
<PAGE>   1

     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 5, 2001

                                                     REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                            ------------------------

                                    FORM S-3
            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
                            ------------------------

                              RENT-A-CENTER, INC.
             (Exact Name of Registrant as Specified in Its Charter)

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

                       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)

                                J. ERNEST TALLEY
               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:

<TABLE>
<S>                                                    <C>
               THOMAS W. HUGHES, ESQ.                                 BRUCE K. DALLAS, ESQ.
             D. FORREST BRUMBAUGH, 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
</TABLE>

     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.  [ ]
                            ------------------------

                        CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
                                                                        PROPOSED             PROPOSED
                                                                        MAXIMUM              MAXIMUM
                                                    AMOUNT              OFFERING            AGGREGATE            AMOUNT OF
              TITLE OF SHARES                       TO BE                PRICE               OFFERING           REGISTRATION
              TO BE REGISTERED                  REGISTERED(1)         PER SHARE(2)           PRICE(2)               FEE
--------------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>                  <C>                  <C>                  <C>
Common Stock, par value $0.01 per share.....   5,060,000 shares         $37.5625           $190,066,250           $47,517
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Includes 660,000 shares to cover over-allotments, if any.

(2) Estimated solely for the purpose of calculating the registration fee
    pursuant to Rule 457(c) under the Securities Act of 1933, based upon the
    high and low sales price per share as reported on the Nasdaq National Market
    on April 4, 2001.

    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.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>   2

      THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
      AND THE SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE
      REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
      IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND
      WE AND THE SELLING STOCKHOLDERS ARE NOT SOLICITING OFFERS TO BUY THESE
      SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

PROSPECTUS (Subject to Completion)

Issued April 5, 2001

                                4,400,000 Shares

                           [RENT-A-CENTER, INC. LOGO]
                                  COMMON STOCK

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

RENT-A-CENTER, INC. IS OFFERING 2,200,000 SHARES AND THE SELLING STOCKHOLDERS
ARE OFFERING 2,200,000 SHARES.
                            ------------------------
RENT-A-CENTER, INC.'S COMMON STOCK IS QUOTED ON THE NASDAQ NATIONAL MARKET UNDER
THE SYMBOL "RCII." ON APRIL 4, 2001, THE REPORTED LAST SALE PRICE OF OUR COMMON
STOCK ON THE NASDAQ NATIONAL MARKET WAS $34 3/8 PER SHARE.
                            ------------------------

INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 6.
                            ------------------------
                           PRICE $            A SHARE
                            ------------------------

<TABLE>
<CAPTION>
                                                        UNDERWRITING                      PROCEEDS
                                            PRICE TO    DISCOUNTS AND    PROCEEDS TO     TO SELLING
                                             PUBLIC      COMMISSIONS    RENT-A-CENTER   STOCKHOLDERS
                                           ----------   -------------   -------------   ------------
<S>                                        <C>          <C>             <C>             <C>
Per Share................................      $              $               $              $
Total....................................  $                  $               $              $
</TABLE>

Rent-A-Center, Inc. and the selling stockholders, or Apollo Investment Fund IV,
L.P. and Apollo Overseas Partners IV, L.P., at their option, have granted the
underwriters the right to purchase up to an additional 660,000 shares of common
stock to cover over-allotments.

The Securities and Exchange Commission and state securities regulators have not
approved or disapproved of 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
          , 2001.
                            ------------------------

MORGAN STANLEY DEAN WITTER
                 BEAR, STEARNS & CO. INC.
                                 LEHMAN BROTHERS
                                               ROBINSON-HUMPHREY

         , 2001
<PAGE>   3
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
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 27%
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 left side 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.
<PAGE>   4

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                        PAGE
                                        ----
<S>                                     <C>
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 Financial and Operating
  Data................................   14
Management's Discussion and Analysis
  of Financial Condition and Results
  of Operations.......................   16
</TABLE>

<TABLE>
<CAPTION>
                                        PAGE
                                        ----
<S>                                     <C>
Business..............................   27
Management............................   38
Selling Stockholders..................   41
Description of Capital Stock..........   42
Shares Eligible for Future Sale.......   47
Underwriters..........................   48
Legal Matters.........................   50
Experts...............................   50
Where You Can Find More Information...   50
Index to Financial Pages..............  F-1
</TABLE>

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

     YOU SHOULD RELY 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. WE AND 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.
<PAGE>   5

                               PROSPECTUS SUMMARY

     You should read this summary together with the more detailed information
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.

                                 RENT-A-CENTER

OUR BUSINESS

     We are the largest rent-to-own operator in the United States with an
approximate 27% market share based on store count. At March 31, 2001, we
operated 2,179 company-owned stores in 50 states, the District of Columbia and
Puerto Rico. Our subsidiary, ColorTyme, Inc., is a national franchisor of
rent-to-own stores. At March 31, 2001, ColorTyme franchised 359 stores in 42
states, 347 of which operate under the ColorTyme name and 12 stores which
operate under the Rent-A-Center name. These franchise stores represent a further
5% market share based on store count.

     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 estimate that
approximately 65% of our business is from repeat customers. We offer well known
brands such as Magnavox, Sony and JVC home electronics, Whirlpool appliances,
Dell and Compaq computers and Ashley and La-Z-Boy furniture. In 2000, home
electronics merchandise generated 40% of contract revenue, 33% 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 423
stores in 1996 to 2,158 at the end of 2000. Over that same period, we
experienced a compounded annual growth rate in sales of 61% and a compounded
annual growth rate in earnings per share before non-recurring items of 38%. In
2000, we had total revenues of $1.6 billion, 13.0% growth over 1999, driven
primarily by same store sales gains of 12.6%. Earnings per share in 2000 before
a non-recurring gain was $2.62, representing 50.6% growth over 1999.

INDUSTRY BACKGROUND

     According to industry sources and our estimates, the rent-to-own industry
consists of approximately 8,000 stores, and provides 7.5 million products to
over 3.0 million households. We estimate the six largest rent-to-own industry
participants account for 4,300 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.

     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,

                                        1
<PAGE>   6

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

     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.

     ENHANCING STORE OPERATIONS

     We continually seek to improve store performance through strategies
intended to produce gains in operating efficiency and profitability. We believe
we will achieve further gains in revenues and operating margins in newly
acquired stores through our administrative network, improved product mix,
sophisticated management information system and purchasing power.

     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. 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 that as the Rent-A-Center name gains in
familiarity and national recognition through our national 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 HISTORY

     We were acquired in 1989 by J. Ernest Talley, our Chairman of the Board and
Chief Executive Officer and conducted our initial public offering in January
1995. Since May 1993, our company-owned store base has grown from 27 to 2,179 as
of March 31, 2001, primarily through acquisitions. During this period, we
acquired over 2,000 company-owned stores and over 350 franchised stores in more
than 60 separate transactions, including six transactions in which we acquired
in excess of 70 stores. Our two most significant acquisitions occurred in 1998.
In May 1998, we acquired substantially all of the assets of Central Rents, Inc.
which operated 176 stores, for approximately $100 million in cash. In August
1998, we acquired Thorn Americas, Inc. 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 65 franchised stores in 49 states and the District of
Columbia.

                                        2
<PAGE>   7

                                  THE OFFERING

Common Stock offered by:

  Rent-A-Center..................    2,200,000 shares

  J. Ernest Talley...............    1,700,000 shares

  Mark E. Speese.................     500,000 shares
                                     ---------

          Total..................    4,400,000 shares
                                     ---------
                                     ---------

Common Stock to be outstanding
  after this offering............    27,385,314 shares
                                     ---------
                                     ---------

Use of Proceeds..................    To repay approximately $50 million of
                                     existing indebtedness and for working
                                     capital and other general corporate
                                     purposes, which may include acquisitions or
                                     additional prepayment of existing
                                     indebtedness. See "Use of Proceeds."

Nasdaq National Market symbol....    RCII

     The above information regarding shares outstanding is as of March 31, 2001
and excludes 10,181,206 shares issuable upon conversion of our outstanding
Series A preferred stock, at a conversion price of $27.935 per share, and
4,192,275 shares issuable upon the exercise of stock options, with a weighted
average exercise price of $25.12, issued pursuant to our Long-Term Incentive
Plan. We intend to seek stockholder approval to increase the number of shares
authorized under our Long-Term Incentive Plan from 6,200,000 shares to 7,900,000
shares at our annual meeting of stockholders in May 2001.

     The Series A preferred stock contains antidilution provisions that reduce
the conversion price if, among other things, we sell common stock at a price to
public lower than the average closing price for the previous 15 trading days.
The price to public would have to be approximately 12.4% lower than this average
closing price for an immediate adjustment to the conversion price to occur as a
result of this offering.

                                        3
<PAGE>   8

                      SUMMARY CONSOLIDATED FINANCIAL DATA

     The data for the three years ended December 31, 2000 has been derived from
the audited financial statements included elsewhere 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 of the 1998
historical financial and operating data to the other periods presented.

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                          -------------------------------------
                                                            1998         1999          2000
                                                          ---------   -----------   -----------
                                                          (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                       <C>         <C>           <C>
CONSOLIDATED STATEMENTS OF EARNINGS
Revenues
  Store
     Rentals and fees...................................  $711,443    $1,270,885    $1,459,664
     Merchandise sales..................................    41,456        88,516        81,166
     Other..............................................     7,282         2,177         3,018
  Franchise
     Merchandise sales..................................    44,365        49,696        51,769
     Royalty income and fees............................     5,170         5,893         5,997
                                                          --------    ----------    ----------
          Total revenues................................   809,716     1,417,167     1,601,614
Operating expenses
  Direct store expenses
     Depreciation of rental merchandise.................   164,651       265,486       299,298
     Cost of merchandise sold...........................    32,056        74,027        65,332
     Salaries and other expenses........................   423,750       770,572       866,234
  Franchise cost of merchandise sold....................    42,886        47,914        49,724
                                                          --------    ----------    ----------
          Total store expenses..........................   663,343     1,157,999     1,280,588
  General and administrative expenses...................    28,715        42,029        48,093
  Amortization of intangibles...........................    15,345        27,116        28,303
  Class action litigation settlements...................    11,500            --       (22,383)(1)
                                                          --------    ----------    ----------
          Total operating expenses......................   718,903     1,227,144     1,334,601
                                                          --------    ----------    ----------
          Operating profit..............................    90,813       190,023       267,013
Non-recurring financing costs...........................     5,018            --            --
Interest expense........................................    39,144        75,673        74,324
Interest income.........................................    (2,004)         (904)       (1,706)
                                                          --------    ----------    ----------
          Earnings before income taxes..................    48,655       115,254       194,395
Income tax expense......................................    23,897        55,899        91,368
                                                          --------    ----------    ----------
          Net earnings..................................    24,758        59,355       103,027
Preferred dividends.....................................     3,954        10,039        10,420
                                                          --------    ----------    ----------
          Net earnings allocable to common
            stockholders................................  $ 20,804    $   49,316    $   92,607
                                                          ========    ==========    ==========
Basic earnings per common share.........................  $    .84    $     2.04    $     3.79
Diluted earnings per common share.......................  $    .83    $     1.74    $     2.96
Basic weighted average shares outstanding...............    24,698        24,229        24,432
Diluted weighted average shares outstanding.............    25,103        34,131        34,812
</TABLE>

                                        4
<PAGE>   9

<TABLE>
<CAPTION>
                                                                AS OF DECEMBER 31, 2000
                                                              ---------------------------
                                                                ACTUAL     AS ADJUSTED(2)
                                                              ----------   --------------
                                                                    (IN THOUSANDS)
<S>                                                           <C>          <C>
CONSOLIDATED BALANCE SHEET DATA:
  Total assets..............................................  $1,486,910     $1,508,154
  Total debt................................................     741,051        691,051
  Total liabilities.........................................     896,307        846,307
  Redeemable convertible voting preferred stock.............     281,232        281,232
  Stockholders' equity......................................     309,371        380,615
</TABLE>

<TABLE>
<CAPTION>
                                                                    YEAR ENDED
                                                                   DECEMBER 31,
                                                              -----------------------
                                                              1998     1999     2000
                                                              -----    -----    -----
<S>                                                           <C>      <C>      <C>
OPERATING DATA
  Stores open at end of period..............................  2,126    2,075    2,158
  Same store revenue growth(3)..............................    8.1%     7.7%    12.6%
  Franchise stores open at end of period....................    324      365      364
</TABLE>

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

(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) Gives effect to the sale of 2,200,000 shares of common stock we are offering
    at an assumed offering price of $34.375 per share, which is the reported
    last sale price of our common stock as set forth on the cover of this
    prospectus, and the application of the estimated net proceeds as described
    under the caption "Use of Proceeds."

(3) Same 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
<PAGE>   10

                                  RISK FACTORS

     You should carefully consider the risks described below before making an
investment decision. The risks described below are not the only ones facing us.
Additional risks not presently known to us or that we currently deem immaterial
may also impair our business operations. Our business, financial condition or
results of operations could be materially adversely affected by any of 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.

     We intend to increase the number of stores that we operate by an average of
approximately 10-15% per year over the next few years. This growth strategy
could place a significant demand on our management and our financial and
operational resources. Our 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 can give no assurance that
we will continue to identify profitable new store locations or underperforming
competitors at our targeted rates. If we cannot successfully grow our business,
we may not be able to sustain our recent earnings growth over an extended period
of time.

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, require 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, the opening of a new store is generally dilutive to our
earnings for a period of six to seven months following its opening. We cannot
assure you that our growth strategy and the integration of the new stores will
be successful and accomplished efficiently.

OUR DEBT AGREEMENTS IMPOSE RESTRICTIONS ON US WHICH MAY LIMIT OR PROHIBIT US
FROM ENGAGING IN CERTAIN TRANSACTIONS.

     Our senior credit facilities and the indenture governing our subordinated
notes impose operational and restrictive covenants on us. These covenants
restrict our ability to 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 and, as a result, we cannot guarantee that we will be able to
meet these tests. In addition, the restrictions contained in our senior credit
facilities 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.

     Our failure to comply with the restrictions in our senior credit facilities
or the indenture could lead to a default under the terms of those documents. 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
accelerated the repayment of borrowings, we cannot assure you that we would have
sufficient liquid assets at that time to repay the

                                        6
<PAGE>   11

amounts then outstanding under our indebtedness or that we would be able to find
additional alternative financing. Even if we could obtain additional alternative
financing, we cannot assure you that it would be on terms that are 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 subordinated notes and limiting
our ability to refinance the subordinated notes.

A CHANGE OF CONTROL COULD ACCELERATE OUR OBLIGATION TO PAY OUR OUTSTANDING
INDEBTEDNESS.

     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 50% of the
amount of our voting stock that they owned on August 5, 1998. 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. If the lenders
under our debt instruments accelerated our obligations, we cannot assure you
that we would have sufficient liquid assets to repay amounts outstanding under
these agreements.

     Under the indenture governing our senior 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 principal amount, plus
accrued interest to the date of repurchase. Furthermore, 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.

BEGINNING IN 2003, WE WILL BE REQUIRED TO PAY CASH DIVIDENDS ON OUR SERIES A
PREFERRED STOCK, WHICH IS CURRENTLY PROHIBITED UNDER OUR SENIOR CREDIT
FACILITIES.

     We will need to renegotiate the terms of our senior credit facilities or
obtain a waiver from our lenders to pay cash dividends on our Series A preferred
stock. If we fail to do so, the failure to comply with either the terms of the
Series A preferred stock or the senior credit facilities could result in an
event of default under the senior credit facilities, which in turn could result
in an event of default under the indenture governing our subordinated notes. In
addition, although the restrictions in the indenture would not at present
prohibit the payment of cash dividends to the holders of our Series A preferred
stock, there is no guarantee that the indenture requirements will continue to be
met.

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, A RULING AGAINST US IN ANY OF THESE PROCEEDINGS, OR ONE OR MORE
JUDGMENTS AGAINST US COULD HAVE A MATERIAL AND ADVERSE EFFECT ON OUR FINANCIAL
CONDITION AND OUR BUSINESS OPERATIONS.

     Some lawsuits against us involve claims that our rental agreements are in
fact disguised installment sales contracts, violate state usury laws or violate
other state laws enacted to protect consumers. We are also defending several
class action suits, or potential class action suits, alleging gender and race
discrimination in our employment practices and consumer protection claims.
Because of the uncertainties associated with litigation, we cannot estimate for
you our ultimate liability for these matters, if any. An adverse ruling in any
of our outstanding material litigation could have a material and adverse effect
on our business operations and our financial condition.

     A material final judgment or decree against us could materially adversely
affect our financial condition by requiring the payment of the judgment or the
posting of a bond. The failure to pay any judgment would be a default under our
senior credit facilities and the indenture governing our subordinated notes.

                                        7
<PAGE>   12

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 MATERIALLY AND ADVERSELY
AFFECT OUR BUSINESS OPERATIONS OR INCREASE OUR EXPOSURE TO LITIGATION.

     In the event that legislation having a negative impact on our business is
adopted, it could have a material and adverse impact on our business operations.
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 46 states that have passed laws
regulating rental purchase transactions and another state that has a retail
installment sales statute 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, we cannot assure you that legislation will not be
enacted in the future. From time to time, legislation has been introduced in
Congress seeking to regulate our business. In addition, we cannot assure you
that the various legislatures in the states where we currently do business will
not adopt new legislation or amend existing legislation that negatively affects
us.

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 COULD MATERIALLY AND
ADVERSELY AFFECT OUR BUSINESS.

     Our continued success is highly dependent upon the personal efforts and
abilities of our senior management, including J. Ernest Talley, our Chairman of
the Board and Chief Executive Officer, Mitchell E. Fadel, our President, and
Dana F. Goble, our Executive Vice-President and Chief Operating Officer. We do
not have employment contracts with or maintain key-man insurance on the lives of
any of these officers and the loss of any one of them could impact us in a
negative way.

A SMALL GROUP OF OUR DIRECTORS AND THEIR AFFILIATES HAVE SIGNIFICANT INFLUENCE
ON ALL STOCKHOLDER VOTES.

     Mr. Talley, Mark E. Speese, a member of our board of directors, 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. Following this offering, approximately 35.1% of
our voting stock on a fully diluted basis, assuming the conversion of our Series
A preferred stock and all outstanding options, will be controlled by Messrs.
Talley, Speese and Apollo. As a result, they will continue to have the ability
to exercise practical 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.

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. Furthermore,
our senior credit facilities, the indenture governing our subordinated notes and
our Series A preferred stock certificate of designations each contain various
change in control provisions which, in the event of a change in control, would
cause a default under those provisions. These provisions and arrangements could
delay, deter or prevent a merger, consolidation, tender offer or other

                                        8
<PAGE>   13

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.

     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, when and how many stores we acquire
           or open;

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

      --   announcements of new product offerings by us or our competitors;

      --   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 BE AFFECTED WHEN ADDITIONAL SHARES ARE SOLD.

     Upon completion of this offering, 63.8% of our common stock on a fully
diluted basis will be held by the public, 1.0% will be held by members of our
management, other than Messrs. Talley and Speese, 10.8% will be held by Messrs.
Talley and Speese and 24.4% will be held by Apollo and its affiliates. If our
stockholders sell substantial amounts 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 that we deem appropriate.

     We, our directors and executive officers, Apollo and its affiliates, 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 Messrs. Talley and Speese, to a stockholders
agreement they have entered into with Apollo and us. Pursuant to 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.

                                        9
<PAGE>   14

               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;

      --   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; 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.

                                        10
<PAGE>   15

                                USE OF PROCEEDS

     We will receive approximately $71.2 million from the sale of our 2,200,000
shares of common stock in this offering, at an assumed offering price of $34.375
per share, which is the reported last sale price of our common stock as set
forth on the cover of this prospectus, net of estimated offering expenses
payable by us and estimated underwriting discounts and commissions. We will not
receive any proceeds from the sale of common stock by the selling stockholders.

     Under the terms of our senior credit facilities, we are required to use
one-half of our net proceeds to repay a portion of our term loans. We anticipate
repaying approximately $50 million of our term loans with the net proceeds.
These term loans bear interest at varying rates equal to 1.25% to 2.75% over
LIBOR, which was 6.55% at December 31, 2000, and mature in amounts of
approximately $2.7 million in each of 2001, 2002 and 2003, $39.0 million in
2004, $148.0 million in 2005 and $371.2 million thereafter. We anticipate using
the balance of the net proceeds for general corporate purposes, which may
include potential acquisitions, opening new stores, working capital, additional
reduction in indebtedness and capital expenditures. We will retain broad
discretion in the allocation of the net proceeds of this offering. Pending these
uses, we plan to invest the net proceeds in investment grade, interest-bearing
securities.

                                DIVIDEND POLICY

     We have not paid any cash dividends since the time of our initial public
offering. Our senior credit facilities currently prohibit 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.

     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 $281,756,000 as of December 31, 2000 the Series A preferred stock was
convertible into 10,086,125 shares of common stock. In order to permit us to pay
the dividends on our Series A preferred stock in cash, we will be required to
renegotiate the operating covenants contained in our senior credit facility
agreement. If we are not able to renegotiate our senior credit facilities or the
terms of the Series A preferred stock, this would result in an event of default
under our senior credit facilities, which in turn could result in an event of
default under our subordinated indenture. Even if the operating covenants are
removed, any cash dividend payments would still be 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. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

                                        11
<PAGE>   16

                            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.

<TABLE>
<CAPTION>
                                                               HIGH       LOW
                                                              -------   -------
<S>                                                           <C>       <C>
YEAR ENDED DECEMBER 31, 1999:
  First Quarter.............................................  $33.375   $24.000
  Second Quarter............................................   34.250    20.000
  Third Quarter.............................................   25.500    16.750
  Fourth Quarter............................................   21.750    15.250
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 (through April 4, 2001)....................   46.422    33.063
</TABLE>

     On April 4, 2001, the reported last sale price for our common stock on the
Nasdaq National Market was $34.375. As of March 31, 2001, there were
approximately 130 record holders of our common stock.

                                        12
<PAGE>   17

                                 CAPITALIZATION

     The following table sets forth our cash and cash equivalents and
capitalization as of December 31, 2000 on an actual basis and as adjusted to
reflect the sale of 2,200,000 shares of common stock by us in this offering at
an assumed public offering price of $34.375 per share, which is the reported
last sale price of our common stock as set forth on the cover of this
prospectus, after deducting underwriting discounts and commissions and estimated
offering expenses payable by us and the repayment of $50.0 million of our term
debt. 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. Our board of directors has approved an
amendment to our certificate of incorporation increasing the number of
authorized shares of common stock from 50,000,000 to 125,000,000. Our
stockholders will consider the approval of this amendment at our annual
stockholders meeting, which is expected to be held on May 15, 2001.

<TABLE>
<CAPTION>
                                                              AS OF DECEMBER 31, 2000
                                                              ------------------------
                                                                ACTUAL     AS ADJUSTED
                                                              ----------   -----------
                                                               (IN THOUSANDS, EXCEPT
                                                                    SHARE DATA)
<S>                                                           <C>          <C>
Cash and Cash Equivalents...................................  $   36,495   $   57,739
                                                              ==========   ==========
Debt:
  Senior debt...............................................  $  566,051   $  516,051
  Subordinated notes payable................................     175,000      175,000
                                                              ----------   ----------
          Total debt........................................     741,051      691,051
Preferred Stock:
  Redeemable convertible voting preferred stock, net of
     placement costs, $.01 par value; 5,000,000 shares
     authorized; 281,756 shares issued and outstanding......     281,232      281,232
Stockholders' Equity:
  Common stock, $.01 par value; 50,000,000 shares
     authorized; 25,700,058 shares issued, 24,709,959 shares
     outstanding (actual); 27,900,058 shares issued,
     26,909,959 shares outstanding (as adjusted)............         257          279
  Additional paid-in capital................................     115,607      186,829
  Retained earnings.........................................     218,507      218,507
                                                              ----------   ----------
  Treasury stock, 990,099 shares at cost....................     (25,000)     (25,000)
                                                              ----------   ----------
          Total stockholders' equity........................     309,371      380,615
                                                              ----------   ----------
          Total capitalization..............................  $1,331,654   $1,352,898
                                                              ==========   ==========
</TABLE>

                                        13
<PAGE>   18

                     SELECTED FINANCIAL AND OPERATING DATA

     The selected financial data presented below for the five years ended
December 31, 2000 have been derived from our consolidated financial statements
as audited by Grant Thornton LLP, independent certified public accountants. 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 by reference 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 of the 1998
historical financial and operating data to the other periods presented. In May
1996, we completed the acquisition of ColorTyme, which affects the comparability
of the 1996 historical financial and operating data to the other periods
presented.

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                 --------------------------------------------------------
                                                   1996       1997       1998        1999         2000
                                                 --------   --------   --------   ----------   ----------
                                                          (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                              <C>        <C>        <C>        <C>          <C>
CONSOLIDATED STATEMENTS OF EARNINGS:
Revenues
  Store
    Rentals and fees...........................  $198,486   $275,344   $711,443   $1,270,885   $1,459,664
    Merchandise sales..........................    10,604     14,125     41,456       88,516       81,166
    Other......................................       687        679      7,282        2,177        3,018
  Franchise
    Merchandise sales..........................    25,229     37,385     44,365       49,696       51,769
    Royalty income and fees....................     2,959      4,008      5,170        5,893        5,997
                                                 --------   --------   --------   ----------   ----------
         Total revenues........................   237,965    331,541    809,716    1,417,167    1,601,614
Operating expenses
  Direct store expenses
    Depreciation of rental merchandise.........    42,978     57,223    164,651      265,486      299,298
    Cost of merchandise sold...................     8,357     11,365     32,056       74,027       65,332
    Salaries and other expenses................   116,577    162,458    423,750      770,572      866,234
  Franchise cost of merchandise sold...........    24,010     35,841     42,886       47,914       49,724
                                                 --------   --------   --------   ----------   ----------
         Total store expenses..................   191,922    266,887    663,343    1,157,999    1,280,588
  General and administrative expenses..........    10,111     13,304     28,715       42,029       48,093
  Amortization of intangibles..................     4,891      5,412     15,345       27,116       28,303
  Class action litigation settlements..........        --         --     11,500           --      (22,383)(1)
                                                 --------   --------   --------   ----------   ----------
         Total operating expenses..............   206,924    285,603    718,903    1,227,144    1,334,601
                                                 --------   --------   --------   ----------   ----------
         Operating profit......................    31,041     45,938     90,813      190,023      267,013
Non-recurring financing costs..................        --         --      5,018           --           --
Interest expense...............................       606      2,194     39,144       75,673       74,324
Interest income................................      (667)      (304)    (2,004)        (904)      (1,706)
                                                 --------   --------   --------   ----------   ----------
         Earnings before income taxes..........    31,102     44,048     48,655      115,254      194,395
Income tax expense.............................    13,076     18,170     23,897       55,899       91,368
                                                 --------   --------   --------   ----------   ----------
         Net earnings..........................    18,026     25,878     24,758       59,355      103,027
Preferred dividends............................        --         --      3,954       10,039       10,420
                                                 --------   --------   --------   ----------   ----------
         Net earnings allocable to common
           stockholders........................  $ 18,026   $ 25,878   $ 20,804   $   49,316   $   92,607
                                                 ========   ========   ========   ==========   ==========
Basic earnings per common share................  $    .73   $   1.04   $    .84   $     2.04   $     3.79
Diluted earnings per common share..............  $    .72   $   1.03   $    .83   $     1.74   $     2.96
Basic weighted average shares..................    24,656     24,844     24,698       24,229       24,432
Diluted weighted average shares................    25,065     25,194     25,103       34,131       34,812
</TABLE>

                                        14
<PAGE>   19

<TABLE>
<CAPTION>
                                                                        AS OF DECEMBER 31,
                                                     ---------------------------------------------------------
                                                      1996       1997        1998         1999         2000
                                                     -------   --------   ----------   ----------   ----------
                                                                          (IN THOUSANDS)
<S>                                                  <C>       <C>        <C>          <C>          <C>
CONSOLIDATED BALANCE SHEET DATA:
  Rental merchandise, net..........................  $95,110   $112,759   $  408,806   $  531,223   $  587,232
  Intangible assets, net...........................   47,192     61,183      727,976      707,324      708,328
  Total assets.....................................  174,467    208,868    1,502,989    1,485,000    1,486,910
  Total debt.......................................   18,993     26,280      805,700      847,160      741,051
  Total liabilities................................   48,964     56,115    1,088,600    1,007,408      896,307
  Redeemable convertible voting preferred stock....       --         --      259,476      270,902      281,232
  Stockholders' equity.............................  125,503    152,753      154,913      206,690      309,371
</TABLE>

<TABLE>
<CAPTION>
                                                                        AS OF DECEMBER 31,
                                                     ---------------------------------------------------------
                                                      1996       1997        1998         1999         2000
                                                     -------   --------   ----------   ----------   ----------
<S>                                                  <C>       <C>        <C>          <C>          <C>
OPERATING DATA:
  Stores open at end of period.....................      423        504        2,126        2,075        2,158
  Same store revenue growth(2).....................      3.8%       8.1%         8.1%         7.7%        12.6%
  Franchise stores open at end of period...........      251        262          324          365          364
</TABLE>

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

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

                                        15
<PAGE>   20

               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 27% market share based on store count. At December 31, 2000, we
operated 2,158 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 December 31, 2000, ColorTyme franchised 364 stores in 42 states, 352
of which operated under the ColorTyme name and 12 stores 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 we were acquired in
1989 by J. Ernest Talley, our Chairman of the Board and Chief Executive Officer.
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 sixth to seventh month
after its initial opening. Historically, a typical store has achieved break-even
profitability in 12 to 15 months after its initial opening. Total financing
requirements of a typical new store approximate $400,000, with roughly 70% to
75% of that amount relating to the purchase of rental merchandise inventory. A
newly opened store historically has achieved results consistent with other
stores that have been operating within the system for greater than two years by
the end of its third year of operation. As a result, our quarterly earnings are
impacted by how many new stores are opened during that 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.

     We believe that the cashflow generated from operations, together with
amounts available under our senior credit facilities, will be sufficient to fund
our debt service requirements, working capital needs, capital expenditures, and
our store expansion intentions during 2001. The revolving credit facility
provides us with revolving loans in an aggregate principal amount not exceeding
$120.0 million. At December 31, 2000, we had $81.3 million available under our
various debt agreements.

     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.

     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 principal
amount, plus accrued interest to the date of repurchase. In addition, our senior
credit facilities restrict our ability to repurchase our subordinated notes,
including pursuant to a change in control. Furthermore, 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
                                        16
<PAGE>   21

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, all of our senior subordinated
notes and for the redemption of our Series A preferred stock, or that we would
be able to obtain financing to do so on favorable terms, if at all.

COMPONENTS OF INCOME AND EXPENSE

     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. Amounts received upon sales of merchandise pursuant to
these options, and upon the sale of used merchandise, are recognized as revenue
when the merchandise is sold.

     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 does not consider salvage value and does not allow the depreciation
of rental merchandise during periods when it is not generating rental revenue.
For income tax purposes we depreciate our merchandise using the modified
accelerated cost recovery system, or MACRS, with a three year class life.

     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, 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. The Financial Accounting
Standards Board has recently proposed the elimination of the amortization of
goodwill associated with acquisitions.

                                        17
<PAGE>   22

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. Total expenses have been allocated between our store
revenues and franchise revenues.

<TABLE>
<CAPTION>
                                                   YEAR ENDED                 YEAR ENDED
                                                  DECEMBER 31,               DECEMBER 31,
                                             -----------------------    -----------------------
                                                 (COMPANY-OWNED
                                                  STORES ONLY)          (FRANCHISE OPERATIONS)
                                             1998     1999     2000     1998     1999     2000
                                             -----    -----    -----    -----    -----    -----
<S>                                          <C>      <C>      <C>      <C>      <C>      <C>
STORE REVENUES
Rentals and fees...........................   93.6%    93.3%    94.5%      --       --       --
Merchandise sales..........................    5.5      6.5      5.3       --       --       --
Other......................................     .9       .2       .2       --       --       --
                                             -----    -----    -----    -----    -----    -----
                                             100.0%   100.0%   100.0%      --       --       --
                                             =====    =====    =====    =====    =====    =====
FRANCHISE REVENUES
Merchandise sales..........................     --       --       --     89.6%    89.4%    89.6%
Royalty income and fees....................     --       --       --     10.4     10.6     10.4
                                             -----    -----    -----    -----    -----    -----
                                                --       --       --    100.0%   100.0%   100.0%
                                             =====    =====    =====    =====    =====    =====
OPERATING EXPENSES
Direct store expenses
  Depreciation of rental merchandise.......   21.7%    19.5%    19.4%      --%      --%      --%
  Cost of merchandise sold.................    4.2      5.4      4.2     86.6     86.2     86.1
  Salaries and other expenses..............   55.7     56.6     56.1       --       --       --
                                             -----    -----    -----    -----    -----    -----
          Total direct store expenses......   81.6     81.5     79.7     86.6     86.2     86.1
General and administrative expenses........    3.5      2.9      2.9      4.9      5.1      4.4
Amortization of intangibles................    2.0      2.0      1.8       .7       .6       .6
Class action litigation settlements........    1.5       --     (1.4)      --       --       --
                                             -----    -----    -----    -----    -----    -----
          Total operating expenses.........   88.6     86.4     83.0     92.2     91.9     91.1
                                             -----    -----    -----    -----    -----    -----
Operating profit...........................   11.4     13.6     17.0      7.8      8.1      8.9
Interest expense/(income)..................    5.0      5.5      4.8      (.7)     (.8)    (1.0)
Non-recurring financing costs..............     .7       --       --       --       --       --
                                             -----    -----    -----    -----    -----    -----
Earnings before income taxes...............    5.7%     8.1%    12.2%     8.5%     8.9%     9.9%
                                             =====    =====    =====    =====    =====    =====
</TABLE>

     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 unit on rent by upgrading our rental
       merchandise, primarily at newly-acquired stores;

     - increasing the number of units 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

                                        18
<PAGE>   23

increase in the number of customers served, the number of items on rent, as well
as revenue earned per item 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 million
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. We expect general and administrative expenses to remain relatively
stable at 3.0% of total revenue in the future.

     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 non-recurring 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 non-recurring 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 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
non-recurring 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.

                                        19
<PAGE>   24

     YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

     Store Revenue.  Total store revenue increased by $601.4 million, or 79.1%,
to $1,361.6 million for 1999 from $760.2 million for 1998. The increase in total
store revenue was primarily attributable to the inclusion of revenue from the
Thorn Americas and Central Rents stores acquired during fiscal year 1998 for the
entire year ended December 31, 1999. Same store revenues increased by $25.3
million, or 7.7%, to $354.3 million for 1999 from $329.0 million in 1998. Same
store revenues represent those revenues earned in stores that were operated by
us for the entire years ending December 31, 1999 and 1998, and therefore exclude
the stores acquired from Thorn Americas and Central Rents. This improvement was
primarily attributable to an increase in both the number of items on rent and in
revenue earned per item on rent.

     Franchise Revenue.  Total franchise revenue increased by $6.1 million, or
12.2%, to $55.6 million for 1999 from $49.5 million in 1998. This increase was
primarily attributable to an increase in the sale of rental merchandise to
franchisees resulting from 41 additional franchise locations in 1999 as compared
to 1998.

     Depreciation of Rental Merchandise.  Depreciation of rental merchandise
increased by $100.8 million, or 61.2%, to $265.5 million for 1999 from $164.7
million for 1998. Depreciation of rental merchandise expressed as a percent of
store rentals and fees revenue decreased to 20.9% in 1999 from 23.1% in 1998.
This decrease is primarily attributable to Thorn Americas and Central Rents
experiencing depreciation rates of 22.9% and 29.8%, respectively, upon their
acquisition in 1998. These rates have decreased following the implementation of
our pricing strategies and inventory management practices.

     Cost of Merchandise Sold.  Cost of merchandise sold increased by $42.0
million, or 130.9%, to $74.0 million for 1999 from $32.0 million in 1998. This
increase was a direct result of the inclusion of merchandise sales and the costs
associated with those sales from the Thorn Americas and Central Rents stores
acquired during the year ended December 31, 1998 for the entire year ended
December 31, 1999.

     Salaries and Other Expenses.  Salaries and other expenses expressed as a
percentage of total store revenue increased to 56.6% for 1999 from 55.7% for
1998. This increase is principally attributable to incentive programs given to
store-based employees in 1999, which provided additional compensation if they
could achieve targeted gains in the number of items on rent and targeted
reductions in the percentage of delinquent accounts. 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 $5.0 million, or 11.7%, to $47.9 million for 1999 from $42.9 in
1998. This increase is a direct result of an increase in merchandise sold to
franchisees in 1999 as compared to 1998 resulting from an additional 41
franchise store locations.

     General and Administrative Expenses.  General and administrative expenses
expressed as a percent of total revenue decreased to 3.0% in 1999 from 3.5% in
1998 (3.2% before the $2.5 million non-recurring expense detailed below). This
decrease was the result of increased revenues from the stores acquired from
Thorn Americas and Central Rents, allowing us to leverage our fixed and
semi-fixed costs over the larger revenue base.

     Amortization of Intangibles.  Amortization of intangibles increased by
$11.8 million, or 76.7%, to $27.1 million for 1999 from $15.3 million in 1998.
This increase was primarily attributable to the additional goodwill amortization
associated with the 1998 acquisitions of Thorn Americas and Central Rents
included for the full year ended December 31, 1999.

     Operating Profit.  Operating profit increased by $99.2 million, or 109.2%,
to $190.0 million for 1999 from $90.8 million for 1998. In the third quarter of
1998, we incurred a pre-tax non-recurring expense of $2.5 million to effect a
name change of the Renters Choice stores to Rent-A-Center. In the fourth quarter
of 1998, we incurred a pre-tax non-recurring class action litigation settlement
of $11.5 million. Stated before the effects of these expenses, operating profit
increased by $85.2 million, or 81.3%. Operating profit as a percentage of total
revenue increased to 13.4% in 1999 from 12.9% in 1998, calculated before the
effects of the

                                        20
<PAGE>   25

non-recurring expenses. This increase is attributable to our efforts in
improving the efficiency and profitability of the stores acquired from Thorn
Americas and Central Rents.

     Net Earnings.  Net earnings increased by $34.6 million, or 139.7%, to $59.4
million in 1999 from $24.8 million in 1998. In addition to the $2.5 million and
$11.5 million pre-tax non-recurring expenses discussed above, we also incurred
pre-tax non-recurring financing costs of $5.0 million associated with interim
financing utilized in the acquisition of Thorn Americas until permanent
financing was obtained. The after-tax effect of these items was $10.3 million.
Calculated before the effects of these non-recurring expenses, net earnings
increased by $24.3 million, or 69.3%.

     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 $6.1 million, or 153.9%, to $10.0 million for 1999 as compared to
$3.9 million in 1998. This increase is a result of the Series A preferred stock
outstanding for the full year in 1999 as compared to only a portion of the year
in 1998.

QUARTERLY RESULTS

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

<TABLE>
<CAPTION>
                                       1ST QUARTER   2ND QUARTER(1)   3RD QUARTER(2)   4TH QUARTER(3)
                                       -----------   --------------   --------------   --------------
                                                   (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                    <C>           <C>              <C>              <C>
YEAR ENDED DECEMBER 31, 2000
  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
YEAR ENDED DECEMBER 31, 1999(4)
  Revenues...........................   $344,697        $351,421         $350,420         $370,629
  Operating profit...................     41,702          45,788           48,960           53,573
  Net earnings.......................     12,027          13,891           15,597           17,840
  Basic earnings per common share....   $    .40        $    .47         $    .54         $    .63
  Diluted earnings per common share..   $    .35        $    .41         $    .46         $    .52
YEAR ENDED DECEMBER 31, 1998(5)
  Revenues...........................   $ 90,233        $103,313         $265,886         $350,284
  Operating profit...................     13,721          15,547           30,467           31,078
  Net earnings.......................      7,856           8,529            4,643            3,730
  Basic earnings per common share....   $    .32        $    .34         $    .13         $    .05
  Diluted earnings per common share..   $    .31        $    .34         $    .13         $    .05
</TABLE>

                                        21
<PAGE>   26

<TABLE>
<CAPTION>
                                    1ST QUARTER   2ND QUARTER(1)   3RD QUARTER(2)   4TH QUARTER(3)
                                    -----------   --------------   --------------   --------------
                                                    (AS A PERCENTAGE OF REVENUES)
<S>                                 <C>           <C>              <C>              <C>
YEAR ENDED DECEMBER 31, 2000
  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
YEAR ENDED DECEMBER 31, 1999(4)
  Revenues........................      100.0%          100.0%           100.0%           100.0%
  Operating profit................       12.1            13.0             14.0             14.5
  Net earnings....................        3.5             4.0              4.5              4.8
YEAR ENDED DECEMBER 31, 1998(5)
  Revenues........................      100.0%          100.0%           100.0%           100.0%
  Operating profit................       15.2            15.0             11.5              8.9
  Net earnings....................        8.7             8.3              1.7              1.1
</TABLE>

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

(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) During the third quarter of 1998, we incurred pre-tax non-recurring
    financing costs of $5.0 million associated with the interim financing
    utilized in the acquisition of Thorn Americas, and $2.5 million associated
    with effecting a name change of the Renters Choice stores to Rent-A-Center.

(3) During the fourth quarter of 1998, we charged $11.5 million (pre-tax) to
    earnings classified as class action legal settlements, in conjunction with
    the settlement of class action litigation in New Jersey.

(4) During 1999, we did not acquire nor sell any stores. However, we did
    consolidate 51 stores into existing locations.

(5) During 1998, six stores were purchased during the first quarter; 177 stores
    were purchased during the second quarter; 1,450 stores were purchased during
    the third quarter; and four stores were purchased during the fourth quarter.
    Of the 1,637 stores acquired, 15 were subsequently consolidated with
    existing store locations. In addition, one store was opened during the first
    quarter, and one store was sold during the third quarter.

LIQUIDITY AND CAPITAL RESOURCES

     Our primary liquidity requirements are for debt service, working capital,
capital expenditures, acquisitions and new store openings. Our primary sources
of liquidity have been cash provided by operations, borrowings and sales of
equity securities. During fiscal 2000, we did not look to borrowings and sales
of our equity securities as a source of additional liquidity. 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.

     Cash provided by operating activities increased by $220.8 million to $191.6
million in 2000 from $(29.2) million in 1999. This increase is primarily the
result of the increase in net earnings, reduced investment in inventory and
reduced cash needs for settling liabilities assumed in the Thorn Americas
acquisition.

     Cash used in investing activities increased by $51.4 million to $79.0
million in 2000 from $27.6 million in 1999. This increase is primarily
attributable to the acquisition of new store locations in 2000, as we resumed
our acquisition program in 2000 following the acquisition of Thorn Americas and
Central Rents in 1998.

     Cash used in financing activities increased by $142.5 million to a net use
of $97.7 million in 2000 compared to net cash provided of $44.8 million in 1999.
This increase is primarily related to the net repayment of debt of $106.1
million in 2000 compared to net borrowings of $41.5 million in 1999.

     Working Capital.  We purchased $462.1 million, $513.9 million and $207.7
million of rental merchandise during 2000, 1999 and 1998, respectively. During
1999, we made a one time net investment in rental inventory in order to
remerchandise the stores acquired in the Thorn Americas and Central Rents
acquisitions.

                                        22
<PAGE>   27

     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 $37.9 million, $36.2 million and $21.9 million on capital
expenditures in 2000, 1999 and 1998, respectively, and expect to spend
approximately $45.0 million in 2001.

     Acquisitions and New Store Openings.  During 2000, we resumed our strategy
of increasing our store base through opening new stores, as well as through
opportunistic acquisitions. It is our intention to increase the number of stores
we operate by an average of approximately 10-15% per year over the next several
years.

     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 December 31, 2000.

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,                                                 ACTUAL
------------                                             --------------
                                                         (IN THOUSANDS)
<S>                                                      <C>
2001..................................................      $  2,651
2002..................................................         2,651
2003..................................................         2,651
2004..................................................        38,977
2005..................................................       147,955
Thereafter............................................       371,166
                                                            --------
                                                            $566,051
                                                            ========
</TABLE>

     Under our senior credit facility, we are required to use 50% of the net
proceeds from this offering to repay our term loans. The following table shows
the scheduled maturity date of our senior debt as adjusted for the anticipated
repayment of $50.0 million from the net proceeds of this offering.

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,                                              AS ADJUSTED
------------                                             --------------
                                                         (IN THOUSANDS)
<S>                                                      <C>
2001..................................................      $  2,221
2002..................................................         2,221
2003..................................................         2,221
2004..................................................        32,650
2005..................................................       123,938
Thereafter............................................       352,800
                                                            --------
                                                            $516,051
                                                            ========
</TABLE>

     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. We
cannot, however, assure you that we will have excess cash available for debt
prepayments.

     Senior Credit Facilities.  The senior credit facilities are provided by a
syndicate of banks and other financial institutions led by The Chase Manhattan
Bank, as administrative agent. At December 31, 2000, we had a total of $566.1
million outstanding under these facilities, all of which was under our term
loans. At December 31, 2000, we had $76.3 million of availability under the
revolving credit facility.

     Borrowings under the senior credit facilities bear interest at varying
rates equal to 1.25% to 2.75% over LIBOR, which was 6.55% at December 31, 2000.
We also have a prime rate option under the facilities, but

                                        23
<PAGE>   28

have not exercised it to date. At December 31, 2000, the average rate on the
senior credit facilities was 8.95% without giving effect to interest rate
protection agreements.

     During 1998, we entered into interest rate protection agreements with two
banks. Under the terms of the interest rate agreements, the LIBOR rate used to
calculate the interest rate charged on $500.0 million of the outstanding senior
term debt has been fixed at an average rate of 5.59%. The protection on $250.0
million expires in 2001, and the protection on the balance 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 contains covenants that limit our ability to:

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

      --   repurchase in excess of $15 million of our 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 cash dividends or repurchase capital stock in excess of $50
           million, less repurchases of up to $15 million of our senior
           subordinated notes;

      --   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 December 31, 2000, the maximum
leverage ratio was 4.75:1, the minimum interest coverage ratio was 2.15:1, and
the minimum fixed charge coverage ratio was 1.3:1. On that date our actual
ratios were 2.38:1, 4.21:1 and 2.2:1.

     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 50% of the amount of our voting stock
that they owned on August 5, 1998, 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. 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 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 IBJ Shroder Bank & Trust
Company, as trustee.

     The 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.

                                        24
<PAGE>   29

     Events of default under the 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. In addition, subject to the restrictions set forth in the senior credit
facility agreement, at any time prior to August 15, 2001 we may redeem up to
33.33% of the original aggregate principal amount of the subordinated notes with
the cash proceeds of one or more equity offerings, at a redemption price of 111%
of the principal amount being redeemed.

     The subordinated notes also require that upon the occurrence of a change of
control (as defined in the 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.

     Sales of Equity Securities.  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
of our senior credit facilities. Beginning in 2003, we will be required to pay
the dividends in cash. Under the terms of our senior credit facilities, we do
not currently have the ability to comply with this requirement. If we are not
able to amend the terms of the senior credit facilities or the Series A
preferred stock, both the payment and the non-payment of dividends on the Series
A preferred stock would trigger an event of default under the senior credit
facilities. This in turn would trigger an event of default under the
subordinated notes if indebtedness under the senior credit facilities were
accelerated. This would likely result in a material adverse effect on our
financial condition.

     The Series A preferred stock is not redeemable until 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.

     Common Stock Repurchase Plan.  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 anytime
following the completion of this offering.

     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.

EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities.  In June 1999, the FASB issued Statement No.
137, Accounting for Derivative Instruments and Hedging Activities--Deferral of
the Effective Date of FASB Statement No. 133.  In June 2000, the FASB issued
Statement 138, Accounting for Certain Derivative Instruments and Certain Hedging
Activities, an amendment of FASB Statement No. 133.  Statement 133, as amended,
establishes accounting and reporting standards requiring that every derivative
instrument be recorded in the balance sheet as either an asset or liability
measured at its fair value. The statement requires that changes in the
derivative instrument's fair value be recognized currently in earnings unless
specific hedge accounting criteria are met. Special accounting for qualifying
hedges allows a derivative instrument's gains and losses to offset related
results on the hedged item in the income statement, to the extent effective, and
requires that a company must formally document, designate and assess the
effectiveness of transaction that receive hedge accounting. Statement 133, as
amended, is effective for fiscal years beginning after June 15, 2000 and was
adopted by us on January 1, 2001.

                                        25
<PAGE>   30

     As of December 31, 2000, we identified and designated the interest rate
swap agreements as derivatives that qualify as hedges under Statement 133, as
amended. We only have interest rate swap agreements that qualify as derivatives
under Statement 133, as amended, and the effects of implementation of this
statement as of January 1, 2001 are not expected to have a material impact on
our financial position, results of operations or cash flows. If Statement 133
were applied to our derivative contracts in place at December 31, 2000, the fair
value of the contracts would increase assets by approximately $2.6 million with
an offsetting amount of $2.6 million recorded in accumulated other comprehensive
income.

                                        26
<PAGE>   31

                                    BUSINESS

OVERVIEW

     We are the largest operator in the United States rent-to-own industry with
an approximate 27% market share based on store count. At March 31, 2001, we
operated 2,179 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, 2001, ColorTyme franchised 359 stores in 42 states, 347 of
which operated under the ColorTyme name and 12 stores which operated under the
Rent-A-Center name. These franchise stores represent a further 5% market share
based on store count.

     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 offer well known brands
such as Magnavox, Sony and JVC home electronics, Whirlpool appliances, Dell and
Compaq computers and Ashley and La-Z-Boy furniture.

     Our customers often lack access to conventional forms of credit. We offer
products such as big screen televisions, computers and sofas, and well known
brands, that might otherwise be unavailable without credit. We also offer high
levels of customer service, including repair, pick-up and delivery at no
additional charge. Our customers benefit from the ability to return merchandise
at any time without further obligation and make payments that build toward
ownership. We estimate that approximately 65% of our business is from repeat
customers.

INDUSTRY BACKGROUND

     According to industry sources and our estimates, the rent-to-own industry
consists of approximately 8,000 stores, and provides 7.5 million products to
over 3.0 million households. We estimate the six largest rent-to-own industry
participants account for 4,300 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 currently focus our strategic efforts on:

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

      --   enhancing the operations and depth of management in all store
           locations; and

      --   building our national brand.

                                        27
<PAGE>   32

     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 May 1993, our company-owned store base has grown from 27 to 2,179,
primarily through acquisitions. During this period, we acquired over 2,000
company-owned stores and over 350 franchised stores in more than 60 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 65 franchised 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, 2000, we opened 36 new stores,
acquired 74 stores and closed 27 existing stores. Of the 27 stores closed, 22
were merged with existing stores and five were sold. The 74 acquired stores were
the result of 19 separate acquisition transactions for an aggregate purchase
price of approximately $42.5 million in cash. During the first quarter of 2001,
we acquired four stores for approximately $1.7 million in cash and opened an
additional 23 new stores. We also closed six stores, merging four with existing
stores and selling two stores, resulting in a total store count of 2,179 at the
end of the quarter.

     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 10-15% per year over the next
several years. We plan to accomplish our future growth through both selective
and opportunistic acquisitions and new store development.

     ENHANCING STORE OPERATIONS

     We continually seek to improve store performance through strategies
intended to produce gains in operating efficiency and profitability. For
example, we eliminated low cost, non-core products such as jewelry, cell phones
and pagers from the stores we acquired in the Thorn Americas acquisition,
reducing the number of different items on rent in these stores from
approximately 1,000 to approximately 150 items. We also added high quality name
brand product offerings in our core consumer electronics, furniture and
appliance categories. Collectively in these stores, these changes have
increased:

      --   the average cost per unit on rent to $425 from $225;

      --   the monthly revenues per store to approximately $61,000 from
           approximately $52,000; and

      --   the store level operating income to 23% in 2000, from 18% in 1998.

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<PAGE>   33

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

      --   using focused advertising to increase store traffic;

      --   expanding the offering of upscale, higher margin products, such as
           Magnavox, Sony, JVC and Mitsubishi electronics, Ashley, La-Z-Boy and
           Benchcraft furniture, Dell, Compaq and Hewlett Packard computers and
           Whirlpool appliances, to increase the number of product rentals;

      --   employing strict store-level cost control;

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

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

     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. 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
national 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, 2001, we operated 2,179 stores in 50 states, Puerto Rico and
the District of Columbia. In addition, our subsidiary ColorTyme franchised 359
stores in 42 states. This information is illustrated by the following table:

<TABLE>
<CAPTION>
                         NUMBER OF STORES
                       --------------------
                       COMPANY
      LOCATION          OWNED    FRANCHISED
      --------         -------   ----------
<S>                    <C>       <C>
Alabama..............      45         1
Alaska...............       3        --
Arizona..............      52         9
Arkansas.............      20         3
California...........     126        11
Colorado.............      26         4
Connecticut..........      18         6
Delaware.............      15         1
District of                 4        --
  Columbia...........
Florida..............     133        10
Georgia..............      95        13
Hawaii...............      11         2
Idaho................       3         4
Illinois.............     118         5
Indiana..............      74        18
Iowa.................      19        --
Kansas...............      28        18
Kentucky.............      39         7
Louisiana............      35         7
Maine................      16         3
Maryland.............      46         7
Massachusetts........      43        12
Michigan.............      94        17
Minnesota............       5        --
Mississippi..........      16         4
Missouri.............      52         7
</TABLE>

<TABLE>
<CAPTION>
                         NUMBER OF STORES
                       --------------------
                       COMPANY
      LOCATION          OWNED    FRANCHISED
      --------         -------   ----------
<S>                    <C>       <C>
Montana..............       1         4
Nebraska.............       4        --
Nevada...............      15         5
New Hampshire........      15         2
New Jersey...........      40         8
New Mexico...........      11         9
New York.............     116        23
North Carolina.......      86        14
North Dakota.........       1        --
Ohio.................     123        11
Oklahoma.............      36        13
Oregon...............      17         5
Pennsylvania.........      80         5
Puerto Rico..........      20        --
Rhode Island.........       7         4
South Carolina.......      27         3
South Dakota.........       2        --
Tennessee............      79         5
Texas................     227        59
Utah.................      15         2
Vermont..............       6        --
Virginia.............      39         5
Washington...........      36         9
West Virginia........      12         2
Wisconsin............      27         2
Wyoming..............       1        --
                        -----       ---
  Total..............   2,179       359
                        =====       ===
</TABLE>

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<PAGE>   34

     Our stores average approximately 4,125 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.
During 2000, home electronic products accounted for approximately 40% of our
store rentals and fees revenue, furniture and accessories for 33%, 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 Magnavox, Sony, JVC 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,
La-Z-Boy 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, 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

                                        30
<PAGE>   35

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 21 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 management 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% in 2000, as compared to approximately 2.3% in 1999 and 2.5%
in 1998. In an effort to improve collections at the stores acquired during 2000,
we implemented our collection procedures in these stores, including our
management incentive plans, which provide incentives to reduce the percentage of
delinquent accounts.

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.

     As of March 31, 2001, we had 302 market managers who, in turn, reported to
50 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 executives
at our headquarters. The regional directors receive a significant amount of
their compensation based on the profits the stores under their management
generate.

                                        31
<PAGE>   36

     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 2,000,000 units of merchandise and each of our
approximately 1,300,000 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 the financial statements. These financial
statements are distributed monthly to all stores, markets, regions and the
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 Whirlpool, Ashley, and
Magnavox, who accounted for approximately 13.3%, 12.1%, and 11.3% respectively,
of merchandise purchased in 2000. 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 years ended December 31, 2000 and 1999, was approximately 4.2% and 4.0%,
respectively. As we obtain new stores in our existing market areas,
                                        32
<PAGE>   37

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 March 31, 2002.

COMPETITION

     The rent-to-own industry is highly competitive. According to industry
sources and our estimates, the six largest industry participants account for
approximately 4,300 of the 8,000 rent-to-own stores in the United States. We are
the largest operator in the rent-to-own industry with 2,179 stores and 359
franchised locations as of March 31, 2001. 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,
2001, ColorTyme franchised 359 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. During 2000, 46 new
franchise locations were added, five were merged with existing stores and 42
were sold, including 39 that we purchased. During that same period, the number
of new franchisees operating stores under the ColorTyme name increased by 14.

     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.

     ColorTyme has an arrangement with STI Credit Corporation, who provides
inventory financing in amounts up to five times monthly revenues to qualifying
franchisees. Under the agreement, if a franchisee fails to repay the loan, we
may take ownership of the stores upon payment of the guaranteed amount.

     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 suppliers are Whirlpool
and Thomson (RCA), who accounted for approximately 14.0% and 6.3%, respectively,
of merchandise purchased by ColorTyme in 2000.

     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
                                        33
<PAGE>   38

directs the advertising programs of the fund, generally consisting of
advertising in print, television and radio. Furthermore, the franchisees 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 Get the Good Stuff(R), the
slogan used in our advertising campaign featuring Mr. Madden, 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, 2001, we had approximately 12,500 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 20 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. 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 20,000 square feet, and average approximately
4,125 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 46 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

                                        34
<PAGE>   39

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 both Minnesota and Wisconsin. 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 five stores in Minnesota, 27 stores in Wisconsin and
40 stores in New Jersey. See the section entitled "--Legal Proceedings."

     Montana, North Carolina, and the District of Columbia have 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 one store in Montana, four stores in
the District of Columbia and 86 stores in North Carolina.

     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.

     Murray v. Rent-A-Center, Inc.  In May 1999, the plaintiffs filed a putative
nationwide class action in federal court in Missouri, alleging that we have
discriminated against African Americans in our hiring, compensation, promotion
and termination policies. Plaintiffs alleged no specific amount of damages in
their complaint. Members of the regional class defined in our completed
settlement of the Allen v. Thorn Americas, Inc. litigation would not be included
in the Murray case. Discovery directed to the issue of the appropriateness of
class certification has been completed and the plaintiff's motion to certify the
class has been fully briefed. The court has called for oral argument on the
motion for class certification, which has been scheduled for April 27, 2001. We
anticipate a decision on this motion by late June 2001. We believe plaintiffs'
claims in this suit are without merit. However, there can be no assurance that
class certification will not be granted or that we will be found to have no
liability.

     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 pursuant to
the Thorn Americas acquisition, and appropriate purchase accounting adjustments
were made for these 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 had a duty to disclose effective interest under New York
consumer

                                        35
<PAGE>   40

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 specified a specific amount on their damages
request.

     The proposed class includes all New York residents who were party to Thorn
Americas' rent-to-own contracts from November 26, 1991 through November 26,
1997. We are vigorously defending this action. In November 2000, following
interlocutory appeal by both parties from the denial of cross-motions for
summary judgment, we obtained a favorable ruling from the Appellate Division of
the State of New York, dismissing plaintiffs' claims based on the alleged
failure to disclose an effective interest rate. Plaintiffs' other claims were
not dismissed. Plaintiff moved to certify a state-wide class in December 2000.
Discovery is now underway. We intend to vigorously oppose 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 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 violates the Wisconsin Consumer Act and the Wisconsin Deceptive
Advertising Statute. The Attorney General claims that our rent-to-rent
transaction, coupled with the opportunity afforded our customers to purchase
rental 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 27 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. The Attorney General's claim
for monetary penalties applies to at least 6,240 transactions through February
28, 2001.

     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. Discovery is underway, and a pre-trial
conference has been set for August 2001. Although we cannot assure you that we
will be found to have no liability in this matter, we believe its ultimate
resolution will not have a material adverse effect upon us.

     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 us in federal court in East St. Louis, Illinois by Claudine

                                        36
<PAGE>   41

Wilfong and 18 other plaintiffs, alleging that we engaged in class-wide gender
discrimination following our 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. With respect to the Wilfong
matter, the plaintiffs, in their prayer for relief, have requested class
certification, injunctive relief, actual damages of $410,000,000, unspecified
compensatory and punitive damages, attorney's fees, filing fees and costs of
suit, pre-judgment interest, and any further relief granted by the court. In the
Bunch matter, the plaintiffs make similar requests for relief, although no
specific amounts are claimed as actual damages. In addition, we have recently
been advised that the U.S. Equal Employment Opportunity Commission has filed a
motion to intervene on behalf of the plaintiffs in the Wilfong matter. Although
these cases are in the early stages, we believe the claims are without merit. We
cannot assure you, however, that we will be found to have no liability for these
matters.

                                        37
<PAGE>   42

                                   MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

     The executive officers and directors of Rent-A-Center, and their respective
ages and positions as of March 31, 2001, are as follows:

<TABLE>
<CAPTION>
NAME                                    AGE                  POSITION
----                                    ---                  --------
<S>                                     <C>   <C>
J. Ernest Talley(1)...................  65    Chairman of the Board of Directors and
                                                Chief Executive Officer
Mitchell E. Fadel.....................  43    President, Director
L. Dowell Arnette.....................  53    Executive Vice President--Growth,
                                                Director
Dana F. Goble.........................  35    Executive Vice President and Chief
                                                Operating Officer
Robert D. Davis.......................  29    Senior Vice President--Finance, Chief
                                                Financial Officer and Treasurer
Bradley W. Denison....................  40    Senior Vice President--General Counsel
Anthony M. Doll.......................  32    Senior Vice President
C. Edward Ford, III...................  34    Senior Vice President
John H. Whitehead.....................  50    Senior Vice President
David A. Kraemer......................  39    Senior Vice President
William C. Nutt.......................  44    Senior Vice President
Timothy J. Stough.....................  45    Senior Vice President
Mark S. Connelly......................  38    Senior Vice President
David G. Ewbank.......................  44    Senior Vice President
David M. Glasgow......................  32    Corporate Secretary
Laurence M. Berg(2)...................  34    Director
Peter P. Copses(1)(3).................  42    Director
J.V. Lentell(1)(2)(3).................  62    Director
Joseph V. Mariner(2)(3)...............  80    Director
Mark E. Speese........................  43    Director
</TABLE>

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

(1) Member of Finance Committee

(2) Member of Audit Committee

(3) Member of Compensation Committee

     J. Ernest Talley has served as Chairman of our board of directors since May
1989 and Chief Executive Officer since November 1994. Mr. Talley operated a
rent-to-own business from 1963 to 1974 in Wichita, Kansas, which he sold to
Remco (later acquired by Thorn Americas and acquired by us as part of the Thorn
Americas acquisition) in 1974. From 1974 to 1988, he was involved in the
commercial real estate business in Dallas, Texas. Mr. Talley co-founded Talley
Lease to Own, Inc. with his son, Michael C. Talley, in 1987 and served as a
director and Chief Executive Officer of that company from 1988 until its merger
with us on January 1, 1995. Mr. Talley's term as a director expires at our 2001
annual stockholders meeting.

     Mitchell E. Fadel has served as our President since July 2000 and as a
director since December 2000. From 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 director expires at our 2001 annual
stockholders meeting.

     L. Dowell Arnette has served as a director since May 1999 and as our
Executive Vice President--Growth since July 2000. 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,

                                        38
<PAGE>   43

Mr. Arnette served as one of our Senior Vice Presidents. From November 1994 to
May 1995, he served as one of our Regional Vice Presidents. From 1993 to
November 1994, he served as our regional manager responsible for the
Southeastern U.S. 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.

     Dana F. Goble has served as our Chief Operating Officer since March 2000
and as one of our Executive Vice Presidents since March 1999. 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 to May 1995, Mr. Goble served as our regional
manager for the Detroit, Michigan area.

     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. Between September 1998 and September 1999, Mr. Davis served
as our Vice President--Finance and Treasurer. Between June 1997 and September
1998, Mr. Davis served as our Treasurer. From January 1997 until June 1997, Mr.
Davis served as our Assistant Secretary and Treasurer. Between June 1995 and
January 1997, Mr. Davis served as our Payroll Supervisor and from June 1993 to
June 1995 served as an accountant for us.

     Bradley W. Denison has served as our Senior Vice President--General Counsel
since October 1998. Between September 1996 and October 1998, Mr. Denison served
as Vice President and Assistant General Counsel for Thorn Americas, Inc. From
August 1996 to October 1996, Mr. Denison served as Associate General Counsel for
Thorn Americas, and from June 1994 until August 1996, Mr. Denison served as
Director and Chief Counsel for Thorn Americas. Prior to that time, Mr. Denison
served as a Staff Attorney for 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. From April 1993
to May 1995, Mr. Doll served as the manager of our stores in Michigan.

     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. Between 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. Between May 1995 and September 1997, Mr. Whitehead served as one
of our Regional Vice Presidents. From July 1993 to May 1995, Mr. Whitehead
served as our regional manager for the Atlanta, Georgia area.

     David A. Kraemer has served as one of our Senior Vice Presidents since
September 1998. From December 1995 until September 1998, Mr. Kraemer served as
one of our Regional Vice Presidents. Prior to that time, Mr. Kraemer served as a
Divisional Vice President for MRTO Holdings from November 1990 until we acquired
MRTO Holdings in September 1995.

     William C. Nutt has served as one of our Senior Vice Presidents since May
1998. Between December 1995 until May 1998, Mr. Nutt served as one of our
Regional Vice Presidents. From December 1992 through 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 1, 2000. From September 1998 until February 2000, Mr. Stough served as
one of our Regional Directors. From January 1998 to September 1998, Mr. Stough
served as a Regional Director for Thorn Americas, overseeing stores from South
Carolina to Vermont. From 1987 to 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. Between June 1998 and September 1999, Mr. Connelly served as one
of our Regional Vice Presidents. Between February
                                        39
<PAGE>   44

1998 and May 1998, Mr. Connelly served as a Division Manager of Central Rents,
which we acquired in May 1988. From October 1997 to February 1998, Mr. Connelly
acted as Director of Operations/Acquisitions of Spin Cycle, a start-up chain of
coin-operated laundromats. From April to October 1997, Mr. Connelly was a group
manager with Rent Mart, a rent-to-own subsidiary of The Associates. From June
1996 through March 1997, Mr. Connelly was the Vice President-Operations of Trans
Texas Capital, a franchisee of ColorTyme. From January 1995 to May 1995, 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 through 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 M. Glasgow has served as our Corporate Secretary since June 1995.
Between June 1995 to June 1997, Mr. Glasgow also served as our Treasurer. From
March 1995 to June 1995, Mr. Glasgow served as our accounting operations
supervisor, and from June 1993 to March 1995, Mr. Glasgow served as one of our
accountants.

     Laurence M. Berg has served as one of our directors since August 1998. Mr.
Berg has been associated since 1992 and a principal since 1995 with Apollo
Advisors, L.P., which together with its affiliates, acts as managing general
partner of Apollo Investment Fund, L.P., AIF II, L.P., Apollo Investment Fund
III, L.P., and Apollo Investment Fund IV, L.P. Mr. Berg is also a director of
Berlitz International, Inc., a provider of language services. Mr. Berg serves as
one of the two directors elected by the holders of our Series A preferred stock.
Mr. Berg's term as a director expires at our 2002 annual stockholders meeting.

     Peter P. Copses has served as one of our directors since August 1998. Since
1990, Mr. Copses has been a principal of Apollo Advisors, L.P., which, together
with its affiliates, acts as managing general partner of Apollo Investment Fund,
L.P., AIF II, L.P., Apollo Investment Fund III, L.P. and Apollo Investment Fund
IV, L.P. 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
director expires at our 2001 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 through July 1993, serving as Chairman of the Board from 1981 through 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 director expires at our 2003 annual
stockholders meeting.

     Joseph V. Mariner, Jr. has served as one of our directors since February
1995. Until his retirement in 1978, Mr. Mariner served as Chairman of the board
of directors and Chief Executive Officer of Hydrometals, Inc., a large
conglomerate with subsidiaries engaged in the manufacture of retail plumbing
supplies, non-powered hand tools and electronic components. Mr. Mariner
currently serves as a director of Temtex Industries, Inc., a manufacturer of
energy efficient fireplaces and gas logs, Peerless Mfg. Co., a manufacturer of
heavy oil and gas filtration equipment and Dyson Kissner Moran Corp., a New York
based private investment company engaged in acquiring and operating a multitude
of manufacturing companies with additional holdings in real estate. Mr.
Mariner's term as a director expires at our 2003 annual stockholders meeting.
However, Mr. Mariner has informed us that he intends to resign from our board of
directors following our 2001 annual stockholders meeting.

     Mark E. Speese has served as one of our directors since 1990. Mr. Speese
previously served as our Vice Chairman from September 1999 until March 2001.
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 to 1986. Mr. Speese is also a
director of Transportation Components, Inc., a distributor of replacement parts
and supplies for commercial vehicles and equipment. Mr. Speese's term as a
director expires at our 2002 annual meeting.
                                        40
<PAGE>   45

                              SELLING STOCKHOLDERS

     In this prospectus, we refer to the entities or individuals listed below
and any family member, trust or trust instrument to whom they may rightfully
transfer their shares as selling stockholders. The following table sets forth
certain information as of March 31, 2001 with respect to each selling
stockholder:

<TABLE>
<CAPTION>
                                   SHARES BENEFICIALLY                        SHARES BENEFICIALLY
                                  OWNED BEFORE OFFERING                       OWNED AFTER OFFERING
                                 -----------------------    SHARES OFFERED    --------------------
NAMES OF SELLING STOCKHOLDER(1)    NUMBER        PERCENT        HEREBY         NUMBER      PERCENT
-------------------------------  ----------      -------    --------------    ---------    -------
<S>                              <C>             <C>        <C>               <C>          <C>
J. Ernest Talley..............    4,928,165(2)    19.5%       1,700,000(3)    3,228,165     11.8%
Mark E. Speese................    1,760,832(4)     7.0%         500,000       1,260,832      4.6%
Apollo entities...............   10,181,206(5)(6) 28.8%                      9,521,206(7)  25.3%
</TABLE>

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

(1)For a description of relationships between us and the selling stockholders,
   please refer back to the section entitled "Management."

(2)Includes (A) 1,903,166 shares of common stock held directly by him, (B)
   24,999 shares underlying stock options which are currently exercisable, (C)
   1,579,809 shares held by the Talley 1999 Trust, a trust organized under the
   laws of the State of Texas of which Mr. Talley is the sole trustee, (D)
   1,000,000 shares held by Talley Partners, Ltd., a Texas limited partnership,
   whose sole general partner is Talley Management, Inc., a Texas corporation,
   and (E) 420,191 shares held by Mr. Talley's spouse.

(3)Includes (A) 700,000 shares held by Mr. Talley directly and (B) 1,000,000
   shares held by Talley Partners, Ltd., a Texas limited partnership, whose sole
   general partner is Talley Management, Inc., a Texas corporation, an entity
   controlled by Mr. Talley.

(4)Includes (A) 1,251,832 shares held directly by him, (B) 9,000 shares
   underlying options which are currently exercisable, (C) 250,000 shares held
   by the Mark Speese 2000 Grantor Retained Annuity Trust, a trust organized
   under the laws of the State of Texas, of which Mr. Speese is the sole
   trustee, and (D) 250,000 shares held by the Carolyn Speese 2000 Grantor
   Retained Annuity Trust, a trust organized under the laws of the State of
   Texas, of which Mr. Speese is the sole trustee.

(5)If the underwriters exercise their over-allotment option, Apollo Investment
   Fund IV, L.P. and Apollo Overseas Partners IV, L.P. have the option to sell
   shares of common stock to satisfy the underwriters over-allotment option.
   Except for this possible sale, Apollo will not be selling any shares of
   common stock in this offering.

(6)Apollo Investment Fund IV, L.P. and Apollo Overseas Partners IV, L.P. are
   affiliates and each is deemed to beneficially own the securities held by the
   other. The 10,181,206 shares of common stock represent the shares of common
   stock into which the Series A preferred stock is convertible. Apollo
   Investment Fund IV, L.P. owns 259,560 shares of Series A preferred stock and
   Apollo Overseas Partners IV, L.P. owns 13,927 shares of Series A preferred
   stock. The Apollo entities also have the right to vote RC Acquisition Corp.'s
   10,925 shares of Series A preferred stock. Apollo disclaims any beneficial
   ownership except to the extent of their pecuniary interests.

(7)Assumes underwriters' over-allotment option is fully exercised, and Apollo
   Investment Fund IV, L.P. and Apollo Overseas Partners IV, L.P. sell 660,000
   shares in the aggregate to satisfy the underwriters' over-allotment option.

                                        41
<PAGE>   46

                          DESCRIPTION OF CAPITAL STOCK

GENERAL

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

     Pursuant to our certificate of incorporation, we are authorized to issue
50,000,000 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,
2001, 25,185,314 shares of common stock were outstanding and 284,412 shares of
Series A preferred stock were outstanding. No other series of preferred stock is
outstanding. On March 20, 2001, our board of directors adopted a resolution to
amend our certificate of incorporation to increase the number of authorized
shares of common stock to 125,000,000. This amendment will be considered by our
stockholders at our 2001 annual meeting to be held on May 15, 2001.

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

                                        42
<PAGE>   47

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. We will, however, be required to pay cash dividends to the Series A
preferred stockholders starting in 2003. We would need a waiver or an amendment
by the lenders under the senior credit facilities, as the credit agreement does
not currently permit cash dividends. Failure to comply with the terms of the
Series A preferred stock could result in an event of default under the senior
credit facilities as well. In addition, although the restrictions in the
indenture for our subordinated notes would not at present prohibit the payment
of cash dividends to the holders of our Series A preferred stock, there is no
guarantee that the indenture requirements would continue to be met from 2003
onward. For each quarter between October 1, 2000 until September 30, 2001,
dividends shall not be paid or accrued on any share of Series A preferred stock
for 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 $55.87.
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 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.

     The Series A preferred stock contains antidilution provisions that reduce
the conversion price if, among other things, we sell common stock at a price to
public lower than the average closing price for the previous 15 trading days.
Changes in the conversion price of less than 1% do not get made immediately, but
cumulate in determining future conversion price adjustments. The price to public
would have to be approximately 12.4% lower than the average closing price for
the previous 15 days for this offering to result in a 1% ($.28 per share)
reduction in the conversion price. A 1% decrease in the conversion price would
result in the issuance of approximately an additional 103,000 shares 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
2,983,116 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.

                                        43
<PAGE>   48

     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 prior to August 5, 2001 in which the selling
           price is equal to or greater than $55.87, subject to certain
           adjustments;

      --   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 RC Acquisition
Corp., an affiliate of Bear, Stearns & Co. The
                                        44
<PAGE>   49

registration rights agreement with the Apollo entities grants the Apollo
entities the right 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. We
will be obligated to effect only two registrations upon one of these requests by
holders of registration rights. The registration rights agreements with the
Apollo entities and RC Acquisition Corp. 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 pursuant to
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 of 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 284,412 were outstanding
as of March 31, 2001. 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 pursuant to 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

                                        45
<PAGE>   50

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.

                                        46
<PAGE>   51

                        SHARES ELIGIBLE FOR FUTURE SALE

     The 4,400,000 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" 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 6,200,000 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 pursuant to our Long-Term Incentive Plan will be
freely tradable, subject to the restrictions on resale by affiliates under Rule
144. We intend to increase the number of shares reserved for issuance under our
Long Term Incentive Plan from 6,200,000 to 7,900,000.

     We have previously entered into registration rights agreements with Apollo
Investment Fund IV, L.P., Apollo Overseas Partners IV, L.P. and RC Acquisition
Corp., an affiliate of Bear, Stearns & Co. Inc. These agreements provide Apollo
and RC Acquisition Corp. 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.

                                        47
<PAGE>   52

                                  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, Bear, Stearns & Co. Inc., Lehman
Brothers Inc. and The Robinson-Humphrey Company, LLC are acting as
representatives, have severally agreed to purchase, and we and the selling
stockholders have severally agreed to sell to them, the number of shares of our
common stock indicated.

<TABLE>
<CAPTION>
                                                             NUMBER
NAME                                                        OF SHARES
----                                                        ---------
<S>                                                         <C>
Morgan Stanley & Co. Incorporated........................
Bear, Stearns & Co. Inc..................................
Lehman Brothers Inc......................................
The Robinson-Humphrey Company, LLC.......................

                                                            ---------
          Total..........................................   4,400,000
                                                            =========
</TABLE>

     The underwriters are offering the shares of common stock subject to their
acceptance of the shares from us and 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 offered by this prospectus 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.

     We, the selling stockholders or Apollo Investment Fund IV, L.P. and Apollo
Overseas Partners IV, L.P., at their option, have granted to the underwriters an
option, exercisable for 30 days from the date of this prospectus, to purchase up
to an aggregate of 660,000 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 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 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           would be $          before
deducting estimated offering expenses of $          .

     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 or otherwise transfer or dispose
           of directly or indirectly, any shares of common stock or any
           securities convertible into or exercisable or

                                        48
<PAGE>   53

           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;

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

      --   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 a merger, sale of stock or otherwise;
           or

      --   securities issued by us in connection with the acquisition of any
           business.

     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 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.

                                        49
<PAGE>   54

                                 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, 1999 and 2000, and for each of
the three years in the period ended December 31, 2000, included and incorporated
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.

                      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,
           2000;

      --   The portions of our proxy statement for our 2001 annual meeting of
           our stockholders that have been incorporated by reference into our
           annual report; 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

                                        50
<PAGE>   55

                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
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-8
</TABLE>

                                       F-1
<PAGE>   56

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

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

     We have audited the accompanying consolidated balance sheets of
Rent-A-Center, Inc. and Subsidiaries as of December 31, 2000 and 1999, and the
related consolidated statements of earnings, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 2000. 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 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, 2000 and 1999, and the consolidated
results of their operations and their consolidated cash flows for each of the
three years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America.

                                            GRANT THORNTON LLP

Dallas, Texas
February 9, 2001

                                       F-2
<PAGE>   57

                      RENT-A-CENTER, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                              -----------------------
                                                                 1999         2000
                                                              ----------   ----------
<S>                                                           <C>          <C>
                                       ASSETS

Cash and cash equivalents...................................  $   21,679   $   36,495
  Accounts receivable--trade................................       3,883        3,254
  Prepaid expenses and other assets.........................      27,867       31,805
  Rental merchandise, net
     On rent................................................     425,469      477,095
     Held for rent..........................................     105,754      110,137
  Property assets, net......................................      82,657       87,168
  Deferred income taxes.....................................     110,367       32,628
  Intangible assets, net....................................     707,324      708,328
                                                              ----------   ----------
                                                              $1,485,000   $1,486,910
                                                              ==========   ==========

                                     LIABILITIES

Accounts payable--trade.....................................  $   53,452   $   65,696
Accrued liabilities.........................................     106,796       89,560
Senior debt.................................................     672,160      566,051
Subordinated notes payable..................................     175,000      175,000
                                                              ----------   ----------
                                                               1,007,408      896,307
COMMITMENTS AND CONTINGENCIES...............................          --           --
PREFERRED STOCK
  Redeemable convertible voting preferred stock, net of
     placement costs, $.01 par value; 5,000,000 shares
     authorized; 271,426 and 281,756 shares issued and
     outstanding in 1999 and 2000, respectively.............     270,902      281,232
STOCKHOLDERS' EQUITY
  Common stock, $.01 par value; 50,000,000 shares
     authorized; 25,297,458 and 25,700,058 shares issued in
     1999 and 2000, respectively............................         253          257
  Additional paid-in capital................................     105,627      115,607
  Retained earnings.........................................     125,810      218,507
                                                              ----------   ----------
  Treasury stock, 990,099 shares at cost....................     (25,000)     (25,000)
                                                              ----------   ----------
                                                                 206,690      309,371
                                                              ----------   ----------
                                                              $1,485,000   $1,486,910
                                                              ==========   ==========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       F-3
<PAGE>   58

                      RENT-A-CENTER, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF EARNINGS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                            ----------------------------------
                                                              1998        1999         2000
                                                            --------   ----------   ----------
<S>                                                         <C>        <C>          <C>
Revenues
  Store
     Rentals and fees.....................................  $711,443   $1,270,885   $1,459,664
     Merchandise sales....................................    41,456       88,516       81,166
     Other................................................     7,282        2,177        3,018
  Franchise
     Merchandise sales....................................    44,365       49,696       51,769
     Royalty income and fees..............................     5,170        5,893        5,997
                                                            --------   ----------   ----------
                                                             809,716    1,417,167    1,601,614
Operating expenses
  Direct store expenses
     Depreciation of rental merchandise...................   164,651      265,486      299,298
     Cost of merchandise sold.............................    32,056       74,027       65,332
     Salaries and other expenses..........................   423,750      770,572      866,234
  Franchise cost of merchandise sold......................    42,886       47,914       49,724
                                                            --------   ----------   ----------
                                                             663,343    1,157,999    1,280,588
  General and administrative expenses.....................    28,715       42,029       48,093
  Amortization of intangibles.............................    15,345       27,116       28,303
  Class action litigation settlements.....................    11,500           --      (22,383)
                                                            --------   ----------   ----------
          Total operating expenses........................   718,903    1,227,144    1,334,601
                                                            --------   ----------   ----------
          Operating profit................................    90,813      190,023      267,013
Interest expense..........................................    39,144       75,673       74,324
Non-recurring financing costs.............................     5,018           --           --
Interest income...........................................    (2,004)        (904)      (1,706)
                                                            --------   ----------   ----------
          Earnings before income taxes....................    48,655      115,254      194,395
Income tax expense........................................    23,897       55,899       91,368
                                                            --------   ----------   ----------
          Net earnings....................................    24,758       59,355      103,027
Preferred dividends.......................................     3,954       10,039       10,420
                                                            --------   ----------   ----------
Net earnings allocable to common stockholders.............  $ 20,804   $   49,316   $   92,607
                                                            ========   ==========   ==========
Basic earnings per common share...........................  $   0.84   $     2.04   $     3.79
                                                            ========   ==========   ==========
Diluted earnings per common share.........................  $   0.83   $     1.74   $     2.96
                                                            ========   ==========   ==========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       F-4
<PAGE>   59

                      RENT-A-CENTER, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                  FOR THE THREE YEARS ENDED DECEMBER 31, 2000
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                  COMMON STOCK     ADDITIONAL
                                 ---------------    PAID-IN     RETAINED   TREASURY
                                 SHARES   AMOUNT    CAPITAL     EARNINGS    STOCK      TOTAL
                                 ------   ------   ----------   --------   --------   --------
<S>                              <C>      <C>      <C>          <C>        <C>        <C>
Balance at January 1, 1998.....  24,905    $249     $ 99,381    $53,123    $     --   $152,753
  Net earnings.................     --       --           --     24,758          --     24,758
  Purchase of treasury stock--
     990 shares................     --       --           --         --     (25,000)   (25,000)
  Exercise of stock options....    169        2        1,872         --          --      1,874
  Tax benefits related to
     exercise of stock
     options...................     --       --          528         --          --        528
                                 ------    ----     --------    --------   --------   --------
Balance at December 31, 1998...  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
                                 ======    ====     ========    ========   ========   ========
</TABLE>

         The accompanying notes are an integral part of this statement.

                                       F-5
<PAGE>   60

                      RENT-A-CENTER, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                            ----------------------------------
                                                               1998        1999        2000
                                                            ----------   ---------   ---------
<S>                                                         <C>          <C>         <C>
Cash flows from operating activities
  Net earnings............................................  $   24,758   $  59,355   $ 103,027
  Adjustments to reconcile net earnings to net cash
     provided by (used in) operating activities
     Depreciation of rental merchandise...................     164,651     265,486     299,298
     Depreciation of property assets......................      17,482      31,313      33,144
     Amortization of intangibles..........................      15,345      27,116      28,303
     Non-recurring charges--loss on assets related to name
       change.............................................       2,451          --          --
     Amortization of financing fees.......................       1,326       2,608       2,705
Changes in operating assets and liabilities, net of
  effects of acquisitions
     Rental merchandise...................................    (171,263)   (387,903)   (342,233)
     Accounts receivable--trade...........................        (155)       (587)        629
     Prepaid expenses and other assets....................       5,240       6,522      (6,624)
     Deferred income taxes................................      20,565      64,231      77,738
     Accounts payable--trade..............................     (27,508)      9,584      12,197
     Accrued liabilities..................................     (46,492)   (106,975)    (16,621)
                                                            ----------   ---------   ---------
          Net cash provided by (used in) operating
            activities....................................       6,400     (29,250)    191,563
Cash flows from investing activities
  Purchase of property assets.............................     (21,860)    (36,211)    (37,937)
  Proceeds from sale of property assets...................         740       8,563       1,403
  Acquisitions of businesses, net of cash acquired........    (947,655)         --     (42,538)
                                                            ----------   ---------   ---------
          Net cash used in investing activities...........    (968,775)    (27,648)    (79,072)
                                                            ----------   ---------   ---------
Cash flows from financing activities
  Purchase of treasury stock..............................     (25,000)         --          --
  Financing fees paid.....................................     (24,017)         --          --
  Proceeds from issuance of preferred stock, net of
     issuance costs.......................................     259,476          --          --
  Exercise of stock options...............................       1,874       3,320       8,434
  Proceeds from debt......................................   1,258,464     320,815     242,975
  Repayments of debt......................................    (479,369)   (279,355)   (349,084)
                                                            ----------   ---------   ---------
          Net cash provided by (used in) financing
            activities....................................     991,428      44,780     (97,675)
                                                            ----------   ---------   ---------
          Net increase (decrease) in cash and cash
            equivalents...................................      29,053     (12,118)     14,816
Cash and cash equivalents at beginning of year............       4,744      33,797      21,679
                                                            ----------   ---------   ---------
Cash and cash equivalents at end of year..................  $   33,797   $  21,679   $  36,495
                                                            ==========   =========   =========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       F-6
<PAGE>   61

                      RENT-A-CENTER, INC. AND SUBSIDIARIES

              CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
                                                              --------------------------------
                                                                 1998         1999      2000
                                                              -----------   --------   -------
<S>                                                           <C>           <C>        <C>
Supplemental cash flow information
  Cash paid during the year for:
     Interest...............................................  $    26,091   $ 76,653   $75,956
     Income taxes...........................................  $    10,212   $  4,631   $ 9,520
Supplemental schedule of non-cash investing and financing
  activities
  Fair value of assets acquired, including cash of $56,027
     in 1998................................................  $ 1,340,480   $     --   $42,538
  Cash paid.................................................   (1,003,682)        --    42,538
                                                              -----------   --------   -------
  Liabilities assumed.......................................  $   336,798   $     --   $    --
                                                              ===========   ========   =======
</TABLE>

During 1999 and 2000, the Company paid preferred dividends of approximately
$11.4 million and $10.3 million by issuing 11,426 and 10,330 shares of preferred
stock, respectively.

        The accompanying notes are an integral part of these statements.

                                       F-7
<PAGE>   62

                      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, 2000, the Company operated 2,158 stores which were located
throughout the 50 United States, the District of Columbia and the Commonwealth
of Puerto Rico.

     ColorTyme, Inc. (ColorTyme), the only subsidiary with substantive
operations, is a nationwide franchisor of 364 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 18 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 the Company 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-8
<PAGE>   63
                      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 $37.2 million, $55.8 million, and $61.2
million in 1998, 1999 and 2000, 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
(APB 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 at the time of grant.

  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 and 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-9
<PAGE>   64
                      RENT-A-CENTER, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

  DERIVATIVE FINANCIAL INSTRUMENTS

     The Company uses interest rate swap agreements to manage interest rate risk
on its variable rate debt. Amounts due to or from counterparties are recorded in
interest income or expense as incurred.

  PROSPECTIVE ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities. In June 1999, the FASB issued Statement No.
137, Accounting for Derivative Instruments and Hedging Activities--Deferral of
the Effective Date of FASB Statement No. 133. In June 2000, the FASB issued
Statement 138, Accounting for Certain Derivative Instruments and Certain Hedging
Activities, an amendment of FASB Statement No. 133. Statement 133, as amended,
establishes accounting and reporting standards requiring that every derivative
instrument be recorded in the balance sheet as either an asset or liability
measured at its fair value. The statement requires that changes in the
derivative instrument's fair value be recognized currently in earnings unless
specific hedge accounting criteria are met. Special accounting for qualifying
hedges allows a derivative instrument's gains and losses to offset related
results on the hedged item in the income statement, to the extent effective, and
requires that a company must formally document, designate and assess the
effectiveness of transaction that receive hedge accounting. Statement 133, as
amended, is effective for fiscal years beginning after June 15, 2000 and will be
adopted by the Company on January 1, 2001.

     As of December 31, 2000, the Company has identified and designated the
interest rate swap agreements as derivatives that qualify as hedges under
Statement 133, as amended. The Company has only interest rate swap agreements
that qualify as derivatives under Statement 133, as amended, and the effects of
implementation of this statement as of January 1, 2001 are not expected to have
a material impact on the Company's financial position, results of operations or
cash flows. If Statement 133 were applied to the Company's derivative contracts
in place at December 31, 2000, the fair value of the contracts would increase
assets by approximately $2.6 million with an offsetting amount of $2.6 million
recorded in accumulated other comprehensive income.

  RECLASSIFICATIONS

     Certain reclassifications have been made to prior year financial
information in order to conform to the 2000 presentation.

NOTE B--ACQUISITIONS

     On August 5, 1998, the Company acquired all of the outstanding common stock
of Thorn Americas, Inc. (Thorn), which operated 1,409 stores, for approximately
$900 million in cash. The acquisition, together with the increased working
capital requirements of the combined entity, was financed via $720 million in
variable-rate senior debt maturing in 6 to 8.5 years, $175 million of 11% senior
subordinated debt maturing in 10 years, and $260 million of redeemable
convertible voting preferred stock. The purchase price exceeded the fair value
of net assets acquired, as adjusted below, by approximately $596 million, which
has been recorded as goodwill and is being amortized over 30 years.

     During 1999, goodwill relating to the Thorn acquisition was increased by
approximately $5.4 million as a result of downward adjustments to the fair value
of the net assets acquired, the largest of which was a $3.8 million decrease in
deferred tax assets (Note J).

     In conjunction with the Thorn acquisition, the Company terminated
substantially all of the existing Thorn home office employees (approximately
550), and discontinued using Thorn's distribution facilities. As a result, at
acquisition the Company recorded liabilities for employee termination costs,
primarily related to severance agreements, of approximately $21.4 million and
costs associated with the discontinued use of leased
                                       F-10
<PAGE>   65
                      RENT-A-CENTER, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

distribution and store facilities of approximately $18.4 million. As of December
31, 2000, all of the termination costs and $15.5 million of the costs associated
with the discontinued use of the leased distribution and store facilities had
been paid.

     At acquisition, the Company recorded an accrual of approximately $125
million for estimated probable losses on Thorn litigation, including $34.5
million related to Fogie v. Thorn Americas, Inc. and Willis v. Thorn Americas,
Inc. The Company was indemnified by the seller for losses relating to the Fogie
and Willis cases, and had recorded a corresponding receivable. As of December
31, 2000 approximately $110 million has been paid in settlement of certain of
the acquired litigation. Details regarding acquired litigation and related
settlements are described in Note K.

     In May 1998, the Company acquired substantially all of the assets of
Central Rents, Inc. (Central Rents), which consisted of 176 stores, for
approximately $100 million in cash. The purchase price exceeded the fair value
of assets acquired by approximately $72 million, which has been recorded as
goodwill and is being amortized over 30 years.

     The Company also acquired the assets of 52 stores in 14 separate
transactions during 1998 for approximately $26.4 million. All acquisitions have
been accounted for as purchases, and the operating results of the acquired
businesses have been included in the financial statements of the Company since
their date of acquisition.

     For the year ending December 31, 2000 the Company acquired 74 stores in 19
separate transactions for an aggregate of approximately $42.5 million in cash.

NOTE C--RENTAL MERCHANDISE

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       2000
                                                              --------   --------
                                                                (IN THOUSANDS)
<S>                                                           <C>        <C>
On rent
  Cost......................................................  $633,360   $768,590
  Less accumulated depreciation.............................   207,891    291,495
                                                              --------   --------
                                                              $425,469   $477,095
                                                              ========   ========
Held for rent
  Cost......................................................  $122,984   $136,850
  Less accumulated depreciation.............................    17,230     26,713
                                                              --------   --------
                                                              $105,754   $110,137
                                                              ========   ========
</TABLE>

NOTE D--PROPERTY ASSETS

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                              ---------------------
                                                                1999         2000
                                                              --------     --------
                                                                 (IN THOUSANDS)
<S>                                                           <C>          <C>
Furniture and equipment.....................................  $ 57,879     $ 71,024
Transportation equipment....................................    29,498       29,500
Building and leasehold improvements.........................    43,009       61,439
Construction in progress....................................       786        3,300
                                                              --------     --------
                                                               131,172      165,263
Less accumulated depreciation...............................    48,515       78,095
                                                              --------     --------
                                                              $ 82,657     $ 87,168
                                                              ========     ========
</TABLE>

                                       F-11
<PAGE>   66
                      RENT-A-CENTER, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE E--INTANGIBLE ASSETS

<TABLE>
<CAPTION>
                                                                             DECEMBER 31,
                                                           AMORTIZATION   -------------------
                                                              PERIOD        1999       2000
                                                           ------------   --------   --------
                                                                            (IN THOUSANDS)
<S>                                                        <C>            <C>        <C>
Noncompete agreements....................................   2-5 years     $  5,152   $  5,152
Franchise network........................................    10 years        3,000      3,000
Goodwill.................................................  20-30 years     748,251    775,797
Other....................................................    Various           142      1,899
                                                                          --------   --------
                                                                           756,545    785,848
Less accumulated amortization............................                   49,221     77,520
                                                                          --------   --------
                                                                          $707,324   $708,328
                                                                          ========   ========
</TABLE>

NOTE F--SENIOR DEBT

     In conjunction with the acquisition of Thorn, the Company entered into a
Senior Credit Facility (the Facility) with a syndicate of banks. The Company
also has other debt facilities. Senior debt consists of the following:

<TABLE>
<CAPTION>
                                                      DECEMBER 31, 1999                    DECEMBER 31, 2000
                                              ----------------------------------   ----------------------------------
                                   FACILITY   MAXIMUM      AMOUNT       AMOUNT     MAXIMUM      AMOUNT       AMOUNT
                                   MATURITY   FACILITY   OUTSTANDING   AVAILABLE   FACILITY   OUTSTANDING   AVAILABLE
                                   --------   --------   -----------   ---------   --------   -----------   ---------
                                                                     (IN THOUSANDS)
<S>                                <C>        <C>        <C>           <C>         <C>        <C>           <C>
Senior Credit Facility:
  Term Loan "A"..................    2004     $99,443     $ 99,443      $    --    $    --     $     --      $    --
  Term Loan "B"..................    2006     222,918      222,918           --    203,300      203,300           --
  Term Loan "C"..................    2007     272,639      272,639           --    248,815      248,815           --
  Term Loan "D"(2)...............    2007          --           --           --    113,936      113,936           --
  Revolver(1)....................    2004     120,000       16,500       64,800    120,000           --       76,272
  Letter of Credit/Multi-Draw....              85,000       59,950       25,050         --           --           --
                                              --------    --------      -------    --------    --------      -------
                                              800,000      671,450       89,850    686,051      566,051       76,272
Other Indebtedness:
  Line of credit.................               5,000          710        4,290      5,000           --        5,000
                                              --------    --------      -------    --------    --------      -------
Total Debt Facilities............             $805,000    $672,160      $94,140    $691,051    $566,051      $81,272
                                              ========    ========      =======    ========    ========      =======
</TABLE>

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

(1) As at December 31, 1999 and 2000 the amounts available under the Company's
    revolver facility were reduced by approximately $38.7 million and $43.7
    million, respectively, for outstanding letters of credit. These letters of
    credit are used to support the Company's insurance obligations.

(2) On June 29, 2000, we refinanced a portion of our senior credit facility by
    adding a new $125 million Term D tranche to our existing facility. 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 0.25%
to 1.75% over the designated prime rate (9.50% per annum at December 31, 2000)
or 1.25% to 2.75% over LIBOR (6.55% at December 31, 2000) at the Company's
option, and are subject to quarterly adjustments based on certain leverage
ratios. At December 31, 1999 and 2000, the average rate on outstanding
borrowings was 8.78% and 8.95%, respectively. 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 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.

                                       F-12
<PAGE>   67
                      RENT-A-CENTER, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

     During 1998, the Company entered into three interest rate swap agreements
to limit the effect of increases in interest rates. These agreements expire in
2001 and 2003, and have an aggregate notional principal amount of $500 million.
The effect of these agreements is to limit the Company's interest rate exposure
by fixing the LIBOR rate at 5.59%. The agreements had no cost to the Company,
and at December 31, 1999 and 2000 they had aggregate fair values of $14.5
million and $2.6 million, respectively.

     The following are scheduled maturities of senior debt at December 31, 2000:

<TABLE>
<CAPTION>
                     YEAR ENDING
                    DECEMBER 31,
                    ------------                       (IN THOUSANDS)
<S>                                                    <C>
2001.................................................     $  2,651
2002.................................................        2,651
2003.................................................        2,651
2004.................................................       38,977
2005.................................................      147,955
Thereafter...........................................      371,166
                                                          --------
                                                          $566,051
                                                          ========
</TABLE>

NOTE G--SUBORDINATED NOTES PAYABLE

     During 1998, the Company issued $175.0 million of subordinated notes,
maturing on August 15, 2008. The notes require semi-annual interest-only
payments at 11%, and are guaranteed by the Company's two principal subsidiaries.
The notes are redeemable at the Company'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. In addition, prior to August 15, 2001,
the Company may redeem up to 33.33% of the original aggregate principal with the
cash proceeds of one or more equity offerings, at a redemption price of 111%.
Upon a change of control, the holders of the subordinated notes have the right
to require the Company to redeem the notes.

     The notes contain restrictive covenants, as defined therein, including a
consolidated interest coverage ratio and limitations on additional indebtedness
and restricted payments.

     The $5.0 million non-recurring financing costs expensed during 1998, relate
to fees paid for bridge financing necessary to complete the Thorn acquisition,
which was subsequently replaced with the subordinated notes.

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

                                       F-13
<PAGE>   68
                      RENT-A-CENTER, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

     Set forth below is certain condensed consolidating financial information
(within the meaning of Rule 3-10 of Regulation S-X) as of December 31, 1999 and
2000, and for each of the three years in the period ended December 31, 2000. The
financial information includes the Guarantors from the dates they were acquired
or formed by the Company and is presented using the push-down basis of
accounting.

<TABLE>
<CAPTION>
                                              PARENT     SUBSIDIARY   CONSOLIDATING
                                             COMPANY     GUARANTORS    ADJUSTMENTS      TOTALS
                                            ----------   ----------   -------------   ----------
                                                               (IN THOUSANDS)
<S>                                         <C>          <C>          <C>             <C>
Condensed consolidating balance sheets
1999
Rental merchandise, net...................  $  531,223    $     --      $      --     $  531,223
Intangible assets, net....................     337,486     369,838             --        707,324
Other assets..............................     601,229      10,261       (365,037)       246,453
                                            ----------    --------      ---------     ----------
          Total assets....................  $1,469,938    $380,099      $(365,037)    $1,485,000
                                            ==========    ========      =========     ==========
Senior Debt...............................  $  672,160    $     --      $      --     $  672,160
Other liabilities.........................     328,714       6,534             --        335,248
Preferred stock...........................     270,902          --             --        270,902
Stockholder's equity......................     198,162     373,565       (365,037)       206,690
                                            ----------    --------      ---------     ----------
          Total liabilities and equity....  $1,469,938    $380,099      $(365,037)    $1,485,000
                                            ==========    ========      =========     ==========
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
                                            ==========    ========      =========     ==========
</TABLE>

<TABLE>
<CAPTION>
                                                            PARENT     SUBSIDIARY
                                                           COMPANY     GUARANTORS     TOTAL
                                                          ----------   ----------   ----------
                                                                     (IN THOUSANDS)
<S>                                                       <C>          <C>          <C>
Condensed consolidating statements of earnings
1998
Total revenues..........................................  $  760,181    $49,535     $  809,716
Direct store expenses...................................     620,457         --        620,457
Other...................................................     121,615     42,886        164,501
                                                          ----------    -------     ----------
Net earnings (loss).....................................  $   18,109    $ 6,649     $   24,758
                                                          ==========    =======     ==========
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
                                                          ==========    =======     ==========
</TABLE>

                                       F-14
<PAGE>   69
                      RENT-A-CENTER, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

<TABLE>
<CAPTION>
                                                            PARENT     SUBSIDIARY
                                                           COMPANY     GUARANTORS     TOTAL
                                                          ----------   ----------   ----------
                                                                     (IN THOUSANDS)
<S>                                                       <C>          <C>          <C>
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
                                                          ==========    =======     ==========
</TABLE>

NOTE H--ACCRUED LIABILITIES

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              ------------------
                                                                1999      2000
                                                              --------   -------
                                                                (IN THOUSANDS)
<S>                                                           <C>        <C>
Taxes other than income.....................................  $ 19,228   $20,306
Accrued litigation costs....................................    19,163    14,753
Accrued insurance costs.....................................    22,473    28,929
Accrued compensation and other..............................    45,932    25,572
                                                              --------   -------
                                                              $106,796   $89,560
                                                              ========   =======
</TABLE>

NOTE I--REDEEMABLE CONVERTIBLE VOTING PREFERRED STOCK

     During 1998, the Company issued 260,000 shares of redeemable convertible
voting preferred stock at $1,000 per share, resulting in aggregate proceeds of
$260.0 million. Placement costs of approximately $0.5 million were charged
against these proceeds to arrive at the original carrying value.

     The preferred stock is convertible, at any time, into shares of the
Company'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 preferred stock have received the liquidation preference.
Dividends accrue on a quarterly basis, at the rate of $37.50 per annum, per
share. Under the terms of the preferred stock, preferred dividends are payable
at the Company's option in cash or additional preferred stock until 2003, after
which dividends must be paid in cash. During 1999 and 2000, the Company paid
approximately $11.4 million and $10.3 million in preferred dividends by issuing
11,426 and 10,330 shares of preferred stock, respectively.

     The preferred stock is not redeemable until 2002, after which time the
Company may, at its option, redeem the shares at 105% of the liquidation
preference plus accrued and unpaid dividends. Holders of the preferred stock
have the right to require the Company to redeem the preferred stock upon a
change of control, if the Company 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 preferred stock, at a price equal to
the liquidation preference value.

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

                                       F-15
<PAGE>   70
                      RENT-A-CENTER, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE J--INCOME TAXES

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

<TABLE>
<CAPTION>
                                                                    YEAR ENDED
                                                                   DECEMBER 31,
                                                              ----------------------
                                                              1998     1999     2000
                                                              ----     ----     ----
                                                                  (IN THOUSANDS)
<S>                                                           <C>      <C>      <C>
Tax at statutory rate.......................................  35.0%    35.0%    35.0%
State income taxes, net of federal benefit..................  5.1%     5.5%      5.5%
Effect of foreign operations, net of foreign tax credits....  0.3%     0.3%      0.2%
Goodwill amortization.......................................  7.3%     6.4%      5.0%
Other, net..................................................  1.4%     1.3%      1.3%
                                                              ----     ----     ----
          Total.............................................  49.1%    48.5%    47.0%
                                                              ====     ====     ====
</TABLE>

     The components of the income tax provision are as follows:

<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31,
                                                         ----------------------------
                                                          1998       1999      2000
                                                         -------   --------   -------
                                                                (IN THOUSANDS)
<S>                                                      <C>       <C>        <C>
Current expense (benefit)
  Federal..............................................  $    --   $(10,770)  $ 6,099
  State................................................    1,756        815     5,637
  Foreign..............................................    1,576      1,623     1,894
                                                         -------   --------   -------
          Total current................................    3,332     (8,332)   13,630
                                                         -------   --------   -------
Deferred expense
  Federal..............................................   18,377     57,342    68,406
  State................................................    2,188      6,889     9,332
                                                         -------   --------   -------
          Total deferred...............................   20,565     64,231    77,738
                                                         -------   --------   -------
          Total........................................  $23,897   $ 55,899   $91,368
                                                         =======   ========   =======
</TABLE>

     Deferred tax assets and liabilities consist of the following:

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       2000
                                                              --------   --------
<S>                                                           <C>        <C>
Deferred tax assets
  Net operating loss carryforwards..........................  $ 91,232   $ 41,515
  Accrued expenses..........................................    27,005     25,667
  Intangible assets.........................................    25,285     22,119
  Property assets...........................................    17,530     18,644
  Other tax credit carryforwards............................     2,835      5,436
  Other.....................................................       311         --
                                                              --------   --------
                                                               164,198    113,381
Deferred tax liability
  Rental merchandise........................................   (53,831)   (80,753)
                                                              --------   --------
          Net deferred tax asset............................  $110,367   $ 32,628
                                                              ========   ========
</TABLE>

                                       F-16
<PAGE>   71
                      RENT-A-CENTER, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

     The Company has Federal net operating loss carryforwards of approximately
$104 million at December 31, 2000, including $10.8 of Federal net operating loss
carryforwards which were acquired in connection with purchased companies. The
utilization of the acquired losses is limited to approximately $3.5 million per
year. The Company also has various state net operating loss carryforwards. If
not utilized, all net operating loss carryforwards will expire between 2005 and
2019.

     The Company has alternative minimum tax credit carryforwards and foreign
tax credit carryforwards aggregating approximately $5.4 million.

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

NOTE K--COMMITMENTS AND CONTINGENCIES

     The Company leases its office and store facilities and certain delivery
vehicles. Rental expense was $51.4 million, $96.8 million and $105.6 million for
1998, 1999, and 2000, respectively. Future minimum rental payments under
operating leases with remaining non-cancelable lease terms in excess of one year
at December 31, 2000 are as follows:

<TABLE>
<CAPTION>
                     YEAR ENDING
                    DECEMBER 31,                       (IN THOUSANDS)
                    ------------                       --------------
<S>                                                    <C>
2001.................................................     $102,713
2002.................................................      101,358
2003.................................................       97,323
2004.................................................       96,121
2005.................................................       92,219
Thereafter...........................................        7,800
                                                          --------
                                                          $497,534
                                                          ========
</TABLE>

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

     Murray v. Rent-A-Center, Inc.  In May 1999, the plaintiffs filed this class
action lawsuit in Missouri, alleging that the Company discriminated against
African Americans in its hiring, compensation, promotion and termination
policies. Plaintiffs alleged no specific amount of damages in their complaint.
The Company believes that the plaintiffs' claims are without merit and intends
to vigorously defend this action. However, given the early stage of this
proceeding, there can be no assurance that the Company will prevail without
liability.

     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
compensatory damages, punitive damages, interest, attorney's fees and certain
injunctive relief. Although the Company intends to vigorously defend itself in
this action, the ultimate outcome cannot presently be determined, and there can
be no assurance that the Company will prevail without liability.

     Wisconsin Attorney General Proceeding.  In August 1999, the Wisconsin
Attorney General filed suit against the Company 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. The Company
intends to vigorously defend itself in this matter. However, there can be no
assurance that the Company will prevail without liability.

                                       F-17
<PAGE>   72
                      RENT-A-CENTER, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

     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 the Company 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. The Company
intends to vigorously defend itself in this matter. However, given the early
stage of these proceedings, there can be no assurance that the Company 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.

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

     In addition, Fogie v. Thorn Americas, Inc., was acquired in the Thorn
acquisition; however, the Company 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 judgment against Thorn 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.

     As part of the ongoing financing arrangement with a credit corporation,
ColorTyme's franchisees can obtain debt financing. ColorTyme provides a limited
guarantee for amounts outstanding under this arrangement.

NOTE L--STOCK BASED COMPENSATION

     The Company's 1994 long-term incentive plan (the Plan) for the benefit of
certain key employees and directors provides the Board of Directors broad
discretion in creating employee equity incentives. Under the plan, up to
6,200,000 shares of the Company's common shares may be 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, 2000, there were
873,163 shares reserved for issuance under the Plan.

                                       F-18
<PAGE>   73
                      RENT-A-CENTER, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

     Information with respect to stock option activity is as follows:

<TABLE>
<CAPTION>
                                   1998                   1999                    2000
                           --------------------   ---------------------   ---------------------
                                       WEIGHTED                WEIGHTED                WEIGHTED
                                       AVERAGE                 AVERAGE                 AVERAGE
                                       EXERCISE                EXERCISE                EXERCISE
                            SHARES      PRICE       SHARES      PRICE       SHARES      PRICE
                           ---------   --------   ----------   --------   ----------   --------
<S>                        <C>         <C>        <C>          <C>        <C>          <C>
Outstanding at beginning
  of year...............   1,324,250    $16.39     3,493,763    $23.96     3,590,038    $23.57
Granted.................   2,680,000     26.65     2,042,250     24.42     1,782,500     24.40
Exercised...............    (168,862)     8.95      (173,875)    12.05      (427,700)    21.34
Forfeited...............    (341,625)    18.28    (1,772,100)    24.81    (1,154,563)    23.60
                           ---------              ----------              ----------
Outstanding at end of
  year..................   3,493,763    $23.96     3,590,038    $23.57     3,790,275    $24.32
                           =========              ==========              ==========
Options exercisable at
  end of year...........     377,263    $16.43       819,739    $20.78     1,097,961    $23.04
</TABLE>

     The weighted average fair value per share of options granted during 1998,
1999 and 2000 was $15.22 $14.38, and $14.97, respectively, all of which were
granted at market value. Information about stock options outstanding at December
31, 2000 is summarized as follows:

<TABLE>
<CAPTION>
                                                     OPTIONS OUTSTANDING
                                      -------------------------------------------------
                                                    WEIGHTED AVERAGE
              RANGE OF                  NUMBER         REMAINING       WEIGHTED AVERAGE
          EXERCISE PRICES             OUTSTANDING   CONTRACTUAL LIFE    EXERCISE PRICE
          ---------------             -----------   ----------------   ----------------
<S>                                   <C>           <C>                <C>
$3.34 to $6.67......................      95,450       4.32 years           $ 6.53
$6.68 to $18.50.....................     660,250       8.28 years           $16.27
$18.51 to $28.50....................   2,319,450       8.21 years           $24.75
$28.51 to $33.88....................     715,125       9.21 years           $32.73
                                       ---------
                                       3,790,275
                                       =========
</TABLE>

<TABLE>
<CAPTION>
                                                             OPTIONS EXERCISABLE
                                                        ------------------------------
                      RANGE OF                            NUMBER      WEIGHTED AVERAGE
                   EXERCISE PRICES                      EXERCISABLE    EXERCISE PRICE
                   ---------------                      -----------   ----------------
<S>                                                     <C>           <C>
$3.34 to $6.67.......................................       96,650         $ 6.53
$6.68 to $18.50......................................      169,300         $16.35
$18.51 to $28.50.....................................      747,636         $25.85
$28.51 to $30.50.....................................       84,375         $30.50
                                                         ---------
                                                         1,097,961
                                                         =========
</TABLE>

     During 2000 the Company charged $65,000 to expense as a result of 25,000
options granted to non-employees for services.

     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 the Company's stock at the
date of grant over the amount an employee must pay to acquire the stock.
Compensation costs for all other stock-based compensation is accounted for under
SFAS 123. If the Company had elected to recognize compensation expense based
upon the fair value at the grant date for options under the Plan consistent with
the

                                       F-19
<PAGE>   74
                      RENT-A-CENTER, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

methodology prescribed by SFAS 123, the Company's 1998, 1999 and 2000 net
earnings and earnings per common share would be reduced to the pro forma amounts
indicated as follows:

<TABLE>
<CAPTION>
                                                            YEAR ENDED DECEMBER 31,
                                                          ---------------------------
                                                           1998      1999      2000
                                                          -------   -------   -------
                                                             (IN THOUSANDS, EXCEPT
                                                                PER SHARE DATA)
<S>                                                       <C>       <C>       <C>
Net earnings allocable to common stockholders
  As reported...........................................  $20,804   $49,316   $92,607
  Pro forma.............................................  $17,580   $41,011   $82,335
Basic earnings per common share
  As reported...........................................  $  0.84   $  2.04   $  3.79
  Pro forma.............................................  $  0.71   $  1.69   $  3.37
Diluted earnings per common share
  As reported...........................................  $  0.83   $  1.74   $  2.96
  Pro forma.............................................  $  0.70   $  1.50   $  2.67
</TABLE>

     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 50% to 70%; risk-free interest rates of
5.55%, 6.50% and 6.0% to 6.77% in 1998, 1999, and 2000, respectively; no
dividend yield; and expected lives of seven years.

NOTE M--401(k) PLAN

     The Company 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. The Company may make
discretionary matching contributions to the plan. During 1998, 1999 and 2000,
the Company made matching contributions of $1,393,386, $2,283,575, and
$2,453,639, respectively, which represents 50% of the employees' contributions
to the plan up to an amount not to exceed 4% of each employee's respective
compensation.

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, 1999 and 2000, 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 discounted cash flow
analysis using interest rates currently offered for loans with similar terms to
borrowers of similar credit quality. At December 31, 2000 the fair value of the
subordinated notes was $169.8 million, which is $5.2 million below their
carrying value of $175.0 million. Information relating to the fair value of the
Company's interest rate swap agreements is set forth in Note F.

                                       F-20
<PAGE>   75
                      RENT-A-CENTER, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE O--EARNINGS PER COMMON SHARE

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

<TABLE>
<CAPTION>
                                                    NET EARNINGS   SHARES   PER SHARE
                                                    ------------   ------   ---------
                                                          (IN THOUSANDS, EXCEPT
                                                             PER SHARE DATA)
<S>                                                 <C>            <C>      <C>
1998
Basic earnings per common share...................    $ 20,804     24,698    $  0.84
Effect of dilutive stock options..................          --       405
                                                      --------     ------
Diluted earnings per common share.................    $ 20,804     25,103    $  0.83
                                                      ========     ======
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
                                                      ========     ======
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
                                                      ========     ======
</TABLE>

     The assumed conversion of the redeemable convertible preferred stock issued
in 1998 would have an anti-dilutive effect on diluted earnings per common share
for 1998 and accordingly has been excluded from the computation thereof.

     For 1998, 1999 and 2000, 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 498,201, 1,707,947, and 1,485,118,
respectively.

NOTE P--UNAUDITED QUARTERLY DATA

     Summarized quarterly financial data for 1999 and 2000 is as follows:

<TABLE>
<CAPTION>
                                  1ST QUARTER   2ND QUARTER   3RD QUARTER   4TH QUARTER
                                  -----------   -----------   -----------   -----------
                                          (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                               <C>           <C>           <C>           <C>
YEAR ENDED DECEMBER 31, 1999
  Revenues......................   $344,697      $351,421      $350,420      $370,629
  Operating profit..............     41,702        45,788        48,960        53,573
  Net earnings..................     12,027        13,891        15,597        17,840
  Basic earnings per common
     share......................       0.40          0.47          0.54          0.63
  Diluted earnings per common
     share......................       0.35          0.41          0.46          0.52
</TABLE>

                                       F-21
<PAGE>   76
                      RENT-A-CENTER, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

<TABLE>
<CAPTION>
                                  1ST QUARTER   2ND QUARTER   3RD QUARTER   4TH QUARTER
                                  -----------   -----------   -----------   -----------
                                          (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                               <C>           <C>           <C>           <C>
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
</TABLE>

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

(1) Includes the effects of a pre-tax, non-recurring legal reversion of $22.4
    million associated with the settlement of three class action lawsuits in the
    state of New Jersey in the second quarter of 2000.

NOTE Q--RELATED PARTY TRANSACTIONS

     On August 18, 1998, the Company repurchased 990,099 shares of its common
stock for $25 million from J. Ernest Talley, its Chairman of the Board and Chief
Executive Officer. The repurchase of Mr. Talley's stock was approved by the
Company's Board of Directors on August 5, 1998. The price was determined by a
pricing committee, and was approved by the Board of Directors of the Company,
with Mr. Talley abstaining. The pricing committee met on August 17, 1998, after
the close of the markets, and Mr. Talley's shares were repurchased at the price
of $25.25 per share, the closing price of the Company's common stock on August
17, 1998.

                                       F-22
<PAGE>   77

                           [RENT-A-CENTER, INC. LOGO]
<PAGE>   78

                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.

<TABLE>
<CAPTION>
                                                             AMOUNT
                                                            --------
<S>                                                         <C>
SEC registration fee......................................  $ 47,517
NASD filing fee...........................................    19,507
Printing and engraving fees and expenses..................   110,000
Legal fees and expenses...................................   325,000
Accounting fees and expenses..............................    35,000
Blue Sky fees and expenses................................     7,500
Nasdaq National Market listing fee........................    17,500
Miscellaneous.............................................    37,976
                                                            --------
          Total...........................................  $600,000
                                                            ========
</TABLE>

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
<PAGE>   79

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, such provision of our certificate of incorporation is repealed or
modified by your 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.

     INDEMNIFICATION AGREEMENTS

     We have also entered into Indemnification Agreements in which we have
agreed to indemnify some of our directors and officers against judgments,
claims, damages, losses and expenses incurred as a result of the fact that any
director or officer, in his capacity as such, is made or threatened to be made a
party to any suit or proceeding. Such directors and officers will be indemnified
to the fullest extent now or hereafter permitted by the DGCL. The
Indemnification Agreements also permit us to advance certain expenses to such
directors and officers in connection with any such suit or proceeding.

     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
<PAGE>   80

ITEM 16. EXHIBITS.

     (1) Exhibits

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                              EXHIBIT DESCRIPTION
        -------                              -------------------
<C>                      <S>
          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 (included on signature page of this
                            registration statement)
</TABLE>

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

 *  To be filed by amendment

 ** Filed herewith

(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.

     (c)  The undersigned registrant hereby undertakes that:

          (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 of 1933 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
<PAGE>   81

                                   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 this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Plano, State of Texas, on April 5, 2001.

                                            RENT-A-CENTER, INC.

                                            By:    /s/ J. ERNEST TALLEY
                                              ----------------------------------
                                                       J. Ernest Talley
                                                    Chairman of the Board
                                                 and Chief Executive Officer

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints J. Ernest Talley and Robert D. Davis, and each or
either one of them, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this registration statement or any registration
statement for this offering that is to be effective upon filing pursuant to Rule
462(b) under the Securities Act of 1933, and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitutes or substitute, may lawfully do or cause to be done by virtue
hereof.

     Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
                      SIGNATURE                                     TITLE                     DATE
                      ---------                                     -----                     ----
<C>                                                     <S>                              <C>
                /s/ J. ERNEST TALLEY                    Chairman of the Board and        April 5, 2001
-----------------------------------------------------     Chief Executive Officer
                  J. Ernest Talley                        (Principal Executive
                                                          Officer)

                /s/ MITCHELL E. FADEL                   Director                         April 5, 2001
-----------------------------------------------------
                  Mitchell E. Fadel

                /s/ L. DOWELL ARNETTE                   Director                         April 5, 2001
-----------------------------------------------------
                  L. Dowell Arnette

                 /s/ ROBERT D. DAVIS                    Senior Vice                      April 5, 2001
-----------------------------------------------------     President--Finance,
                   Robert D. Davis                        Treasurer and Chief
                                                          Financial Officer (Principal
                                                          Financial and Accounting
                                                          Officer)

                /s/ LAURENCE M. BERG                    Director                         April 5, 2001
-----------------------------------------------------
                  Laurence M. Berg
</TABLE>

                                       II-4
<PAGE>   82

<TABLE>
<CAPTION>
                      SIGNATURE                                     TITLE                     DATE
                      ---------                                     -----                     ----
<C>                                                     <S>                              <C>
                 /s/ PETER P. COPSES                    Director                         April 5, 2001
-----------------------------------------------------
                   Peter P. Copses

                                                        Director
-----------------------------------------------------
                    J.V. Lentell

                                                        Director
-----------------------------------------------------
               Joseph V. Mariner, Jr.

                 /s/ MARK E. SPEESE                     Director                         April 5, 2001
-----------------------------------------------------
                   Mark E. Speese
</TABLE>

                                       II-5
<PAGE>   83

                                 EXHIBIT INDEX

     (1) Exhibits

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                              EXHIBIT DESCRIPTION
        -------                              -------------------
<C>                      <S>
          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 (included on signature page of this
                            registration statement)
</TABLE>

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

 *  To be filed by amendment

 ** Filed herewith

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