Welcome to the Rent-A-Center fourth quarter year end 2007 earnings release conference call. (Operator Instructions) Your speakers for today are Mr. Mark Speese, Chairman and Chief Executive Officer of Rent-A-Center; Mr. Mitch Fadel, President and Chief Operating Officer; Mr. Robert Davis, Chief Financial Officer; and Mr. David Carpenter, Vice President of Investor Relations. I would now like to turn the conference over to Mr. Carpenter.

Thank you, Tanisha. Good morning, everyone and thank you for joining us. You should have received a copy of the earnings release distributed after the market closed yesterday that outlines our operational and financial results that were made in the fourth quarter, as well as for the full year for ‘07. If for some reason you did not receive a copy of the release you can download it from our website at investor.rentacenter.com. In addition, certain financial and statistical information that will be discussed during the conference call will also be provided on the same website. Also, in accordance with SEC rules concerning non-GAAP financial measures, the reconciliation of EBITDA is provided in our earnings press release under the Statement of Earnings Highlights. Finally, I must remind you that some of the statements made in this call such as forecast growth in revenues, earnings, operating margins, cash flow, and profitability, and other business or trend information are forward-looking statements. These matters are, of course, subject to many factors that could cause actual results to differ materially from our expectations reflected in the forward-looking statements. These factors are described in the earnings release issued yesterday, as well as our most recent Annual Report on Form 10-K for the year ended December 31, 2006 and quarterly reports on Form 10-Q for the quarters ended March 31, 2007, June 30, 2007 and September 30, 2007 as filed with the SEC. Rent-A-Center undertakes no obligation to publicly update or revise any forward-looking statements. I’d now like to turn the conference call over to Mitch.

Thanks Dave. Good morning, everyone and thanks for joining us on our fourth quarter earnings call. As you can see in the press release, total revenue and adjusted diluted earnings per share for the quarter were both within our guidance. Our same-store sales were 1% for the quarter and we ended the year with a positive 2.1% comp. Overall the fourth quarter was good for us in a time where many retailers were struggling. Traffic was about what we expected and in January, although not great traffic again, was about what we expected as we continue with our Worry-Free Guarantee advertising campaign. Collections continue to improve, in fact, we ran 0.5% better than last fall. Our skips and stolens came down 40 basis points from the summer as a result of getting that delinquency down. Our inventory held for rent metric came down almost 3% from last quarter and was 110 basis points lower on a year-over-year basis, another operating metric that’s getting back where we want it. The store consolidation plan that we announced in early December is going well and should be substantially completed by the end of the first quarter. We are on track for the additional $2 to $2.5 million of monthly operating profit beginning in the second quarter; the net benefit is now in our annual guidance as given in our press release. So, in summary the quarter ended up a good one and although the macroeconomic environment is still challenging, and somewhat uncertain we are focused on things we can control. Mainly I am talking about execution: execution of our consolidation plan; controlling our delinquencies which are now back where they need to be; controlling of our inventory levels which is clearly in the right direction, etcetera. And for that I’d like to thank our 20,000 co-workers for their execution of our plan and their continued commitment to Rent-A-Center’s success. And with that I’ll turn it over to our CFO, Robert Davis.

Thank you, Mitch. I am just going to spend a few moments here updating you on a few of our financial highlights during the quarter and for the year, and then I’ll turn the call over to Mark. I would like to mention that much of the information I provide whether it is historical results or forecasted results will be presented on a recurring and comparable basis. As outlined in the press release, total revenues increased during the fourth quarter by 9.3%, supported by the same-store sale comp of 1% that Mitch mentioned. Net earnings and diluted earnings per share were $28.1 million and $0.42 respectively, and fell within our guidance range for the quarter of $0.38 to $0.44. As reflected in the press release, our reported GAAP earnings were impacted by the previously announced restructuring plan, as well as the Shafer/Johnson settlement. Once the restructuring is fully implemented, we expect to realize an additional $2 to $2.5 million in incremental operating income on a monthly basis. And as Mitch mentioned, the benefit is now reflected in our annual 2008 guidance. For the full year of 2007, our revenues increased 19.4% to just over $2.9 billion, with same-store sales of 2.1%, while diluted earnings per share equated to $2.01 on a pro forma basis. Our fourth quarter EBITDA came in around $82.7 million at a margin of 11.5%, a 40 basis point increase from the third quarter of 2007, and for all of 2007, our EBITDA increased 8.9% from the prior year to $388.3 million at a margin of 13.4%. This has translated into the generation of over $240 million in operating cash flow during the year, an increase of over $53 million from the prior year. Because of our strong recurring cash flow, we were able to reduce our…

Thank you, Robert. Good morning, everyone and thank you for your time in joining us today. I must say generally speaking, I am pleased with our overall performance during the fourth quarter. As you read in the press release and heard from both Mitch and Robert, we saw improvements in many of the key areas of our business. Particularly, when compared to the previous quarter. And while there’s certainly some seasonality involved here, as Mitch mentioned we’ve been successful in improving our collections or delinquency numbers, now back to our historical levels. We continue to see benefits from the Worry-Free Guarantee proposition. We have improved inventory levels and margin improvement and continue to generate strong recurring cash flow. Let me also add how pleased I am concerning the store consolidation plan and the progress that we’ve made to date on that and I appreciate everyone’s hard work and cooperation in executing that plan. With regards to the financial service business, let me remind you during our last call we stated we would be slowing down so as to improve the results of those that we have, as well as to improve and build out the infrastructure to support additional growth in the future. We’ve made good improvements on those fronts, yet we still have more to do, particularly as it relates to the back office support. At the unit level we’ve seen nice improvements in store results, be it loan demand, volume, delinquencies, personnel, etcetera. In terms of back office, we are continuing the build out of automation and refining processes to give us a scalable platform that will allow us to efficiently and cost effectively reach mass. It is going well but taking more time than expected, and as such, given our expected timetable now to complete that, I…

(Operator Instructions) Your first question comes from Arvind Bhatia - Sterne, Agee & Leach. Arvind Bhatia - Sterne, Agee & Leach: I was wondering if you can talk about the consolidation a little bit more; in particular, if you can and I don’t know if it’s too early to talk about this, but are you able to judge how much revenue or customers you are keeping from the stores that you’re consolidating?

It is too early to tell; we’re in a middle of the consolidation, a lot of the stores have transferred all their customers out, but it is too early to tell. We don’t have any reason to believe we won’t be on our original forecast and we haven’t seen anything that would change our opinion of our original forecast which translates to the $2 to $2.5 million of operating profit we believe beginning in the second quarter. Arvind Bhatia - Sterne, Agee & Leach: And then on the same-store sales for the quarter, can you provide some color on how much of the 1% was driven by pricing versus traffic? And then on the 0% to 2% for 2008, how much benefit are you getting from Rent-Way in your estimation?

On the first part, I don’t have that in front of me. It was a mix on the same-store sales between pricing and what you call traffic from a (inaudible) standpoint it was a mix. I don’t have the breakdown in front of me, but they were both up. And so we continue to get a little bit from a pricing standpoint and year-over-year a little bit on the unit gain side. As far as ‘08, how much the Rent-Way stores are helping us, we expect them to be in the comp at a higher rate than our core stores, not dramatically and it’s only about 20% of our stores. But they’ll come in at a little bit higher than the core stores but when you layer in only 20% of stores, I think probably the most impact they’d have is 1%. If we’re flat to 2%, like we’ve got in our guidance, if we’re at 2%, probably half of that would be driven by those Rent-Way stores, they will be higher than 2%, but again, they’re only 20% of the stores so no more than half of that 2% in the guidance.

What we indicated in the previous call is reconciling that the high side of that guidance range for ‘08, 2% comp if we were able to achieve the high side of that, we would expect 1% to come from Rent-Way, 0.5% to come from the core and another 0.5% to come from the financial services rollout. Arvind Bhatia - Sterne, Agee & Leach: No change in that thinking then.

No change in that expectation at this point. Arvind Bhatia - Sterne, Agee & Leach: And last question for you Robert, can you talk about CapEx expectations for 2008 and in general, how much debt do you expect to pay down for 2008?

From a CapEx perspective we’ve got about $70 million that we’re estimating right now, $15 million of which you would define as expansion CapEx between new rent-to-own stores that we are expecting to open in various markets and/or the financial services ramp up so, about $15 million of that $70 is for expansion. The other $55 million is roughly maintenance CapEx for, as you know, 20% of our stores leases renew every year, and so we do paint and carpets and things of that nature, and then some additional corporate IT renewing systems, and so forth. So, of the $70 million about $55 would be considered maintenance and about $15 would be considered expansion. Regarding debt reduction for ‘08 obviously, we always look at managing our cash flow according to the (inaudible) business and what’s going on in the environment. We’ve already paid down $60 million so far this year, we have no “stated goals” of debt reduction, however, we are managing our leverage covenants appropriately and according to what we feel is the most prudent use of our cash. Arvind Bhatia - Sterne, Agee & Leach: Okay. Thank you and good quarter.

Your next question comes from Dennis Telzrow - Stephens, Inc.

Couple of quick questions, Robert any thoughts on free cash flow this year?

Dennis right now, the EBITDA range that I had mentioned earlier in my guidance $390 to $410 million that will translate into roughly $155 to a range of $175 million in free cash flow; that’s after CapEx, but before acquisitions or other uses of that cash. So, regarding our indebtedness and future share repurchases and things of that nature, obviously Mark alluded to it again and emphasized the point that our strong recurring cash flow gives us confidence in the way we manage the business and we’ll continue to do so.

So, guidance for Q1 obviously does not incorporate the benefits of the store consolidation, and then we see it Q2 and on, is that the way I read it?

Pretty much. There could be a little bit in the first quarter. It’s not like the $2 to $2.5 million is all in one day but really, it will be certainly fully loaded not until the second quarter. There’s a little in the first quarter but beginning in the second quarter we expect that run rate at $2 to $2.5 million.

And any thoughts on all the plusses and negatives going on in the tax refund, extra tax refund this year, so tax refund’s probably a little later in the quarter and if we get this other tax refund in the summer, what’s your reflection on what happened in ‘01 when we saw that in August?

So far this quarter, we’re not seeing anything different than past years. We’re seeing very normal trends from a payout standpoint; early purchase options though presumably from tax refunds, we’re not seeing any delay.

And primarily Dennis, because as we understand it that delay in tax refunds are mainly for those individuals that would qualify for AMT tax and our customers aren’t in that tax bracket, so we are not seeing that impact.

Some of the forms that you have to put are more for long returns versus short returns, so not seeing any changes. As far as what could happen this summer, we’ve talked a little bit about it, kind of wait and see what Washington ends up with to try to speculate with what that plan would look like now. We haven’t spent a lot of time speculating. Once we know what the plan is, we would certainly put a game plan around it to take advantage of it to make it the most advantageous for Rent-A-Center that we can. But right now to spend time just based on a news story when it’s not finalized yet, we haven’t spent much time coming up with our game plan for that. It’s all speculation at this point. But on the first quarter, nothing different than past years so far.

Mark you talked about building the back office for the financial service segment. Is that primarily collections or anything else in that back office?

No, I wouldn’t say it’s primarily collections. It’s really just some of the IT platforms between the POS system at the store, the Cash Recycler that we use at the store, all that reconciles back to all the reporting that we use to get daily metrics be it collections and/or otherwise. It’s really been IT intensive and to some extent, the way it’s being done is labor intensive. The idea of what we’re trying to do through technology is to streamline that as we think about real-time information and access to real-time information, as importantly being able to take away some of the human capital requirements. When you think about building this thing out to scale, if we’ve got to add 10 more people as an example for every 30 stores – and I’m making that number up – that’s not a very cost efficient or effective platform and that’s really what we are working on is having systems and programs and IT in place that will allow us to again, add lots of stores that will still give us real-time information without incurring lots of additional cost to support it.

Your next question comes from Carla Casella – JP Morgan. Carla Casella – JP Morgan: Maybe if you can talk a bit about the charge-offs or the trend in the finance business charge-offs or delinquencies. I don’t know how, the best metrics you look at?

If you are talking the third quarter they had peaked up a little bit just like the rent-to-own business where we’ve made some really pretty good improvements in the fourth quarter.

Our stated goal or company standard for delinquency on the financial services business is 15.9% delinquency. As Mark indicated, we did have a tick up in that in the third quarter similar to the rent-to-own business. Our overall losses for the year were about 23%. I think the industry is 25% to 26%. Our desire is to have that well below 20%. The delinquency improvements that we made in the fourth quarter, we’re running below that 15.9% standard as we speak. Made that improvement in the fourth quarter and it’s turning into lower losses now as we move forward. And in fact, for January our losses were under 19% for the month of January. And so seeing nice improvements in that regard; Mark mentioned that at the unit level, we’re seeing good improvements in volume, delinquency, charge-offs etcetera. and we feel good about the improvements we’ve made.

I think a point of clarification if I may, Carla or maybe understanding, the delinquency goal again that 15.9%, that’s past due. The losses translate into a different number. Our goal is 18%, so just so you understand the difference between delinquency and loss, not one and same. Carla Casella – JP Morgan: And the goal in the losses is 18% or 19%?

18%. We were slightly under 19% in January. So, to Robert’s point, the improvements we made on the delinquency number during the fourth quarter and thus far, it’s translated into lower loss.

And they were 23% last year... Carla Casella – JP Morgan: And the industry is 25%-26%?

Right.

That’s the internal goal to get down to 18% and we believe we can get there but it is a lot lower goal than what the industry standard is. Carla Casella – JP Morgan: And then on the litigation front, are there other outstanding cases that you’re working on right now that we could see resolution for this year?

If you go to the Disclosures, there’s another one out there that’s titled Cologne that’s been there for 10 plus years we assumed with the Thorn acquisition in ‘98. But from a material litigation perspective, if you will, there is not much else I think that’s in the Disclosure. I must say as it relates to that we’ve made some very good improvements on that front over the last couple of years and have obviously been focused on whether it’s control systems, policy and such that would hopefully get us to this stage. With this recent announcement concerning the California, I’m feeling quite good at the moment where we are on that front. Carla Casella – JP Morgan: In terms of signing up new customers or new customers coming into the stores are you seeing any trends? You had mentioned earlier in the year that you were seeing a slowdown in new rental agreements? How does that stand and how has that trended month-to-month during the quarter?

Certainly overall in the fourth quarter it was about what we expected and as I mentioned in my prepared comments January was about where we expected from a traffic standpoint. So, when we are talking about it being slow back in the summer really the timeframe between June and September was the slowest time...

I know we mentioned on the October call that October had turned out to be one of our better months.

Right, right

In quite a while.

Right. And you can see that in our comp number because we had a flat comp forecast and ended up at 1%. October was better than anticipated; we talked about that in the last call. Overall for the fourth quarter it leveled out, and I’d call it, more of what we anticipated when you put all three months together. October was a little better than we expected but when I layer all three, I would say for the quarter it was about what we expected the traffic to be and the same for January. Carla Casella – JP Morgan: And do you attribute that to your own efforts or is it the economy or are you seeing pockets where there is more strength than others economically?

I think it’s a combination of certainly the economy, that has a lot to do with it, but we work hard every day on trying to drive more traffic primarily through our new advertising campaign, the Worry-Free Guarantee, which we rolled out this fall, as well as some other tweaks we do to the advertising; how we spend our money, whether we spend it in saturation mailing versus direct mailing; do we spend on cable TV or a direct response type TV. So, there’s a lot of different things we try to move the needle, and we don’t just sit and either hope for the economy, or hope for our customer to get stronger to be able to drive more traffic. So, the economy is part of it but from a marketing and advertising standpoint we work on a lot of things to drive it, so I’d say the short answer to your question is a combination of the economy and our own efforts.

Your next question comes from John Baugh - Stifel Nicolaus.

Nice quarter. My question is not so much about the State of Virginia but to make it general, but here in the State of Virginia, the House and the Senate are talking about capping payday lending at a 36% interest rate. The question is essentially, what’s going on around the country, I guess it’s a state-by-state debate, on a regulatory front? You’d have to answer that generally, since we can’t afford to talk about the 20 odd states you work in, but I am just wondering what you’re seeing there?

I think you’re right. It is state-by-state and as you’ve heard us say, in terms of our growth initiatives we are only focusing on looking at states that a) have enabling legislation today and b) states that we don’t think are at risk with that legislation. The matter is being reviewed in other states and there are different views in those different states. The industry is working hard through the translocation and other; it’s really about education and awareness and understanding the value proposition and the need for it, and that’s what we and the industry are doing. There is work that has to be done there. Might Virginia enact that legislation? I am not going to speculate, but there are many other states that are very comfortable with what they have in place, and I think you may know and I will draw this out because I think it helps make the point. There are a couple of states that do not have enabling legislation and in fact, perhaps took it away. Georgia being one and now there are some studies that are coming out that show that in fact consumers were better off when the proposition was available to them. They are showing an increase in delinquencies on other debt. They are showing an increase in bankruptcies, and so forth, and so I think again as time and awareness and education; it’s going to take some work, but we’ve got those kinds of compelling stories and facts, if you will, that I think can go a long way to help protect the legislation that’s there in Virginia or in other cases create a safe environment for the consumer and for the providers of the product. But it’s a state-by-state deal.

And there’s only a couple of hot spots; it feels like less than a year ago, but there is couple of hot spots, Virginia being one, New Hampshire being another one but nowhere where we have stores currently are one of those hot spots right now John.

When I read the press release the $60 million of the debt reduction that’s occurred since the start of the year, I guess that’s not all from operations. You’ve used your cash to some degree. Could you split out roughly how much cash have you used to reduce debt?

No, it would be a speculation John, if you look at our cash balance last year it was roughly $92 million or something like that at the end of the year that went up $5 million balance sheet date to balance sheet date. I would say the majority of it is through operating cash flow. If you think about just maintaining cash on hand to operate the business we like to target around $70 million so if you wanted to say $20 or $25 million of that was through cash on hand that would be a safe assumption, but we just don’t have that break-out in front of us for January yet.

Then in your free cash flow guidance, which by the way thank you for that, for ‘08, are you going to have to fund most likely this $11 million settlement in ‘08 with cash and is that assumed in there or what if any other lingering cash settlement payments need to be done or have they all been made at this point with the exception of the $11 million?

The free cash flow estimates that I gave, $155 to $175 million, that does exclude the $11 million anticipated funding of this Shafer/Johnson matter. However, I will remind you that we don’t have the final number yet we will be receiving some remuneration from the Perez settlement from last fall; about half of the unclaimed funds will come back to the company. We are estimating that number right now could be around $8 million. And then also we had previously mentioned that the California AG settlement which is fully reserved for on our balance sheet, but has yet to be funded, that’s another $9.5 million. So, that’ll probably offset the Perez reversion, and so net-net of it all is that $11 million will come out of that $155 to $175.

And yes, we do expect to pay it in ‘08.

Your next question comes from Emily Chang - Lehman Brothers.

I wanted to see, we’ve done a number of channel checks and frankly, it’s been a little difficult for me to discern, is it higher promotional environment for you or is it really just greater advertising around the Worry-Free Guarantee and I was hoping you could give us some color on that specifically in the month of January?

January from a promotional standpoint we’ve ran the same promotion that we’ve run for 5 or 6 years now; it’s the month where we are the most promotional because people are getting over the holiday bills and the January blues so to speak so we do heavy promotion in January. But it’s the same promotion we’ve run for 5 or 6 years with one caveat, the Worry-Free Guarantee built in because that’s our new advertising campaign. So, it’s no more promotional than in the past, but I think it’s getting noticed more. The Worry-Free Guarantee advertising is getting noticed more, and it is just my intuition and just from talking to a few people, but no more promotional than normal.

And you touched slightly on this in the prior Q&A, but as you look at share repurchases versus debt pay down, are you specifically favoring one over the other?

I wouldn’t say we are favoring one over the other. We have always looked at, and I think Robert alluded what’s the best way to deploy the cash at that point in time, and obviously, there is a host of things that have to be taken into consideration at that point in time be it share price, cost of capital etcetera. We’re comfortable with where we are from a debt perspective in our covenants. At the same time, I think you know, that we’ve been pretty conservative on how we’ve managed the balance sheet. We have obviously as of late have chosen to pay some of the debt down and I think that’s been a good use of cash, but going forward, I think as we have done in the past, we will look at a host of different things at that particular point in time and determine what’s the best use.

Your next question comes from Joel Havard - Hilliard Lyons.

My question is really hoping for some elaboration or some color on the picture of G&A expense both total and on a per store basis. If you can walk us through what you think ‘08 is going to look like as we get through the consolidation effort, and then how ‘09 would compare to that.

When you talk about G&A, obviously on the income statement that we provide in our press release that’s really talking about the back office corporate expense, as well as the regional directors out in the field, but does not include store level costs or the line supervisor to the district manager. So, as you think about the G&A expense, obviously we did improve that margin in the fourth quarter about 20 basis points from the third quarter. We expect that to be flat on an overall percentage basis. As you think about 2008, we came in at 4.3 for ‘07, expect that to be flat roughly in ‘08. And then as you think about 2009 we would see some enhancements in that, primarily through the ramp up in financial services. There is some investment in the back office for the financial services business, and so we expect that margin to be fairly in line or maybe tick down slightly in ‘09 and beyond. As you think about the store level G&A expense or what we call salaries and other, that improved 40 basis points in the fourth quarter. In the way that we look at it, salaries and other on-store revenue not total revenue, from 60.6 to 60.2. We gave a guidance range in our forecast about how to think about that in terms of the impact of the consolidation plan, sales guidance, and so forth and at this point, our thoughts are embedded in that guidance.

You’re right Robert and that’s where you really see the benefit of the consolidation plan is in that salary and other line. Robert mentioned 40 basis points improvement in the fourth quarter for the year. Those were just about 59% of store revenue and you can see our guidance next year is 57% to 58.5% and that’s really where you see the benefit of that consolidation.

Joel just one other point in the ‘08 guidance that we gave at the end of the third quarter, prior to announcing the consolidation plan, our expectation for salaries and other was 58.5% to 60%. Now, our guidance for ‘08 that incorporates the consolidation plan, that’s a 150 basis points lower than our prior guidance, so 57% to 58.5% from 58.5% to 60% in our pervious announcement, so we do expect 150 basis point improvement in that line item.

Given how much you absorbed in Q4, what carry over consolidation expense should we look forward in Q1?

Probably no carry over; I think there was some expense in the fourth quarter of the program. As we go through the whole first quarter, there may be some in January as we continue to plan, but by March we’re starting to see some of the benefit. So, I think it’s pretty much a wash, maybe slightly helpful in the first quarter, and then by the second quarter we’re in that run rate of $2 to $2.5 million a month.

Your next question comes from Henry Coffey - Ferris, Baker Watts.

It obviously looks like you’re shrinking inventory, while still seeing favorable development in sales. And when looking at that, you had in-store inventory of about 735, you had inventory on rent of about 202. That total reduction, how much of that is attributable to store closings and is most of that just a function of the way the balance sheet would have looked regardless?

I think most of it is a function of the way it would have looked regardless. It was a little bit high at the end of the third quarter and we talked about depending when you’ve ordered the inventory and if the inventory comes in late September versus first week of October it affects that number. Because it’s just a snapshot in time number. But we control that by how much we order, the stores have plenty of inventory. In the fourth quarter it goes down because business is better; there is more traffic. First quarter, generally it goes down even a little more from that because of the income tax returns. So, I think if anything our consolidation plan affects that number negatively, if you think about the fact that we’ve got 280 stores, where we’ve got extra if the store is closed, we have to do something with that inventory. We spread it around to the other stores that are in that area, sell it and do those kind of things but generally it would have come down anyhow just based on our purchasing program and the way that the seasonality in the business works.

The merchandise in the store came down about 10% which is obviously…

Henry, I think you’re obviously looking at the year-over-year on the balance sheet.

Right, I am.

And I think a good comparison − you may not have in front of you − if you look at the third quarter, compared to the fourth, you’ll see the on-rent actually went up, which you would expect. The third quarter was a difficult quarter. We lost lots of units on rent. Those by default went to inventory held for rent, and then come the fourth quarter, pick up in business so that the inventory on rent is actually up sequentially I don’t recall the amoun…

But so in analyzing this thing we better factor in the September results as well, is what you’re suggesting?

Yes, it’s better to look at it sequentially.

Sequentially you’ll see the held for rent actually went up, and then the offset is the held for rent went down and that was through both the combination of increasing the on rent, slowing down some of the purchases because we were over inventory given the soft third quarter, and then your normal sales and liquidations or disposals of inventory that you would have in any given time anyway.

I’ll take a look at that when I get the numbers in front of me, and some of this is just small items. What was your end of period share count at the end of ‘06 and what is it today?

At the end of ‘06 on a diluted basis it was 70 point…

No, shares outstanding?

The basic shares outstanding, if you are excluding the…

Do you just have the straight end of period shares out?

We don’t have that in front of us.

I can get it if you can call me back offline and get me that, that’d be helpful.

Okay.

And then, finally, looking at some of this free cash flow information you provided for us. The $175 million does not include any movement on the litigation front, any cash that goes out the door there. Does it also include or not include the expected cash outflows from the store closings that you mentioned back in December?

It does not include the impact of cash outflows that we previously talked about and primarily that’s lease buyouts is the vast majority of that.

Right. That just occurs over time.

Right, it occurs over time and I think we’ve talked about expecting that to occur over a 12 to 18 months timeframe and we’re negotiating out of leases.

And before they come to a conclusion and we’re just making monthly payments.

Right.

I am just going through the minutiae of some of our valuation but, it looks like some very, very favorable trends on the revenue front, as well as the balance sheet that’s getting more and more healthy and more and more liquid. Finally, on the delinquency issues you said they’re inline with historical results can you give us a little more color on that?

In the fourth quarter actually we were lower than last year. Our goal is to be at 5.9% or under 6% − 5.99%. On Saturday accounts that are one day or more past due in the fourth quarter were about 6.3% which includes weeks around Christmas where it goes up.

Right.

That’s pretty good and it was actually better than last year. Of course, this time of year now we are getting the income tax returns and...

Right, and it all reverses.

We ran lower than 5.9% this past Saturday below our goal because there’s more money with the tax refunds, and so forth. So, it’s at or below historical levels at this point.

I know in this bleak environment we shouldn’t be talking about new products but you’ve got an awful lot going on in the new product front. How is that working for you with the larger screen TVs and things?

The flat panel TVs are certainly starting to have an impact on our electronics numbers. Our electronics percentage of revenue I think in ‘07 actually went up from ‘06 for the first year in four or five years maybe that it actually went up as a percent of our overall revenues. So, it’s starting to have an impact again not so much on more rentals because we always had big screen TVs, but they are at a little higher ticket price so they helped from that standpoint, but for’07 for the first time electronics went up like I just said. So, it’s starting to have an impact. The deflation there so far has been good for us because they’re down in a price range where we can bring in sizes up to 60-inch at this point. So, we can bring in the larger screen sizes because of that deflation and it certainly helps at this point.

All right thank you. Good quarter. Your next question comes from Jordan Hymowitz - Philadelphia Financial.

Couple of questions. One, what was the charge-off number in the quarter?

What charge-off number are you referring to Jordan?

The number that was 3.2% last quarter?

We ran 40 basis points below that.

So 2.8%?

Correct.

Next question is, does your guidance include the $60 million in debt retirement in the quarter?

Not at this point.

Third is on the regulatory front, I have not seen the House Financial Services Committee at all mention payday lending on a national front. Has there been any language or verbiage in that regard in the House of Representatives where most of these things seem to emanate from at this point?

Not that I am aware of.

There has been legislation talked about that we would support, and some from an angle that we probably wouldn’t support, it has been talked about but it’s…

There’s no bills…

There’s no House topic or anything pending on that front.

And final question, is the last time you gave guidance on financial services, you said it would adversely impact the year by $0.05 to $0.07, is that still the plan?

It’s all about when we open them. And as Mark talked about getting the back office and some of these IT issues completed and scalable is what we are focused on now. It depends when we get back to opening them and if it goes down 150, that timing can hurt a little bit because we open them later in the year and if they’re dilutive at the beginning you don’t get any of that positive on the back end. I would inch that up to $0.06 to $0.08?

Yes.

Our model now, again, depending a little bit on when we open them. Some of it’s a timing issue but I’d inch that up to $0.06 to $0.08 at this point Jordan.

Your next question comes from Andrew Berg - Post Advisory Group.

Versus stock buybacks you indicated under the bank credit facility you’ve got more than enough capacity to buy back stock. What’s the ability under your senior subordinated notes under the restricted payments basket?

It’s roughly $130 million.

$130 million of existing availability?

Yes.

Your next question comes from Bill Baldwin - Baldwin Anthony Securities.

A couple of questions, first can you offer some insight as to what is causing the depreciation as a percent of rental revenues to be inching up here at this point in time? It’s happened through 2007. It looks like it’s in your guidance for 2008. What are the dynamics that are taking place there?

I think a couple of things, one the summer, the business being under pressure certainly drives that up a little bit as you price and term products when a business is under pressure that’s going to inch up a little bit; what you have to do to drive business. Secondly, the price changes we made, you’ll remember this summer we talked about how we were raising the weekly or monthly rate a little bit, lowering the term which gave an overall price decline to the consumer, but more dollars faster for us. If you raise the weekly or monthly price but lower the term overall you have a lower cash price for the consumer but more dollars per month coming in from the gross margin standpoint, so that had something do with it. You’ll recall Bill we did that back in 2001 and it worked very successfully for us and we like our results so far from this plan. So, it’s more dollars, but a little bit higher percentage of cost even though the gross dollars are higher. So, those are the two things affecting that number a little bit.

But you have to depreciate your merchandise over a little bit shorter period of time then?

Correct, but you get more dollars in a shorter period that’s a good thing but on paper that depreciation percentage will be a little higher.

Second question, in terms of your promotions and advertising, and so forth, are you seeing any measurable impact or is it possible to measure any impact of the trickle-down effect from customers coming in that perhaps hadn’t been doing business with Rent-A-Center or rent-to-own type stores and due to the turmoil in the credit markets, and so forth, they find themselves now in a position where they need the services of rent-to-own. Are you able to identify any new customers from that standpoint?

It’s hard to identify where they are coming from. We get lots of new customers every month and it’s hard to identify where they’re coming from, although I can tell you from an advertising standpoint we’re cognizant of that fact and do you advertise it at a little higher demographic as credit cards tighten up? Does that mean we advertise to a little higher demographic? And we are testing some of those things and in general just advertising to a wider range of demographic to try to add more new customers, so I can’t that we are seeing that because it’s hard to tell where a customer comes from but I can tell you from a marketing and advertising standpoint that’s one of things we look at over time.

Mitch, are you trying to reach that customer with your new advertising through through yours mailer or through electronic media? How are you trying to reach the little bit higher level customer?

Both in direct mail, television, the Internet with our website, and then using different search engines. And again, the Worry-Free Guarantee being the message on all that is to give people that haven’t tried us before the fact that they can do it without a worry, money-back guarantee, and so forth so if you think about a trial offer, what’s better than a money-back guarantee if you are not satisfied?

Right.

You could certainly target that customer easier, if you will, through print as opposed to broadcast in which case we’re reaching the whole; you can mix it a little bit based on what station you are on or what program you are on. Most of it is probably being targeted through print.

Over time as you use these different channels to reach this type of customer, are you setup or will you be able to measure the effectiveness of the different types of advertising you’re using to see how effective one is versus the other, is there ways to measure that?

Yes, there is. We can see who the customer is that comes in and over time; do different studies. It’s easier to look at the return on investment when you’re talking about the Internet or direct mail pieces, and so forth. Television is always the hard one to really gauge what it’s doing for any advertiser, that’s the hardest one to gauge. Although we’ve got some different ways to look at it; we’ve used an outside consulting firm to look at how we spend our money and have gotten their results and are tweaking our advertising a little based on that. So, that yes, we’ve got a lot of different ways to measure what you’re talking about Bill; television still being the one that’s a little bit harder to measure the return on that investment.

And last question, as far as overall spending on advertising in 2008 versus 2007 as a percentage of your store revenues, is that going to be about flat year-over-year or how you’re looking at?

Yes.

Yes.

Your next question comes from Kevin Wenck - Polynous Capital Management.

Couple questions. The held for rent at end of year, is that likely to come down further as you continue working through the consolidation process?

Probably not because of the consolidation process as much as the first quarter seasonally it normally does come down and we expect it to go down a little bit more at the end of the first quarter. Last year it came down 140 basis points between the fourth quarter and the end of the first quarter. I don’t know that it’ll come down 140 basis points because we’re starting out at quite a bit lower number than last year but it should come down some when we end the first quarter.

I didn’t know if you still were over-assorted in some of the locations that merchandise was consolidated into?

We certainly are a little bit and that will help at the end of the first quarter but with that only being a couple hundred stores out of over 3,000, the bigger impact will just be the seasonality of the business. But yes, you are right Kevin that it’ll help a little bit as we get through the consolidation.

And what will be a rough budget at this point for the whole year of ‘08 for merchandise purchases?

We are forecasting a net investment in inventory of roughly $20 to $25 million and that obviously will support the comp. And then I don’t have the number of purchases, if you will, but if you back out on the income statement when we file the K later this month, we’ll reconcile inventory for you from a depletion standpoint, depreciation of rental merchandise, cost of goods sold, and so forth.

The cost of rental and fees guidance is 22.6 to 23, it’s about a point higher than you experienced earlier last year. Is a lot of that attributable to what was discussed in the earlier question, of your slightly higher depreciation rate or what are some other factors in that?

That’s exactly correct. That’s indicative of what Mitch referred to on the prior question. We were a little bit more promotional in the summer as business got soft, and then the pricing and terms changes we made a few months ago will obviously impact the percentage but gross margin dollars should be higher.

Now, the revenue guidance for Q1, suggests backing out through numbers, the merchandise sales could be $80 to $85 million which year-over-year would be up about 20%. So, am I in the right ballpark as what’s happening with that or if I am not, what are some other things that are increasing to get to your first quarter revenue number?

We would expect merchandise sales to be a little higher this first quarter than the prior year, but there is also financial services revenue that’s going to be increasing over the prior first quarter with the stores we opened during 2007, and then also we have a subsidiary called dPi that is driving some of that as well.

And then one final question, the cost of merchandise sales in Q4 was 83%, well above what it had been in earlier quarters last year, well above the guidance for ‘08. What was going on there?

A lot of it is was the consolidation plan and moving out some of the inventory at a much lower margin, just selling it out, because we had coming up on 280 stores of extra inventory. That’d be the primary reason it was higher.

Plus the fact we were real high at the end of the third quarter. We were moving out…

Getting rid of some of that inventory.

Okay, and then with the guidance you have for Q1 and also, for the full year, it sounds like you’re pretty confident at this point that you’ve worked through all that?

Correct.

Your next question comes from John Baugh - Stifel Nicolaus.

Looking at the macro picture for ‘08 and beyond, it seems to me to be maybe a big plus looming and may be a big negative and the plus being we’re clearly in a credit constrained environment particularly for the lower income profile customer, which is your customer and I could see that driving a lot of people to your stores, potentially. On the negative, blue collar, construction jobs and manufacturing jobs look like they’re weakening fairly substantially. Care to comment on how you see those two playing out and which one wins or is it a draw? Any thoughts?

You’re right, there are some competing forces going out, if you will, and I think you’ve heard us say and I think generally speaking we are recession resistant that in traditional tough economic times it creates opportunities for us as you said. As access to credit becomes more difficult which it is; cost of credit in some cases is going up, and even though the Feds lowered the rate when you look at the credit providers and what they’re doing, they’ve certainly tightened the extension of credit. And they’re raising fees on that credit whether it’s late fees or the likes. And we view that or I view that as opportunities for us. The other extreme given who we generally deal with, anything with a tax disposable income and we’ve talked about the impact of high energy costs, and so forth and how do you offset that. I believe based on what we know today, and when you think about unemployment, if that goes up again the need for our products and services still exists. People will still have to have a refrigerator if they’re drawing unemployment, those funds are still available to us and we’d take that proposition if you will. So, as I sit here today not that there is not uncertainty out there in how it’s all going to play out but I think the indicators I would tilt a little bit more in our favor frankly. The audience that we serve or prospective audience could in fact, grow in size and create more opportunities versus what we may lose on the other end of it, based on what we know as we sit here today.

There are no further questions at this time. Mr. Speese you may begin your summary.

Ladies and gentleman, thank you for your time, your interest, and support of the company as always we appreciate it. Again I have to say I’m pleased with this past quarter. I feel good about the consolidation plan and where we are with regards to that. Financial services as we mentioned we’ve got work to do but again, I feel good with some of the things that we’re seeing on that front, and my long-term view remains very optimistic in our ability to capitalize on that. And in the meantime, obviously we’re focused on managing the things that are inside of our control and believe that as we go into ‘08 we’re well positioned. So, again we appreciate your support and interest and we look forward to reporting back to you next quarter. Thank you very much.