The table below shows the scheduled maturity dates of our outstanding debt at September 30, 20172022 for each of the years ending December 31:
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 Value | | Fair Value | | Difference |
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 notes | 250,000 |
| | 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
RENT-A-CENTER, INC. AND SUBSIDIARIES
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, 2021 | | Charges & Adjustments | | Payments & 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 costs | 6,628 |
| | 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) | 2022 | | 2021 | | 2022 | | 2021 |
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 | |
Mexico | 16,041 | | | 15,917 | | | 48,454 | | | 45,670 | |
Franchising | 29,713 | | | 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) | 2022 | | 2021 | | 2022 | | 2021 |
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 | |
Mexico | 11,330 | | | 11,293 | | | 34,242 | | | 32,323 | |
Franchising | 6,879 | | | 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 Now | 184,293 |
| | 194,398 |
| | 622,160 |
| | 624,310 |
|
Mexico | 12,237 |
| | 12,454 |
| | 35,351 |
| | 39,514 |
|
Franchising | 4,672 |
| | 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 Now | 92,088 |
| | 102,998 |
| | 310,451 |
| | 319,492 |
|
Mexico | 8,466 |
| | 8,897 |
| | 24,668 |
| | 27,478 |
|
Franchising | 2,132 |
| | 2,260 |
| | 6,803 |
| | 7,269 |
|
Total gross profit | $ | 412,465 |
| | $ | 457,226 |
| | $ | 1,307,661 |
| | $ | 1,492,328 |
|
RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
|
| | | | | | | | | | | | | | | |
| 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 Now | 10,379 |
| | 29,592 |
| | 49,595 |
| | 86,508 |
|
Mexico | (242 | ) | | 235 |
| | (122 | ) | | (1,803 | ) |
Franchising | 1,032 |
| | 1,430 |
| | 3,565 |
| | 4,268 |
|
Total segments | 35,028 |
| | 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) | 2022 | | 2021 | | 2022 | | 2021 |
Operating profit | | | | | | | |
Rent-A-Center Business | $ | 71,999 | | | $ | 109,272 | | | $ | 271,283 | | | $ | 357,036 | |
Acima(1) | 48,885 | | | 51,884 | | | 94,318 | | | 144,797 | |
Mexico | 996 | | | 2,285 | | | 5,011 | | | 6,659 | |
Franchising | 5,077 | | | 4,816 | | | 15,170 | | | 15,495 | |
Total segments | 126,957 | | | 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 Now | 568 |
| | 815 |
| | 1,983 |
| | 2,480 |
|
Mexico | 496 |
| | 746 |
| | 1,549 |
| | 2,549 |
|
Franchising | 45 |
| | 44 |
| | 133 |
| | 133 |
|
Total segments | 8,834 |
| | 11,100 |
| | 27,380 |
| | 36,112 |
|
Corporate | 9,845 |
| | 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) | 2022 | | 2021 | | 2022 | | 2021 |
Depreciation and amortization | | | | | | | |
Rent-A-Center Business | $ | 4,629 | | | $ | 4,792 | | | $ | 15,665 | | | $ | 13,821 | |
Acima(1)(2) | 439 | | | 570 | | | 1,496 | | | 1,568 | |
Mexico | 182 | | | 130 | | | 494 | | | 369 | |
Franchising | 35 | | | 24 | | | 110 | | | 58 | |
Total segments | 5,285 | | | 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) | 2022 | | 2021 | | 2022 | | 2021 |
Capital expenditures | | | | | | | |
Rent-A-Center Business | $ | 10,714 | | | $ | 6,637 | | | $ | 30,917 | | | $ | 21,202 | |
Acima(1) | 16 | | | 276 | | | 205 | | | 945 | |
Mexico | 696 | | | 478 | | | 1,219 | | | 744 | |
Franchising | 166 | | | — | | | 278 | | | — | |
Total segments | 11,592 | | | 7,391 | | | 32,619 | | | 22,891 | |
Corporate | 6,949 | | | 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 Now | 430 |
| | 860 |
| | 1,525 |
| | 1,457 |
|
Mexico | 56 |
| | 36 |
| | 103 |
| | 259 |
|
Total segments | 7,111 |
| | 4,760 |
| | 22,961 |
| | 12,808 |
|
Corporate | 6,258 |
| | 13,895 |
| | 30,567 |
| | 34,031 |
|
Total capital expenditures | $ | 13,369 |
| | $ | 18,655 |
| | $ | 53,528 |
| | $ | 46,839 |
|
20
RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Segment information - Selected balance sheet data:
| | (in thousands) | September 30, 2017 | | December 31, 2016 | (in thousands) | September 30, 2022 | | December 31, 2021 |
On rent rental merchandise, net | | | | On rent rental merchandise, net | | | |
Core U.S. | $ | 364,656 |
| | $ | 426,845 |
| |
Acceptance Now | 292,247 |
| | 354,486 |
| |
Rent-A-Center Business | | Rent-A-Center Business | $ | 444,174 | | | $ | 477,901 | |
Acima(1) | | Acima(1) | 480,317 | | | 676,279 | |
Mexico | 13,514 |
| | 13,787 |
| Mexico | 19,387 | | | 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, 2022 | | December 31, 2021 |
Held for rent rental merchandise, net | | | | Held for rent rental merchandise, net | | | |
Core U.S. | $ | 189,029 |
| | $ | 192,718 |
| |
Acceptance Now | 5,897 |
| | 7,489 |
| |
Rent-A-Center Business | | Rent-A-Center Business | $ | 118,329 | | | $ | 123,111 | |
Acima(1) | | Acima(1) | 417 | | | 626 | |
Mexico | 4,842 |
| | 6,629 |
| Mexico | 9,962 | | | 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, 2022 | | December 31, 2021 |
Assets by segment | | | | Assets by segment | | | |
Core U.S. | $ | 793,036 |
| | $ | 872,551 |
| |
Acceptance Now | 363,212 |
| | 432,383 |
| |
Rent-A-Center Business | | Rent-A-Center Business | $ | 1,022,173 | | | $ | 1,026,886 | |
Acima(1) | | Acima(1) | 1,195,982 | | | 1,476,752 | |
Mexico | 33,062 |
| | 31,415 |
| Mexico | 46,561 | | | 41,669 | |
Franchising | 3,094 |
| | 2,197 |
| Franchising | 19,346 | | | 15,412 | |
Total segments | 1,192,404 |
| | 1,338,546 |
| Total segments | 2,284,062 | | | 2,560,719 | |
Corporate | 237,913 |
| | 264,195 |
| Corporate | 484,534 | | | 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
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
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) | 2022 | | 2021 | | 2022 | | 2021 |
Numerator: | | | | | | | |
Net (loss) earnings | $ | (5,778) | | | $ | 21,267 | | | $ | 9,710 | | | $ | 125,128 | |
Denominator: | | | | | | | |
Weighted-average shares outstanding | 55,380 | | | 58,267 | | | 54,376 | | | 57,603 | |
Effect of dilutive stock awards(1) (2) | — | | | 9,927 | | | 5,422 | | | 9,853 | |
Weighted-average dilutive shares | 55,380 | | | 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 units | 465 | | | — | | | 81 | | | 110 | |
Anti-dilutive performance share units | 941 | | | 295 | | | 197 | | | 295 | |
Anti-dilutive stock options | 865 | | | 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.
|
| | | | | | | | | | | | | | | |
| 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 outstanding | 53,306 |
| | 53,155 |
| | 53,272 |
| | 53,111 |
|
Effect of dilutive stock awards(1) | — |
| | 299 |
| | — |
| | 281 |
|
Weighted-average dilutive shares | 53,306 |
| | 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 units | 1,419 |
| | 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. |
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;
•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;
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
•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
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.
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.
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.
RENT-A-CENTER, INC. AND SUBSIDIARIES
The following table is a reference for the discussion that follows.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | | | Nine Months Ended | | | | |
| September 30, | | Change | | September 30, | | Change |
(dollar amounts in thousands) | 2022 | | 2021 | | $ | | % | | 2022 | | 2021 | | $ | | % |
Revenues | | | | | | | | | | | | | | | |
Store | | | | | | | | | | | | | | | |
Rentals and fees | $ | 829,459 | | | $ | 930,849 | | | $ | (101,390) | | | (10.9) | % | | $ | 2,569,804 | | | $ | 2,592,788 | | | $ | (22,984) | | | (0.9) | % |
Merchandise sales | 147,616 | | | 192,016 | | | (44,400) | | | (23.1) | % | | 541,265 | | | 646,038 | | | (104,773) | | | (16.2) | % |
Installment sales | 16,718 | | | 17,028 | | | (310) | | | (1.8) | % | | 52,355 | | | 52,992 | | | (637) | | | (1.2) | % |
Other | 1,340 | | | 1,082 | | | 258 | | | 23.8 | % | | 3,698 | | | 3,035 | | | 663 | | | 21.8 | % |
Total store revenue | 995,133 | | | 1,140,975 | | | (145,842) | | | (12.8) | % | | 3,167,122 | | | 3,294,853 | | | (127,731) | | | (3.9) | % |
Franchise | | | | | | | | | | | | | | | |
Merchandise sales | 22,823 | | | 33,671 | | | (10,848) | | | (32.2) | % | | 67,849 | | | 96,342 | | | (28,493) | | | (29.6) | % |
Royalty income and fees | 6,001 | | | 6,622 | | | (621) | | | (9.4) | % | | 19,962 | | | 20,830 | | | (868) | | | (4.2) | % |
Total revenues | 1,023,957 | | | 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 fees | 310,079 | | | 344,623 | | | (34,544) | | | (10.0) | % | | 968,655 | | | 912,531 | | | 56,124 | | | 6.2 | % |
Cost of merchandise sold | 179,477 | | | 228,024 | | | (48,547) | | | (21.3) | % | | 615,543 | | | 717,983 | | | (102,440) | | | (14.3) | % |
Cost of installment sales | 6,032 | | | 6,291 | | | (259) | | | (4.1) | % | | 18,379 | | | 18,566 | | | (187) | | | (1.0) | % |
Total cost of store revenues | 495,588 | | | 578,938 | | | (83,350) | | | (14.4) | % | | 1,602,577 | | | 1,649,080 | | | (46,503) | | | (2.8) | % |
| | | | | | | | | | | | | | | |
Franchise cost of merchandise sold | 22,834 | | | 33,570 | | | (10,736) | | | (32.0) | % | | 68,183 | | | 96,190 | | | (28,007) | | | (29.1) | % |
Total cost of revenues | 518,422 | | | 612,508 | | | (94,086) | | | (15.4) | % | | 1,670,760 | | | 1,745,270 | | | (74,510) | | | (4.3) | % |
Gross profit | 505,535 | | | 568,760 | | | (63,225) | | | (11.1) | % | | 1,584,173 | | | 1,666,755 | | | (82,582) | | | (5.0) | % |
Operating expenses | | | | | | | | | | | | | | | |
Store expenses | | | | | | | | | | | | | | | |
Labor | 156,192 | | | 163,945 | | | (7,753) | | | (4.7) | % | | 486,751 | | | 479,989 | | | 6,762 | | | 1.4 | % |
Other store expenses | 197,847 | | | 189,553 | | | 8,294 | | | 4.4 | % | | 624,306 | | | 540,698 | | | 83,608 | | | 15.5 | % |
General and administrative expenses | 40,002 | | | 45,958 | | | (5,956) | | | (13.0) | % | | 141,273 | | | 149,468 | | | (8,195) | | | (5.5) | % |
Depreciation and amortization | 12,798 | | | 13,835 | | | (1,037) | | | (7.5) | % | | 40,208 | | | 40,794 | | | (586) | | | (1.4) | % |
Other charges | 61,619 | | | 88,323 | | | (26,704) | | | (30.2) | % | | 185,435 | | | 212,095 | | | (26,660) | | | (12.6) | % |
Total operating expenses | 468,458 | | | 501,614 | | | (33,156) | | | (6.6) | % | | 1,477,973 | | | 1,423,044 | | | 54,929 | | | 3.9 | % |
Operating profit | 37,077 | | | 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, net | 22,744 | | | 19,712 | | | 3,032 | | | 15.4 | % | | 60,665 | | | 52,019 | | | 8,646 | | | 16.6 | % |
Earnings before income taxes | 14,333 | | | 40,595 | | | (26,262) | | | (64.7) | % | | 45,535 | | | 176,110 | | | (130,575) | | | (74.1) | % |
Income tax expense | 20,111 | | | 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 sales | 67,566 |
| | 73,219 |
| | (5,653 | ) | | (7.7 | )% | | 266,061 |
| | 281,703 |
| | (15,642 | ) | | (5.6 | )% |
Installment sales | 17,276 |
| | 17,626 |
| | (350 | ) | | (2.0 | )% | | 51,690 |
| | 53,718 |
| | (2,028 | ) | | (3.8 | )% |
Other | 2,257 |
| | 2,633 |
| | (376 | ) | | (14.3 | )% | | 7,428 |
| | 10,001 |
| | (2,573 | ) | | (25.7 | )% |
Total store revenue | 639,293 |
| | 688,657 |
| | (49,364 | ) | | (7.2 | )% | | 2,048,198 |
| | 2,260,606 |
| | (212,408 | ) | | (9.4 | )% |
Franchise | | | | | | | | | | | | | | | |
Merchandise sales | 2,676 |
| | 3,113 |
| | (437 | ) | | (14.0 | )% | | 9,211 |
| | 12,083 |
| | (2,872 | ) | | (23.8 | )% |
Royalty income and fees | 1,996 |
| | 2,107 |
| | (111 | ) | | (5.3 | )% | | 6,177 |
| | 6,459 |
| | (282 | ) | | (4.4 | )% |
Total revenues | 643,965 |
| | 693,877 |
| | (49,912 | ) | | (7.2 | )% | | 2,063,586 |
| | 2,279,148 |
| | (215,562 | ) | | (9.5 | )% |
Cost of revenues | | | | | | | | | | | | | | | |
Store | | | | | | | | | | | | | | | |
Cost of rentals and fees | 153,202 |
| | 159,454 |
| | (6,252 | ) | | (3.9 | )% | | 474,511 |
| | 504,834 |
| | (30,323 | ) | | (6.0 | )% |
Cost of merchandise sold | 70,551 |
| | 68,684 |
| | 1,867 |
| | 2.7 | % | | 256,730 |
| | 253,473 |
| | 3,257 |
| | 1.3 | % |
Cost of installment sales | 5,207 |
| | 5,553 |
| | (346 | ) | | (6.2 | )% | | 16,099 |
| | 17,240 |
| | (1,141 | ) | | (6.6 | )% |
Total cost of store revenues | 228,960 |
| | 233,691 |
| | (4,731 | ) | | (2.0 | )% | | 747,340 |
| | 775,547 |
| | (28,207 | ) | | (3.6 | )% |
Franchise cost of merchandise sold | 2,540 |
| | 2,960 |
| | (420 | ) | | (14.2 | )% | | 8,585 |
| | 11,273 |
| | (2,688 | ) | | (23.8 | )% |
Total cost of revenues | 231,500 |
| | 236,651 |
| | (5,151 | ) | | (2.2 | )% | | 755,925 |
| | 786,820 |
| | (30,895 | ) | | (3.9 | )% |
Gross profit | 412,465 |
| | 457,226 |
| | (44,761 | ) | | (9.8 | )% | | 1,307,661 |
| | 1,492,328 |
| | (184,667 | ) | | (12.4 | )% |
Operating expenses | | | | | | | | | | | | | | | |
Store expenses | | | | | | | | | | | | | | | |
Labor | 179,643 |
| | 186,289 |
| | (6,646 | ) | | (3.6 | )% | | 551,197 |
| | 595,668 |
| | (44,471 | ) | | (7.5 | )% |
Other store expenses | 171,995 |
| | 195,096 |
| | (23,101 | ) | | (11.8 | )% | | 546,485 |
| | 599,759 |
| | (53,274 | ) | | (8.9 | )% |
General and administrative expenses | 43,768 |
| | 38,187 |
| | 5,581 |
| | 14.6 | % | | 130,637 |
| | 121,383 |
| | 9,254 |
| | 7.6 | % |
Depreciation, amortization and impairment of intangibles | 18,679 |
| | 19,998 |
| | (1,319 | ) | | (6.6 | )% | | 55,928 |
| | 60,598 |
| | (4,670 | ) | | (7.7 | )% |
Other charges | 6,825 |
| | 956 |
| | 5,869 |
| | 613.9 | % | | 31,580 |
| | 22,240 |
| | 9,340 |
| | 42.0 | % |
Total operating expenses | 420,910 |
| | 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, net | 11,276 |
| | 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.
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
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.
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
$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.
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 Ended | | | | | | Nine Months Ended | | | | | |
| September 30, | | Change | | September 30, | | Change | |
(dollar amounts in thousands) | 2022 | | 2021 | | $ | | % | | 2022 | | 2021 | | $ | | % | |
Revenues | $ | 473,755 | | | $ | 500,986 | | | $ | (27,231) | | | (5.4) | % | | $ | 1,482,445 | | | $ | 1,531,686 | | | $ | (49,241) | | | (3.2) | % | |
Gross profit | 334,892 | | | 356,590 | | | (21,698) | | | (6.1) | % | | 1,046,332 | | | 1,072,946 | | | (26,614) | | | (2.5) | % | |
Operating profit | 71,999 | | | 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 profit | 309,779 |
| | 343,071 |
| | (33,292 | ) | | (9.7 | )% | | 965,739 |
| | 1,138,089 |
| | (172,350 | ) | | (15.1 | )% |
Operating profit | 23,859 |
| | 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 Ended | | | | | | Nine Months Ended | | | | | |
| September 30, | | Change | | September 30, | | Change | |
(dollar amounts in thousands) | 2022 | | 2021 | | $ | | % | | 2022 | | 2021 | | $ | | % | |
Revenues | $ | 504,448 | | | $ | 623,445 | | | $ | (118,997) | | | (19.1) | % | | $ | 1,633,994 | | | $ | 1,716,174 | | | $ | (82,180) | | | (4.8) | % | |
Gross profit | 152,434 | | | 193,527 | | | (41,093) | | | (21.2) | % | | 481,742 | | | 539,181 | | | (57,439) | | | (10.7) | % | |
Operating profit | 48,885 | | | 51,884 | | | (2,999) | | | (5.8) | % | | 94,318 | | | 144,797 | | | (50,479) | | | (34.9) | % | |
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| 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 profit | 92,088 |
|
| 102,998 |
| | (10,910 | ) | | (10.6 | )% | | 310,451 |
| | 319,492 |
| | (9,041 | ) | | (2.8 | )% |
Operating profit | 10,379 |
|
| 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
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.
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 Ended | | | | | | Nine Months Ended | | | | |
| September 30, | | Change | | September 30, | | Change |
(dollar amounts in thousands) | 2022 | | 2021 | | $ | | % | | 2022 | | 2021 | | $ | | % |
Revenues | $ | 16,041 | | | $ | 15,917 | | | $ | 124 | | | 0.8 | % | | $ | 48,454 | | | $ | 45,670 | | | $ | 2,784 | | | 6.1 | % |
Gross profit | 11,330 | | | 11,293 | | | 37 | | | 0.3 | % | | 34,242 | | | 32,323 | | | 1,919 | | | 5.9 | % |
Operating profit | 996 | | | 2,285 | | | (1,289) | | | (56.4) | % | | 5,011 | | | 6,659 | | | (1,648) | | | (24.7) | % |
Change in same store revenue | | | | | | | 0.2 | % | | | | | | | | 4.9 | % |
Stores in same store revenue calculation(1) | | | | | | | 109 | | | | | | | | 109 | |
(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 profit | 8,466 |
| | 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.
Franchising segment | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | | | Nine Months Ended | | | | |
| September 30, | | Change | | September 30, | | Change |
(dollar amounts in thousands) | 2022 | | 2021 | | $ | | % | | 2022 | | 2021 | | $ | | % |
Revenues | $ | 29,713 | | | $ | 40,920 | | | $ | (11,207) | | | (27.4) | % | | $ | 90,040 | | | $ | 118,495 | | | $ | (28,455) | | | (24.0) | % |
Gross profit | 6,879 | | | 7,350 | | | (471) | | | (6.4) | % | | 21,857 | | | 22,305 | | | (448) | | | (2.0) | % |
Operating profit | 5,077 | | | 4,816 | | | 261 | | | 5.4 | % | | 15,170 | | | 15,495 | | | (325) | | | (2.1) | % |
|
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| 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 profit | 2,132 |
| | 2,260 |
| | (128 | ) | | (5.7 | )% | | 6,803 |
| | 7,269 |
| | (466 | ) | | (6.4 | )% |
Operating profit | 1,032 |
| | 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.
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
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.
Merchandise Losses. Merchandise losses consist of the following:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
(in thousands) | 2022 | | 2021 | | 2022 | | 2021 |
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 Business | | Mexico | | Franchising | | Total |
Locations at beginning of period(1) | 1,846 | | | 123 | | | 466 | | | 2,435 | |
New location openings | 14 | | | 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 locations | 4 | | | — | | | — | | | 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 period | 2,463 |
| | 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 period | 2,406 |
| | 1,175 |
| | 76 |
| | 131 |
| | 227 |
| | 4,015 |
|
Acquired locations closed and accounts merged with existing locations | 6 |
| | — |
| | — |
| | — |
| | — |
| | 6 |
|
Total approximate purchase price of acquired stores (in millions) | $ | 2.2 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 2.2 |
|
35
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.
|
| | | | | | | | | | | | | | | | | | | |
| 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 Credit | 1,070 |
| | 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 Leases | 474,279 |
| | 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
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.
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
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.
RENT-A-CENTER, INC. AND SUBSIDIARIES
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.
RENT-A-CENTER, INC. AND SUBSIDIARIES
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: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Period | | Total Number of Shares Purchased | | Average 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, 2022 | | 37,789 | | $ | 27.43 | | | 37,789 | | $ | 359.0 | |
September 1, 2022 - September 30, 2022 | | 1,180,524 | | $ | 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.
RENT-A-CENTER, INC. AND SUBSIDIARIES
Item 6.Exhibits.
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Exhibit No. | Description |
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Exhibit No. | Description |
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3.1 | |
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3.2 | |
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3.3 | |
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3.4 | |
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4.13.5 | |
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4.1 | |
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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.) |
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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.) |
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4.4 | |
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10.1† | |
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10.2 | |
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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.) |
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10.4 | |
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10.6 | |
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10.7 | |
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10.8 | |
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10.9† | |
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10.10†10.1* | |
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10.11† | |
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10.12† | |
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10.20† | |
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10.21† | |
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10.22† | |
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10.26† | |
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10.27† | |
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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.) |
RENT-A-CENTER, INC. AND SUBSIDIARIES
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10.29†31.1* | |
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10.30 | |
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10.34 | |
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10.40†
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10.41†
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10.42†
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10.43 | |
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10.44 | |
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18.1 | |
RENT-A-CENTER, INC. AND SUBSIDIARIES
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21.1 | |
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31.1* | |
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31.2* | |
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32.1* | |
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32.2* | |
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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 |
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101.SCH* | XBRL Taxonomy Extension Schema Document |
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101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB* | XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document |
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†104* | Management contract or compensatory plan or arrangementCover page Interactive Data File (embedded within the inline XBRL document contained in Exhibit 101) |
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.
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| | RENT-A-CENTER, INC. |
| RENT-A-CENTER, INC. |
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| By: | /S/ MAUREEN B. SHORT FAHMI W. KARAM |
| | Maureen B. ShortFahmi W. Karam |
| | InterimEVP, Chief Financial Officer |
Date: November 1, 20173, 2022