UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20172022
or
¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from        to
Commission File Number: 001-38047
Rent-A-Center, Inc.
(Exact name of registrant as specified in its charter)
Delaware45-0491516
Delaware45-0491516
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification No.)
5501 Headquarters Drive
Plano, Texas 75024
(Address, including zip code of registrant’s
principal executive offices)
Registrant’s telephone number, including area code: 972-801-1100
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common stock, $.01 par valueRCIIThe Nasdaq Stock Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES   ý    NO   ¨Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES   ý    NO   ¨Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging Growth Company☐
Large accelerated filerýAccelerated filer¨
Non-accelerated filer¨(Do not check if a smaller reporting company)Smaller reporting company¨
Emerging Growth Company¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES   ¨    NO   ýYes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of October 23, 2017:26, 2022:
ClassOutstanding
Common stock, $.01 par value55,670,048



TABLE OF CONTENTS
ClassOutstandingPage No.
Common stock, $.01 par value per share53,311,807

TABLE OF CONTENTS
Page No.
PART I.FINANCIAL INFORMATION
1
2
Condensed Consolidated Balance Sheets as of September 30, 20172022 andDecember 31, 20162021
3
4
46
57
1424
2637
2637
2637
2838
2838
Defaults Upon Senior Securities
2838
2838
2838
Exhibits
39
 





i


Item 1. Condensed Consolidated Financial Statements.
RENT-A-CENTER, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
(In thousands, except per share data)Unaudited Unaudited
Revenues       
Store       
Rentals and fees$552,194
 $595,179
 $1,723,019
 $1,915,184
Merchandise sales67,566
 73,219
 266,061
 281,703
Installment sales17,276
 17,626
 51,690
 53,718
Other2,257
 2,633
 7,428
 10,001
Total store revenues639,293
 688,657
 2,048,198
 2,260,606
Franchise       
Merchandise sales2,676
 3,113
 9,211
 12,083
Royalty income and fees1,996
 2,107
 6,177
 6,459
Total revenues643,965
 693,877
 2,063,586
 2,279,148
Cost of revenues       
Store       
Cost of rentals and fees153,202
 159,454
 474,511
 504,834
Cost of merchandise sold70,551
 68,684
 256,730
 253,473
Cost of installment sales5,207
 5,553
 16,099
 17,240
Total cost of store revenues228,960
 233,691
 747,340
 775,547
Franchise cost of merchandise sold2,540
 2,960
 8,585
 11,273
Total cost of revenues231,500
 236,651
 755,925
 786,820
Gross profit412,465
 457,226
 1,307,661
 1,492,328
Operating expenses       
Store expenses       
Labor179,643
 186,289
 551,197
 595,668
Other store expenses171,995
 195,096
 546,485
 599,759
General and administrative expenses43,768
 38,187
 130,637
 121,383
Depreciation, amortization and impairment of intangibles18,679
 19,998
 55,928
 60,598
Other charges6,825
 956
 31,580
 22,240
Total operating expenses420,910
 440,526
 1,315,827
 1,399,648
Operating (loss) profit(8,445) 16,700
 (8,166) 92,680
Debt refinancing charges—
 —
 1,936
 —
Interest expense11,453
 11,710
 34,346
 35,424
Interest income(177) (141) (492) (346)
(Loss) earnings before income taxes(19,721) 5,131
 (43,956) 57,602
Income tax (benefit) expense(7,122) (1,050) (15,785) 16,414
Net (loss) earnings$(12,599) $6,181
 $(28,171) $41,188
Basic (loss) earnings per common share$(0.24) $0.12
 $(0.53) $0.78
Diluted (loss) earnings per common share$(0.24) $0.12
 $(0.53) $0.77
Cash dividends declared per common share$—
 $0.08
 $0.16
 $0.24
 Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
(in thousands, except per share data)
Revenues
Store
Rentals and fees$829,459 $930,849 $2,569,804 $2,592,788 
Merchandise sales147,616 192,016 541,265 646,038 
Installment sales16,718 17,028 52,355 52,992 
Other1,340 1,082 3,698 3,035 
Total store revenues995,133 1,140,975 3,167,122 3,294,853 
Franchise
Merchandise sales22,823 33,671 67,849 96,342 
Royalty income and fees6,001 6,622 19,962 20,830 
Total revenues1,023,957 1,181,268 3,254,933 3,412,025 
Cost of revenues
Store
Cost of rentals and fees310,079 344,623 968,655 912,531 
Cost of merchandise sold179,477 228,024 615,543 717,983 
Cost of installment sales6,032 6,291 18,379 18,566 
Total cost of store revenues495,588 578,938 1,602,577 1,649,080 
Franchise cost of merchandise sold22,834 33,570 68,183 96,190 
Total cost of revenues518,422 612,508 1,670,760 1,745,270 
Gross profit505,535 568,760 1,584,173 1,666,755 
Operating expenses
Store expenses
Labor156,192 163,945 486,751 479,989 
Other store expenses197,847 189,553 624,306 540,698 
General and administrative expenses40,002 45,958 141,273 149,468 
Depreciation and amortization12,798 13,835 40,208 40,794 
Other charges61,619 88,323 185,435 212,095 
Total operating expenses468,458 501,614 1,477,973 1,423,044 
Operating profit37,077 67,146 106,200 243,711 
Debt refinancing charges— 6,839 — 15,582 
Interest expense22,960 19,742 61,018 52,167 
Interest income(216)(30)(353)(148)
Earnings before income taxes14,333 40,595 45,535 176,110 
Income tax expense20,111 19,328 35,825 50,982 
Net (loss) earnings$(5,778)$21,267 $9,710 $125,128 
Basic (loss) earnings per common share$(0.10)$0.36 $0.18 $2.17 
Diluted (loss) earnings per common share$(0.10)$0.31 $0.16 $1.85 
Cash dividends declared per common share$0.34 $0.31 $1.02 $0.93 
See accompanying notes to condensed consolidated financial statements.



1


RENT-A-CENTER, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (LOSS)
(Unaudited)
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
(In thousands)Unaudited Unaudited
Net (loss) earnings$(12,599) $6,181
 $(28,171) $41,188
Other comprehensive (loss) income:       
Foreign currency translation adjustments(181) (921) 6,555
 152
Total other comprehensive (loss) income(181) (921) 6,555
 152
Comprehensive (loss) income$(12,780) $5,260
 $(21,616) $41,340
 Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
(in thousands)
Net (loss) earnings$(5,778)$21,267 $9,710 $125,128 
Other comprehensive (loss) income:
Foreign currency translation adjustments, net of tax of $(163) and $(251), $(14) and $(240) for the three and nine months ended September 30, 2022 and 2021, respectively(615)(944)(51)(901)
Total other comprehensive (loss) income(615)(944)(51)(901)
Comprehensive (loss) income$(6,393)$20,323 $9,659 $124,227 
See accompanying notes to condensed consolidated financial statements.



2


RENT-A-CENTER, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 September 30, 2017 December 31, 2016
(In thousands, except share and par value data)Unaudited  
ASSETS   
Cash and cash equivalents$76,208
 $95,396
Receivables, net of allowance for doubtful accounts of $3,225 and $3,593 in 2017 and 2016, respectively62,293
 69,785
Prepaid expenses and other assets54,384
 54,989
Rental merchandise, net   
On rent670,417
 795,118
Held for rent199,768
 206,836
Merchandise held for installment sale4,429
 3,629
Property assets, net of accumulated depreciation of $562,968 and $522,101 in 2017 and 2016, respectively305,394
 316,428
Goodwill56,380
 55,308
Other intangible assets, net1,044
 5,252
Total assets$1,430,317
 $1,602,741
LIABILITIES   
Accounts payable – trade$88,206
 $108,238
Accrued liabilities328,278
 332,196
Deferred income taxes139,203
 173,144
Senior debt, net98,954
 186,747
Senior notes, net538,440
 537,483
Total liabilities1,193,081
 1,337,808
STOCKHOLDERS’ EQUITY   
Common stock, $.01 par value; 250,000,000 shares authorized; 109,681,559 and 109,519,369 shares issued in 2017 and 2016, respectively1,097
 1,095
Additional paid-in capital829,573
 827,107
Retained earnings763,920
 800,640
Treasury stock at cost, 56,369,752 shares in 2017 and 2016(1,347,677) (1,347,677)
Accumulated other comprehensive loss(9,677) (16,232)
Total stockholders' equity237,236
 264,933
Total liabilities and stockholders' equity$1,430,317
 $1,602,741
September 30, 2022December 31, 2021
(in thousands, except share and par value data)
ASSETS
Cash and cash equivalents$165,627 $108,333 
Receivables, net of allowance for doubtful accounts of $12,378 and $8,479 in 2022 and 2021, respectively113,230 126,378 
Prepaid expenses and other assets71,276 63,468 
Rental merchandise, net
On rent943,878 1,173,024 
Held for rent128,708 132,984 
Merchandise held for installment sale6,942 6,405 
Property assets, net of accumulated depreciation of $597,128 and $557,453 in 2022 and 2021, respectively300,135 308,098 
Operating lease right-of-use assets306,948 291,338 
Deferred tax asset68,205 68,391 
Goodwill289,750 289,750 
Other intangible assets, net373,897 425,158 
Total assets$2,768,596 $2,993,327 
LIABILITIES
Accounts payable – trade$139,751 $135,666 
Accrued liabilities308,390 362,708 
Operating lease liabilities310,099 296,535 
Deferred tax liability92,759 113,943 
Senior debt, net931,973 1,135,207 
Senior notes, net437,461 435,992 
Total liabilities2,220,433 2,480,051 
STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value; 250,000,000 shares authorized; 125,019,025 and 124,398,373 shares issued in September 30, 2022 and December 31, 2021, respectively1,103 1,065 
Additional paid-in capital1,261,323 1,146,509 
Retained earnings1,093,517 1,143,647 
Treasury stock at cost, 67,036,165 and 65,790,667 shares in September 30, 2022 and December 31, 2021, respectively(1,795,358)(1,765,574)
Accumulated other comprehensive loss(12,422)(12,371)
Total stockholders' equity548,163 513,276 
Total liabilities and stockholders' equity$2,768,596 $2,993,327 
See accompanying notes to condensed consolidated financial statements.



3


RENT-A-CENTER, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSSTOCKHOLDERS’ EQUITY
(Unaudited)
 Common StockAdditional
Paid-In
Capital		Retained
Earnings		Treasury
Stock		Accumulated Other Comprehensive (Loss) IncomeTotal
SharesAmount
(in thousands)
Balance at December 31, 2021124,398 $1,065 $1,146,509 $1,143,647 $(1,765,574)$(12,371)$513,276 
Net loss— — — (4,237)— — (4,237)
Other comprehensive income— — — — — 661 661 
Exercise of stock options22 1 476 — — — 477 
Vesting of restricted share units, net of shares withheld for employee taxes424 4 (4)— — — — 
Tax effect of stock awards vested and options exercised— — (8,466)— — — (8,466)
Stock-based compensation— — 41,410 — — — 41,410 
Dividends declared— — — (20,063)— — (20,063)
Balance at March 31, 2022124,844 1,070 1,179,925 1,119,347 (1,765,574)(11,710)523,058 
Net earnings— — — 19,725 — — 19,725 
Other comprehensive loss— — — — — (97)(97)
Exercise of stock options52 — 783 — — — 783 
Vesting of restricted share units, net of shares withheld for employee taxes85 1 (1)— — — — 
Tax effect of stock awards vested and options exercised— — (969)— — — (969)
Stock-based compensation— — 36,438 — — — 36,438 
Dividends declared— — — (20,104)— — (20,104)
Balance at June 30, 2022124,981 1,071 1,216,176 1,118,968 (1,765,574)(11,807)558,834 
 Net loss— — — (5,778)— — (5,778)
 Other comprehensive loss— — — — — (615)(615)
 Purchase of treasury stock— (13)— — (29,784)— (29,797)
 Exercise of stock options33 — 461 — — — 461 
Vesting of restricted share units, net of shares withheld for employee taxes5 45 (45)— — — — 
Tax effect of stock awards vested and options exercised— — (42)— — — (42)
 Stock-based compensation— — 44,773 — — — 44,773 
 Dividends declared— — — (19,673)— — (19,673)
Balance at September 30, 2022125,019 $1,103 $1,261,323 $1,093,517 $(1,795,358)$(12,422)$548,163 

4

RENT-A-CENTER, INC. AND SUBSIDIARIES

 Nine Months Ended September 30,
 2017 2016
(In thousands)Unaudited
Cash flows from operating activities   
Net (loss) earnings$(28,171) $41,188
Adjustments to reconcile net (loss) earnings to net cash provided by operating activities   
Depreciation of rental merchandise469,483
 498,897
Bad debt expense11,051
 11,247
Stock-based compensation expense2,198
 7,439
Depreciation of property assets55,156
 58,044
Loss on sale or disposal of property assets18
 3,569
Amortization and impairment of intangibles4,667
 1,761
Amortization of financing fees3,276
 2,345
Write-off of debt financing fees1,936
 —
Deferred income taxes(33,940) (14,821)
Changes in operating assets and liabilities, net of effects of acquisitions   
Rental merchandise(339,278) (333,842)
Receivables(3,560) (1,127)
Prepaid expenses and other assets600
 101,691
Accounts payable – trade(20,032) 1,223
Accrued liabilities12,040
 (2,724)
Net cash provided by operating activities135,444
 374,890
Cash flows from investing activities   
Purchase of property assets(53,528) (46,839)
Proceeds from sale of stores3,951
 4,506
Acquisitions of businesses(2,241) (3,086)
Net cash used in investing activities(51,818) (45,419)
Cash flows from financing activities   
Exercise of stock options270
 —
Shares withheld for payment of employee tax withholdings(225) (290)
Debt issuance costs(5,258) —
Proceeds from debt216,880
 51,610
Repayments of debt(303,498) (284,868)
Dividends paid(12,811) (21,291)
Net cash used in financing activities(104,642) (254,839)
Effect of exchange rate changes on cash1,828
 (4,690)
Net (decrease) increase in cash and cash equivalents(19,188) 69,942
Cash and cash equivalents at beginning of period95,396
 60,363
Cash and cash equivalents at end of period$76,208
 $130,305
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - (Continued)
(Unaudited)
 Common StockAdditional
Paid-In
Capital		Retained
Earnings		Treasury
Stock		Accumulated Other Comprehensive (Loss) IncomeTotal
SharesAmount
(in thousands)
Balance at December 31, 2020112,181 $1,105 $886,902 $1,091,010 $(1,375,541)$(11,396)$592,080 
Net earnings— — — 42,552 — — 42,552 
Other comprehensive loss— — — — — (853)(853)
Exercise of stock options330 3 8,941 — — — 8,944 
Vesting of restricted share units, net of shares withheld for employee taxes(1)
902 7 (20,910)— — — (20,903)
Stock-based compensation— — 20,148 — — — 20,148 
Dividends declared— — — (20,722)— — (20,722)
Acima acquisition10,780 27 120,914 — — — 120,941 
Balance at March 31, 2021124,193 1,142 1,015,995 1,112,840 (1,375,541)(12,249)742,187 
Net earnings— — — 61,309 — — 61,309 
Other comprehensive income— — — — — 896 896 
Exercise of stock options96 1 1,681 — — — 1,682 
Vesting of restricted share units, net of shares withheld for employee taxes58 1 — — — — 1 
Stock-based compensation— — 39,566 — — — 39,566 
Dividends declared— — — (20,477)— — (20,477)
Balance at June 30, 2021124,347 1,144 1,057,242 1,153,672 (1,375,541)(11,353)825,164 
 Net earnings— — — 21,267 — — 21,267 
 Other comprehensive loss— — — — — (944)(944)
 Purchase of treasury stock— (4)— — (20,035)— (20,039)
 Exercise of stock options29 1 741 — — — 742 
 Stock-based compensation— — 48,442 — — — 48,442 
 Dividends declared— — — (20,553)— — (20,553)
Balance at September 30, 2021124,376 $1,141 $1,106,425 $1,154,386 $(1,395,576)$(12,297)$854,079 
(1)Includes shares released from escrow related to the 2019 Merchant's Preferred acquisition.
See accompanying notes to condensed consolidated financial statements.


5

RENT-A-CENTER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Nine Months Ended September 30,
 20222021
(in thousands)
Cash flows from operating activities
Net earnings$9,710 $125,128 
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation of rental merchandise937,728 880,341 
Bad debt expense18,100 9,825 
Stock-based compensation expense122,621 108,156 
Depreciation of property assets51,384 49,335 
Loss on sale or disposal of property assets5,979 318 
Amortization of intangibles51,382 73,228 
Amortization of financing fees4,798 4,178 
Write-off of debt financing fees— 9,926 
Deferred income taxes(21,025)32,752 
Changes in operating assets and liabilities, net of acquired assets
Rental merchandise(704,191)(900,921)
Receivables(4,951)(21,286)
Prepaid expenses and other assets(7,808)(721)
Operating lease right-of-use assets and lease liabilities(2,047)(339)
Accounts payable – trade4,085 (51,853)
Accrued liabilities(53,682)8,137 
Net cash provided by operating activities412,083 326,204 
Cash flows from investing activities
Purchase of property assets(49,436)(45,876)
Proceeds from sale of property assets35 3 
Acquisitions of businesses(775)(1,273,542)
Net cash used in investing activities(50,176)(1,319,415)
Cash flows from financing activities
Share repurchases(29,797)(20,035)
Exercise of stock options1,720 11,368 
Shares withheld for payment of employee tax withholdings(9,477)(20,903)
Debt issuance costs— (47,622)
Proceeds from debt90,000 1,490,000 
Repayments of debt(296,563)(366,875)
Dividends paid(60,410)(53,182)
Net cash (used in) provided by financing activities(304,527)992,751 
Effect of exchange rate changes on cash(86)(159)
Net increase (decrease) in cash and cash equivalents57,294 (619)
Cash and cash equivalents at beginning of period108,333 159,449 
Cash and cash equivalents at end of period$165,627 $158,830 
See accompanying notes to condensed consolidated financial statements.


46
RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


Note 1 - Basis of Presentation
The interim condensed consolidated financial statements of Rent-A-Center, Inc. included herein have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”(the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP"(“GAAP”) have been condensed or omitted pursuant to the SEC’s rules and regulations, although we believe the disclosures are adequate to make the information presented not misleading. We suggest these financial statements be read in conjunction with the financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2016.2021. In our opinion, the accompanying unaudited interim financial statements contain all adjustments, consisting only of those of a normal recurring nature, necessary to present fairly our results of operations and cash flows for the periods presented. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.
TheseUse of Estimates
In preparing financial statements in conformity with U.S. generally accepted accounting principles, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent losses and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. In applying accounting principles, we must often make individual estimates and assumptions regarding expected outcomes or uncertainties. Our estimates, judgments and assumptions are continually evaluated based on available information and experience. However, uncertainties, such as the future unknown impacts of the COVID-19 pandemic and other macroeconomic factors, including recent significant increases to the consumer price index, a condensed labor market, wage inflation, and global supply chain issues may affect certain estimates and assumptions inherent in the financial reporting process, which may impact reported amounts of assets and liabilities in future periods and cause actual results to differ from those estimates.
Principles of Consolidation and Nature of Operations
The financial statements included herein include the accounts of Rent-A-Center, Inc. and its direct and indirect subsidiaries. All intercompany accounts and transactions have been eliminated. Unless the context indicates otherwise, references to “Rent-A-Center” refer only to Rent-A-Center, Inc., the parent, and references to the “Company”, “we,” “us” and “our” refer to the consolidated business operations of Rent-A-Center and any or all of its direct and indirect subsidiaries. We report four operating segments: Core U.S.Rent-A-Center Business, Acima (formerly Preferred Lease), Acceptance Now, Mexico, and Franchising.
Our Core U.S.Rent-A-Center Business segment consists of company-owned rent-to-ownlease-to-own stores in the United States Canada and Puerto Rico that lease household durable goods to customers on a rent-to-ownlease-to-own basis. We also offer merchandise on an installment sales basis in certain of our stores under the names “Get It Now” and “Home Choice.” Our Rent-A-Center Business segment operates through our company-owned stores and e-commerce platform through rentacenter.com.
Our Acceptance NowAcima segment, which operates in the United States and Puerto Rico, which includes the operations of Acima Holdings (as defined in Note 2 below) acquired in February 2021 and our previous Preferred Lease virtual and staffed locations, generally offers the rent-to-ownlease-to-own transaction to consumers who do not qualify for financing from the traditional retailer through staffed or unstaffed kiosks located within such retailers’ locations. Those kiosks can be staffed by an Acceptance Now employee (staffed locations)retailer’s locations, or other virtual options. Virtual locations employ a virtual solution where customers, either directly or with the assistance of a representative of the third-party retailer, initiate the rent-to-ownlease-to-own transaction online in the retailers'retailers’ locations using our tablet computer and our virtual solution (direct locations).solutions.
Our Mexico segment consists of our company-owned rent-to-ownlease-to-own stores in Mexico that lease household durable goods to customers on a rent-to-ownlease-to-own basis.
Rent-A-Center Franchising International, Inc., an indirect wholly ownedwholly-owned subsidiary of Rent-A-Center, is a franchisor of rent-to-ownlease-to-own stores. Our Franchising segment’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-ownlease-to-own transaction. The balance of our Franchising segment’s revenue is generated primarily from royalties based on franchisees’ monthly gross revenues.
Newly Adopted Accounting Pronouncements
In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which includes multiple provisions intended to simplify various aspects of the accounting for share-based payments. Rent-A-Center adopted ASU 2016-09 beginning January 1, 2017. We adopted the recognition of excess tax benefits in the provision for income taxes rather than paid-in-capital, and the classification of excess tax benefits on the statement of cash flows on a prospective basis. We elected to continue to estimate forfeitures expected to occur in our determination of compensation cost recognized each period. Furthermore, we adopted the minimum statutory withholding requirements and classification of employee taxes paid on the statement of cash flows on a modified retrospective and full retrospective basis, respectively. Additional amendments included in the accounting standard update were not applicable to us. Impacts resulting from adoption were immaterial to the consolidated financial statements.
Note 2 - Senior DebtAcquisitions and Divestitures
On March 19, 2014,February 17, 2021, we completed the acquisition of Acima Holdings, LLC (“Acima Holdings”). Acima Holdings is a leading platform offering customers virtual lease-to-own solutions at the point-of-sale via web and mobile technology.
In accordance with the agreement and plan of merger entered into a Credit Agreementin connection with the transaction (the "Credit Agreement"“Merger Agreement”) among the Company, the several lenders from time to time parties, we issued to the Credit Agreement, Bankformer owners of America, N.A., BBVA Compass Bank, Wells Fargo Bank, N.A., and SunTrust Bank, as syndication agents, and JPMorgan Chase Bank, N.A., as administrative agent. The Credit Agreement initially provided a $900.0 million senior credit facility consistingAcima Holdings an aggregate of $225.0 million in term loans10,779,923 shares of our common stock (the "Term Loans"“Aggregate Stock Consideration”) and a $675.0 million revolving credit facilitypaid to them aggregate cash consideration of $1.3 billion (the "Revolving Facility"“Aggregate Cash Consideration”). The Credit Agreement was previously amended on February 1, 2016 (the “First Amendment”), on September 30, 2016 (the “Second Amendment”), and on March 31, 2017 (the "Third Amendment and Waiver"). On June 6, 2017, we entered into a Fourth Amendment (the “Fourth Amendment”), effective as of June 6, 2017, with JPMorgan Chase Bank, N.A., as administrative agent, the other agents party thereto and the lenders party thereto, to the Credit Agreement.

In


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

accordance with the terms of the Merger Agreement, the portion of the Aggregate Stock Consideration issued to employee former owners of Acima Holdings is subject to restricted stock agreements providing vesting conditions over a 36-month period that began upon closing of the transaction. The portion of the Aggregate Stock Consideration issued to nonemployee former owners of Acima Holdings were previously subject to the terms of an 18-month lockup agreement, which expired on August 17, 2022. Following the expiration of the lock-up agreement, all shares of our common stock received by non-employee former owners in the transaction have now become transferable. We entered into a Registration Rights Agreement at the closing of the transaction pursuant to which certain former owners of Acima are entitled to registration rights in respect of the portion of the Aggregate Stock Consideration received by them in the transaction.
The amounts outstandingaggregate purchase price in accordance with accounting standards under U.S. GAAP was approximately $1.4 billion, including the Term Loans were $49.1 millionAggregate Cash Consideration, and $191.8 millionthe 2,683,328 shares of the Aggregate Stock Consideration issued to non-employee former owners of Acima Holdings, valued at September 30, 2017$51.14 per share, as of the closing date and December 31, 2016, respectively.discounted for lack of marketability on account of the transfer restrictions described above. The amount outstanding underAggregate Cash Consideration for the Revolving Facilityacquisition was $55.0 million at September 30, 2017 and there were no outstandingfinanced with a combination of cash on hand, borrowings under the Revolvingour ABL Credit Facility at December 31, 2016. Outstanding borrowings for senior debt at September 30, 2017 and December 31, 2016 were reduced by total unamortized issuance costs of $6.2 million and $5.1 million, respectively. Theproceeds from issuances under our Term Loans are scheduled to mature on March 19, 2021, and the RevolvingLoan Facility, has a scheduled maturity of March 19, 2019.
The Term Loans are payable in consecutive quarterly installments each in an aggregate principal amount of $562,500, with a final installment equal to the remaining principal balance of the Term Loans due on March 19, 2021. In the event our Consolidated Total Leverage Ratio (as such term is defined in the Credit Agreement) exceeds 2.5:1, we are also required to pay down the Term Loans by a percentage of annual excess cash flow, as defined in the Credit Agreement. Additional payments will be equalNote 7, in addition to 25% of annual excess cash flows if the Consolidated Total Leverage Ratio is between 2.5:1 and 3.0:1, increasing to 50% of annual excess cash flows if the Consolidated Total Leverage Ratio is greater than 3.0:1. We made a mandatory excess cash flow prepayment in March 2017 with respect to our results for the year ended December 31, 2016, of approximately $141 million and in March 2016 with respect to our results for the year ended December 31, 2015, of approximately $27 million. We are further required to pay down the Term Loans with proceeds from certain asset sales or borrowingsthe issuance of new unsecured senior notes. See Note 7 and Note 8 for additional information.
The aggregate purchase price excludes the remaining 8,096,595 shares of the Aggregate Stock Consideration issued to employee former owners of Acima Holdings. Such shares were valued at $414.1 million, based on the per share price of $51.14 as definedof the date of closing. These shares are instead being recognized as stock-based compensation expense subject to ASC Topic 718, “Stock-based Compensation”, over the required vesting period, and recorded to Other charges in our unaudited Condensed Consolidated Statements of Operations.
Assets acquired and liabilities assumed in connection with the Credit Agreement.acquisition have been recorded at their fair values. The following table provides the estimated fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date:
Borrowings under
(in thousands)February 17, 2021
Aggregate cash consideration$1,273,263 
Aggregate stock consideration, subject to lockup agreements120,929 
Total Purchase price$1,394,192 
ASSETS ACQUIRED
Receivables, net(1)
$25,255 
Prepaid expenses and other assets700 
Rental merchandise
On rent340,575 
Property assets171,455 
Operating lease right-of-use assets9,136 
Deferred income taxes28,559 
Goodwill219,530 
Other intangible assets520,000 
Total assets acquired$1,315,210 
LIABILITIES ASSUMED
Accounts payable - trade16,023 
Accrued liabilities11,716 
Operating lease liabilities9,689 
Deferred income taxes(116,410)
Total liabilities assumed(78,982)
Total equity value$1,394,192 
(1) Includes gross contractual receivables of $61.6 million related to merchandise lease contracts, of which $34.7 million were estimated to be uncollectible.
Carrying value for assets and liabilities assumed as part of the Revolving Facility bear interest at varying rates equal to eitheracquisition, including receivables, prepaid expenses and other assets, accounts payable and accrued liabilities were recorded as fair value, as of the Eurodollar rate plus 1.50% to 3.00%, or the prime rate plus 0.50% to 2.00% (ABR), at our election (pursuantdate of acquisition, due to the Fourth Amendment discussed below)short term nature of these balances. Operating lease right-of-use assets and liabilities were recorded as the discounted value of future obligations in accordance with ASC Topic 842, “Leases”. The margins on the Eurodollar loans and on the ABR loansfair value measurements for borrowings under the Revolving Facility, which were 3.00% and 2.00%, respectively, at September 30, 2017, may fluctuate based upon an increase or decrease in our Consolidated Total Leverage Ratio as defined by a pricing grid included in the Credit Agreement. The margins on the Eurodollar loans and on the ABR loans for Term Loans are 3.00% and 2.00%, respectively, but may also fluctuate in the event the all-in pricing for any subsequent incremental Term Loan exceeds the all-in pricing for prior Term Loans by more than 0.50% per annum. A commitment fee equal to 0.30% to 0.50% of the unused portion of the Revolving Facility is payable quarterly, and fluctuates dependent upon an increase or decrease in our Consolidated Total Leverage Ratio. The commitment fee during the third quarter of 2017 was equal to 0.50% of the unused portion of the Revolving Facility.
Our borrowings under the Credit Agreement are, subject to certain exceptions, secured by a security interest in substantially all of our tangible andacquired intangible assets including intellectual property, and are also secured by a pledge of the capital stock of our U.S. subsidiaries.
Subject to a number of exceptions, the Credit Agreement contains, without limitation, covenants that generally limit our ability and the ability of our subsidiaries to:
incur additional debt;
repurchase capital stock, repurchase 6.625% notes and 4.75% notes and/or pay cash dividends when the Consolidated Total Leverage Ratio is greater than 3.75:1 (subject to an exception for cash dividends in an amount not to exceed $15 million annually);
incur liens or other encumbrances;
merge, consolidate or sell substantially all property or business;
sell, lease or otherwise transfer assets (other than in the ordinary course of business);
make investments or acquisitions (unless they meet financial tests and other requirements); or
enter into an unrelated line of business.
Since the Consolidated Total Leverage Ratio at September 30, 2017 is greater than 3.75:1, we are limited to a maximum of $15 million in dividend payments for the fiscal year. As of September 30, 2017, we have paid dividends of $12.8 million.
The Fourth Amendment removed or modified certain covenants under the Credit Agreement, including:
the maximum Consolidated Total Leverage Ratio was removed;
the maximum Consolidated Senior Secured Leverage Ratio was removed;
the minimum Consolidated Fixed Charge Coverage Ratio was reduced from 1.50:1 to 1.10:1 and the definitions of Consolidated Fixed Charges and Consolidated Fixed Charge Coverage Ratio were modified. In addition, the sole consequence of a breach of this covenant shall be that a Minimum Availability Period shall result, which impacts the borrowing capacity under the Loans;
any guarantee obligations of Foreign Subsidiaries may not exceed an aggregate of $10 million outstanding at any time;



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

indebtedness, including Capital Lease Obligations, mortgage financings and purchase money obligations that are secured by Liens permitted under the Credit Agreement, may not exceeddeveloped technology were primarily based on significant unobservable inputs (Level 3) developed using company-specific information. Certain fair values were determined based on an aggregate outstanding amount of $10 million, unless such Indebtedness was outstanding on the effective dateindependent valuation of the Fourth Amendment;net assets acquired, including $340.6 million of rental merchandise and $520 million of identifiable intangible assets with an estimated weighted average useful life of 8 years, as follows:
removed certain Permitted Investments,
Asset ClassEstimated Fair Value
(in thousands)		Estimated Remaining Useful Life (in years)
Merchant relationships$380,000 10
Relationship with existing lessees60,000 1
Trade name40,000 7
Non-compete agreements40,000 3
Developed technology, included in Property assets, net, in line with our accounting policies, was also acquired with a value of $170.0 million and modified Permitted Acquisitions,an estimated remaining useful life of 10 years. The fair value for these intangible and property assets were estimated using common industry valuation methods for similar asset types, based primarily on cost inputs and projected cash flows.
In addition, we recorded goodwill of $219.5 million in our Acima operating segment, which is now tiedconsists of the excess of the net purchase price over the fair value of the net assets acquired. Goodwill represents expected cost and revenue synergies and other benefits expected to certain performance criteria, includingresult within our retail partner business from the Borrowing Base.
Asacquisition of Acima Holdings. The total value of goodwill for tax purposes differs from recorded goodwill as a result of the Fourth Amendment,Aggregate Stock Consideration subject to restricted stock agreements, differences in value assigned to other purchased assets, and acquisition-related expenses. Tax goodwill will be amortized over 15 years.
Acima Holdings' results of operations are reflected in our unaudited Condensed Consolidated Statements of Operations from the date of acquisition.
Subsequent to the date of acquisition, we are no longer requiredrecorded certain adjustments to maintainthe purchase price allocation within the measurement period, including an adjustment to the fair value of rental merchandise decreasing the value of the acquired assets by approximately $17.1 million. The adjustment to the fair value of rental merchandise was based on further assessment of the carrying value of the assets and corresponding evaluation of related (Level 2) market inputs. Total cumulative measurement period adjustments resulted in a certain Consolidated Total Leverage Ratio or Consolidated Senior Secured Leverage Ratio, and we are prohibited from repurchasing our common stock and senior notesdecrease to goodwill of approximately $(22.2) million. The purchase price allocation for the remaining termAcima Holdings acquisition was complete as of the Credit Agreement. In addition, under the Fourth Amendment, we agreed to provide additional collateral protections to secure the obligations under the Credit Agreement.
The Fourth Amendment reduced the total capacity of the Revolving Facility from $675 million to $350 million. The Fourth Amendment also modified the borrowing terms of the revolving loans under the Credit Agreement, which, as amended, establishes that the aggregate outstanding amounts (including after any draw request) not exceed the Borrowing Base. The Borrowing Base is tied to the Company’s Eligible Installment Sales Accounts, Inventory and Eligible Rental Contracts, in addition to Reserves and the Term Loan Reserve. We will provide to the Agent information necessary to calculate the Borrowing Base within 30 days of the end of each calendar month, unless the remaining availability of the Revolving Facility is less than 20% of the maximum borrowing capacity of the Revolving Facility or $60 million, in which case the Company must provide weekly information.
The Credit Agreement as modified by the Fourth Amendment permits us to increase the amount of the Term Loans and/or the Revolving Facility from time to time on up to three occasions, in an aggregate amount of no more than $100 million. We may request an Incremental Revolving Loan or Incremental Term Loan, provided that at the time of such request, we are not in default, have obtained the consent of the administrative agent and the lenders providing such increase, and after giving effect thereto, (i) the Consolidated Fixed Charge Coverage Ratio on a pro forma basis is no less than 1.10:1, (ii) the Total Revolving Extensions of Credit do not exceed the Borrowing Base, and (iii) if the request occurs during a Minimum Availability Period, the Availability must be more than the Availability Threshold Amount.
The Fourth Amendment permits the Agent, in its sole discretion, to make loans to us that it deems necessary or desires (i) to preserve or protect the Collateral, (ii) to enhance the likelihood of, or maximize the amount of, repayment of the Loans and other Obligations, or (iii) to pay any other amount chargeable to or requirement to be paid by the Company pursuant to the terms of the Credit Agreement. The aggregate amount of such Protective Advances outstanding at any time may not exceed $35 million.December 31, 2021.
In connection with the Fourth Amendment,this acquisition, we recorded a write-down of previously unamortized debt issuance costs ofincurred approximately $1.9$23.9 million in acquisition-related expenses including expenses related to legal, professional, and banking transaction fees, which are treated as an addition to goodwill for tax purposes. These costs were included in Other charges in our unaudited Condensed Consolidated Statements of Operations.
The following unaudited pro forma combined results of operations present our financial results as if the second quarteracquisition of 2017. In addition, we paid arrangementAcima had been completed on January 1, 2020. These unaudited pro forma results may not necessarily reflect the actual results of operations that would have been achieved, nor are they necessarily indicative of future results of operations. The unaudited pro forma information reflects the step-up and amendment feesstep-down depreciation and amortization adjustments for the fair value of the assets acquired, adjustments to stock compensation expense as a result of Aggregate Stock Consideration subject to restricted stock awards, the Agent and the lenders that provided their consent to the Amendment of approximately $5.3 million, which were capitalizedadjustments in the second quarter of 2017 and will be amortized to interest expense over the remaining term of the agreement.
We also utilize our Revolving Facility for the issuance of letters of credit, as well as to manage normal fluctuations in operational cash flow caused by the timing of cash receipts. In that regard, we may from time to time draw funds under the Revolving Facility for general corporate purposes. Amounts are drawn as needed due to the timingelimination of cash flowshistorical debt and are generally paid downplacement of the new debt, and the related adjustments to the income tax provision. In addition, the pro forma net income has been adjusted to include transaction expenses and other non-recurring costs as cashof January 1, 2020. The unaudited pro forma financial information is generated by our operating activities. We believeas follows:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2021202020212020
(unaudited)(unaudited)(unaudited)(unaudited)
Pro Forma total revenues$1,181,268 $1,042,799 $3,606,629 $3,011,812 
Pro Forma net earnings(1)
36,320 32,004 158,181 31,160 
(1)Total pro forma adjustments to net earnings represented increases of $15.0 million and $5.9 million for the cash flow generated from operations, together with amounts available under our Credit Agreement, will be sufficient to fund our operations during the next 12 months. As ofthree and nine months ended September 30, 2017, we have issued letters2021, and decreases of credit of $86 million.
The table below shows$98.9 million and $276.9 million for the requiredthree and actual ratios under the Credit Agreement calculated as ofnine months ended September 30, 2017:2020, respectively.

Required RatioActual Ratio
Consolidated Fixed Charge Coverage RatioNo less than1.10:10.45:1
9
The actual Consolidated Fixed Charge Coverage ratio was calculated pursuant to the Credit Agreement by dividing the sum of consolidated EBITDA minus Unfinanced Capital Expenditures minus the excess (to the extent positive) of (i) expenses for income taxes paid in cash minus (ii) cash income tax refunds received) for the 12-month period ending September 30, 2017 ($21.5 million), by consolidated fixed charges for the 12-month period ending September 30, 2017 ($47.7 million). For purposes of the calculation, “consolidated fixed charges” is defined as the sum of consolidated interest expense and scheduled principal payments on indebtedness actually made during such period. The actual Consolidated Fixed Charge Coverage Ratio of 0.45:1 as of September 30, 2017 was below the minimum requirement of 1.10:1 as defined in the Fourth Amendment modifications above. As a result of being out of compliance with this covenant, we must maintain $50.0 million of excess availability on the Revolving Facility. Availability under our Revolving Facility was $147.5 million at September 30, 2017, net of the $50 million of excess availability we must maintain on the Revolving Facility.


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RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

The amounts of revenue and earnings of Acima Holdings included in our Condensed Consolidated Statements of Operations from the acquisition date of February 17, 2021 are as follows:
Events
(in thousands)
February 17, 2021 -
September 30, 2021
(unaudited)
Total revenues$1,042,966 
Net earnings(1)
102,063 
(1)Net earnings for the period includes amortization of defaultintangible assets acquired upon closing of the Acima Holdings acquisition.
Note 3 - Revenues
The following table disaggregates our revenue for the periods ended September 30, 2022 and 2021:
 Three Months Ended September 30, 2022
 Rent-A-Center Business
Acima(1)
MexicoFranchisingConsolidated
(in thousands)
Store
Rentals and fees$426,805 $387,488 $15,166 $— $829,459 
Merchandise sales30,009 116,795 812 — 147,616 
Installment sales16,718 — — — 16,718 
Other223 165 63 889 1,340 
Total store revenues473,755 504,448 16,041 889 995,133 
Franchise
Merchandise sales— — — 22,823 22,823 
Royalty income and fees— — — 6,001 6,001 
Total revenues$473,755 $504,448 $16,041 $29,713 $1,023,957 
(1) Represents revenues for our Acima segment, as defined in Note 1.
 Nine Months Ended September 30, 2022
 Rent-A-Center Business
Acima(1)
MexicoFranchisingConsolidated
(in thousands)
Store
Rentals and fees$1,305,871 $1,218,143 $45,790 $— $2,569,804 
Merchandise sales123,255 415,465 2,545 — 541,265 
Installment sales52,355 — — — 52,355 
Other964 386 119 2,229 3,698 
Total store revenues1,482,445 1,633,994 48,454 2,229 3,167,122 
Franchise
Merchandise sales— — — 67,849 67,849 
Royalty income and fees— — — 19,962 19,962 
Total revenues$1,482,445 $1,633,994 $48,454 $90,040 $3,254,933 
(1) Represents revenues for our Acima segment, as defined in Note 1.


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RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
 Three Months Ended September 30, 2021
 Rent-A-Center Business
Acima(1)
MexicoFranchisingConsolidated
(In thousands)
Store
Rentals and fees$446,049 $469,692 $15,108 $— $930,849 
Merchandise sales37,515 153,725 776 — 192,016 
Installment sales17,028 — — — 17,028 
Other394 28 33 627 1,082 
Total store revenues500,986 623,445 15,917 627 1,140,975 
Franchise
Merchandise sales— — — 33,671 33,671 
Royalty income and fees— — — 6,622 6,622 
Total revenues$500,986 $623,445 $15,917 $40,920 $1,181,268 
(1) Represents revenues for our Acima segment, as defined in Note 1.
 Nine Months Ended September 30, 2021
 Rent-A-Center Business
Acima(1)
MexicoFranchisingConsolidated
(In thousands)
Store
Rentals and fees$1,313,512 $1,236,059 $43,217 $— $2,592,788 
Merchandise sales163,943 479,701 2,394 — 646,038 
Installment sales52,992 — — — 52,992 
Other1,239 414 59 1,323 3,035 
Total store revenues1,531,686 1,716,174 45,670 1,323 3,294,853 
Franchise
Merchandise sales— — — 96,342 96,342 
Royalty income and fees— — — 20,830 20,830 
Total revenues$1,531,686 $1,716,174 $45,670 $118,495 $3,412,025 
(1) Represents revenues for our Acima segment, as defined in Note 1.
Lease Purchase Agreements
Rent-A-Center Business, Acima, and Mexico
Rentals and Fees. Rental merchandise is leased to customers pursuant to lease-to-own agreements, which provide for weekly, semi-monthly or monthly terms with non-refundable lease payments. At the expiration of each lease term, customers may renew the lease-to-own agreement for the next lease term. Generally, the customer has the right to acquire title of the merchandise either through a purchase option or through payment of all required lease terms. Customers can terminate the lease-to-own agreement at the end of any lease term without penalty. Therefore, lease-to-own agreements are accounted for as operating leases.
Lease payments received at our Rent-A-Center Business stores, certain Acima staffed locations formerly operating under the Credit Agreement include customary events, such asPreferred Lease brand, and Mexico stores must be prepaid in advance of the next lease term. Under the Acima Holdings business model, revenues may be earned prior to the lease payment due date, in which case revenue is accrued prior to receipt of the lease payment, net of estimated returns and uncollectible renewal payments. Under both models, rental revenue is recognized over the lease term. See Note 4 for additional information regarding accrued lease revenue.
Cash received for rental payments, including fees, prior to the period in which it should be recognized, is deferred and recognized according to the lease term. At September 30, 2022 and December 31, 2021, we had $31.7 million and $51.7 million, respectively, in deferred revenue included in accrued liabilities related to our lease to own agreements. Revenue related to various payment, reinstatement or late fees is recognized when paid by the customer at the point service is provided. Rental merchandise in our Rent-A-Center Business, former Preferred Lease locations, and Mexico stores is depreciated using the income forecasting method and recognized in cost of rentals and fees in our Consolidated Statement of Operations over the

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RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
lease term. Lease merchandise in Acima Holdings is depreciated over the lease term using a cross-acceleration provisionstraight-line depreciation method. Under the income forecasting method, the consumption of lease merchandise occurs during periods of rental and depreciation directly coincides with the receipt of rental revenue over the lease-to-own contract period. Depreciation under the straight-line method is recognized each period over the term of the lease-to-own contract irrespective of receipt of revenue payments from the customer.
We also offer additional product plans along with our rental agreements which provide customers with liability protection against significant damage or loss of a product, and club membership benefits, including various discount programs and product service and replacement benefits in the event merchandise is damaged or lost, and payment insurance in the event eligible customers become unemployed. Customers renew product plans in conjunction with their rental term renewals, and can cancel the plans at any time. Revenue for product plans is recognized over the term of the plan. Costs incurred related to product plans are primarily recognized in cost of sales.
Revenue from contracts with customers
Rent-A-Center Business, Acima, and Mexico
Merchandise Sales. Merchandise sales include payments received for the exercise of the early purchase options offered through our lease-to own agreements or merchandise sold through point of sale transactions. Revenue for merchandise sales is recognized when payment is received and ownership of the merchandise passes to the customer. The remaining net value of merchandise sold is recorded to cost of sales at the time of the transaction.
Installment Sales. Revenue from the sale of merchandise in our retail installment stores is recognized when the installment note is signed and control of the merchandise has passed to the customer. The cost of merchandise sold through installment agreements is recognized in cost of sales at the time of the transaction. We offer extended service plans with our installment agreements which are administered by third parties and provide customers with product service maintenance beyond the term of the installment agreement. Payments received for extended service plans are deferred and recognized, net of related costs, when the installment payment plan is complete and the service plan goes into effect. Customers can cancel extended service plans at any time during the installment agreement period and receive a refund for payments previously made towards the plan. At September 30, 2022 and December 31, 2021, we had $2.1 million and $2.6 million in deferred revenue included in accrued liabilities related to extended service plans.
Other. Other revenue consists of revenue generated by other miscellaneous product plans offered to our rental and installment customers. Revenue for other product plans is recognized in accordance with the terms of the applicable plan agreement.
Franchising
Merchandise Sales. Revenue from the sale of rental merchandise is recognized upon shipment of the merchandise to the franchisee.
Royalty Income and Fees. Franchise royalties, including franchisee contributions to corporate advertising funds, represent sales-based royalties calculated as a percentage of gross rental payments and sales. Royalty revenue is accrued and recognized as rental payments and merchandise sales occur. Franchise fees are initial fees charged to franchisees for new or converted franchise stores. Franchise fee revenue is recognized on a straight-line basis over the term of the franchise agreement. At September 30, 2022 and December 31, 2021, we had $3.6 million and $4.1 million, respectively, in deferred revenue included in accrued liabilities related to franchise fees.
Note 4 - Receivables and Allowance for Doubtful Accounts
Installment sales receivables consist primarily of receivables due from customers for the sale of merchandise in our retail installment stores. Installment sales receivables associated with the sale of merchandise at our Get It Now and Home Choice stores generally consist of the sales price of the merchandise purchased and any additional fees for services the customer has chosen, less the customer’s down payment. No interest is accrued and interest income is recognized each time a customer makes a payment, generally on a monthly basis. Interest paid on installment agreements for both the nine months ended September 30, 2022 and 2021 was $9.2 million.
Trade and notes receivables consist of amounts due from our lease-to-own customers for renewal and uncollected rental payments, adjusted for the probability of collection based on our assessment of historical collection rates; amounts owed from our franchisees for inventory purchases, earned royalties and other obligations; and other corporate related receivables. Credit is extended to franchisees based on an evaluation of each franchisee’s financial condition and collateral is generally not required. Trade receivables are generally due within 30 days.

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RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Receivables consist of the following:
(in thousands)September 30, 2022December 31, 2021
Installment sales receivables$67,398 $66,276 
Trade and notes receivables58,210 68,581 
Total receivables125,608 134,857 
Less allowance for doubtful accounts(1)
(12,378)(8,479)
Total receivables, net of allowance for doubtful accounts$113,230 $126,378 
1) Lease receivables are accrued on a net basis, adjusted for the probability of collection based on our assessment of historical collection rates, as described above. Therefore, we do not maintain a separate allowance for doubtful accounts related to our lease receivables.
We have established an allowance for doubtful accounts for our installment notes receivable. Our policy for determining the allowance is primarily based on historical loss experience, as well as the results of management’s review and analysis of the payment and collection of the installment notes receivable within the previous year. We believe our allowance is adequate to absorb all expected losses. Our policy is to charge off installment notes receivable that are 120 days or more past due. Charge-offs are applied as a reduction to the allowance for doubtful accounts and any recoveries of previously charged off balances are applied as an increase to the allowance for doubtful accounts.
The allowance for our Franchising trade and notes receivables is determined by considering a number of factors, including the length of time receivables are past due, previous loss history, the franchisee’s current ability to pay its obligation, and the condition of the general economy and the industry as a whole. Trade receivables that are more than 90 days past due are either written-off or fully reserved in our allowance for doubtful accounts. Payments subsequently received on such receivables are credited to the allowance for doubtful accounts.
The allowance for doubtful accounts related to Franchising trade and notes receivables was $1.0 million and $0.9 million, and the allowance for doubtful accounts related to installment sales receivables was $11.4 million and $7.6 million at September 30, 2022 and December 31, 2021, respectively.
Changes in our allowance for doubtful accounts are as follows:
(in thousands)September 30, 2022
Beginning allowance for doubtful accounts$8,479 
Bad debt expense(1)
18,100 
Accounts written off, net of recoveries(14,201)
 Ending allowance for doubtful accounts$12,378 
(1) Uncollectible installment payments, franchisee obligations, and other corporate receivables are recognized in other store operating expenses in our condensed consolidated financial statements.
Note 5 - Leases
We lease space for all of our Rent-A-Center Business and Mexico stores under operating leases expiring at various times through 2032. In addition, we lease space for certain support facilities under operating leases expiring at various times through 2032. Most of our store leases are five year leases and contain renewal options for additional periods ranging from three to five years at rental rates adjusted according to agreed upon formulas. We evaluate all leases to determine if it is likely that we defaultwill exercise future renewal options and in most cases we are not reasonably certain of exercise due to competing market rental rates and lack of significant penalty, or business disruption incurred by not exercising the renewal options.
In certain situations involving the sale of a Rent-A-Center Business corporate store to a franchisee, we enter into a lease assignment agreement with the buyer, but we remain the primary obligor under the original lease for the remaining active term. These assignments are therefore classified as subleases and the original lease is included in our operating lease right-of-use assets and operating lease liabilities in our Condensed Consolidated Balance Sheets.
We lease vehicles for all of our Rent-A-Center Business stores under operating leases with lease terms expiring twelve months after the start date of the lease. We classify these leases as short-term and have elected the short-term lease exemption for our vehicle leases, and have therefore excluded them from our operating lease right-of-use assets within our Condensed Consolidated Balance Sheets. We also lease vehicles for all of our Mexico stores which have terms expiring at various times through 2026 with rental rates adjusted periodically for inflation. Finally, we have a minimal number of equipment leases, primarily related to temporary storage containers and certain back-office technology hardware assets.

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RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
In our calculation of operating lease right-of-use assets and operating lease liabilities we have elected not to separate the lease and non-lease components. Furthermore, operating lease right-of-use assets and operating lease liabilities are discounted using our incremental borrowing rate, since the implicit rate is not readily determinable. We do not currently have any financing leases.
Operating lease costs are recorded on a straight-line basis within other debt.store expenses in our Condensed Consolidated Statements of Operations.
Total operating lease costs by expense type:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2022202120222021
Operating lease cost included in Other store expenses(1)(2)
$31,100 $33,218 $93,365 $102,044 
Operating lease cost included in Other charges(2)
264 16 299 260 
Sublease receipts(1,642)(2,850)(5,700)(9,333)
Total operating lease charges$29,722 $30,384 $87,964 $92,971 
(1) Includes short-term lease costs, which are not significant.
(2) Excludes variable lease costs of $9.4 million and $27.2 million for the three and nine months ended September 30, 2022 compared to $8.4 million and $25.4 million for the three and nine months ended September 30, 2021.
Supplemental cash flow information related to leases:
Nine Months Ended September 30,
(in thousands)20222021
Cash paid for amounts included in measurement of operating lease liabilities$77,780 $80,800 
Cash paid for short-term operating leases not included in operating lease liabilities14,170 13,022 
Right-of-use assets obtained in exchange for new operating lease liabilities81,937 87,178 
Weighted-average discount rate and weighted-average remaining lease term:
(in thousands)September 30, 2022December 31, 2021
Weighted-average discount rate(1)
6.8 %6.0 %
Weighted-average remaining lease term (in years)44
(1) The January 1, 2019 incremental borrowing rate was used for leases in existence at the time of adoption of ASU 2016-02.
Reconciliation of undiscounted operating lease liabilities to the present value operating lease liabilities at September 30, 2022:
(in thousands)Operating Leases
2022$27,138 
2023100,626 
202483,448 
202565,635 
202641,461 
Thereafter35,038 
Total undiscounted operating lease liabilities353,346 
Less: Interest(43,247)
Total present value of operating lease liabilities$310,099 
Note 6 - Income Taxes
The effective tax rate was 78.7% for the nine months ended September 30, 2022, compared to 28.9% for the corresponding period in 2021. The effective tax rate for the nine months ended September 30, 2022 was primarily impacted by the difference between recorded goodwill and goodwill recognized for tax purposes, primarily as a result of the Aggregate Stock Consideration issued to employee former owners of Acima Holdings subject to restricted stock agreements. The effective tax rate for the nine months ended September 30, 2021 was also impacted by the tax effect of the equity consideration included in the Aggregate Stock Consideration subject to vesting conditions, discrete income tax items related to excess tax benefits from

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RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
the vesting of our annual restricted stock award grants and stock option exercises, and the release of domestic and foreign tax valuation allowances.
Note 7 - Senior Debt
On February 17, 2021, we entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and lenders party thereto, providing for a seven-year $875 million senior secured term loan facility (the “Term Loan Facility”) and an Asset Based Loan Credit Facility (the “ABL Credit Facility”) providing for a five-year asset-based revolving credit facility with commitments of $550 million and a letter of credit sublimit of $150 million. Commitments under the ABL Credit Facility may be increased, at our option and under certain conditions, by up to an additional $125 million in the aggregate.
Proceeds from the Term Loan Facility were net of original issue discount of $4.4 million upon issuance from the lenders. In addition, an eventin connection with the closing of defaultthe Term Loan Facility and the ABL Credit Facility, we incurred approximately $30.2 million in debt issuance costs, including bank financing fees and third party legal and other professional fees, of which $25.3 million was capitalized in accordance with ASC Topic 470, “Debt” and recorded as a reduction of our outstanding senior debt, net in our Condensed Consolidated Balance Sheets. Remaining debt issuance costs incurred of $4.9 million were expensed and recorded to Other charges in our Condensed Consolidated Statement of Operations.
On September 21, 2021 we entered into a First Amendment to the Term Loan Facility, effective as of September 21, 2021. The amendment effected a repricing of the applicable margin under the Credit Agreement would occur if a changeTerm Loan Facility by reducing the LIBOR floor by 25 basis points from 0.75% to 0.50%, and the applicable margin, with respect to any initial term loans, by 75 basis points from 4.00% to 3.25%.
In connection with the execution of control occurs. This is defined to include the case where aFirst Amendment, we incurred approximately $1.5 million in debt issuance costs, including third party becomesarrangement and other professional fees, of which approximately $1.4 million were expensed as debt refinance charges in our Condensed Consolidated Statement of Operations, and approximately $0.1 million were capitalized and recorded as a reduction to our outstanding senior debt in our Condensed Consolidated Balance Sheets. In addition, in accordance with ASC Topic 470, “Debt”, we recorded approximately $5.4 million in write-offs of unamortized debt issuance costs and original issue discount previously capitalized upon the beneficial owner of 35% or more of our voting stock or a majority of Rent-A-Center’s Board of Directors are not Continuing Directors (allissuance of the current membersTerm Loan Facility on February 17, 2021. The write-offs were recorded as debt refinance charges in our Condensed Consolidated Statement of our Board of Directors are Continuing Directors under the Credit Agreement). An event of default would also occur if one or more judgments wereOperations.
On August 10, 2022, we entered against us of $50.0 million or more and such judgments were not satisfied or bonded pending appeal within 30 days after entry.
In additioninto a First Amendment to the RevolvingABL Credit Facility, discussed above, we maintain a $20 million unsecured, revolving lineeffective as of creditAugust 10, 2022. The amendment effected the replacement of LIBOR with INTRUST Bank, N.A. to facilitate cash management. The availabilityTerm Secured Overnight Financing Rate (“Term SOFR”) as the benchmark rate of our INTRUST line of credit is restricted if the borrowing capacity under our Revolving Facility drops below $10 million. interest thereunder.
As of September 30, 2017, we2022, the total remaining balance of unamortized debt issuance costs and original issue discount related to our senior debt reported in the Condensed Consolidated Balance Sheets were approximately $17.4 million and $2.5 million, respectively. Remaining unamortized debt issuance costs and original issue discount will be amortized to interest expense over the remaining term of the Term Loan Facility.
The amount outstanding under the Term Loan Facility was $861.9 million at September 30, 2022. We had $1.1$90.0 million outstanding borrowings against this lineunder our ABL Credit Facility at September 30, 2022 and borrowing capacity of $373.8 million.
We also utilize the ABL Credit Facility for the issuance of letters of credit. As of September 30, 2022, we have issued letters of credit in the aggregate outstanding amount of $86.2 million primarily relating to workers compensation insurance claims.
Term Loan Credit Agreement
The Term Loan Facility, which matures on February 17, 2028, amortizes in equal quarterly installments at a rate of 1.00% per annum of the original principal amount thereof, with the remaining balance due at final maturity. Subject in each case to certain restrictions and no outstandingconditions, we may add up to $500 million of incremental term loan facilities to the Term Loan Facility or utilize incremental capacity under the Term Loan Facility at any time by issuing or incurring incremental equivalent term debt.
Interest on borrowings under the Term Loan Facility is payable at December 31, 2016.a fluctuating rate of interest determined by reference to the eurodollar rate plus an applicable margin of 3.25%, subject to a 0.50% LIBOR floor. The line of credit renews annually.total interest rate on the Term Loan Facility was 6.06% at September 30, 2022. Borrowings under the lineTerm Loan Facility amortize in equal quarterly installments in an amount equal to 1.000% per annum of the original aggregate principal amount thereof, with the remaining balance due at final maturity.
The Term Loan Facility is secured by a first-priority security interest in substantially all of our present and future tangible and intangible personal property, including our subsidiary guarantors, other than the ABL Priority Collateral (as defined below), and by a second-priority security interest in the ABL Priority Collateral, subject to certain exceptions. The obligations under the

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RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Term Loan Facility are guaranteed by us and our material wholly-owned domestic restricted subsidiaries that also guarantee the ABL Credit Facility.
The Term Loan Facility contains covenants that are usual and customary for similar facilities and transactions and that, among other things, restrict our ability and our restricted subsidiaries to create certain liens and enter into certain sale and lease-back transactions; create, assume, incur or guarantee certain indebtedness; consolidate or merge with, or convey, transfer or lease all or substantially all of our and our restricted subsidiaries’ assets, to another person; pay dividends or make other distributions on, or repurchase or redeem, our capital stock or certain other debt; and make other restricted payments. The Term Loan Facility also includes mandatory prepayment requirements related to asset sales (subject to reinvestment), debt incurrence (other than permitted debt) and excess cash flow, subject to certain limitations described therein. These covenants are subject to a number of limitations and exceptions set forth in the documentation governing the Term Loan.
The Term Loan provides for customary events of default, including, but not limited to, failure to pay principal and interest, failure to comply with covenants, agreements or conditions, and certain events of bankruptcy or insolvency involving us and our significant subsidiaries.
The Term Loan Facility was fully drawn at the closing of the Acima Holdings acquisition to fund a portion of the Aggregate Cash Consideration payable in the transaction, repay certain of our outstanding indebtedness and that of our subsidiaries, repay all outstanding indebtedness of Acima Holdings and its subsidiaries and pay certain fees and expenses incurred in connection with the transaction. A portion of such proceeds were used to repay $197.5 million outstanding under the prior term loan facility, dated as of August 5, 2019, among us, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (the “Prior Term Loan Facility”).
ABL Credit Agreement
The ABL Credit Facility will mature on February 17, 2026. We may borrow only up to the lesser of the level of the then-current borrowing base and the aggregate amount of commitments under the ABL Credit Facility. The borrowing base is tied to the amount of eligible installment sales accounts, inventory and eligible rental contracts, reduced by certain reserves.
The ABL Credit Facility bears interest at a fluctuating rate determined by reference to Term SOFR plus an applicable margin of 1.50% to 2.00%. The total interest rate on the ABL Credit Facility at September 30, 2022 was 4.783%. A commitment fee equal to 0.250% to 0.375% of the unused portion of the ABL Credit Facility fluctuates dependent upon average utilization for the prior month as defined by a pricing grid included in the documentation governing the ABL Credit Facility. The commitment fee at September 30, 2022 was 0.375%. We paid $0.7 million of commitment fees during the third quarter of 2022.
Loans under the ABL Credit Facility may be borrowed, repaid and re-borrowed until February 17, 2026, at which time all amounts borrowed must be repaid. The obligations under the ABL Credit Facility are guaranteed by us and certain of our wholly owned domestic restricted subsidiaries, subject to certain exceptions. The obligations under the ABL Credit Facility and such guarantees are secured on a first-priority basis by all of our and our subsidiary guarantors’ accounts, inventory, deposit accounts, securities accounts, cash and cash equivalents, rental agreements, general intangibles (other than equity interests in our subsidiaries), chattel paper, instruments, documents, letter of credit bear interestrights, commercial tort claims related to the foregoing and other related assets and all proceeds thereof related to the foregoing, subject to permitted liens and certain exceptions (such assets, collectively, the “ABL Priority Collateral”) and a second-priority basis in substantially all other present and future tangible and intangible personal property of ours and the subsidiary guarantors, subject to certain exceptions.
The ABL Credit Facility contains covenants that are usual and customary for similar facilities and transactions and that, among other things, restrict our ability and our restricted subsidiaries to create certain liens and enter into certain sale and lease-back transactions; create, assume, incur or guarantee certain indebtedness; consolidate or merge with, or convey, transfer or lease all or substantially all of our and our restricted subsidiaries’ assets, to another person; pay dividends or make other distributions on, or repurchase or redeem, our capital stock or certain other debt; and make other restricted payments.
The ABL Credit Facility also requires the maintenance of a consolidated fixed charge coverage ratio of at least 1.10 to 1.00 at the end of each fiscal quarter only in the event either (i) certain specified events of default have occurred and are continuing or (ii) availability is less than or equal to the greater of $56.25 million and 15% of the line cap then in effect. These covenants are subject to a variable ratenumber of limitations and exceptions set forth in the documentation governing the ABL Credit Facility. The fixed charge coverage ratio as of September 30, 2022 was 0.68 to 1.00, however, neither of the conditions in (i) or 2.00%.(ii) described above were applicable. Therefore, the maintenance of the fixed charge coverage ratio as of September 30, 2022 was not required.

16
RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The documentation governing the ABL Credit Facility provides for customary events of default, including, but not limited to, failure to pay principal and interest, failure to comply with covenants, agreements or conditions, and certain events of bankruptcy or insolvency involving us and our significant subsidiaries.
The table below shows the scheduled maturity dates of our outstanding debt at September 30, 20172022 for each of the years ending December 31:
(in thousands)Term Loan FacilityABL Credit FacilityTotal
2022$2,188 $— $2,188 
20238,750 — 8,750 
20248,750 — 8,750 
20258,750 — 8,750 
20268,750 90,000 98,750 
Thereafter824,687 — 824,687 
Total senior debt$861,875 $90,000 $951,875 
(in thousands)Term Loan Revolving Facility INTRUST Line of Credit Total
2017$562
 $—
 $1,070
 $1,632
20182,250
 —
 —
 2,250
20192,250
 55,000
 —
 57,250
20202,250
 —
 —
 2,250
202141,813
 —
 —
 41,813
Thereafter—
 —
 —
 —
Total senior debt$49,125
 $55,000
 $1,070
 $105,195

Note 38 - Subsidiary Guarantors – Senior Notes
On November 2, 2010,February 17, 2021, we issued $300.0$450 million in senior unsecured notes due November 2020,February 15, 2029, at par value, bearing interest at 6.625%6.375% (the “Notes”), pursuantthe proceeds of which were used to an indenture dated November 2, 2010, among Rent-A-Center, Inc., its subsidiary guarantors and The Bank of New York Mellon Trust Company, as trustee. Afund a portion of the proceedsAggregate Cash Consideration upon closing of this offeringthe Acima Holdings acquisition. Interest on the Notes is payable in arrears on February 15 and August 15 of each year, beginning on August 15, 2021. In connection with the issuance of the Notes, we incurred approximately $15.7 million in debt issuance costs, including bank financing fees and third party legal and other professional fees, which were used to repay approximately $200.0 million of outstanding term debt under our Prior Credit Agreement. The remaining net proceeds were used to repurchase sharescapitalized in accordance with ASC Topic 470, “Debt” and recorded as a reduction of our common stock. Theoutstanding Notes in our Condensed Consolidated Balance Sheets. Debt issuance costs are amortized as interest expense over the term of the Notes. As of September 30, 2022, the total remaining balance of unamortized debt issuance costs related to our senior notes reported in the Condensed Consolidated Balance Sheets was approximately $12.5 million.
We may redeem some or all of the Notes at any time on or after February 15, 2024 for cash at the redemption prices set forth in the indenture governing the Notes, plus accrued and unpaid interest to, but not including, the redemption date. Prior to February 15, 2024, we may redeem up to 40% of the aggregate principal amount of the 6.625% notes outstanding as of September 30, 2017 and December 31, 2016, was $292.7 million, reduced by $2.0 million and $2.5 million of unamortized issuance costs, respectively.
On May 2, 2013, we issued $250.0 million in senior unsecured notes due May 2021, bearing interest at 4.75%, pursuant to an indenture dated May 2, 2013, among Rent-A-Center, Inc., its subsidiary guarantors and The Bank of New York Mellon Trust Company, as trustee. A portion ofNotes with the proceeds of this offering were usedcertain equity offerings at a redemption price of 106.375% plus accrued and unpaid interest to, repurchase sharesbut not including, the redemption date. In addition, we may redeem some or all of our common stock underthe Notes prior to February 15, 2024, at a $200.0 million accelerated stock buyback program. The remaining net proceeds were used to repay outstanding revolving debt under our Prior Credit Agreement. Theredemption price of 100% of the principal amount of the 4.75% notes outstanding asNotes plus accrued and unpaid interest to, but not including, the redemption date, plus a “make-whole” premium. If we experience specific kinds of September 30, 2017change of control, we will be required to offer to purchase the Notes at a price equal to 101% of the principal amount thereof plus accrued and December 31, 2016, was $250.0 million, reduced by $2.3 million and $2.8 million of unamortized issuance costs, respectively.unpaid interest.
The indenturesNotes are our general unsecured senior obligations, and are effectively subordinated to all of our existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness, structurally subordinated to all existing and future indebtedness and other liabilities of our non-guarantor subsidiaries, equal in right of payment to all of our and our guarantor subsidiaries’ existing and future senior indebtedness and senior in right of payment to all of our future subordinated indebtedness, if any. The Notes are jointly and severally guaranteed on a senior unsecured basis by certain of our domestic subsidiaries that have outstanding indebtedness or guarantee other specified indebtedness, including the ABL Credit Facility and the Term Loan Facility.
The indenture governing the 6.625% notes and the 4.75% notes are substantially similar. Each indentureNotes contains covenants that limit, among other things, our ability to:
incur additional debt;
and the ability of some of our restricted subsidiaries to create liens, transfer or sell assets, incur indebtedness or our subsidiaries;
grant liens to third parties;
issue certain preferred stock, pay cashdividends, redeem stock or make other distributions, make other restricted payments or investments, create restrictions on payment of dividends or repurchase stock when total leverage is greater than 2.50:1 (subjectother amounts to an exception for cash dividends in an amount not to exceed $20 million annually); and
us by our restricted subsidiaries, merge or consolidate with other entities, engage in certain transactions with affiliates and designate our subsidiaries as unrestricted subsidiaries. These covenants are subject to a mergernumber of exceptions and qualifications. The covenants limiting restricted payments, restrictions on payment of dividends or sell substantially allother amounts to us by our restricted subsidiaries, the ability to incur indebtedness, asset dispositions and transactions with affiliates will be suspended if and while the Notes have investment grade ratings from any two of our assets.Standard & Poor’s Ratings Services, Moody’s Investors Service, Inc. and Fitch, Inc.
EventsThe indenture governing the Notes also provides for events of default, under each indenture include customary events, such as a cross-acceleration provision inwhich, if any of them occurs, would permit or require the event that we default inprincipal, premium, if any, and interest on all the payment of other debtthen outstanding Notes to be due at maturity or upon acceleration for default in an amount exceeding $50.0 million, as well as in the event a judgment is entered against us in excess of $50.0 million that is not discharged, bonded or insured.
The 6.625% notes may be redeemed on or after November 15, 2015, at our option, in whole or in part, at a premium declining from 103.313%. The 6.625% notes may be redeemed on or after November 15, 2018, at our option, in whole or in part, at par. The 6.625% notes also require that upon the occurrence of a change of control (as defined in the 2010 indenture), the holders of the

and payable.


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RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

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.
The 4.75% notes may be redeemed on or after May 1, 2016, at our option, in whole or in part, at a premium declining from 103.563%. The 4.75% notes may be redeemed on or after May 1, 2019, at our option, in whole or in part, at par. The 4.75% notes also require that upon the occurrence of a change of control (as defined in the 2013 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.
Any mandatory repurchase of the 6.625% notes and/or the 4.75% notes would trigger an event of default under our Credit Agreement. We are not required to maintain any financial ratios under either of the indentures.
Rent-A-Center and its subsidiary guarantors have fully, jointly and severally, and unconditionally guaranteed the obligations of Rent-A-Center with respect to the 6.625% notes and the 4.75% notes. Rent-A-Center has no independent assets or operations, and each subsidiary guarantor is 100% owned directly or indirectly by Rent-A-Center. The only direct or indirect subsidiaries of Rent-A-Center that are not guarantors are minor subsidiaries. There are no restrictions on the ability of any of the subsidiary guarantors to transfer funds to Rent-A-Center in the form of loans, advances or dividends, except as provided by applicable law.
Note 49 - Fair Value
We follow a three-tier fair value hierarchy, which classifies the inputs used in measuring fair values, in determining the fair value of our non-financial assets and non-financial liabilities, which consist primarily of goodwill. These tiers include: Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. There were no changes in the methods and assumptions used in measuring fair value during the period.
At September 30, 2017, ourOur financial instruments include cash and cash equivalents, receivables, payables, senior debtborrowings against our ABL Credit Facility and senior notes.Term Loan Facility, and outstanding Notes. The carrying amount of cash and cash equivalents, receivables and payables approximates fair value at September 30, 20172022 and December 31, 2016,2021, because of the short maturities of these instruments. Our senior debt isIn addition, the interest rates on our Term Loan Facility and ABL Credit Facility are variable rate debt that re-prices frequently and, entails no significant change in credit risk and, as a result,therefore, we believe the carrying value of outstanding borrowings approximates their fair value approximates carrying value.
The fair value of our senior notesNotes is based on Level 1 inputs and was as follows at September 30, 2017 and December 31, 2016:2022:
September 30, 2022
(in thousands)Carrying ValueFair ValueDifference
Senior notes$450,000 $351,000 $(99,000)
 September 30, 2017 December 31, 2016
(in thousands)Carrying Value Fair Value Difference Carrying Value Fair Value Difference
6.625% senior notes$292,740
 $277,371
 $(15,369) $292,740
 $266,393
 $(26,347)
4.75% senior notes250,000
 226,250
 (23,750) 250,000
 206,250
 (43,750)
Total senior notes$542,740
 $503,621
 $(39,119) $542,740
 $472,643
 $(70,097)
Note 510 - Other Charges
Acceptance Now Store Closures. DuringAcima Holdings Acquisition. As described in Note 2, on February 17, 2021, we completed the first six monthsacquisition of 2017, we closed 319 Acceptance Now manned locations and 9 Acceptance Now direct locations, relatedAcima Holdings, a leading provider of virtual lease-to-own solutions. Included in the aggregate consideration issued to the hhgregg bankruptcy and liquidation plan andformer owners of Acima Holdings were 8,096,595 common shares, valued at $414.1 million, subject to 36-month vesting conditions under restricted stock agreements, which will be recognized over the Conn's referral contract termination. These closures resulted in pre-tax charges of $16.4 million forvesting term as stock compensation expense. During the nine months ended September 30, 2017, consisting primarily2022 and 2021, we recognized approximately $111.5 million and $93.1 million in stock compensation expense related to these restricted stock agreements, respectively.
The fair value of rental merchandise losses, disposalassets acquired as part of fixedthe transaction included $520 million in intangible assets and other miscellaneous labor and shutdown costs. In addition, we recorded a pre-tax impairment charge of $3.9$170 million to our intangible assets for our discontinued vendor relationship.
Corporate Cost Rationalization. During the first nine months of 2017, we executed a head count reduction that impacted approximately 10% of our field support center workforce. This resulted in pre-tax charges for severance and other payroll-related costs of approximately $3.4 million fordeveloped technology. During the nine months ended September 30, 2017.2022 and 2021, we recognized approximately $50.6 million and $72.4 million in amortization expense and $11.9 million and $9.3 million in incremental depreciation expense related to these assets, respectively.
Effects of Hurricanes.During the third quarternine months ended September 30, 2022 and 2021, we recognized approximately $0.2 million and $17.3 million in transaction costs associated with the closing of 2017, Hurricanes Harvey, Irma and Maria caused significant damagethe transaction, respectively.
During the nine months ended September 30, 2021 we recognized approximately $7.9 million in the continental United States and surrounding areas,post-acquisition integration costs, including Texas, Florida, and Puerto Rico, resulting$3.5 million in pre-tax expenses of approximately $1.9employee severance, $3.3 million forin inventory losses, store repairand $1.1 million in other integration costs, fixed asset write-offs, and employee assistance. Approximately $1.7 million of these pre-tax expenses related to Hurricanes Harvey and Irma, while the remaining $0.2 million related to employee assistance payments for Hurricane Maria. At this time, we are unable to reasonably estimate the extent of losses incurred due to the damage caused by Hurricane Maria, but we expect to have a more complete assessment during the fourth quarter of 2017.including reorganization advisory fees.
U.S Core Store and Acceptance Now Consolidation Plan. During the second quarter of 2016, we closed 167 U.S. Core and 96 Acceptance Now locations, resulting in a pre-tax restructuring charge of $1.0 million and $19.9 million for the three and nine




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

months ended September 30, 2016. Restructuring charges consisted of lease obligation costs, disposal of fixed assets, and other miscellaneous labor and shutdown costs.
Mexico Store Consolidation Plan. During the first quarter of 2016, we closed 14 stores in Mexico, resulting in pre-tax restructuring charges of $2.3 million in the Mexico segment for disposal of rental merchandise, fixed assets and leasehold improvements and other charges to decommission the stores.
Activity with respect to otherOther charges for the nine months ended September 30, 20172022 is summarized in the below table:
(in thousands) Accrued Charges at December 31, 2021Charges & AdjustmentsPayments & Adjustments Accrued Charges at September 30, 2022
Cash charges:
Acima Holdings transaction costs$— $187 $(187)$— 
Labor reduction costs(1)
1,593 5,160 (3,757)2,996 
Other cash charges— 293 (293)— 
Total cash charges$1,593 5,640 $(4,237)$2,996 
Non-cash charges:
Acima Holdings restricted stock agreements(2)
111,489 
Depreciation and amortization of acquired assets(3)
62,558 
Asset impairments(4)
6,768 
Other(1,020)
Total other charges$185,435 
(in thousands) Accrued Charges at December 31, 2016 Charges & Adjustments Payments  Accrued Charges at September 30, 2017
Cash charges:       
Labor reduction costs$1,393
 $3,744
 $(2,699) $2,438
Lease obligation costs6,628
 285
 (4,135) 2,778
Other miscellaneous—
 634
 (634) —
Total cash charges$8,021
 4,663
 $(7,468) $5,216
Non-cash charges:       
Rental merchandise losses  15,548
    
Loss on sale of fixed assets  956
    
Impairment of intangible asset  3,896
    
Other(1)
  6,517
    
Total other charges  $31,580
    
(1) Represents charges incurred for employee severance.
(1) Other primarily includes litigation settlements, incremental legal and advisory fees(2) Represents stock compensation expense related to shareholder proposals,common stock issued to Acima Holdings employees under restricted stock agreements as part of the acquisition proceeds subject to vesting restrictions, as described in Note 2 and effectsNote 12.
(3) Represents amortization of hurricanes.the total fair value of acquired intangible assets and incremental depreciation related to the fair value increase over net book value of acquired software assets in connection with the acquisition of Acima Holdings as described in Note 2.
(4) Primarily represents impairment of software assets.
Note 611 - Segment Information
The operating segments reported below are the segments for which separate financial information is available and for which segment results are evaluated by the chief operating decision makers. Our operating segments are organized based on factors including, but not limited to, type of business transactions, geographic location and store ownership. AllWithin our operating segments, we offer merchandise for lease from fourcertain basic product categories: furniture, including mattresses, tires, consumer electronics, appliances, tools, handbags, computers, furnituresmartphones, and accessories. Our Core U.S. and Franchising segments also offer smartphones.
Segment information as of and for the three and nine months ended September 30, 20172022 and 20162021 is as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2022202120222021
Revenues
Rent-A-Center Business$473,755 $500,986 $1,482,445 $1,531,686 
Acima(1)
504,448 623,445 1,633,994 1,716,174 
Mexico16,041 15,917 48,454 45,670 
Franchising29,713 40,920 90,040 118,495 
Total revenues$1,023,957 $1,181,268 $3,254,933 $3,412,025 
(1) Represents revenues for our Acima operating segment as defined in Note 1.
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2022202120222021
Gross profit
Rent-A-Center Business$334,892 $356,590 $1,046,332 $1,072,946 
Acima(1)
152,434 193,527 481,742 539,181 
Mexico11,330 11,293 34,242 32,323 
Franchising6,879 7,350 21,857 22,305 
Total gross profit$505,535 $568,760 $1,584,173 $1,666,755 
(1) Represents gross profit for our Acima operating segment as defined in Note 1.

 Three Months Ended September 30, Nine Months Ended September 30,
(in thousands)2017 2016 2017 2016
Revenues       
Core U.S.$442,763
 $481,805
 $1,390,687
 $1,596,782
Acceptance Now184,293
 194,398
 622,160
 624,310
Mexico12,237
 12,454
 35,351
 39,514
Franchising4,672
 5,220
 15,388
 18,542
Total revenues$643,965
 $693,877
 $2,063,586
 $2,279,148
19
 Three Months Ended September 30, Nine Months Ended September 30,
(in thousands)2017 2016 2017 2016
Gross profit       
Core U.S.$309,779
 $343,071
 $965,739
 $1,138,089
Acceptance Now92,088
 102,998
 310,451
 319,492
Mexico8,466
 8,897
 24,668
 27,478
Franchising2,132
 2,260
 6,803
 7,269
Total gross profit$412,465
 $457,226
 $1,307,661
 $1,492,328


10
RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)
 Three Months Ended September 30, Nine Months Ended September 30,
(in thousands)2017 2016 2017 2016
Operating (loss) profit       
Core U.S.$23,859
 $26,058
 $79,241
 $127,009
Acceptance Now10,379
 29,592
 49,595
 86,508
Mexico(242) 235
 (122) (1,803)
Franchising1,032
 1,430
 3,565
 4,268
Total segments35,028
 57,315
 132,279
 215,982
Corporate(43,473) (40,615) (140,445) (123,302)
Total operating (loss) profit$(8,445) $16,700
 $(8,166) $92,680
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2022202120222021
Operating profit
Rent-A-Center Business$71,999 $109,272 $271,283 $357,036 
Acima(1)
48,885 51,884 94,318 144,797 
Mexico996 2,285 5,011 6,659 
Franchising5,077 4,816 15,170 15,495 
Total segments126,957 168,257 385,782 523,987 
Corporate(2)
(89,880)(101,111)(279,582)(280,276)
Total operating profit$37,077 $67,146 $106,200 $243,711 
(1) Represents operating profit for our Acima segment as defined in Note 1.
 Three Months Ended September 30, Nine Months Ended September 30,
(in thousands)2017 2016 2017 2016
Depreciation, amortization and impairment of intangibles       
Core U.S.$7,725
 $9,495
 $23,715
 $30,950
Acceptance Now568
 815
 1,983
 2,480
Mexico496
 746
 1,549
 2,549
Franchising45
 44
 133
 133
Total segments8,834
 11,100
 27,380
 36,112
Corporate9,845
 8,898
 28,548
 24,486
Total depreciation, amortization and impairment of intangibles$18,679
 $19,998
 $55,928
 $60,598
We recorded an impairment(2) Includes stock compensation expense of intangibles of $3.9$42.1 million inand $111.5 millionrecognized for the Acceptance Now segment during the firstthree and nine months ended September 30, 2022, and $42.8 million and $93.1 millionrecognized for the three and nine months ended September 30, 2021, related to common stock issued to Acima Holdings employees under restricted stock agreements as part of 2017 that is not includedthe acquisition consideration subject to vesting restrictions as described in Note 10.
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2022202120222021
Depreciation and amortization
Rent-A-Center Business$4,629 $4,792 $15,665 $13,821 
Acima(1)(2)
439 570 1,496 1,568 
Mexico182 130 494 369 
Franchising35 24 110 58 
Total segments5,285 5,516 17,765 15,816 
Corporate(3)
7,513 8,319 22,443 24,978 
Total depreciation and amortization$12,798 $13,835 $40,208 $40,794 
(1) Represents depreciation and amortization for our Acima segment as defined in Note 1.
(2)Excludes amortization expense of approximately $14.2 million and $50.6 million for the table above. The impairment charge wasthree and nine months ended September 30, 2022, compared to $29.2 million and $72.4 million for the three and nine months ended September 30, 2021, recorded to Other Chargescharges in the Condensed Consolidated Statement of Operations.Operations, related to intangible assets acquired upon closing of the Acima Holdings acquisition. See Note 10 for additional information.
(3)Excludes depreciation expense of approximately $3.9 million and $11.9 million for the three and nine months ended September 30, 2022, compared to $4.0 million and $9.3 million for the three and nine months ended September 30, 2021, recorded to Other charges in the Condensed Consolidated Statement of Operations, related to software acquired upon closing of the Acima Holdings acquisition. See Note 10 for additional information.
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2022202120222021
Capital expenditures
Rent-A-Center Business$10,714 $6,637 $30,917 $21,202 
Acima(1)
16 276 205 945 
Mexico696 478 1,219 744 
Franchising166 — 278 — 
Total segments11,592 7,391 32,619 22,891 
Corporate6,949 13,084 16,817 22,985 
Total capital expenditures$18,541 $20,475 $49,436 $45,876 
(1) Represents capital expenditures for our Acima segment as defined in Note 1.


 Three Months Ended September 30, Nine Months Ended September 30,
(in thousands)2017 2016 2017 2016
Capital expenditures       
Core U.S.$6,625
 $3,864
 $21,333
 $11,092
Acceptance Now430
 860
 1,525
 1,457
Mexico56
 36
 103
 259
Total segments7,111
 4,760
 22,961
 12,808
Corporate6,258
 13,895
 30,567
 34,031
Total capital expenditures$13,369
 $18,655
 $53,528
 $46,839
20


11
RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Segment information - Selected balance sheet data:
(Unaudited)
(in thousands)September 30, 2017 December 31, 2016(in thousands)September 30, 2022December 31, 2021
On rent rental merchandise, net   On rent rental merchandise, net
Core U.S.$364,656
 $426,845
Acceptance Now292,247
 354,486
Rent-A-Center BusinessRent-A-Center Business$444,174 $477,901 
Acima(1)
Acima(1)
480,317 676,279 
Mexico13,514
 13,787
Mexico19,387 18,844 
Total on rent rental merchandise, net$670,417
 $795,118
Total on rent rental merchandise, net$943,878 $1,173,024 
(1) Represents on-rent rental merchandise for our Acima segment as defined in Note 1.
(in thousands)September 30, 2017 December 31, 2016(in thousands)September 30, 2022December 31, 2021
Held for rent rental merchandise, net   Held for rent rental merchandise, net
Core U.S.$189,029
 $192,718
Acceptance Now5,897
 7,489
Rent-A-Center BusinessRent-A-Center Business$118,329 $123,111 
Acima(1)
Acima(1)
417 626 
Mexico4,842
 6,629
Mexico9,962 9,247 
Total held for rent rental merchandise, net$199,768
 $206,836
Total held for rent rental merchandise, net$128,708 $132,984 
(1) Represents held-for-rent rental merchandise for our Acima segment as defined in Note 1.
(in thousands)September 30, 2017 December 31, 2016(in thousands)September 30, 2022December 31, 2021
Assets by segment   Assets by segment
Core U.S.$793,036
 $872,551
Acceptance Now363,212
 432,383
Rent-A-Center BusinessRent-A-Center Business$1,022,173 $1,026,886 
Acima(1)
Acima(1)
1,195,982 1,476,752 
Mexico33,062
 31,415
Mexico46,561 41,669 
Franchising3,094
 2,197
Franchising19,346 15,412 
Total segments1,192,404
 1,338,546
Total segments2,284,062 2,560,719 
Corporate237,913
 264,195
Corporate484,534 432,608 
Total assets$1,430,317
 $1,602,741
Total assets$2,768,596 $2,993,327 
(1) Represents total assets for our Acima segment as defined in Note 1.
Note 712 - Common Stock and Stock-Based Compensation
In early December 2021, our Board of Directors authorized a stock repurchase program for up to $500 million (the “December 2021 Program”), which superseded our previous stock repurchase program. Under the December 2021 Program, we may purchase shares of our common stock from time to time in the open market or privately negotiated transactions. We recognized $1.1are not obligated to acquire any shares under the program, and the program may be suspended or discontinued at any time. No shares of our common stock were repurchased during the six months ended June 30, 2022. Under the December 2021 Program, 1,218,313 shares of our common stock were repurchased for an aggregate purchase price of approximately $29.8 million and $2.6 million in pre-tax compensation expense related to stock options and restricted stock units during the three months ended September 30, 20172022. Subsequent to September 30, 2022 we repurchased an additional 2,318,486 shares for an aggregate purchase price of $45.2 million under the December 2021 Program and approximately $285 million remains available for repurchases. Under previous stock repurchase programs, 335,508 shares of our common stock were repurchased during the three and nine months ended September 30, 2021 for an aggregate purchase price of approximately $20.0 million.
We recognized $2.7 million and $5.6 million in compensation expense related to stock awards issued under the Rent-A-Center, Inc. 2021 Long-Term Incentive Plan (the “2021 Plan”) and 2016 respectively,Long-Term Incentive Plan (the “2016 Plan”) during the three months ended September 30, 2022 and $2.22021, and $11.1 million and $7.4$15.0 million during the nine months ended September 30, 20172022 and 2016, respectively.2021. During the nine months ended September 30, 2017,2022, we granted approximately 827,000 stock options, 490,000713,000 market-based performance restricted stock units and 466,000406,000 time-vesting restricted stock units. The stock options granted were valued using a Black-Scholes pricing model withunits under the following assumptions: an expected volatility of 43.75% to 53.67%, a risk-free interest rate of 1.54% to 2.07%, an expected dividend yield of 2.73% to 3.85% and an expected term of 3.5 years to 5.75 years. The weighted-average exercise price of the options granted during the nine months ended September 30, 2017 was $9.21 and the weighted-average grant-date fair value was $2.83.2021 Plan. Performance-based restricted stock units are valued using a Monte Carlo simulation. Time-vesting restricted stock units are valued using thebased on our closing stock price on the trading day immediately preceding the daydate of the grant.grant, or as of the date of modification in the event an award is modified. The weighted-average grant date fair value of the market-based performance and time-vesting restricted stock units granted during the nine months ended September 30, 20172022 was $9.00.$24.59 and $28.31, respectively.
As described in Note 2, Aggregate Stock Consideration issued to the former owners of Acima Holdings included 10,779,923 of common shares valued at $51.14 per share, as of the date of closing. Of this total, 2,683,328 common shares were included in the aggregate purchase price of the transaction for financial reporting purposes, while 8,096,595 common shares, valued at $414.1 million, issued under restricted stock agreements and subject to vesting conditions, are recognized as stock compensation expense over the vesting term in accordance with ASC Topic 718, “Stock-based Compensation”. We recognized $42.1 million and $42.8 million in stock compensation expense related to these restricted stock agreements during the three

21
RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
months ended September 30, 2022 and 2021, and $111.5 million and $93.1 million during the nine months ended September 30, 2022 and 2021, which was recorded to Other charges in our Condensed Consolidated Statements of Operations, as described in Note 10.
Note 813 - Contingencies
From time to time, the Company,we, along with our subsidiaries, isare party to various legal proceedings and governmental inquiries arising in the ordinary course of business. We reserve for loss contingencies that are both probable and reasonably estimable. We regularly monitor developments related to these legal proceedings, and review the adequacy of our legal reserves on a quarterly basis. We do not currently expect these losses to have a material impact on our condensed consolidated financial statements if and when such losses are incurred. Nevertheless, we cannot predict the impact of future developments affecting our claims and lawsuits, and any resolution of a claim or lawsuit or reserve within a particular fiscal period may materially and adversely impact our results of operations for that period. In addition, claims and lawsuits against us may seek injunctive or other relief that requires changes to our business practices or operations and it is possible that any required changes may materially and adversely impact our business, financial condition, results of operations or reputation.
Unclaimed Property.We are subject to unclaimed property audits by states in the ordinary course of business. A comprehensive multi-state unclaimed property audit is currently in progress. The property subject to review in thisthe audit process includes unclaimed wages, vendor payments and customer refunds. State escheat laws generally require entities to report and remit abandoned and unclaimed property to the state. Failure to timely report and remit the property can result in assessments that could include interest and penalties, in addition to the payment of the escheat liability itself. We routinely remit escheat payments to states and believe we are in compliance with applicable escheat laws.
Acima Consumer Financial Protection Bureau investigation. Prior to the execution of the definitive agreement to acquire Acima Holdings, Acima Holdings received a Civil Investigative Demand dated October 1, 2020 (the “CID”) from the Consumer Financial Protection Bureau (the “CFPB”) requesting certain information, documents and data relating to Acima Holding’s products, services and practices for the period from January 1, 2015 to the date on which responses to the CID are provided in full. The purpose of the CID is to determine whether Acima Holdings extends credit, offers leases, or otherwise offers or provides a consumer financial product or service and whether Acima Holdings complies with certain consumer financial protection laws. We doare fully cooperating with the CFPB investigation. The CFPB has not expectmade any allegations in the investigation, and we are currently unable to predict the eventual scope, ultimate timing or outcome of the auditCFPB investigation.
On the terms and subject to the conditions set forth in the definitive agreement to acquire Acima Holdings, the former owners of Acima Holdings agreed to indemnify Rent-A-Center for certain losses arising after the consummation of the transaction with respect to the CID and certain pre-closing taxes. The indemnification obligations of the former owners of Acima Holdings were limited to an indemnity holdback in the aggregate amount of $50 million, which was escrowed at the closing of the transaction, and will be Rent-A-Center’s sole recourse against the former owners of Acima Holdings with respect to all of the indemnifiable claims under the definitive transaction agreement. In respect of certain pre-closing taxes, a portion of the escrowed funds were released to Acima Holdings’ former owners on the first business day following the date that was 18 months after the closing date of the transaction, in accordance with the definitive agreement.In respect of the CID, other than with respect to any then-pending or unresolved claims for indemnification submitted by Rent-A-Center, remaining escrowed funds of $45 million will be released on the earlier of February 17, 2024 and the date on which a final determination is entered providing for a resolution of the matters regarding the CID.
There can be no assurance that the CID will be finally resolved prior to the release to the former owners of Acima Holdings of the escrowed funds reserved therefor, or that such escrowed amount will be sufficient to address all covered losses or that the CFPB’s ongoing investigation or future exercise of its enforcement, regulatory, discretionary or other powers will not result in findings or alleged violations of consumer financial protection laws that could lead to enforcement actions, proceedings or litigation, whether by the CFPB, other state or federal agencies, or other parties, and the imposition of damages, fines, penalties, restitution, other monetary liabilities, sanctions, settlements or changes to Acima Holdings’ business practices or operations that could materially and adversely affect our business, financial condition, results of operations or reputation.
California Attorney General. The California Attorney General (the “CAG”) issued an investigative subpoena in 2018 seeking information with respect to certain of our Acceptance Now business practices (now part of the Acima segment). In November 2021, the parties reached an agreement in principle regarding the resolution of this matter.On August 2, 2022, the parties finalized the settlement of this matter, which includes a proposed final judgment for approval by the Superior Court of the State of California. In the agreement and in consideration of the final resolution of this matter, we agreed to pay a total of $15.5 million in restitution to consumers and civil penalties along with certain injunctive provisions, including (1) in the case of rental-purchase transactions in California originating through a third-party host retailer, not to charge a cash price on the rental-purchase agreement that is greater than the cash price offered to the consumer by the host retailer, and (2) to implement certain additional customer disclosures, employee training and other compliance requirements and restrictions as set forth in the stipulated agreement. We did not admit to any violations of law or any negotiated settlements to have a material adverse impact to our financial statements.
Our subsidiary, ColorTyme Finance, Inc. (“ColorTyme Finance”)wrongdoing. Although we disagree with the CAG’s interpretation of the relevant California statutory language regarding the definition of “cash price”, is a party to an agreement with Citibank, N.A., pursuant to which Citibank provides financing to qualifying franchisees of Franchising. Underwe entered into the Citibank agreement, upon an event of default



1222
RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

agreement to avoid the expense, risk and distractions associated with potential protracted litigation. The agreed upon settlement amount of $15.5 million was paid in August 2022.
by the franchisee under agreements governing this financingMassachusetts Attorney General. The Massachusetts Attorney General (the “MAG”) issued a civil investigative demand in 2018 seeking information with respect to certain of our business practices, including regarding account management and upon the occurrence of certain other events, Citibank can assignbusiness practices in connection with our lease-to-own transactions. Since receiving such demand, we have cooperated with the loansMAG in connection with its investigation. In June 2021, the MAG provided us with proposed settlement terms including a monetary payment, injunctive provisions regarding certain business practices and compliance requirements. We are continuing to cooperate and discuss resolution of the collateral securing such loansinquiry with the MAG. We are currently unable to ColorTyme Finance,predict the ultimate timing or outcome of the MAG investigation.
State Attorneys General Investigation. On November 1, 2021, Acima received a letter from the Nebraska Attorney General’s office stating that the Attorney General of Nebraska, along with ColorTyme Finance paying a coalition of thirty-eight state Attorneys General, initiated a multi-state investigation into the business acts and practices of Acima and that a civil investigative demand(s) and/or causingsubpoena(s) pursuant to respective state consumer protection laws will be paidforthcoming. Since receiving the outstanding debt to Citibankletter, we have held multiple discussions with officials at the lead attorneys general offices and, then succeedingbased on those discussions, it is our understanding that the investigation is looking at business practices within the virtual lease-to-own industry and includes or will include multiple companies. In April 2022, we received a request for information and documents. Acima is cooperating with the investigation and is currently in the process of producing requested information.No specific allegations have been made against Acima pursuant to the rightsinvestigation. We are currently unable to predict the eventual scope, timing or outcome of Citibank under the debt agreements, including the right to foreclose on the collateral. Rent-A-Center and ColorTyme Finance guarantee the obligations of the franchise borrowers under the Citibank facility. The maximum guarantee obligation under this agreement, excluding the effects of any amounts that could be recovered under collateralization provisions, is $27.0 million, of which $1.1 million was outstanding as of September 30, 2017.matter.
Note 914 - (Loss) Earnings (Loss) Per Common Share
Summarized basic and diluted (loss) earnings per common share were calculated as follows:
 Three Months Ended September 30,Nine Months Ended September 30,
(in thousands, except per share data)2022202120222021
Numerator:
Net (loss) earnings$(5,778)$21,267 $9,710 $125,128 
Denominator:
Weighted-average shares outstanding55,380 58,267 54,376 57,603 
Effect of dilutive stock awards(1) (2)
— 9,927 5,422 9,853 
Weighted-average dilutive shares55,380 68,194 59,798 67,456 
Basic (loss) earnings per common share$(0.10)$0.36 $0.18 $2.17 
Diluted (loss) earnings per common share(1) (2)
$(0.10)$0.31 $0.16 $1.85 
Anti-dilutive securities excluded from diluted (loss) earnings per common share:
Anti-dilutive restricted share units465 — 81 110 
Anti-dilutive performance share units941 295 197 295 
Anti-dilutive stock options865 33 279 33 
(1) Weighted-average dilutive shares outstanding for the nine months ended September 30, 2022 and 2021, includes approximately 3.7 million and 8.1 million common shares, respectively, issued in connection with the acquisition of Acima Holdings and subject to vesting conditions under restricted stock agreements.
(2) There was no dilutive effect to the loss per common share for the three months ended September 30, 2022 due to the net loss incurred for the period.

23
 Three Months Ended September 30, Nine Months Ended September 30,
(in thousands, except per share data)2017 2016 2017 2016
Numerator:       
Net (loss) earnings$(12,599) $6,181
 $(28,171) $41,188
Denominator:       
Weighted-average shares outstanding53,306
 53,155
 53,272
 53,111
Effect of dilutive stock awards(1)
—
 299
 —
 281
Weighted-average dilutive shares53,306
 53,454
 53,272
 53,392
        
Basic (loss) earnings per common share$(0.24) $0.12
 $(0.53) $0.78
Diluted (loss) earnings per common share$(0.24) $0.12
 $(0.53) $0.77
Anti-dilutive securities excluded from diluted (loss) earnings per common share:       
Anti-dilutive restricted share units1,419
 814
 1,419
 814
Anti-dilutive stock options

3,103
 3,185
 3,103
 2,618
(1)
There was no dilutive effect to the loss per common share for the three and nine months ended September 30, 2017 due to the net loss incurred for both periods.


13



RENT-A-CENTER, INC. AND SUBSIDIARIES


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995.1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “seeks” or words of similar meaning, or future or conditional verbs, such as “will,” “should,” “could,” “may,” “aims,” “intends,” or “projects.” These forward-looking statements, include, without limitation, those relating to the potential effects of the pandemic of the respiratory disease caused by a novel coronavirus (“COVID-19”) and ongoing challenging macro-economic conditions on our business, operations, financial performance and prospects, the future business prospects and financial performance of our Company following our acquisition of Acima Holdings, LLC (“Acima Holdings”), cost and revenue synergies and other benefits expected to result from the Acima Holdings acquisition, our expectations, plans and strategy relating to our capital structure and capital allocation, including any share repurchases under the Company's share repurchase program, and other statements that are not historical facts.
A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. You should not place undue reliance on forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. These forward-looking statements are all based on currently available operating, financial and competitive information and are subject to various risks and uncertainties. Our actual future results and trends may differ materially and adversely depending on a variety of factors, including, but not limited to, the risks and uncertainties discussed under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”Operations” below. Given these risks and uncertainties, you should not rely on forward-looking statements as a prediction of actual results. Any or all of the forward-looking statements contained in this Quarterly Report on Form 10-Q and any other public statement made by us, including by our management, may turn out to be incorrect. We are including this cautionary note to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for forward-looking statements. WeExcept as required by law, we expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, changes in assumptions or otherwise. Factors that could cause or contribute to these differences include, but are not limited to:
•the possibility that the anticipated benefits from the Acima Holdings acquisition may not be fully realized or may take longer to realize than expected;
• the possibility that costs, difficulties or disruptions related to the integration of Acima Holdings operations into our other operations will be greater than expected;
• our ability to (i) effectively adjust to changes in the composition of our offerings and product mix as a result of acquiring Acima Holdings and continue to maintain the quality of existing offerings and (ii) successfully introduce other new product or service offerings on a timely and cost-effective basis;
• changes in our future cash requirements as a result of the Acima Holdings acquisition, whether caused by unanticipated increases in capital expenditures or working capital needs, unanticipated liabilities or otherwise;
• our ability to identify potential acquisition candidates, complete acquisitions and successfully integrate acquired companies;
•the impact of the COVID-19 pandemic and related government and regulatory restrictions issued to combat the pandemic, including adverse changes in such restrictions, the expiration of governmental stimulus programs, and impacts on (i) demand for our lease-to-own products offered in our operating segments, (ii) our Acima retail partners, (iii) our customers and their willingness and ability to satisfy their lease obligations, (iv) our suppliers' ability to satisfy our merchandise needs and related supply chain disruptions, (v) our employees, including our ability to adequately staff our operating locations, (vi) our financial and operational performance, and (vii) our liquidity;
•the general strength of the economy and other economic conditions affecting consumer preferences and spending:spending, including the availability of credit to our target consumers and to other consumers, impacts from the high level of inflation, central bank monetary policy initiatives to address inflation concerns, and possible recession;
•factors affecting the disposable income available to our current and potential customers;
•changes in the unemployment rate;
uncertainties concerning the outcome, impact, effects and results•capital market conditions, including availability of the exploration offunding sources for us;
•changes in our strategic and financial alternatives;credit ratings;

24


•difficulties encountered in improving the financial and operational performance of our business segments;
•risks associated with pricing changes and strategies being deployed in our chief executive officer and chief financial officer transitions, including businesses;
•our ability to continue to realize benefits from our initiatives regarding cost-savings and other EBITDA enhancements, efficiencies and working capital improvements;
•our ability to continue to effectively operate and execute our strategies during the interim periodstrategic initiatives, including mitigating risks associated with any potential mergers and difficultiesacquisitions, or delays in identifying and/or attracting a permanent chief financial officer with the required level of experience and expertise;refranchising opportunities;
•failure to manage our store labor and other store expenses;expenses, including merchandise losses;
our ability to develop and successfully execute strategic initiatives;
•disruptions caused by the operation of our store information management system;systems or disruptions in the systems of our host retailers;
•risks related to our virtual lease-to-own business, including our ability to continue to develop and successfully implement the necessary technologies;
•our ability to achieve the benefits expected from our integrated virtual and staffed retail partner offering and to successfully grow this business segment;
•exposure to potential operating margin degradation due to the higher cost of merchandise in our Acima offering and higher merchandise losses than compared to our Rent-A-Center Business segment;
•our transition to more-readily scalable "cloud-based"“cloud-based” solutions;
•our ability to develop and successfully implement digital or E-commerce capabilities;capabilities, including mobile applications;
•our ability to protect our proprietary intellectual property;
•our ability or that of our host retailers to protect the integrity and security of customer, employee and host retailer information, which may be adversely affected by hacking, computer viruses, or similar disruptions;
•disruptions in our supply chain;
•limitations of, or disruptions in, our distribution network;
•rapid inflation or deflation in the prices of our products;products and other related costs;
•our ability to execute and the effectiveness of a store consolidation,consolidations, including our ability to retain the revenue from customer accounts merged into another store location as a result of a store consolidation;
•our available cash flow;flow and our ability to generate sufficient cash flow to continue paying dividends;
•increased competition from traditional competitors, virtual lease-to-own competitors, online retailers, Buy-Now-Pay-Later and other Fintech companies and other competitors, including subprime lenders;
•our ability to identify and successfully market products and services that appeal to our current and future targeted customer demographic;segments and to accurately estimate the size of the total addressable market;
•consumer preferences and perceptions of our brands;
uncertainties regarding the ability to open new locations;
our ability to acquire additional stores or customer accounts on favorable terms;
our ability to control costs and increase profitability;
•our ability to retain the revenue associated with acquired customer accounts and enhance the performance of acquired stores;
•our ability to enter into new and collect on our rental or lease purchase agreements;
•changes in the passageenforcement of legislationexisting laws and regulations and the enactment of new laws and regulations adversely affecting the Rent-to-Own industry;our business, including any legislative or regulatory enforcement efforts that seek to re-characterize store-based or virtual lease-to-own transactions as credit sales and to apply consumer credit laws and regulations to our business;
•our compliance with applicable statutes or regulations governing our transactions;businesses;
•changes in interest rates;

•changes in tariff policies;

14

RENT-A-CENTER, INC. AND SUBSIDIARIES


•adverse changes in the economic conditions of the industries, countries or markets that we serve;
•information technology and data security costs;
•the impact of any breaches in data security or other disturbances to our information technology and other networks and our ability to protect the integrity and security of individually identifiable data of our customers and employees;networks;
changes in our stock price, the number of shares of common stock that we may or may not repurchase, and our dividend policy and any changes thereto, if any;
•changes in estimates relating to self-insurance liabilities and income tax and litigation reserves;
•changes in our effective tax rate;
•fluctuations in foreign currency exchange rates;
•our ability to maintain an effective system of internal controls;controls, including in connection with the integration of Acima;
the resolution of our litigation;•litigation or administrative proceedings to which we are or may be a party to from time to time; and

25


•the other risks detailed from time to time in our reports tofurnished or filed with the United States Securities and Exchange Commission.Commission (the “SEC”).
Additional important factors that could cause our actual results to differ materially from our expectations are discussed under the section “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016,2021 and elsewhere in this Quarterly Report on Form 10-Q. You should not unduly rely on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. 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 Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events.
Our Business
We are onea leading lease-to-own provider with operations in the United States, Puerto Rico and Mexico. We provide a critical service for a large portion of the largest rent-to-own operators in North America, focused on improving the quality of life for our customersunderserved consumers by providing them with access to, and the opportunity to obtain ownership of, high-quality, durable products such as consumer electronics, appliances, computers, (including tablets), smartphones, and furniture (including accessories),via small payments over time under a flexible rental purchase agreementslease-purchase agreement with no long-term debt obligation. Through our Rent-A-Center Business, we provide a fully integrated customer experience through our e-commerce platform and brick and mortar presence. Our Acima business offers lease-to-own solutions through retailers in stores and online enabling such retailers to grow sales by expanding their customer base utilizing our differentiated offering. We were incorporated in the State of Delaware in 1986.1986, and our common stock is traded on the Nasdaq Global Select Market under the ticker symbol “RCII.”
Executive Summary
Our Growth Strategy
We areOur strategy is focused on growing our missionbusiness model through emphasis on the following key initiatives:
•executing on market opportunities and enhancing our competitive position across both traditional and virtual lease-to-own solutions;
•accelerating the shift to provide cash-e-commerce, expanding product categories, including into emerging product categories, and credit-constrained consumersimproving the fully integrated customer experience;
•using technology to support frictionless retailer onboarding with affordable and flexible accessseamless integration to durable goods that promote a higher qualityretailers′ platforms;
•continuing to generate repeat business while expanding our potential customer base;
•leveraging the integration of living. On April 10, 2017, we announced a new and comprehensive strategy to restore growth, improve profitability and maximize value. These initiatives are designed to strengthen the Core U.S. segment; optimize and grow the Acceptance Now segment; and leverage technology investments to expand distribution channels and integrate retail and online offerings:
Strengthen the Core
Enhance value proposition and facilitate ownership
Optimize product mix
Stabilize and upgrade the workforce
Improve account management
Drive efficiencies in-store
Optimize footprint
Optimize and Grow Acceptance Now
Enhance value proposition and facilitate ownership
Optimize partner relationships
Centralize account management
Grow Acceptance Now unstaffed solutions
EnhanceAcima Holdings decision engine and expanding digital payments and communication channels; and
Embrace Technology•generating favorable adjusted EBITDA margin and Channel Expansionstrong free cash flow to fund strategic priorities and deliver and return capital to shareholders.
Leverage technology investmentsAs we pursue our strategy, we may take advantage of merger and acquisition opportunities from time to time that advance our key initiatives, and engage in discussions regarding these opportunities, which could include mergers, consolidations or acquisitions or dispositions or other transactions, although there can be no assurance that any such activities will be consummated.
Build digital capabilities to support omni-channel platform
Expand Acceptance Now to new channels, customers and products


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RENT-A-CENTER, INC. AND SUBSIDIARIES


Recent Developments
Executive Transition. On October 31, 2022, Fahmi W. Karam joined the Company as Executive Vice President - Chief Financial Officer, replacing Maureen B. Short who departed on September 28, 2022.
Dividend. On September 21, 2022, we announced that our board of directors approved a quarterly cash dividend of $0.34 per share for the fourth quarter of 2022. The dividend was paid on October 25, 2022 to our common stockholders of record as of the close of business on October 4, 2022.
Effects of Hurricanes.Hurricanes. In AugustSeptember 2022, Hurricanes Fiona and September 2017, Hurricanes Harvey, Irma and MariaIan caused significant damage in the continental United States and surrounding territories, primarily including Texas, Florida and Puerto Rico. We incurred charges during the third quarter of 2017 as a result of the damage and displacement caused by these storms, including inventory losses, store repairs, employee assistance, and fixed asset write-offs. Storm related costs are included in other charges for the respective segment as discussed in Note 5 to the unaudited condensed consolidated financial statements. We continue to assess the full impact of damage caused by these storms but do not expect to incur significant charges as a result of the damage and expect additional charges relateddisplacement caused by these storms.


26


Business and Operational Trends
Macroeconomic Conditions. Beginning in the first quarter of 2020, the worldwide spread of COVID-19 caused significant disruptions to the 2017 hurricanesU.S. and world economies. In response to be recordedCOVID-19, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), providing U.S. citizens and businesses with various stimulus and income tax relief benefits throughout 2020 and early 2021 to help offset immediate negative financial impacts sustained as a result of COVID-19. In addition, we proactively implemented certain response measures, including providing our Rent-A-Center Business and Acima customers with additional electronic payment methods to facilitate contactless transactions. These response measures resulted in improved customer payment behaviors contributing to higher revenues and lower merchandise losses in 2020 and the first half of 2021.
In the third quarter of 2021 we began to experience negative customer behavioral trends, including increases in delinquent payments and merchandise loss activity, resulting in declining revenues and increased operating expenses, respectively. These negative trends continued to accelerate in the fourth quarter of 2017.
Strategic Alternatives Announcement; Suspension2021, following the expiration of Quarterly Dividend. We announcedgovernment stimulus and relief programs combined with a significant rise in the US consumer price index, resulting in significant pressure on October 30, 2017 that our Board of Directors, in consultation with its financial and legal advisors, has initiated a process to explore a full range of strategic and financial alternatives focused on maximizing stockholder value. We do not intend to discuss or disclose developments with respect to this process unless and until our board has approved a definitive course of action or the process is otherwise concluded. We also announced the suspensiondiscretionary income levels of our quarterly cash dividend untilconsumers. This led the process has concluded.
Steven L. Pepper Resignation. We also announced on October 30, 2017 that Steven L. Pepper resigned from his position as director and ChairmanCompany to tighten our underwriting policies in an effort to improve risk management related to the execution of new leases. The continuation of the Boardabove trends combined with the tightening of Rent-A-Center,our underwriting policies, which has reduced the number of active leases and corresponding lease revenue, has continued to negatively impact our financial results, including our results of operations and operating cash flows, through the first three quarters of 2022.
In addition to the negative trends in customer behavior described above, we have also been impacted by other negative macroeconomic trends, including a condensed labor market, which has contributed to wage inflation, and global supply chain disruptions resulting in reduced product availability and rising product costs. Recent wage inflation trends have resulted in higher labor costs for the Company, while supply chain disruptions have partially contributed to declines in our revenue, due to lower product availability, and increased merchandise losses driven by higher product costs.
While the lease-to-own industry has historically remained a resilient business model throughout various economic cycles, providing credit constrained customers with his resignation taking effecta viable option to obtain merchandise they may not otherwise be able to obtain the full extent to which our risk management strategy, consumer spending behavior, or other macro-economic trends, may impact our business in future periods is uncertain. The continuation of these trends may have a material adverse impact on Octoberour financial statements, including our results of operations, operating cash flows, liquidity and capital resources.
See “Risk Factors” in Part I, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2017. Mr. Pepper informed us that he is resigning2021, for additional discussion of operational impacts to our business and additional risks associated with COVID-19 and other macroeconomic conditions.
RAC Business E-commerce revenue. In recent years, e-commerce revenues have continued to increase as a resultpercentage of his disagreementtotal revenue in our RAC Business segment. For the three-months ended September 30, 2022 e-commerce revenues represented approximately 23% of total lease-to-own store revenues compared to 21% for the three-months ended September 30, 2021. Due to recent trends in consumer shopping behaviors and expectations, the Company believes e-commerce solutions are an important part of its lease-to-own offering. However, the Company is unable to quantify the extent to which e-commerce revenues are incremental compared to what its overall revenues would have been in the absence of those e-commerce transactions. In addition, the profitability of e-commerce transactions can be impacted by different merchandise loss factors compared to traditional store-based transactions in the RAC Business segment. Therefore, the Company is unable to determine with certainty whether the continuation of this trend toward increased e-commerce transactions will have a significant impact to our board’s decisionfinancial statements in future periods or be favorable or unfavorable to initiate a process through which we will explore various strategic andour financial alternatives.results.
Results of Operations
The following discussion focuses on our results of operations and issues related to our liquidity and capital resources. You should read this discussion in conjunction with the condensed consolidated financial statements and notes thereto for the three and nine months ended September 30, 2022 included elsewhere in Part I, Item I of this Quarterly Report on Form 10-Q.
Overview
The following briefly summarizes certain of our financial information for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021.
During the first nine months of 2017, we experienced a decline in2022, consolidated revenues gross profit anddecreased approximately $157.1 million, while operating profit driven primarily by declines in same store revenue, reductions in our store base for the Core U.S. and Acceptance Now segments, impacts related to the recent hurricanes, and an increase in other charges. Other charges were primarily comprised of Acceptance Now store closures, reductions in our field support center, incremental legal and advisory fees, damages caused by the recent hurricanes, and debt refinancing costs, partially offset by litigation settlements.
The Acceptance Now segment revenues decreased by approximately $2.2$137.5 million, or 0.3% primarily due to store closures for Conn's and hhgregg, and impacts from the recent hurricanes. Grossa decrease in gross profit decreased by 2.8% primarily due to lower gross margins on merchandise salesof $82.6 million driven by our continued focus to encourage ownershiplower revenues and reduce returned product. Operating profit declined 42.7% primarily due toincreases in other charges related to store closures and sales deleverage. Excluding these other charges, operating profit decreased by 17.9%.expenses of $83.6 million described further below.

27


Revenues in our Core U.S.Rent-A-Center Business segment decreased approximately $206.1$49.2 million for the nine months ended September 30, 2017, primarily2022 due to a 3.2% decrease in same store revenuesales primarily due to decreases in merchandise sales and rentals and fees revenues of 9.4%, rationalization of our Core U.S. store base in the prior year,$40.7 million and impacts from the recent hurricanes. Gross profit as a percentage of revenue decreased 1.9%$7.6 million, respectively, reflecting lower demand for consumer durable goods, mainly due to the decrease in store revenue and pricing actions taken to right size the segment's inventory mix and changeseffects from the new value proposition. Laborwind-down of stimulus programs in 2021, and other store expensesdecreases in lease payments collected primarily due to inflationary pressures on the discretionary income of our consumers driven by recent increases in the consumer price index. Operating profit decreased approximately $40.2 million and $61.4 million, respectively, but were negatively affected by sales deleverage.
Gross profit for the Mexico segment as a percentage of revenue increased by 0.2% for the nine months ended September 30, 2017, driven by higher gross margin merchandise sales due to pricing initiatives.
Cash flow from operations was $135.4$85.8 million for the nine months ended September 30, 2017. We used our free cash flow2022, primarily due to pay down debtlower revenues described above, in addition to higher merchandise losses of $29.5 million, and increased labor costs of $14.5 million, driven primarily by $86.6wage inflation.
The Acima segment revenues decreased approximately $82.2 million duringfor the first nine months ended September 30, 2022, due to a $64.2 million decrease in merchandise sales and $17.9 million decrease in rentals and fees revenues, primarily attributable to inflationary pressures on consumer's discretionary income and the wind-down of the year, endingstimulus programs in 2021, in addition to effects of changes in our underwriting policies described above. Operating profit decreased approximately $50.5 million for the period with $76.2nine months ended September 30, 2022, primarily due to lower revenues described above and higher merchandise losses of $30.4 million.
The Mexico segment revenues increased by 6.1% for the nine months ended September 30, 2022, contributing to an increase in gross profit of 5.9%, or $1.9 million. Operating profit, however, decreased $1.6 million for the nine months ended September 30, 2022, primarily due to increased labor costs of $1.0 million and higher merchandise losses of $1.1 million.
Revenues for the Franchising segment decreased $28.5 million for the nine months ended September 30, 2022, primarily due to a decrease in inventory purchases by franchisees. Operating profit decreased $0.3 million for the nine months ended September 30, 2022 primarily due to lower revenues described above.
Cash flow from operations was $412.1 million for the nine months ended September 30, 2022. As of September 30, 2022, we held $165.6 million of cash and cash equivalents.equivalents and had outstanding indebtedness of $1.4 billion.





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RENT-A-CENTER, INC. AND SUBSIDIARIES


The following table is a reference for the discussion that follows.
Three Months EndedNine Months Ended
September 30,ChangeSeptember 30,Change
(dollar amounts in thousands)20222021$%20222021$%
Revenues
Store
Rentals and fees$829,459 $930,849 $(101,390)(10.9)%$2,569,804 $2,592,788 $(22,984)(0.9)%
Merchandise sales147,616 192,016 (44,400)(23.1)%541,265 646,038 (104,773)(16.2)%
Installment sales16,718 17,028 (310)(1.8)%52,355 52,992 (637)(1.2)%
Other1,340 1,082 258 23.8 %3,698 3,035 663 21.8 %
Total store revenue995,133 1,140,975 (145,842)(12.8)%3,167,122 3,294,853 (127,731)(3.9)%
Franchise
Merchandise sales22,823 33,671 (10,848)(32.2)%67,849 96,342 (28,493)(29.6)%
Royalty income and fees6,001 6,622 (621)(9.4)%19,962 20,830 (868)(4.2)%
Total revenues1,023,957 1,181,268 (157,311)(13.3)%3,254,933 3,412,025 (157,092)(4.6)%
Cost of revenues
Store
Cost of rentals and fees310,079 344,623 (34,544)(10.0)%968,655 912,531 56,124 6.2 %
Cost of merchandise sold179,477 228,024 (48,547)(21.3)%615,543 717,983 (102,440)(14.3)%
Cost of installment sales6,032 6,291 (259)(4.1)%18,379 18,566 (187)(1.0)%
Total cost of store revenues495,588 578,938 (83,350)(14.4)%1,602,577 1,649,080 (46,503)(2.8)%
Franchise cost of merchandise sold22,834 33,570 (10,736)(32.0)%68,183 96,190 (28,007)(29.1)%
Total cost of revenues518,422 612,508 (94,086)(15.4)%1,670,760 1,745,270 (74,510)(4.3)%
Gross profit505,535 568,760 (63,225)(11.1)%1,584,173 1,666,755 (82,582)(5.0)%
Operating expenses
Store expenses
Labor156,192 163,945 (7,753)(4.7)%486,751 479,989 6,762 1.4 %
Other store expenses197,847 189,553 8,294 4.4 %624,306 540,698 83,608 15.5 %
General and administrative expenses40,002 45,958 (5,956)(13.0)%141,273 149,468 (8,195)(5.5)%
Depreciation and amortization12,798 13,835 (1,037)(7.5)%40,208 40,794 (586)(1.4)%
Other charges61,619 88,323 (26,704)(30.2)%185,435 212,095 (26,660)(12.6)%
Total operating expenses468,458 501,614 (33,156)(6.6)%1,477,973 1,423,044 54,929 3.9 %
Operating profit37,077 67,146 (30,069)(44.8)%106,200 243,711 (137,511)(56.4)%
Debt refinancing charges— 6,839 (6,839)— %— 15,582 (15,582)— %
Interest, net22,744 19,712 3,032 15.4 %60,665 52,019 8,646 16.6 %
Earnings before income taxes14,333 40,595 (26,262)(64.7)%45,535 176,110 (130,575)(74.1)%
Income tax expense20,111 19,328 783 4.1 %35,825 50,982 (15,157)(29.7)%
Net (loss) earnings$(5,778)$21,267 $(27,045)(127.2)%$9,710 $125,128 $(115,418)(92.2)%
 Three Months Ended     Nine Months Ended    
 September 30, Change September 30, Change
(dollar amounts in thousands)2017 2016 $ % 2017 2016 $ %
Revenues               
Store               
Rentals and fees$552,194
 $595,179
 $(42,985) (7.2)% $1,723,019
 $1,915,184
 $(192,165) (10.0)%
Merchandise sales67,566
 73,219
 (5,653) (7.7)% 266,061
 281,703
 (15,642) (5.6)%
Installment sales17,276
 17,626
 (350) (2.0)% 51,690
 53,718
 (2,028) (3.8)%
Other2,257
 2,633
 (376) (14.3)% 7,428
 10,001
 (2,573) (25.7)%
Total store revenue639,293
 688,657
 (49,364) (7.2)% 2,048,198
 2,260,606
 (212,408) (9.4)%
Franchise               
Merchandise sales2,676
 3,113
 (437) (14.0)% 9,211
 12,083
 (2,872) (23.8)%
Royalty income and fees1,996
 2,107
 (111) (5.3)% 6,177
 6,459
 (282) (4.4)%
Total revenues643,965
 693,877
 (49,912) (7.2)% 2,063,586
 2,279,148
 (215,562) (9.5)%
Cost of revenues               
Store               
Cost of rentals and fees153,202
 159,454
 (6,252) (3.9)% 474,511
 504,834
 (30,323) (6.0)%
Cost of merchandise sold70,551
 68,684
 1,867
 2.7 % 256,730
 253,473
 3,257
 1.3 %
Cost of installment sales5,207
 5,553
 (346) (6.2)% 16,099
 17,240
 (1,141) (6.6)%
Total cost of store revenues228,960
 233,691
 (4,731) (2.0)% 747,340
 775,547
 (28,207) (3.6)%
Franchise cost of merchandise sold2,540
 2,960
 (420) (14.2)% 8,585
 11,273
 (2,688) (23.8)%
Total cost of revenues231,500
 236,651
 (5,151) (2.2)% 755,925
 786,820
 (30,895) (3.9)%
Gross profit412,465
 457,226
 (44,761) (9.8)% 1,307,661
 1,492,328
 (184,667) (12.4)%
Operating expenses               
Store expenses               
Labor179,643
 186,289
 (6,646) (3.6)% 551,197
 595,668
 (44,471) (7.5)%
Other store expenses171,995
 195,096
 (23,101) (11.8)% 546,485
 599,759
 (53,274) (8.9)%
General and administrative expenses43,768
 38,187
 5,581
 14.6 % 130,637
 121,383
 9,254
 7.6 %
Depreciation, amortization and impairment of intangibles18,679
 19,998
 (1,319) (6.6)% 55,928
 60,598
 (4,670) (7.7)%
Other charges6,825
 956
 5,869
 613.9 % 31,580
 22,240
 9,340
 42.0 %
Total operating expenses420,910
 440,526
 (19,616) (4.5)% 1,315,827
 1,399,648
 (83,821) (6.0)%
Operating (loss) profit(8,445) 16,700
 (25,145) (150.6)% (8,166) 92,680
 (100,846) (108.8)%
Debt refinancing charges—
 —
 —
 — % 1,936
 —
 1,936
 100.0 %
Interest, net11,276
 11,569
 (293) (2.5)% 33,854
 35,078
 (1,224) (3.5)%
(Loss) earnings before income taxes(19,721) 5,131
 (24,852) (484.4)% (43,956) 57,602
 (101,558) (176.3)%
Income tax (benefit) expense(7,122) (1,050) (6,072) (578.3)% (15,785) 16,414
 (32,199) (196.2)%
Net (loss) earnings$(12,599) $6,181
 $(18,780) (303.8)% $(28,171) $41,188
 $(69,359) (168.4)%
Three Months Ended September 30, 2017,2022, compared to Three Months Ended September 30, 20162021
Store Revenue. Total store revenue decreased by $49.4$145.9 million, or 7.2%12.8%, to $639.3$995.1 million for the three months ended September 30, 2017,2022, from $688.7$1,141.0 million for the three months ended September 30, 2016.2021. This decrease was primarily due to decreases of approximately $39.0$119.0 million and $10.1$27.2 million in revenues in the Core U.S.Acima and Acceptance NowRent-A-Center Business segments, respectively, as discussed further in the segment performance section “Segment Performance” below.


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RENT-A-CENTER, INC. AND SUBSIDIARIES


Same store revenue is reported on a constant currency basis and generally represents revenue earned in 2,663 locations that were operated by us for 13 months or more, excluding any store that receives a certain level of customer accounts from another store (acquisition or merger). Receiving stores will be eligible for inclusion in the same store sales base in the twenty-fourth full month following the account transfer. In addition, due to the severity of the hurricane impacts, we instituted a change to the same store sales store selection criteria to exclude stores in geographically impacted regions for 18 months. Same store revenues decreased by $13.3 million, or 3.1%, to $417.8 million for the three months ended September 30, 2017, as compared to $431.1 million in 2016. The decrease in same store revenues was primarily attributable to a decline in the Core U.S. segment, as discussed further in the segment performance section below.
Cost of Rentals and Fees. Cost of rentals and fees consists primarily of depreciation of rental merchandise. Cost of rentals and fees for the three months ended September 30, 2017,2022, decreased by $6.3$34.5 million, or 3.9%10.0%, to $153.2$310.1 million as compared to $159.5$344.6 million in 2016. This2021. The decrease in cost of rentals and fees was primarily attributable to decreases of $4.5approximately $32.4 million and $1.7$2.4 million in

29


the Core U.S.Acima and Acceptance NowRent-A-Center Business segments, respectively, as a result of lower rentals and fees revenue.respectively. Cost of rentals and fees expressed as a percentage of rentals and fees revenue increased to 27.7%was 37.4% for the three months ended September 30, 20172022, as compared to 26.8%37.0% in 2016.2021.
Cost of Merchandise Sold. Cost of merchandise sold increaseddecreased by $1.9$48.5 million, or 2.7%21.3%, to $70.6$179.5 million for the three months ended September 30, 2017,2022, from $68.7$228.0 million in 2016,2021, primarily attributable to an increasedecreases of $2.5$45.5 million and $2.9 million in the Acceptance Now segment.Acima and Rent-A-Center Business segments, respectively. The gross margin percent of merchandise sales decreased to (4.4)(21.6)% for the three months ended September 30, 2017,2022, from 6.2%(18.8)% in 2016.2021.
Gross Profit. Gross profit decreased by $44.8$63.3 million, or 9.8%11.1%, to $412.5$505.5 million for the three months ended September 30, 2017,2022, from $457.2$568.8 million in 2016,2021, primarily due primarily to decreases of $33.3$41.1 million and $10.9$21.7 million in the Core U.S.Acima and Acceptance NowRent-A-Center Business segments, respectively.respectively, as discussed further in the section “Segment Performance” below. Gross profit as a percentage of total revenue decreasedincreased to 64.1%49.4% for the three months ended September 30, 2017,2022, as compared to 65.9%48.1% in 2016, primarily as a result of implementing targeted pricing actions and changes from the new value proposition, as discussed further in the segment performance section below.2021.
Store Labor. Store labor decreased by $6.6$7.7 million, or 3.6%4.7%, to $179.6$156.2 million, for the three months ended September 30, 2017,2022, as compared to $186.3$163.9 million in 2016,2021, primarily attributabledue to decreases of $3.7$6.2 million and $2.4$1.7 million in the Core U.S.Acima and Acceptance NowRent-A-Center Business segments, respectively, as a result of a lower Core U.S. store base, and closure of Acceptance Now locations in the first half of 2017.respectively. Store labor expressed as a percentage of total store revenue was 28.1%15.7% for the three months ended September 30, 2017,2022, as compared to 27.1%14.4% in 2016.2021.
Other Store Expenses. Other store expenses decreasedincreased by $23.1$8.4 million, or 11.8%4.4%, to $172.0$197.8 million for the three months ended September 30, 2017,2022, as compared to $195.1$189.6 million in 2016,2021, primarily attributabledue to a decreasean increase of $27.4$18.9 million in the Core U.S.Rent-A-Center Business segment, as a result of lower customer stolen merchandise losses, lower store count and lower advertising expenses, partially offset by a $4.2decrease of $11.3 million increase in the Acceptance Now segment primarily due to higher customer stolen merchandise losses.Acima segment. Other store expenses expressed as a percentage of total store revenue were 26.9%19.9% for the three months ended September 30, 2017,2022, compared to 28.3%16.6% in 2016.2021.
General and Administrative Expenses. General and administrative expenses increaseddecreased by $5.6$6.0 million, or 14.6%13.0%, to $43.8$40.0 million for the three months ended September 30, 2017,2022, as compared to $38.2$46.0 million in 2016, driven2021, primarily by project related expenses, insurance expensesdue to decreases in overhead labor and other legal and professional fees.incentive compensation. General and administrative expenses expressed as a percentage of total revenue were 6.8%3.9% for both the three months ended September 30, 2017, compared to 5.5% in 2016.2022 and 2021.
Other Charges. Other charges increaseddecreased by $5.8$26.7 million, or 613.9%30.2%, to $6.8$61.6 million for the three months ended September 30, 2017,2022, as compared to $1.0$88.3 million in 2016.2021. Other charges for the three months ended September 30, 2017 and 20162022 primarily included charges$42.1 million in stock compensation expense related to the closurevesting of Core U.S.a portion of the equity consideration issued in the acquisition of Acima Holdings and Acceptance Now locations, reductions$18.1 million in our field support center, damage caused by hurricanes,depreciation and incrementalamortization of acquired software and intangible assets. Other charges for the three months ended September 30, 2021 primarily included $42.8 million in stock compensation expense related to equity consideration subject to vesting conditions, $33.2 million in depreciation and amortization of acquired software and intangible assets, $7.2 million in legal settlement reserves, and advisory fees, partially offset by a litigation claims settlement.$4.2 million in other one-time transaction and integration costs related to the acquisition of Acima Holdings.
Operating (Loss) Profit. Operating resultsprofit decreased by $25.1$30.0 million, or 150.6%, to a loss of $8.4$37.1 million for the three months ended September 30, 2017,2022, as compared to a profit of $16.7$67.1 million in 2016,2021, primarily due to the decreases in gross profit of $2.2$63.3 million and $19.2described above, partially offset by a net decrease of $33.2 million in the Core U.S.operating expenses, driven by lower labor expenses, general & administrative expenses, and Acceptance Now segments, respectively, as discussed further in the segment performance sections below.other charges. Operating resultsprofit expressed as a percentage of total revenue was (1.3)%3.6% for the three months ended September 30, 2017,2022, compared to 2.4%5.7% in 2016, primarily due to the decrease in gross profit for the Core U.S. and Acceptance Now segments, and increases in general & administrative expenses and other charges as discussed above. Excluding other charges, operating profit was $(1.6) million, or (0.3)% of revenue2021.
Income Tax Expense. Income tax expense for the three months ended September 30, 2017, compared to $17.7 million, or 2.5% of revenue for the comparable period of 2016.
Income Tax. Income tax benefit for the three months ended September 30, 20172022 was $7.1$20.1 million, as compared to $1.1$19.3 million in 2016. The effective tax rate was 36.1% for the three months ended September 30, 2017, compared to (20.5)% in 2016, primarily due to the decrease in operating profit described above. Excluding other charges, the effective tax rate was 2.9% for the three months ended September 30, 2016.2021.


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RENT-A-CENTER, INC. AND SUBSIDIARIES


Nine Months Ended September 30, 2017,2022, compared to Nine Months Ended September 30, 20162021
Store Revenue. Total store revenue decreased by $212.4$127.8 million, or 9.4%3.9%, to $2,048.2$3,167.1 million for the nine months ended September 30, 2017,2022, from $2,260.6$3,294.9 million for the nine months ended September 30, 2016. This2021. The decrease was primarily due to a decrease of approximately $206.1$82.2 million and $49.2 million in the Core U.S. segment,Acima and Rent-A-Center Business segments, respectively, as discussed further in the segment performance section “Segment Performance” below.
Same store revenue is reported on a constant currency basis and generally represents revenue earned in 3,324 locations that were operated by us for 13 months or more, excluding any store that receives a certain level of customer accounts from another store (acquisition or merger). Receiving stores will be eligible for inclusion in the same store sales base in the twenty-fourth full month following the account transfer. In addition, due to the severity of the hurricane impacts, we instituted a change to the same store sales store selection criteria to exclude stores in geographically impacted regions for 18 months. Same store revenues decreased by $90.9 million, or 6.3%, to $1,357.5 million for the nine months ended September 30, 2017, as compared to $1,448.4 million in 2016. The decrease in same store revenues was primarily attributable to a decline in the Core U.S. segment, as discussed further in the segment performance section below.
Cost of Rentals and Fees. Cost of rentals and fees consists primarily of depreciation of rental merchandise. Cost of rentals and fees for the nine months ended September 30, 2017, decreased2022, increased by $30.3$56.2 million, or 6.0%6.2%, to $474.5$968.7 million as compared to $504.8$912.5 million in 2016.2021. This decreaseincrease in cost of rentals and fees was primarily attributable to a $31.2increases of $51.9 million decreaseand $3.1 million in the Core U.S. segment as a result of lower rentalsAcima and fees revenue.Rent-A-Center Business segments, respectively. Cost of rentals and fees expressed as a percentage of rentals and fees revenue increased to 27.5%37.7% for the nine months ended September 30, 20172022 as compared to 26.4%35.2% in 2016.2021.
Cost of Merchandise Sold. Cost of merchandise sold increaseddecreased by $3.3$102.5 million, or 1.3%14.3%, to $256.7$615.5 million for the nine months ended September 30, 2017,2022, from $253.5$718.0 million in 2016,2021, primarily attributable to an increasedecreases of $4.8$76.7 million and

30


$25.5 million in the Acceptance Now segment, partially offset by a decrease of $1.6 million in both the Core U.S.Acima and Mexico segments.Rent-A-Center Business segments, respectively. The gross margin percent of merchandise sales decreased to 3.5%(13.7)% for the nine months ended September 30, 2017,2022, from 10.0%(11.1)% in 2016.2021.
Gross Profit. Gross profit decreased by $184.7$82.6 million, or 12.4%5.0%, to $1,307.7$1,584.2 million for the nine months ended September 30, 2017,2022, from $1,492.3$1,666.8 million in 2016,2021, due primarily to a decreasedecreases of $172.4$57.4 million and $26.6 million in the Core U.S. segment.Acima and Rent-A-Center Business segments, respectively, as discussed further in the section “Segment Performance” below. Gross profit as a percentage of total revenue decreased to 63.4%48.7% for the nine months ended September 30, 2017,2022, as compared to 65.5%48.8% in 2016.2021.
Store Labor. Store labor decreasedincreased by $44.5$6.8 million, or 7.5%1.4%, to $551.2$486.8 million, for the nine months ended September 30, 2017,2022, as compared to $595.7$480.0 million in 2016,2021, primarily attributable to an increase of $14.5 million in the Rent-A-Center Business segment, partially offset by a decrease of $40.2$8.7 million in the Core U.S. segment as a result of our rationalization of the Core U.S. store base in the prior year and lower medical insurance expenses.Acima segment. Store labor expressed as a percentage of total store revenue was 26.9%15.4% for the nine months ended September 30, 2017,2022, as compared to 26.3%14.6% in 2016.2021.
Other Store Expenses. Other store expenses decreasedincreased by $53.3$83.6 million, or 8.9%, to $546.5$624.3 million for the nine months ended September 30, 2017,2022, as compared to $599.8$540.7 million in 2016,2021, due to increases of $45.1 million and $36.6 million in the Rent-A-Center Business and Acima segments, respectively, primarily attributable to a decrease of $61.4 million in the Core U.S. segment as a result of our rationalization of the Core U.S. store base, partially offset by an increase of $8.4$61.1 million in merchandise losses, as discussed further in the Acceptance Now segment as a result of increased customer stolen merchandise.section “Segment Performance” below. Other store expenses expressed as a percentage of total store revenue were 26.7%19.7% for the nine months ended September 30, 2017,2022, compared to 26.5%16.4% in 2016.2021.
General and Administrative Expenses. General and administrative expenses increaseddecreased by $9.3$8.2 million, or 7.6%5.5%, to $130.6$141.3 million for the nine months ended September 30, 2017,2022, as compared to $121.4$149.5 million in 2016, primarily due to project related expenses, insurance expenses, legal and other professional fees.2021. General and administrative expenses expressed as a percentage of total revenue were 6.3%4.3% for the nine months ended September 30, 2017,2022, compared to 5.3%4.4% in 2016.2021.
Other Charges. Other charges increaseddecreased by $9.3$26.7 million, or 42.0%, to $31.6$185.4 million for the nine months ended September 30, 2017,2022, as compared to $22.2$212.1 million in 2016.for the nine months ended September 30, 2021. Other charges for the nine months ended September 30, 2017 and 20162022 primarily included charges$111.5 million in stock compensation expense related to the closurevesting of Core U.S.a portion of the equity consideration issued in the acquisition of Acima Holdings, $62.5 million in depreciation and Acceptance Now locations, reductionsamortization of acquired software and intangible assets, $6.8 million in our field support center, damage caused by hurricanes,asset impairments, $5.2 million in employee severance, $1.2 million in state sales tax assessment reserves, and incremental$1.2 million in Acima retail partner conversion losses. Other charges for the nine months ended September 30, 2021 primarily included $93.1 million in in stock compensation expense related to equity consideration subject to vesting conditions, $81.7 million in depreciation and amortization of acquired software and intangible assets, related to the acquisition of Acima Holdings, $25.2 million one-time transaction and integration costs related to the acquisition of Acima Holdings, and $10.7 million in legal and advisory fees, partially offset by litigation claims settlements.settlement reserves.
Operating (Loss) Profit. Operating resultsprofit decreased by $100.8$137.5 million, or 108.8%, to a loss of $8.2$106.2 million for the nine months ended September 30, 2017,2022, as compared to a profit of $92.7$243.7 million in 20162021, primarily due primarily to decreasesthe decrease of $47.8 million and $36.9$82.6 million in the Core U.S. and Acceptance Now segments, respectively, offset bygross profit, in addition to an increase of $1.7$54.9 million in the Mexico segmentoperating expenses, as discussed in the segment performance sections below.described above. Operating lossprofit expressed as a percentage of total revenue was (0.4)%3.3% for the nine months ended September 30, 2017,2022, compared to operating profit expressed as a percentage of total revenue of 4.1%7.1% in 2016, primarily due to the decrease in gross profit for the Core U.S. and Acceptance Now segments, store deleverage, and increases in general & administrative expenses and other charges discussed above. Excluding other charges, operating profit was $23.4 million, or 1.1% of revenue2021.
Income Tax Expense. Income tax expense for the nine months ended September 30, 2017,2022 was $35.8 million, as compared to $114.9$51.0 million or 5.0%in 2021, primarily due to a decrease in earnings before taxes of revenue for the comparable period of 2016.
Income Tax. Incomeapproximately $130.6 million. The effective tax benefitrate was 78.7% for the nine months ended September 30, 2017 was $15.8 million, as2022, compared to income28.9% in 2021, primarily due to the difference between recorded goodwill and goodwill recognized for tax expensepurposes, as a result of $16.4 million in 2016. Thethe Aggregate Stock Consideration from the Acima Holdings transaction subject to restricted stock agreements. In addition, the effective tax rate was 35.9% for the nine months ended September 30, 2017, compared2021, was further impacted by discrete income tax items related to

excess tax benefits from the vesting of our annual restricted stock award grants and stock option exercises, and the release of domestic and foreign tax valuation allowances.


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RENT-A-CENTER, INC. AND SUBSIDIARIES


28.5% in 2016. Excluding other charges, the effective tax rate was 36.7% for the nine months ended September 30, 2017, as compared to 37.8% in 2016.
Segment Performance
Core U.S.Rent-A-Center Business segment
Three Months EndedNine Months Ended
September 30,ChangeSeptember 30,Change
(dollar amounts in thousands)20222021$%20222021$%
Revenues$473,755 $500,986 $(27,231)(5.4)%$1,482,445 $1,531,686 $(49,241)(3.2)%
Gross profit334,892 356,590 (21,698)(6.1)%1,046,332 1,072,946 (26,614)(2.5)%
Operating profit71,999 109,272 (37,273)(34.1)%271,283 357,036 (85,753)(24.0)%
Change in same store revenue(5.3)%(3.2)%
Stores in same store revenue calculation(1)
1,760 1,760
 Three Months Ended     Nine Months Ended    
 September 30, Change September 30, Change
(dollar amounts in thousands)2017 2016 $ % 2017 2016 $ %
Revenues$442,763
 $481,805
 $(39,042) (8.1)% $1,390,687
 $1,596,782
 $(206,095) (12.9)%
Gross profit309,779
 343,071
 (33,292) (9.7)% 965,739
 1,138,089
 (172,350) (15.1)%
Operating profit23,859
 26,058
 (2,199) (8.4)% 79,241
 127,009
 (47,768) (37.6)%
Change in same store revenue      (5.1)%       (9.4)%
Stores in same store revenue calculation      2,008       2,108
(1) Same store sales generally represents revenue earned in stores that were operated by us for 13 months or more and are reported on a constant currency basis as a percentage of total revenue earned in stores of the segment during the indicated period. We exclude from the same store sales base any store that receives a certain level of customer accounts from closed stores or acquisitions. The receiving store will be eligible for inclusion in the same store sales base in the 30th full month following account transfer. Due to the COVID-19 pandemic and related temporary store closures, all 32 stores in Puerto Rico were excluded starting in March 2020 through March 2022.
Revenues. The decrease in revenue for the three and nine months ended September 30, 2017,2022, as compared to 2021, were primarily due to decreases in same store sales of 5.3% and 3.2%, respectively, driven primarily by a decreasedecreases in rentals and fees of $19.2 million for the three months ended September 30, 2022, and merchandise sales of $40.7 million for the nine months ended September 30, 2022. Decreases in revenue of $34.5 million and $189.3 million, respectively, as compared to 2016. This decrease is primarilyreflect lower demand for consumer durable goods mainly due to the decreaseeffects from the wind-down of stimulus programs in same store revenue, rationalization2021, combined with recent increases in the US consumer price index and corresponding pressure on the discretionary income of our Core U.S. store base incustomers. As of September 30, 2022, the segment's lease portfolio balance was approximately $2.4 million, or 1.7%, lower than the prior year and impacts from the recent hurricanes. The decrease in same store revenue was driven primarily by a lower portfolio balance in 2017.as of September 30, 2021.
Gross Profit. Gross profit decreased for the three and nine months ended September 30, 2017,2022, as compared to 2016,2021, driven primarily due toby the decrease in store revenuerevenues described above and targeted pricing actions implemented to right size the inventory mix and changes from the new value proposition.above. Gross profit as a percentage of segment revenues decreased to 70.0%was 70.7% and 69.4%70.6% for the three and nine months ended September 30, 2017, respectively,2022, as compared to 71.2% and 71.3%70.0% for the respective periodscorresponding period in 2016.2021.
Operating Profit. Operating profit as a percentage of segment revenues was 5.4%15.2% and 5.7%18.3% for the three and nine months ended September 30, 2017, respectively,2022, compared to 5.4%21.8% and 8.0%23.3% for the respective periodscorresponding period in 2016, primarily2021. The decrease in operating margin for the three and nine months ended September 30, 2022, as compared to 2021, was partially driven by decreases in revenues and gross profit described above, in addition to increases in losses due to sales deleverage, offset by a decrease in store laborcustomer stolen merchandise of $3.8$10.5 million and $40.2 million, and other store expenses of $27.4 million and $61.4$25.2 million for the three and nine months ended September 30, 2017, respectively. Declines in store2022, respectively, and increased labor and other store expenses werecosts of $14.5 million for the nine months ended September 30, 2022, driven primarily by lower store count, lower customer stolen merchandise losses, and lower advertising expenses.wage inflation. Charge-offs in our Core U.S. rent-to-ownRent-A-Center Business lease-to-own stores due to customer stolen merchandise, expressed as a percentage of Core U.S. rent-to-ownRent-A-Center Business lease-to-own revenues, were approximately 2.4%5.8% and 2.7%4.6% for the three and nine months ended September 30, 2017, respectively,2022, compared to 4.7%3.4% and 3.7%2.8% for the respectivecorresponding periods in 2016.2021. Charge-offs in our Core U.S. rent-to-ownRent-A-Center Business lease-to-own stores due to other merchandise losses, expressed as a percentage of Core U.S. rent-to-ownRent-A-Center Business lease-to-own revenues, were approximately 2.0% and 1.9%1.7% for both the three and nine months ended September 30, 2017, respectively,2022, compared to 2.1%approximately 1.8% and 1.8%1.6% for the respectivecorresponding periods in 2016.2021. Other merchandise losses include unrepairable and missing merchandise, and loss/damage waiver claims.
Acceptance NowAcima segment
Three Months EndedNine Months Ended
September 30,ChangeSeptember 30,Change
(dollar amounts in thousands)20222021$%20222021$%
Revenues$504,448 $623,445 $(118,997)(19.1)%$1,633,994 $1,716,174 $(82,180)(4.8)%
Gross profit152,434 193,527 (41,093)(21.2)%481,742 539,181 (57,439)(10.7)%
Operating profit48,885 51,884 (2,999)(5.8)%94,318 144,797 (50,479)(34.9)%
 Three Months Ended     Nine Months Ended    
 September 30, Change September 30, Change
(dollar amounts in thousands)2017 2016 $ % 2017 2016 $ %
Revenues$184,293

$194,398
 $(10,105) (5.2)% $622,160
 $624,310
 $(2,150) (0.3)%
Gross profit92,088

102,998
 (10,910) (10.6)% 310,451
 319,492
 (9,041) (2.8)%
Operating profit10,379

29,592
 (19,213) (64.9)% 49,595
 86,508
 (36,913) (42.7)%
Change in same store revenue      7.9 %       4.9 %
Stores in same store revenue calculation      537
       1,098
Revenues. Revenues. The decrease in revenues for the three months ended September 30, 2022, as compared to 2021, was primarily due to decreases in rentals and fees revenues and merchandise sales revenues of $82.2 million and $36.9 million respectively. The decrease in revenue for the nine months ended September 30, 2022, as compared to 2021, was primarily due to decreases in merchandise sales revenues and rentals and fees revenues of $64.2 million and $17.9 million, respectively. Consistent with our RAC Business segment, decreases in revenue reflect lower demand for consumer durable goods mainly due to the effects from

32


the wind-down of stimulus programs in 2021, combined with recent increases in the US consumer price index and corresponding pressure on the discretionary income of our customers. In addition, decreases in revenue were also attributable to the tightening of our underwriting policies, in an effort to improve risk management related to the execution of new leases, as described further in Business and Operational Trends.
Gross Profit. Gross profit as a percentage of segment revenues decreased to 30.2% and 29.5% for the three and nine months ended September 30, 2017, was driven primarily by store closures for hhgregg2022, compared to 31.0% and Conn's locations, as well as impacts from the recent hurricanes, partially offset by higher same store revenue.
Gross profit. Gross profit decreased31.4% for the three and nine months ended September 30, 2017, compared to the respectivecorresponding periods in 2016, primarily due to an increase in cost of merchandise sold driven by a focused effort to encourage ownership and reduce returned product. Gross2021.
Operating Profit. Operating profit as a percentage of segment revenues was 50.0% and 49.9%increased to 9.7% for the three andmonths ended September 30, 2022 compared to 8.3% for the three months ended September 30, 2021, but decreased to 5.8% for the nine months ended September 30, 2017, respectively,2022 compared to 53.0% and 51.2%8.4% for the respective periods in 2016.


20

RENT-A-CENTER, INC. AND SUBSIDIARIES


Operating profit. Operating profit decreased by 64.9% and 42.7% for the three and nine months ended September 30, 2017, respectively,2021. Operating profit margin increased for the three months ended September 30, 2022 as compared to the respective periodssame period in 2016. The decrease2021, partially due to lower revenues described above, in operatingaddition to lower customer stolen merchandise losses of $12.6 million. Operating profit margin decreased for the three and nine months ended September 30, 2017 was primarily due to increased rental merchandise losses, charges incurred for store closures, and sales deleverage. Excluding other charges, operating profit decreased by 46.5% and 17.9% for the three and nine months ended September 30, 2017, respectively,2022 as compared to the respective periodssame period in 2016.2021, partially due to lower revenues described above, in addition to higher customer stolen merchandise losses of $29.8 million. Charge-offs in our Acceptance NowAcima locations due to customer stolen merchandise, expressed as a percentage of revenues, were approximately 12.5%9.0% and 12.0%11.2% for the three and nine months ended September 30, 2017, respectively,2022, compared to 8.4%9.3% and 9.2% for the respective periods in 2016. Excluding other charges, charge-offs due to customer stolen merchandise were 10.8% and 9.8%8.9% for the three and nine months ended September 30, 2017, respectively.2021. Charge-offs in our Acceptance NowAcima locations due to other merchandise losses, expressed as a percentage of revenues, were approximately 1.2%0.0% and 1.1%0.1% for the three and nine months ended September 30, 2017,2022, compared to 1.3%0.0% and 1.1%0.1% for the respectivecorresponding periods in 2016.2021.
Mexico segment
Three Months EndedNine Months Ended
September 30,ChangeSeptember 30,Change
(dollar amounts in thousands)20222021$%20222021$%
Revenues$16,041 $15,917 $124 0.8 %$48,454 $45,670 $2,784 6.1 %
Gross profit11,330 11,293 37 0.3 %34,242 32,323 1,919 5.9 %
Operating profit996 2,285 (1,289)(56.4)%5,011 6,659 (1,648)(24.7)%
Change in same store revenue0.2 %4.9 %
Stores in same store revenue calculation(1)
109109 
(1) Same store sales generally represents revenue earned in stores that were operated by us for 13 months or more and are reported on a constant currency basis as a percentage of total revenue earned in stores of the segment during the indicated period. We exclude from the same store sales base any store that receives a certain level of customer accounts from closed stores or acquisitions. The receiving store will be eligible for inclusion in the same store sales base in the 30th full month following account transfer.
 Three Months Ended     Nine Months Ended    
 September 30, Change September 30, Change
(dollar amounts in thousands)2017 2016 $ % 2017 2016 $ %
Revenues$12,237
 $12,454
 $(217) (1.7)% $35,351
 $39,514
 $(4,163) (10.5)%
Gross profit8,466
 8,897
 (431) (4.8)% 24,668
 27,478
 (2,810) (10.2)%
Operating (loss) profit(242) 235
 (477) (203.0)% (122) (1,803) 1,681
 93.2 %
Change in same store revenue      (6.2)%       (6.3)%
Stores in same store revenue calculation      118
       118
Revenues. Revenues for the three months ended September 30, 2017 were positively impacted by approximately $0.6 million due to exchange rate fluctuations as compared to the three months ended September 30, 2016, while revenues for the nine months ended September 30, 2017 were negatively impacted by exchange rate fluctuations of approximately $1.2$0.2 million compared to the nine months ended September, 30 2016. On a constant currency basis, the decrease in revenueand $0.3 million for the three and nine months ended September 30, 2017, was primarily driven by a decrease in same store revenue,2022, as compared to the same periods in 2016.
Gross Profit. Gross profit2021. On a constant currency basis, revenues for the three months ended September 30, 2017 was positively impacted by approximately $0.4 million due to exchange rate fluctuations, while gross profit for theand nine months ended September 30, 2017,2022 increased approximately $0.3 million and $3.1 million, compared to the corresponding periods in 2021.
Gross Profit. Gross profit was negatively impacted by exchange rate fluctuations of approximately $0.9$0.2 million and $0.3 million for the three and nine months ended September 30, 2022, as compared to the same periods in 2016.2021. On a constant currency basis, gross profit decreased primarilyfor the three and nine months ended September 30, 2022 increased by approximately $0.2 million and $2.2 million as a result of decreased rental revenue, partially offset by increased merchandise sales.compared to the same periods in 2021. Gross profit as a percentage of segment revenues was 69.2%70.6% and 69.8%70.7% for the three and nine months ended September 30, 2017, respectively, as2022, compared to 71.4%70.9% and 69.5%70.8% for the respectivecorresponding periods in 2016.2021.
Operating (Loss) Profit. Operating resultsprofit for the three and nine months ended September 30, 2017, were2022 was minimally impacted by the exchange rate fluctuations as compared to respectivethe same periods in 2016. On a constant currency basis, operating results2021. Operating profit as a percentage of segment revenues decreased to (2.0)% for the three months ended September 30, 2017, from 1.9% for the respective period in 2016, primarily driven by the declines in revenues6.2% and gross profit described above. Operating results as a percentage of segment revenues increased to (0.3)% for the nine months ended September 30, 2017, from (4.6)% for the respective period in 2016. Operating losses for the nine months ended September 30, 2016 included other charges of $2.3 million, primarily related to store closures during the first quarter of 2016. Excluding other charges, operating results as a percentage of segment revenues would have been (0.7%) and 0.5%10.3% for the three and nine months ended September 30, 2017, respectively,2022, compared to 1.7%14.4% and 1.3%14.6% for the respectivecorresponding periods in 2016.2021.


33


Franchising segment
Three Months EndedNine Months Ended
September 30,ChangeSeptember 30,Change
(dollar amounts in thousands)20222021$%20222021$%
Revenues$29,713 $40,920 $(11,207)(27.4)%$90,040 $118,495 $(28,455)(24.0)%
Gross profit6,879 7,350 (471)(6.4)%21,857 22,305 (448)(2.0)%
Operating profit5,077 4,816 261 5.4 %15,170 15,495 (325)(2.1)%
 Three Months Ended     Nine Months Ended    
 September 30, Change September 30, Change
(dollar amounts in thousands)2017 2016 $ % 2017 2016 $ %
Revenues$4,672
 $5,220
 $(548) (10.5)% $15,388
 $18,542
 $(3,154) (17.0)%
Gross profit2,132
 2,260
 (128) (5.7)% 6,803
 7,269
 (466) (6.4)%
Operating profit1,032
 1,430
 (398) (27.8)% 3,565
 4,268
 (703) (16.5)%
Revenues. Revenues decreased for the three and nine months ended September 30, 2017, respectively,2022 compared to the respectivecorresponding periods in 2016,2021, primarily due to lower merchandise sales to the Company's franchise partners.a decrease of $28.5 million in inventory purchases by franchisees.
Gross Profit. Gross profit as a percentage of segment revenues increased to 45.6%was 23.2% and 44.2%24.3% for the three and nine months ended September 30, 2017, respectively, from 43.3%2022, compared to 18.0% and 39.2%18.8% for the respectivecorresponding periods in 2016.2021.


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RENT-A-CENTER, INC. AND SUBSIDIARIES


Operating Profit. Operating profit as a percentage of segment revenues decreased to 22.1%was 17.1% and 16.8%, for the three months ended September 30, 2017, compared to 27.4% for the respective period in 2016, and increased to 23.2% for the nine months ended September 30, 2017,2022 compared to 23.0%11.8% and 13.1% for the respective periodcorresponding periods in 2016.2021.
Liquidity and Capital Resources
Overview. For the nine months ended September 30, 2017,2022, we had $135.4generated $412.1 million of netin operating cash provided by operating activities.flow. We paid down debt by $86.6 million from cash generated from operations and also used cash in the amount of $53.5$296.6 million for debt repayments, $60.4 million for dividends, $49.4 million for capital expenditures, and $12.8 million$29.8 for paymentshare repurchases, offset by cash proceeds from indebtedness of dividends, ending$90.0 million. We ended the nine-month periodthird quarter of 2022 with $76.2$165.6 million of cash and cash equivalents.equivalents and outstanding indebtedness of $1.4 billion.
Analysis of Cash Flow. Cash provided by operating activities decreased $239.5increased by $85.9 million to $135.4$412.1 million for the nine months ended September 30, 2017,2022, from $374.9$326.2 million in 2016. This was2021, primarily attributabledue to the receipta decrease in 2016inventory purchases, partially offset by a decrease of income tax refunds of approximately $80.0$115.4 million the decline in net earnings for the nine months ended September 30, 2017 compared to the same period in 2016, and other net changes in operating assets and liabilities.earnings.
Cash used in investing activities increased approximately $6.4 milliondecreased to $51.8$50.2 million for the nine months ended September 30, 2017, from $45.42022, compared to $1,319.4 million in 2016,2021, a change of $1,269.2 million, primarily due primarily to an increasethe acquisition of Acima Holdings in capital expenditures.February 2021.
Cash used in(used in) provided by financing activities was $104.6$(304.5) million for the nine months ended September 30, 2017,2022, compared to $254.8$992.8 million in 2016,2021, representing a change of $150.2$1,297.3 million. The change was primarily due to debt proceeds of $1.5 billion received in the first quarter of 2021 used to fund the acquisition of Acima Holdings in February 2021, partially offset by debt issuance costs of $46.1 million primarily driven by our net reductionpaid in the first quarter of 2021 in connection with the receipt of debt proceeds, in addition to lower debt repayments of $86.6$70.3 million for the nine months ended September 30, 2017, as compared to a net decrease in debt of $233.3 million for the comparable period in 2016, payment of debt issuance costs of $5.3 million related to our recent debt amendment, offset by an $8.5 million decrease in dividend payments for the nine months ended September 30, 20172022, compared to the same period in 2016.2021.
Liquidity Requirements. Our primary liquidity requirements are for rental merchandise purchases. As we implement our growth strategies, the need for additional rental merchandise is expected to remain our primary capital requirement. Other capital requirements include expenditures for property assets, debt service, and debt service.dividends. Our primary sources of liquidity have been cash provided by operations. In the future, to provide any additional funds necessary for the continued operations and expansion of our business, we may incur from time to time additional short-term 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 relate to our financial condition and performance, and some of which are beyond our control, such as prevailing interest rates and general financing and 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.
Should we require additional funding sources, we maintain revolving credit facilities, including a $20.0 million line of credit at INTRUST Bank, N.A. The availability of our INTRUST line of credit is restricted if the borrowing capacity under our Revolving Facility drops below $10 million. We utilize our RevolvingABL Credit Facility for the issuance of letters of credit, as well as to manage normal fluctuations in operational cash flow caused by the timing of cash receipts. In that regard, we may from time to time draw funds under the RevolvingABL Credit Facility for general corporate purposes. Amounts are drawn as needed due to the timing of cash flows and are generally paid down as cash is generated by our operating activities. We believe the cash flow generated from operations together with amounts availableand availability under our ABL Credit Agreement,Facility will be sufficient to fund our liquidity requirementsoperations during the next 12 months. While our operating cash flow has been strong and we expect this strength to continue, our liquidity could be negatively impacted if we do not remain as profitable as we expect. At October 23, 2017,26, 2022, we had $51.2approximately $99.4 million in cash on hand, and $147.5$373.8 million available under our Revolving Facility at September 30, 2017, net of the $50 million of excess availability we must maintain on the Revolving Facility as a result of being out of compliance with our Fixed Charge Coverage Ratio covenant.ABL Credit Facility.
On October 31, 2017, we renewed our line of credit at INTRUST Bank, N.A. The availability of our INTRUST line of credit following the renewal is $12.5 million.
On June 6, 2017, we amended our Credit Agreement (the “Fourth Amendment”), effective as of June 6, 2017, with JPMorgan Chase Bank, N.A., as administrative agent, the other agents party thereto and the lenders party thereto. Under the Fourth Amendment, we agreed to provide additional collateral protections to secure the obligations under the Credit Agreement. The Fourth Amendment also modified the borrowing terms of the revolving loans under the Credit Agreement, which, as amended, establishes that the aggregate outstanding amounts (including after any draw request) not exceed the Borrowing Base. The Borrowing Base is tied to the Company’s Eligible Installment Sales Accounts, Inventory and Eligible Rental Contracts, in addition to Reserves and the Term Loan Reserve. We will provide to the Agent information necessary to calculate the Borrowing Base within 30 days of the end of each calendar month, unless the remaining availability of the Revolving Facility is less than 20% of the maximum borrowing capacity of the Revolving Facility or $60 million, in which case the Company must provide weekly information.
The Fourth Amendment reduced the capacity of the Revolving Facility from $675 million to $350 million and the aggregate amount of Incremental Term Loans and Incremental Revolving Commitments from $250 million to $100 million. We may request an Incremental Revolving Loan, provided that at the time of such draw, and after giving effect thereto, (i) the Consolidated Fixed


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RENT-A-CENTER, INC. AND SUBSIDIARIES


Charge Coverage Ratio on a pro forma basis is no less than 1.10:1, (ii) the Total Revolving Extensions of Credit do not exceed the Borrowing Base, and (iii) if the draw occurs during a Minimum Availability Period, the Availability must be more than the Availability Threshold Amount.
A change in control would result in an event of default under our senior credit facilities which would allow our lenders to accelerate the indebtedness owed to them. In addition, if a change in control occurs, we may be required to offer to repurchase all of our outstanding senior unsecured notes at 101% of their principal amount, plus accrued interest to the date of repurchase. Our senior credit facilities limit our ability to repurchase the senior unsecured notes, including in the event of a change in control. In the event a change in control occurs, we cannot be sure we would have enough funds to immediately pay our accelerated senior credit facilities and senior note obligations or that we would be able to obtain financing to do so on favorable terms, if at all.
Deferred Taxes. Certain federal tax legislation enacted during the period 2009 to 20142017 permitted bonus first-year depreciation deductions ranging from 50% to 100% of the adjusted basis of qualified property placed in service during such years. The depreciation benefits associated with these tax acts are now reversing. On December 18, 2015, theThe Protecting Americans from Tax Hikes Act of 2015 ("PATH"(“PATH”) extended the 50% bonus depreciation to 2015 and through December 2019.September 26, 2017, when it was updated by the Tax Cuts and Jobs Act of 2017 (“Tax Act”). The PATH act permits first-yearTax Act allows 100% bonus depreciation of 50%for certain property placed in 2015-2017, 40% in 2018,service between September 27, 2017 and 30% in 2019.December 31, 2022, at which point it will begin to phase out. The PATH actbonus depreciation provided by the Tax Act resulted in an estimated benefit of $154$349 million for us in 2016.2021. We estimate the remaining tax deferral associated with bonus depreciation from these actsActs is approximately $199$402 million at September 30, 2017,December 31, 2021, of which approximately 75.4%80%, or $149$320 million, will reverse in 2017,2022, and the majority of the remainder will reverse between 20182023 and 2019. We also estimate a benefit of $171 million resulting from bonus depreciation in 2017 which will offset the $149 million reversal, resulting in a net positive impact to cash taxes of $22 million.2024.

34


Merchandise Losses. Merchandise losses consist of the following:
 Three Months Ended September 30,Nine Months Ended September 30,
 (in thousands)2022202120222021
Customer stolen merchandise(1)
$77,005 $77,233 $262,236 $202,909 
Other merchandise losses(2)
8,146 8,079 26,577 24,839 
Total merchandise losses$85,151 $85,312 $288,813 $227,748 
 Three Months Ended September 30, Nine Months Ended September 30,
 (in thousands)2017 2016 2017 2016
Customer stolen merchandise (1)
$36,950
 $41,962
 $120,245
 $124,070
Other merchandise losses (2)
10,899
 12,917
 32,380
 35,420
Total merchandise losses$47,849
 $54,879
 $152,625
 $159,490
(1)Increase in customer stolen merchandise losses for the nine months ended September 30, 2022, compared to the corresponding period in 2021, is primarily due to increases in the US consumer price index and corresponding pressure on the discretionary income of our consumers, as described in the Results of Operations section above. In addition, the increase for the nine months ended September 30, 2022, is also partly attributable to the timing of the acquisition of Acima Holdings on February 17, 2021, resulting in a partial period of losses for the first quarter of 2021.
(1)
Customer stolen merchandise for the three and nine months ended September 30, 2017 includes inventory losses related to the closure of hhgregg and Conn's locations. See other charges in Note 5 to the condensed consolidated financial statements.
(2)
Other merchandise losses include unrepairable and missing merchandise, and loss/damage waiver claims.
(2)Other merchandise losses include unrepairable and missing merchandise, and loss/damage waiver claims.
Capital Expenditures. We make capital expenditures in order to maintain our existing operations, as well as foracquire new capital assets in new and acquired stores and investmentinvest in information technology. We spent $53.5$49.4 million and $46.8$45.9 million on capital expenditures during the nine months ended September 30, 20172022 and 2016,2021, respectively. The increase in capital expenditures for the nine months ended September 30, 2017, compared to the respective period in 2016, is primarily due to the timing of cash payments related to information technology investments in 2016, and store refreshes performed during 2017.
Acquisitions and New Location Openings. During the first nine months of 2017,2022, we acquired newfour lease-to-own store locations and customer accounts for an aggregate purchase price of approximately $2.2 million$0.8 million. The store locations were closed upon acquisition and consolidated into existing store operations in two different transactions.our Rent-A-Center Business segment.
The table below summarizes the store location activity for the nine-month period ended September 30, 2017.2022 for our Rent-A-Center Business, Mexico and Franchising operating segments.
 Rent-A-Center BusinessMexicoFranchisingTotal
Locations at beginning of period(1)
1,846 123 466 2,435 
New location openings14 3 1 18 
Closed locations
Merged with existing locations(12)(1)— (13)
Sold or closed with no surviving location— — (15)(15)
Locations at end of period(1)
1,848 125 452 2,425 
Acquired locations closed and accounts merged with existing locations4 — — 4 
Total approximate purchase price of acquired stores (in millions)
$0.8 $— $— $0.8 
(1) Does not include locations in our Acima segment.
Senior Debt. On February 17, 2021, we entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and lenders party thereto, that provides for a five-year asset-based revolving credit facility with commitments of $550 million and a letter of credit sublimit of $150 million, which commitments may be increased, at our option and under certain conditions, by up to an additional $125 million in the aggregate (as amended on August 10, 2022, the “ABL Credit Facility”). Under the ABL Credit Facility, we may borrow only up to the lesser of the level of the then-current borrowing base and the aggregate amount of commitments under the ABL Credit Facility. The borrowing base is tied to the amount of eligible installment sales accounts, inventory and eligible rental contracts, reduced by certain reserves. The ABL Credit Facility bears interest at a fluctuating rate determined by reference to Term SOFR plus an applicable margin of 1.50% to 2.00%, which, as of October 26, 2022, was 5.935%. A commitment fee equal to 0.250% to 0.375% of the unused portion of the ABL Credit Facility fluctuates dependent upon average utilization for the prior month as defined by a pricing grid included in the documentation governing the ABL Credit Facility. Loans under the ABL Credit Facility may be borrowed, repaid and re-borrowed until February 17, 2026, at which time all amounts borrowed must be repaid.
The obligations under the ABL Credit Facility are guaranteed by us and certain of our wholly owned domestic restricted subsidiaries, subject to certain exceptions. The obligations under the ABL Credit Facility and such guarantees are secured on a first-priority basis by all of our and our subsidiary guarantors’ accounts, inventory, deposit accounts, securities accounts, cash and cash equivalents, rental agreements, general intangibles (other than equity interests in our subsidiaries), chattel paper, instruments, documents, letter of credit rights, commercial tort claims related to the foregoing and other related assets and all proceeds thereof related to the foregoing, subject to permitted liens and certain exceptions (such assets, collectively, the “ABL Priority Collateral”) and a second-priority basis in substantially all other present and future tangible and intangible personal property of ours and the subsidiary guarantors, subject to certain exceptions.

 Core U.S. Acceptance Now Staffed Acceptance Now Direct Mexico Franchising Total
Locations at beginning of period2,463
 1,431
 478
 130
 229
 4,731
New location openings—
 196
 11
 1
 —
 208
Acquired locations remaining open—
 —
 —
 —
 3
 3
Conversions—
 (15) 15
 —
 —
 —
Closed locations           
Merged with existing locations(40) (436) (427) —
 —
 (903)
Sold or closed with no surviving location(17) (1) (1) —
 (5) (24)
Locations at end of period2,406
 1,175
 76
 131
 227
 4,015
Acquired locations closed and accounts merged with existing locations6
 —
 —
 —
 —
 6
Total approximate purchase price of acquired stores (in millions)
$2.2
 $—
 $—
 $—
 $—
 $2.2
35


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RENT-A-CENTER, INC. AND SUBSIDIARIES




Senior Debt. See descriptionOn February 17, 2021, we also entered into a term loan credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and lenders party thereto, that provides for a seven-year $875 million senior secured term loan facility (as amended on September 21, 2021, the “Term Loan Facility”). Subject in each case to certain restrictions and conditions, we may add up to $500 million of incremental term loan facilities to the Term Loan Facility or utilize incremental capacity under the Term Loan Facility at any time by issuing or incurring incremental equivalent term debt. Interest on borrowings under the Term Loan Facility is payable at a fluctuating rate of interest determined by reference to the eurodollar rate plus an applicable margin of 3.25%, subject to a 0.50% LIBOR floor. Borrowings under the Term Loan Facility amortize in equal quarterly installments in an amount equal to 1.000% per annum of the original aggregate principal amount thereof, with the remaining balance due at final maturity. The Term Loan Facility is secured by a first-priority security interest in substantially all of present and future tangible and intangible personal property of the Company and the subsidiary guarantors, other than the ABL Priority Collateral, and by a second-priority security interest in the ABL Priority Collateral, subject to certain exceptions. The obligations under the Term Loan Facility are guaranteed by the Company and the Company’s material wholly-owned domestic restricted subsidiaries that also guarantee the ABL Credit AgreementFacility.
The Term Loan Facility was fully drawn at the closing of the Acima Holdings acquisition to fund a portion of the Aggregate Cash Consideration, repay certain our outstanding indebtedness under the previous term loan facility, repay all outstanding indebtedness of Acima and its subsidiaries and pay certain fees and expenses incurred in connection with the Acima Holdings acquisition.
At October 26, 2022, we had outstanding borrowings of $861.9 million under our Term Loan Facility and available commitments of $373.8 million under our ABL Credit Facility, net of letters of credit.
See Note 2 to the7 of our condensed consolidated financial statements.statements included in this report for additional information regarding our senior debt.
Senior Notes. On February 17, 2021, we issued $450.0 million in senior unsecured notes due February 15, 2029, at par value, bearing interest at 6.375% (the “Notes”), the proceeds of which were used to fund a portion of the Aggregate Cash Consideration upon closing of the Acima Holdings acquisition. Interest on the Notes is payable in arrears on February 15 and August 15 of each year, beginning on August 15, 2021. We may use $150 millionredeem some or all of the Revolving FacilityNotes at any time on or after February 15, 2024 for cash at the issuance of letters of credit, of which $91.5 million had been so utilized as of October 23, 2017. The Term Loans are scheduledredemption prices set forth in the indenture governing the Notes, plus accrued and unpaid interest to, mature on March 19, 2021, andbut not including, the Revolving Facility has a scheduled maturity of March 19, 2019. The weighted average Eurodollar rate on our outstanding debt was 1.23% at October 23, 2017.
Senior Notes. See descriptionsredemption date. Prior to February 15, 2024, we may redeem up to 40% of the senior notes in Note 3aggregate principal amount of the Notes with the proceeds of certain equity offerings at a redemption price of 106.375% plus accrued and unpaid interest to, but not including, the condensed consolidated financial statements.redemption date. In addition, we may redeem some or all of the Notes prior to February 15, 2024, at a redemption price of 100% of the principal amount of the Notes plus accrued and unpaid interest to, but not including, the redemption date, plus a “make-whole” premium. If we experience specific kinds of change of control, it will be required to offer to purchase the Notes at a price equal to 101% of the principal amount thereof plus accrued and unpaid interest.
StoreOperating Leases. We lease space for substantially all of our Core U.S.Rent-A-Center Business and Mexico stores andunder operating leases expiring at various times through 2032. In addition we lease space for certain support facilities under operating leases expiring at various times through 2023.2032. Most of our store leases are five year leases and contain renewal options for additional periods ranging from three to five years at rental rates adjusted according to agreed-upon formulas.
Franchising Guarantees. Our subsidiary, ColorTyme Finance, Inc. ("ColorTyme Finance"), is a party to an agreement with Citibank, N.A., pursuant to which Citibank provides financing to qualifying franchisees of Franchising. Under the Citibank agreement, upon an event of default by the franchisee under agreements governing this financing and upon the occurrence of certain other events, Citibank can assign the loans and the collateral securing such loans to ColorTyme Finance, with ColorTyme Finance paying or causing to be paid the outstanding debt to Citibank and then succeeding to the rights of Citibank under the debt agreements, including the right to foreclose on the collateral. Rent-A-Center and ColorTyme Finance guarantee the obligations of the franchise borrowers under the Citibank facility. The maximum guarantee obligation under this agreement, excluding the effects of any amounts that could be recovered under collateralization provisions, is $27.0 million, of which $1.1 million was outstanding as As of September 30, 2017.2022, our total remaining obligation for existing store lease contracts was approximately $351.7 million.
Contractual Cash Commitments. The table below summarizes debt,We lease vehicles for all of our Rent-A-Center Business stores under operating leases with lease terms expiring 12 months after the start date of the lease. We classify these leases as short-term and other minimum cash obligations outstanding ashave elected the short-term lease exemption for our vehicle leases, and have therefore excluded them from our operating lease right-of-use assets within our Condensed Consolidated Balance Sheets. As of September 30, 2017:2022, our total remaining minimum obligation for existing Rent-A-Center Business vehicle lease contracts was approximately $0.8 million.
We also lease vehicles for all of our Mexico stores which have terms expiring at various times through 2026 with rental rates adjusted periodically for inflation. As of September 30, 2022, our total remaining obligation for existing Mexico vehicle lease contracts was approximately $1.6 million.
See Note 5 of our condensed consolidated financial statements included in this report for additional discussion of our store operating leases.
Uncertain Tax Position. As of September 30, 2022, we have recorded $6.4 million in uncertain tax positions. Although these positions represent a potential future cash liability to us, the amounts and timing of such payments are uncertain.

36
 Payments Due by Period
(in thousands)Total 2017 2018-2019 2020-2021 Thereafter
Senior Term Debt(1)
$49,125
 $562
 $4,500
 $44,063
 $—
Revolving Facility(2)
55,000
 —
 55,000
 —
 —
INTRUST Line of Credit1,070
 1,070
 —
 —
 —
6.625% Senior Notes(3)
360,619
 9,697
 38,788
 312,134
 —
4.75% Senior Notes(4)
297,500
 5,938
 23,750
 267,812
 —
Operating Leases474,279
 42,148
 272,337
 138,389
 21,405
Total(5) 
$1,237,593
 $59,415
 $394,375
 $762,398
 $21,405
(1)
Does not include interest payments. Our senior term debt bears interest at varying rates equal to the Eurodollar rate (not less than 0.75%) plus 3.00% or the prime rate plus 2.00% at our election. The Eurodollar rate on our senior term debt at September 30, 2017, was 1.24%.
(2)
Does not include interest payments. Our Revolving Facility bears interest at varying rates equal to the Eurodollar rate plus 1.50% to 3.00% or the prime rate plus 0.50% to 2.00% at our election. The weighted average Eurodollar rate on our Revolving Facility at September 30, 2017 was 1.19%.
(3)
Includes interest payments of $9.7 million on each May 15 and November 15 of each year.
(4)
Includes interest payments of $5.9 million on each May 1 and November 1 of each year.
(5)
As of September 30, 2017, we have recorded $33.1 million in uncertain tax positions. Because of the uncertainty of the amounts to be ultimately paid as well as the timing of such payments, uncertain tax positions are not reflected in the contractual obligations table.


Seasonality. Our revenue mix is moderately seasonal, with the first quarter of each fiscal year generally providing higher merchandise sales than any other quarter during a fiscal year, primarily related to our customers' receipt of their federal income tax refunds.year. Generally, our customers will more frequently exercise the early purchase option on their existing rentallease purchase agreements or purchase pre-leased merchandise off the showroom floor during the first quarter of each fiscal year. Furthermore, we tendyear, primarily due to experience slower growth in the numberreceipt of rental purchase agreements in the third quarter of each fiscal year when compared to other quarters throughout the year. We expect these trends to continue in the future.federal income tax refunds.
New Accounting Pronouncements
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which clarifies existing accounting literature relating to how and when a company recognizes revenue. Under ASU 2014-09, a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. On July 9, 2015, the FASB approved a one-year deferral of the effective date. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which amends ASU 2014-09 relating to how and when a company recognizes revenue when another party is involved in providing a good or service to a customer. Under Topic 606, a


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RENT-A-CENTER, INC. AND SUBSIDIARIES


company will recognize revenue on a gross basis when it provides a good or service to a customer (acts as the principal in a transaction), and on a net basis when it arranges for the good or service to be provided to the customer by another party (acts as an agent in a transaction). ASU 2016-08 provides additional guidance for determining whether a company acts as a principal or agent, depending primarily on whether a company controls goods or services before delivery to the customer. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which provides additional guidance related to the identification of performance obligations within the contract, and licensing. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which provides additional guidance related to certain technical areas within ASU 2014-09. In December 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, which provides additional guidance related to certain technical areas within ASU 2014-09. In September 2017, the FASB issued ASU 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments, which adds, amends, and supersedes SEC paragraphs related to the adoption and transition provisions of ASU 2014-09 and ASU 2016-02. The adoption of these additional ASUs must be concurrent with the adoption of ASU 2014-09, which will be required for us beginning January 1, 2018, with early adoption permitted as of the original effective date. These ASUs allow adoption with either retrospective application to each prior period presented, or modified retrospective application with the cumulative effect recognized as of the date of initial application. We are currently in the process of evaluating the potential impact this new pronouncement will have on our financial statements and do not anticipate early adoption. We have not completed our evaluation and therefore cannot conclude whether the pronouncement will have a significant impact on our financial statements at this time. We expect to complete our evaluation by the end of 2017. We currently anticipate that we will utilize the modified retrospective method of adoption, however, this expectation may change following the completion of our evaluation of the impact of this pronouncement on our financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which replaces existing accounting literature relating to the classification of, and accounting for, leases. Under ASU 2016-02, a company must recognize for all leases (with the exception of leases with terms less than 12 months) a liability representing a lessee's obligation to make lease payments arising from a lease, and a right-of-use asset representing the lessee's right to use, or control the use of, a specified asset for the lease term. Lessor accounting is largely unchanged, with certain improvements to align lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. The adoption of ASU 2016-02 will be required for us beginning January 1, 2019, with early adoption permitted. The ASU must be adopted using a modified retrospective transition, applying the new criteria to all leases existing or entered into after the beginning of the earliest comparative period in the consolidated financial statements. We do not expect to early adopt this standard and are currently in the process of determining what impact the adoption of this ASU will have on our financial position, results of operations and cash flows.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which provides guidance on the treatment of cash receipts and cash payments for certain types of cash transactions, to eliminate diversity in practice in the presentation of the cash flow statement. The adoption of ASU 2016-15 will be required for us on a retrospective basis beginning January 1, 2018, with early adoption permitted. We do not expect to early adopt this standard or believe that the adoption of this ASU will materially affect our presentation of cash flows.
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by eliminating the hypothetical purchase price allocation and instead using the difference between the carrying amount and the fair value of the reporting unit. The adoption of ASU 2017-04 will be required for us on a prospective basis beginning January 1, 2020, with early adoption permitted. We are currently in the process of determining our adoption date and what impact the adoption of this ASU will have on our financial statements.
In May 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting, which clarifies which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. Under the new guidance, modification accounting is required if the fair value, vesting conditions or classification (equity or liability) of the new award are different from the original award immediately before the original award is modified. The adoption of ASU 2017-09 will be required for us on a prospective basis beginning January 1, 2018, with early adoption permitted. We do not expect to early adopt this standard or believe that the adoption of this ASU will materially affect our financial statements.
From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that we adopt as of the specified effective date. Unless otherwise discussed,As of September 30, 2022, we believe the impact of any other recently issued standards that are not yet effective are either not applicable to us at this time, or will not have a material impact on our consolidated financial statements upon adoption.


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RENT-A-CENTER, INC. AND SUBSIDIARIES


Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Interest Rate Sensitivity
As of September 30, 2017, we had $292.7 million in senior notes outstanding at a fixed interest rate of 6.625%, and $250.0 million in senior notes outstanding at a fixed interest rate of 4.75%. We also had $49.1 million outstanding in Term Loans, $55.0 million outstanding under our Revolving Facility and $1.1 million outstanding on our INTRUST line of credit, each at interest rates indexed to the Eurodollar rate or the prime rate. The fair value of the 6.625% senior notes, based on the closing price at September 30, 2017, was $277.4 million. The fair value of the 4.75% senior notes, based on the closing price at September 30, 2017, was $226.3 million. Carrying value approximates fair value for all other indebtedness.
Market Risk
Market risk is the potential change in an instrument’s value caused by fluctuations in interest rates. Our primary market risk exposure is fluctuations in interest rates. Monitoring and managing this risk is a continual process carried out by our senior management. We manage our market risk based on an ongoing assessment of trends in interest rates and economic developments, giving consideration to possible effects on both total return and reported earnings. As a result of such assessment, we may enter into swap contracts or other interest rate protection agreements from time to time to mitigate this risk.
Interest Rate Risk
As of September 30, 2022, we had $450 million in Notes outstanding at a fixed interest rate of 6.375%. We havealso had $861.9 million outstanding debt with variableunder the Term Loan Facility at interest rates indexed to the Eurodollar rate or the prime or Eurodollar rates that exposes us to the risk of increased interest costs ifrate and $90.0 million outstanding under our ABL Credit Facility at interest rates rise. As of September 30, 2017, we have not entered into any interest rate swap agreements.indexed to Term SOFR. Carrying value approximates fair value for such indebtedness. Based on our overall interest rate exposure at September 30, 2017,2022, a hypothetical 1.0% increase or decrease in market interest rates would have the effect of causing a $1.1an additional $9.7 million additional annualized pre-tax charge or credit to our condensed consolidated statement of operations. We have not entered into any interest rate swap agreements as of September 30, 2022.
Foreign Currency Translation
We are exposed to market risk from foreign exchange rate fluctuations of the Mexican peso to the U.S. dollar as the financial position and operating results of our stores in Mexico are translated into U.S. dollars for consolidation. Resulting translation adjustments are recorded as a separate component of stockholders’ equity.
Item 4.Controls and Procedures.
Disclosure controls and procedures. In accordance with Rule 13a-15(b) under the Securities Exchange Act of 1934, an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and interim Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a–15(e) and 15d–15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our management, including our Chief Executive Officer and our interim Chief Financial Officer, concluded that, as of September 30, 2017,2022, our disclosure controls and procedures (as defined in Rules 13a–15(e) and 15d–15(e) under the Securities Exchange Act of 1934) were effective.
Changes in internal controls over financial reporting. For the quarter ended September 30, 2017,2022, there have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) that in the aggregate, have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – Other Information
Item 1. Legal Proceedings
Alan Hall, et. al. v. Rent-A-Center, Inc., et. al.; James DePalma, et. al. v. Rent-A-Center, Inc., et. al. On December 23, 2016,From time to time, we, along with our subsidiaries, are party to various legal proceedings and governmental inquiries arising in the ordinary course of business. We reserve for loss contingencies that are both probable and reasonably estimable. We regularly monitor developments related to these legal proceedings, and review the adequacy of our legal reserves on a putative class action was filedquarterly basis. We do not currently expect these losses to have a material impact on our consolidated financial statements if and when such losses are incurred. Nevertheless, we cannot predict the impact of future developments affecting our claims and lawsuits, and any resolution of a claim or lawsuit or reserve within a particular fiscal period may materially and adversely impact our results of operations for that period. In addition, claims and lawsuits against us may seek injunctive or other relief that requires changes to our business practices or operations and it is possible that any required changes may materially and adversely impact

37


our business, financial condition, results of operations or reputation. Please see Note 13 of our condensed consolidated financial statements included in this report for additional discussion of certain of our former officers by Alan Hall in federal court in Sherman, Texas. The complaint alleges that the defendants violated Section 10(b) and/or Section 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by issuing false and misleading statements and omitting material facts regarding our business, including implementation of our point-of-sale system, operations and prospects during the period covered by the complaint. The complaint purports to be brought on behalf of all purchasers of our common stock from July 27, 2015 through October 10, 2016, and seeks damages in unspecified amounts and costs, fees, and expenses. A complaint filed by James DePalma also in Sherman, Texas alleging similar claims was consolidated by the court into the Hall matter. On October 19, 2017, the magistrate judge entered a recommendation to deny our motion to dismiss the complaint to the district judge who will decide the issue. We intend to file our objections to the magistrate's recommendation by November 2, 2017, as permitted. We believe that these claims are without merit and intend to vigorously defend ourselves. However, we cannot assure you that we will be found to have no liability in this matter.legal proceedings.


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Kevin Paul, derivatively and on behalf of Rent-A-Center, Inc. v. Robert D. Davis et. al.; Sheila Coleman, derivatively and on behalf of Rent-A-Center, Inc. v. Robert D. Davis et. al.; Michael Downing, derivatively and on behalf of Rent-A-Center, Inc. v. Mark E. Speese et. al. On March 15 and 16, 2017, substantially similar shareholder derivative suits were filed against certain current and former officers and directors and, nominally, against us, in state court in Dallas County, Texas. Another substantially similar shareholder derivative suit was filed against certain current and former officers and directors and, nominally, against us, in state court in Collin County, Texas on May 8, 2017. All three of the cases have been consolidated in state court in Dallas County, Texas. The lawsuits allege that the defendants breached their fiduciary duties owed to Rent-A-Center and otherwise mismanaged the affairs of the company as it concerns public statements made related to our point-of-sale system, operational results of our Acceptance Now segment, and our revenues and profitability. The petitions in these suits claim damages in unspecified amounts; seek an order directing the Company to make various changes to corporate governance and internal procedures, including putting forth a shareholder vote on various governance matters; restitution from the individual defendants; and cost, fees and expenses. We believe that these claims are without merit and intend to vigorously defend ourselves. However, we cannot assure you that the individual defendants will be found to have no liability in this matter.
Arnaud van der Gracht de Rommerswael, derivatively and on behalf of Rent-A-Center, Inc. v. Mark Speese et. al. On April 3, 2017, another shareholder derivative suit was filed against certain current and former officers and directors, JPMorgan Chase Bank, N.A., The Bank of New York Mellon Trust Company, N.A., and, nominally, against us, in federal court in Sherman, Texas. The complaint alleges that the defendants breached their fiduciary duties owed to Rent-A-Center and otherwise mismanaged the affairs of the company as it concerns (i) public statements made related to the rollout of our point-of-sale system; (ii) compensation paid to Guy Constant and Robert Davis surrounding their resignations; and (iii) change-of-control language in certain debt agreements, which the suit alleges impacts shareholders’ willingness to vote for a slate of directors nominated by Engaged Capital Flagship Master Fund, LP. (“Engaged Capital”). The complaint claims damages in unspecified amounts, disgorgement of benefits from alleged breaches of duty by the individual defendants; an order declaring that certain language in the debt agreements is unenforceable; an order enjoining the lender defendants from enforcing certain provisions in the debt agreements; an order directing the Company’s board to approve Engaged Capital’s slate of directors; an order directing the Company to make unspecified changes to corporate governance and internal procedures; and costs, fees, and expenses.
In response to the motion to dismiss filed by the defendants on April 25, 2017, the plaintiff amended his complaint on May 9, 2017 and on May 19, 2017. The amended complaint alleges breach of fiduciary duty, unjust enrichment and waste of corporate assets related to alleged acts for the purposes of entrenching board members, including the approval of change-of-control language in certain debt agreements, the implementation of the point-of-sale system, and the severance compensation paid to Guy Constant and Robert Davis.
On July 10, 2017, the plaintiff’s claims against JPMorgan Chase Bank, N.A. and The Bank of New York Mellon Trust Company, N.A. were dismissed.
On October 12, 2017, the court issued an order requiring plaintiffs to re-plead the claims related to our point-of-sale system, and denying the motion to dismiss with respect to the waste and entrenchment claims.
We believe that these claims are without merit and intend to vigorously defend ourselves. However, we cannot assure you that the defendants will be found to have no liability in this matter.
Blair v. Rent-A-Center, Inc. This matter is a state-wide class action complaint originally filed on March 13, 2017 in the Federal District Court for the Northern District of California. The complaint alleges various claims, including that our cash sales and total rent to own prices exceed the pricing permitted under the Karnette Rental-Purchase Act. In addition, the plaintiffs allege that we fail to give customers a fully executed rental agreement and that all such rental agreements that were issued to customers unsigned are void under the law. The plaintiffs are seeking statutory damages under the Karnette Rental-Purchase Act which range from $100 - $1,000 per violation, injunctive relief, and attorney’s fees. We believe that these claims are without merit and intend to vigorously defend ourselves. However, we cannot assure you that we will be found to have no liability in this matter.


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Item 1A. Risk Factors
Except as set forth in Item 1A of Part II, "Risk Factors," in our Form 10-Q for the quarter ended September 30, 2017, thereThere have been no material changes to the risk factors disclosed in Item 1A of Part 1, "Risk Factors," in“Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2016.2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.The following table presents information with respect to purchases of our common stock the Company made during the three months ended September 30, 2022:
PeriodTotal Number of Shares PurchasedAverage Price Paid per Share
Total number of shares purchased as part of publicly announced plans or programs(1)
Maximum dollar value of shares that may yet be purchased under publicly
announced plans or
programs (in millions)(1)
August 1, 2022 - August 31, 202237,789$27.43 37,789$359.0
September 1, 2022 - September 30, 20221,180,524$24.35 1,180,524$330.2
(1) Shares repurchased pursuant to the share repurchase program publicly announced on December 2021 that allows for the repurchase of an aggregate of up to $500.0 million of shares of our common stock through open market and privately negotiated transactions from time to time.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.



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Item 6.Exhibits.
Exhibit No.Description
Exhibit No.Description
3.1
Certificate of Incorporation of Rent-A-Center, Inc., as amended (Incorporated(incorporated herein by reference to Exhibit 3.1 to the registrant's Current Report on Form 8-K dated as of December 31, 2002.)2002)
3.2
Certificate of Amendment to the Certificate of Incorporation of Rent-A-Center, Inc., dated May 19, 2004 (Incorporated(incorporated herein by reference to Exhibit 3.2 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2004.)2004)
3.3
Amended and Restated BylawsCertificate of Amendment to the Certificate of Incorporation of Rent-A-Center, Inc. (Incorporated, dated June 8, 2021 (incorporated herein by reference to Exhibit 3.1 to the registrant's Current Report on Form 8-K dated as of September 28, 2011.)June 8, 2021)
3.4
Certificate of Designations of Series D Preferred Stock of Rent-A-Center, Inc. (Incorporated(incorporated herein by reference to Exhibit 3.1 to the registrant's Current Report on Form 8-K dated as of March 29, 2017.)2017)
4.13.5
Amended and Restated Bylaws of Rent-A-Center, Inc. (incorporated herein by reference to Exhibit 3.1 to the registrant's Current Report on Form 8-K dated as of June 6, 2022)
4.1
Form of Certificate evidencing Common Stock (Incorporated herein by reference to Exhibit 4.1 to the registrant's Current Report on Form 10-Q dated as of March 31, 2017.)
4.2
Indenture, dated as of November 2, 2010,February 17, 2021, by and among Rent-A-Center, Inc., as Issuer, the Guarantors named therein, as Guarantors,between Radiant Funding SPV, LLC and TheTruist Bank of New York Mellon Trust Company, N.A., as Trustee (Incorporated herein by reference to Exhibit 4.1 to the registrant's Current Report on Form 8-K dated as of November 2, 2010.February 17, 2021.)
4.3
Indenture, dated asDescription of May 2, 2013, by and among Rent-A-Center, Inc., as Issuer, the Guarantors named therein, as Guarantors, and The Bank of New York Mellon Trust Company, N.A., as Trustee’s Common Stock (Incorporated herein by reference to Exhibit 4.14.3 to the registrant's Current Report on Form 8-K dated as of May 2, 2013.)
4.4
Rights Agreement, dated as of March 28, 2017, between Rent-A-Center, Inc. and American Stock Transfer & Trust Company, LLC, as Rights Agent (Incorporated herein by reference to Exhibit 4.1 to the registrant's Current Report on Form 8-K dated as of March 25, 2017.)
10.1†
Amended and Restated Rent-A-Center, Inc. Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.1 to the registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.)
10.2
Guarantee and Collateral Agreement, dated March 19, 2014, by and among Rent-A-Center, Inc., its subsidiaries named as guarantors therein and JPMorgan Chase Bank, N.A. as Administrative Agent (Incorporated herein by reference to Exhibit 10.2 to the registrant's Current Report on Form 8-K dated March 19, 2014.)
10.3
Franchisee Financing Agreement, dated April 30, 2002, but effective as of June 28, 2002, by and between Texas Capital Bank, National Association, ColorTyme, Inc. and Rent-A-Center, Inc. (Incorporated herein by reference to Exhibit 10.14 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.)
10.4
Supplemental Letter Agreement to Franchisee Financing Agreement, dated May 26, 2003, by and between Texas Capital Bank, National Association, ColorTyme, Inc. and Rent-A-Center, Inc. (Incorporated herein by reference to Exhibit 10.23 to the registrant's Registration Statement on Form S-4 filed July 11, 2003.)


10.5
First Amendment to Franchisee Financing Agreement, dated August 30, 2005, by and among Texas Capital Bank, National Association, ColorTyme, Inc. and Rent-A-Center East, Inc. (Incorporated herein by reference to Exhibit 10.7 to the registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2005.)
10.6
Franchise Financing Agreement, dated as of August 2, 2010, between ColorTyme Finance, Inc. and Citibank, N.A. (Incorporated herein by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K dated as of August 2, 2010.)
10.7
Unconditional Guaranty of Rent-A-Center, Inc., dated as of August 2, 2010, executed by Rent-A-Center, Inc. in favor of Citibank, N.A. (Incorporated herein by reference to Exhibit 10.2 to the registrant's Current Report on Form 8-K dated as of August 2, 2010.)
10.8
Unconditional Guaranty of Rent-A-Center, Inc., dated as of August 2, 2010, executed by ColorTyme Finance, Inc. in favor of Citibank, N.A. (Incorporated herein by reference to Exhibit 10.3 to the registrant's Current Report on Form 8-K dated as of August 2, 2010.)
10.9†
Form of Stock Option Agreement issuable to Directors pursuant to the Amended and Restated Rent-A-Center, Inc. Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.20 to the registrant'sregistrant’s Annual Report on Form 10-K for the year ended December 31, 2004.2020.)


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RENT-A-CENTER, INC. AND SUBSIDIARIES


10.10†10.1*
Form of Stock Option Agreement issuableFirst Amendment to management pursuant to the Amended and Restated Rent-A-Center, Inc. Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.21 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2004.)
10.11†
Summary of Director Compensation (Incorporated herein by reference to Exhibit 10.11 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2016.)
10.12†
Form of Stock Compensation Agreement issuable to management pursuant to the Amended and Restated Rent-A-Center, Inc. Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.15 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2005.)
10.13†
Form of Long-Term Incentive Cash Award issuable to management pursuant to the Amended and Restated Rent-A-Center, Inc. Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.16 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2005.)
10.14†
Form of Loyalty and Confidentiality Agreement entered into with management (Incorporated herein by reference to Exhibit 10.14 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2016.)
10.15†
Rent-A-Center, Inc. 2006 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.17 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.)
10.16†
Form of Stock Option Agreement issuable to management pursuant to the Rent-A-Center, Inc. 2006 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.18 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.)
10.17†
Form of Stock Compensation Agreement issuable to management pursuant to the Rent-A-Center, Inc. 2006 Equity Incentive Plan (Incorporated herein by reference to Exhibit 10.19 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2006.)
10.18†
Form of Long-Term Incentive Cash Award issuable to management pursuant to the Rent-A-Center, Inc. 2006 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.20 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2006.)
10.19†
Rent-A-Center, Inc. 2006 Equity Incentive Plan and Amendment (Incorporated herein by reference to Exhibit 4.5 to the registrant's Registration Statement on Form S-8 filed with the SEC on January 4, 2007.)
10.20†
Form of Stock Option Agreement issuable to management pursuant to the Rent-A-Center, Inc. 2006 Equity Incentive Plan (Incorporated herein by reference to Exhibit 10.22 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2006.)
10.21†
Form of Stock Compensation Agreement issuable to management pursuant to the Rent-A-Center, Inc. 2006 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.23 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2006.)
10.22†
Form of Stock Option Agreement issuable to Directors pursuant to the Rent-A-Center, Inc. 2006 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.24 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2006.)
10.23†
Form of Deferred Stock Unit Award Agreement issuable to Directors pursuant to the Rent-A-Center, Inc. 2006 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.23 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2010.)
10.24†
Form of Executive Transition Agreement entered into with management (Incorporated herein by reference to Exhibit 10.24 to the registrant's Annual Report on Form 10-K for the year ended August 31, 2016.)
10.25†
Rent-A-Center, Inc. 2016 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.36 to the registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2016.)
10.26†
Rent-A-Center, Inc. Non-Qualified Deferred Compensation Plan (Incorporated herein by reference to Exhibit 10.28 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2007.)
10.27†
Rent-A-Center, Inc. 401-K Plan (Incorporated herein by reference to Exhibit 10.30 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2008.)
10.28
ABL Credit Agreement, dated as of March 19, 2014,August 10, 2022, by and among Rent-A-Center, Inc., the several lenders from time to time partiesLenders party thereto Bank of America, N.A., BBVA Compass Bank, Wells Fargo Bank, N.A. and Suntrust Bank, as syndication agents, and JPMorgan Chase Bank, N.A., as administrative agent (Incorporated herein by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated as of March 19, 2014.)


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RENT-A-CENTER, INC. AND SUBSIDIARIES


10.29†31.1*
Rent-A-Center East, Inc. Retirement Savings Plan for Puerto Rico Employees (Incorporated herein by reference to Exhibit 99.1 to the registrant's Registration Statement on Form S-8 filed January 28, 2011.)
10.30
First Amendment to Franchisee Financing Agreement between ColorTyme Finance, Inc. and Citibank, N.A., dated as of July 25, 2012 (Incorporated herein by reference to Exhibit 10.32 to the registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2012.)
10.31
Master Confirmation Agreement, dated as of May 2, 2013, between Rent-A-Center, Inc. and Goldman Sachs & Co. (Incorporated herein by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K dated as of May 2, 2013.)
10.32
Second Amendment to Franchisee Financing Agreement between ColorTyme Finance, Inc. and Citibank, N.A., dated as of August 30, 2013 (Incorporated herein by reference to Exhibit 10.34 to the registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2013.)
10.33
Third Amendment to Franchisee Financing Agreement between ColorTyme Finance, Inc. and Citibank, N.A., dated as of May 1, 2014 (Incorporated herein by reference to Exhibit 10.33 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2014.)
10.34
Waiver and Fourth Amendment to Franchisee Financing Agreement between ColorTyme Finance, Inc. and Citibank, N.A., dated as of September 1, 2014 (Incorporated herein by reference to Exhibit 10.34 to the registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2014.)
10.35
First Amendment to the Credit Agreement, dated February 1, 2016, between the Company, JPMorgan Chase Bank, N.A., as administrative agent, the other agents party thereto and the lenders party thereto (Incorporated herein by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K dated as of February 1, 2016.)
10.36†
Form of Stock Option Agreement issuable to management pursuant to the Rent-A-Center, Inc. 2016 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.37 to the registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2016.)
10.37†
Form of Stock Compensation Agreement (RSU) issuable to management pursuant to the Rent-A-Center, Inc. 2016 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.38 to the registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2016.)
10.38†
Form of Stock Compensation Agreement (PSU) issuable to management pursuant to the Rent-A-Center, Inc. 2016 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.39 to the registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2016.)
10.39
Second Amendment to the Credit Agreement, dated effective as of September 30, 2016, between the Company, JPMorgan Chase Bank, N.A., as administrative agent, the other agents party thereto and the lenders party thereto (Incorporated herein by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K dated as of October 4, 2016.)
10.40†
Interim CEO Employment Agreement, dated as of January 9, 2017, between Mark E. Speese and Rent-A-Center, Inc. (Incorporated herein by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K dated as of January 9, 2017.)
10.41†
Separation Agreement and Release of Claims, dated as of January 9, 2017, between Robert D. Davis and Rent-A-Center, Inc. (Incorporated herein by reference to Exhibit 10.2 to the registrant's Current Report on Form 8-K dated as of January 9, 2017.)
10.42†
Amendment No. 1 to Interim CEO Employment Agreement, dated April 10, 2017, between Mark E. Speese and Rent-A-Center, Inc. (Incorporated herein by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K dated as of April 9, 2017.)
10.43
Third Amendment and Waiver to the Credit Agreement, dated effective as of May 1, 2017, between the Company, JPMorgan Chase Bank, N.A., as administrative agent, the other agents party thereto and the lenders party thereto (Incorporated herein by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K dated as of May 1, 2017.)
10.44
Fourth Amendment to the Credit Agreement (including Amended and Restated Guarantee and Collateral Agreement), dated as of June 6, 2017, between the Company, JPMorgan Chase Bank, N.A., as administrative agent, the other agents party thereto and the lenders party thereto (Incorporated herein by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K dated as of June 6, 2017.)
18.1
Preferability letter regarding change in accounting principle (Incorporated herein by reference to Exhibit 18.1 to the registrant's Quarterly Report on the Form 10-Q for the quarter ended September 30, 2014).


31

RENT-A-CENTER, INC. AND SUBSIDIARIES


21.1
Subsidiaries of Rent-A-Center, Inc. (Incorporated herein by reference to Exhibit 21.1 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2016.)
31.1*
Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 implementing Section 302 of the Sarbanes-Oxley Act of 2002 by MarkMitchell E. SpeeseFadel
31.2*
Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 implementing Section 302 of the Sarbanes-Oxley Act of 2002 by Maureen B. ShortFahmi W. Karam
32.1*
Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by MarkMitchell E. SpeeseFadel
32.2*
Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Maureen B. ShortFahmi W. Karam
101.INS*XBRL Instance Document - The instance document does not appear in the interactive data files because its XBRL tags are embedded within the inline XBRL document
101.SCH*XBRL Taxonomy Extension Schema Document
101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*XBRL Taxonomy Extension Label Linkbase Document
101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document
†104*Management contract or compensatory plan or arrangementCover page Interactive Data File (embedded within the inline XBRL document contained in Exhibit 101)
*Filed herewithherewith.



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RENT-A-CENTER, INC. AND SUBSIDIARIES



SIGNATURE
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
RENT-A-CENTER, INC.
RENT-A-CENTER, INC.
By:
/S/    MAUREEN B. SHORT      FAHMI W. KARAM
Maureen B. ShortFahmi W. Karam
InterimEVP, Chief Financial Officer
Date: November 1, 20173, 2022







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