes and pay cash dividends in the event the pro forma senior leverage ratio is greater than 2.50x;
|
•
|
incur liens or other encumbrances;
|
•
|
merge, consolidate or sell substantially all our property or business;
|
•
|
sell assets, other than inventory, in the ordinary course of business;
|
•
|
make investments or acquisitions unless we meet financial tests and other requirements;
|
•
|
make capital expenditures in the event the pro forma consolidated leverage ratio is greater than 2.75x; or
|
•
|
enter into an unrelated line of business.
|
|
Required Ratio
|
|
Actual Ratio
|
||
Maximum consolidated leverage ratio
|
No greater than
|
|
3.25:1
|
|
1.31:1
|
Minimum fixed charge coverage ratio
|
No less than
|
|
1.35:1
|
|
1.66:1
|
•
|
incur additional debt;
|
•
|
sell assets or our subsidiaries;
|
•
|
grant liens to third parties;
|
•
|
pay cash dividends or repurchase stock; and
|
•
|
engage in a merger or sell substantially all of our assets.
|
|
Payments Due by Period
|
|||||||||||||||||||
Contractual Cash Obligations
|
Total
|
|
|
2012
|
|
2013-2014
|
|
2015-2016
|
|
Thereafter
|
||||||||||
|
(In thousands)
|
|||||||||||||||||||
Senior Debt (including current portion)
|
$
|
293,300
|
|
(1)
|
|
$
|
6,250
|
|
|
$
|
59,550
|
|
|
$
|
227,500
|
|
|
$
|
—
|
|
6
5
/
8
% Senior Notes
(2)
|
468,936
|
|
|
|
9,938
|
|
|
39,750
|
|
|
39,750
|
|
|
379,498
|
|
|||||
Operating Leases
|
582,239
|
|
|
|
48,523
|
|
|
324,964
|
|
|
181,157
|
|
|
27,595
|
|
|||||
Total
(3)
|
$
|
1,344,475
|
|
|
|
$
|
64,711
|
|
|
$
|
424,264
|
|
|
$
|
448,407
|
|
|
$
|
407,093
|
|
(1)
|
Amount referenced does not include interest payments. Our new senior credit facilities bear interest at varying rates equal to the Eurodollar rate plus 1.5% to 2.5% or the prime rate plus 0.5% to 1.5% at our election. The weighted average Eurodollar rate on our outstanding debt at
September 30, 2012
was 0.23%.
|
(2)
|
Includes interest payments of $9.9 million on each of May 15 and November 15 of each year.
|
(3)
|
As of
September 30, 2012
, we have $10.2 million in uncertain tax positions. Because of the uncertainty of the amounts to be ultimately paid as well as the timing of such payments, uncertain tax positions are not reflected in the contractual obligations table.
|
•
|
our ability to meet market expectations with respect to the growth and profitability of our RAC Acceptance and International segments;
|
•
|
quarterly variations in our results of operations, which may be impacted by, among other things, changes in same store sales or when and how many locations we acquire or open;
|
•
|
quarterly variations in our competitors’ results of operations;
|
•
|
changes in earnings estimates or buy/sell recommendations by financial analysts; and
|
•
|
the stock price performance of comparable companies.
|
Period
|
Total Number
of Shares
Purchased
|
|
Average Price
Paid per Share
(Including Fees)
|
|
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
|
|
Maximum Dollar Value
that May Yet Be
Purchased Under the
Plans or Programs
(Including Fees)
|
|
||||||
July 1 through July 31
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
267,973,139
|
|
(1)
|
August 1 through August 31
|
378,254
|
|
|
$
|
35.8973
|
|
|
378,254
|
|
|
$
|
254,394,849
|
|
(1)
|
September 1 through September 30
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
254,394,849
|
|
(1)
|
Total
|
378,254
|
|
|
$
|
35.8973
|
|
|
378,254
|
|
|
$
|
254,394,849
|
|
(1)
|
(1)
|
Includes the $200.0 million increase in authorization for stock repurchases under our common stock repurchase program which was announced on October 22, 2012.
|
3.1
|
Certificate of Incorporation of Rent-A-Center, Inc., as amended (Incorporated herein by reference to Exhibit 3.1 to the registrant's Current Report on Form 8-K dated as of December 31, 2002.)
|
|
|
3.2
|
Certificate of Amendment to the Certificate of Incorporation of Rent-A-Center, Inc., dated May 19, 2004 (Incorporated herein by reference to Exhibit 3.2 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2004.)
|
|
|
3.3
|
Amended and Restated Bylaws of Rent-A-Center, Inc. (Incorporated herein by reference to Exhibit 3.1 to the registrant's Current Report on Form 8-K dated as of September 28, 2011.)
|
|
|
4.1
|
Form of Certificate evidencing Common Stock (Incorporated herein by reference to Exhibit 4.1 to the registrant's Registration Statement on Form S-4/A filed on January 13, 1999.)
|
|
|
4.2
|
Indenture, dated as of November 2, 2010, by and among Rent-A-Center, Inc., as Issuer, the Guarantors named therein, as Guarantors, and The Bank of New York Mellon Trust Company, N.A., as Trustee (Incorporated herein by reference to Exhibit 4.1 to the registrant's Current Report on Form 8-K dated as of November 2, 2010.)
|
|
|
4.3
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Registration Rights Agreement relating to the 6.625% Senior Notes due 2020, dated as of November 2, 2010, among Rent-A-Center, Inc., the subsidiary guarantors party thereto and J.P. Morgan Securities LLC, as representative for the initial purchasers named therein (Incorporated herein by reference to Exhibit 4.1 to the registrant's Current Report on Form 8-K dated as of November 2, 2010.)
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4.4
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Supplemental Indenture, dated as of December 21, 2010, among Diamondback Merger Sub, Inc., Rent-A-Center, Inc., and The Bank of New York Mellon Trust Company, N.A., as Trustee (Incorporated herein by reference to Exhibit 4.4 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2010.)
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4.5
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Supplemental Indenture, dated as of December 21, 2010, among The Rental Store, Inc., Rent-A-Center, Inc., and The Bank of New York Mellon Trust Company, N.A., as Trustee (Incorporated herein by reference to Exhibit 4.5 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2010.)
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10.1†
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Amended and Restated Rent-A-Center, Inc. Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.1 to the registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.)
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10.2
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Amended and Restated Guarantee and Collateral Agreement, dated as of May 28, 2003, as amended and restated as of July 14, 2004, made by Rent-A-Center, Inc. and certain of its Subsidiaries in favor of JPMorgan Chase Bank, as Administrative Agent (Incorporated herein by reference to Exhibit 10.2 to the registrant's Current Report on Form 8-K dated July 15, 2004.)
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10.3
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Franchisee Financing Agreement, dated April 30, 2002, but effective as of June 28, 2002, by and between Texas Capital Bank, National Association, ColorTyme, Inc. and Rent-A-Center, Inc. (Incorporated herein by reference to Exhibit 10.14 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.)
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10.4
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Supplemental Letter Agreement to Franchisee Financing Agreement, dated May 26, 2003, by and between Texas Capital Bank, National Association, ColorTyme, Inc. and Rent-A-Center, Inc. (Incorporated herein by reference to Exhibit 10.23 to the registrant's Registration Statement on Form S-4 filed July 11, 2003.)
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10.5
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First Amendment to Franchisee Financing Agreement, dated August 30, 2005, by and among Texas Capital Bank, National Association, ColorTyme, Inc. and Rent-A-Center East, Inc. (Incorporated herein by reference to Exhibit 10.7 to the registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2005.)
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10.6
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Franchise Financing Agreement, dated as of August 2, 2010, between ColorTyme Finance, Inc. and Citibank, N.A. (Incorporated herein by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K dated as of August 2, 2010.)
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10.7
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Unconditional Guaranty of Rent-A-Center, Inc., dated as of August 2, 2010, executed by Rent-A-Center, Inc. in favor of Citibank, N.A. (Incorporated herein by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K dated as of August 2, 2010.)
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10.8
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Unconditional Guaranty of Rent-A-Center, Inc., dated as of August 2, 2010, executed by ColorTyme Finance, Inc. in favor of Citibank, N.A. (Incorporated herein by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K dated as of August 2, 2010.)
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10.9†
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Form of Stock Option Agreement issuable to Directors pursuant to the Amended and Restated Rent-A-Center, Inc. Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.20 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2004.)
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10.10†
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Form of Stock Option Agreement issuable to management pursuant to the Amended and Restated Rent-A-Center, Inc. Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.21 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2004.)
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10.11†
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Summary of Director Compensation (Incorporated herein by reference to Exhibit 10.11 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2011.)
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10.12†
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Form of Stock Compensation Agreement issuable to management pursuant to the Amended and Restated Rent-A-Center, Inc. Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.15 to the registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2006.)
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10.13†
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Form of Long-Term Incentive Cash Award issuable to management pursuant to the Amended and Restated Rent-A-Center, Inc. Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.16 to the registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2006.)
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10.14†
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Form of Loyalty and Confidentiality Agreement entered into with management (Incorporated herein by reference to Exhibit 10.17 to the registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2006.)
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10.15†
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Rent-A-Center, Inc. 2006 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.17 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.)
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10.16†
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Form of Stock Option Agreement issuable to management pursuant to the Rent-A-Center, Inc. 2006 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.18 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.)
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10.17†
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Form of Stock Compensation Agreement issuable to management pursuant to the Rent-A-Center, Inc. 2006 Equity Incentive Plan (Incorporated herein by reference to Exhibit 10.19 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2006.)
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10.18†
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Form of Long-Term Incentive Cash Award issuable to management pursuant to the Rent-A-Center, Inc. 2006 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.20 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2006.)
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10.19†
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Rent-A-Center, Inc. 2006 Equity Incentive Plan and Amendment (Incorporated herein by reference to Exhibit 4.5 to the registrant's Registration Statement on Form S-8 filed with the SEC on January 4, 2007.)
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10.20†
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Form of Stock Option Agreement issuable to management pursuant to the Rent-A-Center, Inc. 2006 Equity Incentive Plan (Incorporated herein by reference to Exhibit 10.22 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2006.)
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10.21†
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Form of Stock Compensation Agreement issuable to management pursuant to the Rent-A-Center, Inc. 2006 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.23 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2006.)
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10.22†
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Form of Stock Option Agreement issuable to Directors pursuant to the Rent-A-Center, Inc. 2006 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.24 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2006.)
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10.23†
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Form of Deferred Stock Unit Award Agreement issuable to Directors pursuant to the Rent-A-Center, Inc. 2006 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.23 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2010.)
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10.24†
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Form of Executive Transition Agreement entered into with management (Incorporated herein by reference to Exhibit 10.21 to the registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.)
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10.25†
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Employment Agreement, dated October 2, 2006, between Rent-A-Center, Inc. and Mark E. Speese (Incorporated herein by reference to Exhibit 10.22 to the registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.)
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10.26†
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Non-Qualified Stock Option Agreement, dated October 2, 2006, between Rent-A-Center, Inc. and Mark E. Speese (Incorporated herein by reference to Exhibit 10.23 to the registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.)
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10.27†
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Rent-A-Center, Inc. Non-Qualified Deferred Compensation Plan (Incorporated herein by reference to Exhibit 10.28 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2007.)
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10.28†
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Rent-A-Center, Inc. 401-K Plan (Incorporated herein by reference to Exhibit 10.30 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2008.)
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10.29
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Fourth Amended and Restated Credit Agreement, dated as of May 28, 2003, as amended and restated as of July 14, 2011, among Rent-A-Center, Inc., the several banks and other financial institutions or entities from time to time parties thereto, Bank of America, N.A., Compass Bank and Wells Fargo Bank, N.A., as syndication agents, and JPMorgan Chase Bank, N.A., as administrative agent (Incorporated herein by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K dated as of July 14, 2011.)
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10.30†
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Rent-A-Center East, Inc. Retirement Savings Plan for Puerto Rico Employees (Incorporated herein by reference to Exhibit 99.1 to the registrant's Registration Statement on Form S-8 filed January 28, 2011.)
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10.31
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First Amendment, dated as of April 13, 2012, to the Fourth Amended and Restated Credit Agreement, dated as of May 28, 2003, as amended and restated as of July 14, 2011, among Rent-A-Center, Inc., the several banks and other financial institutions or entities from time to time parties thereto, Bank of America, N.A., Compass Bank and Wells Fargo Bank, N.A., as syndication agents, and JPMorgan Chase Bank, N.A., as administrative agent (Incorporated herein by reference to Exhibit 10.31 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012.)
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10.32*
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First Amendment to Franchise Financing Agreement between ColorTyme Finance, Inc. and Citibank, N.A., dated as of July 25, 2012
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21.1
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Subsidiaries of Rent-A-Center, Inc. (Incorporated herein by reference to Exhibit 21.1 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2011.)
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31.1*
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Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 implementing Section 302 of the Sarbanes-Oxley Act of 2002 by Mark E. Speese
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31.2*
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Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 implementing Section 302 of the Sarbanes-Oxley Act of 2002 by Robert D. Davis
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32.1*
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Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Mark E. Speese
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32.2*
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Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Robert D. Davis
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101.INS*
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XBRL Instance Document
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101.SCH*
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XBRL Taxonomy Extension Schema Document
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101.CAL*
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XBRL Taxonomy Extension Calculation Linkbase Document
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101.DEF*
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XBRL Taxonomy Extension Definition Linkbase Document
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101.LAB*
|
XBRL Taxonomy Extension Label Linkbase Document
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101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase Document
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1.
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Date of proposed Loans ________________________________
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2.
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Aggregate amount of Loans requested. ________________________________
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3.
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Ad
ministrator hereby certifies that all conditions precedent specified by the Agreement for these Loans have been complied with in all respects.
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4.
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Attached hereto is a schedule evidencing the Borrowers requesting Loans and the requested Loan amounts.
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Date:
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October 26, 2012
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Date:
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October 26, 2012
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(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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