UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 ________________________________

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

    Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definition of "large accelerated filer," "accelerated filer"filer," "smaller reporting company," and "smaller reporting"emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

    Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

THE AARON’S COMPANY, INC.

NOTE 1. BASIS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Spin-off Transaction

On November 30, 2020 (the "separation and distribution date"), Aaron's Holdings Company, Inc. completed the previously announced separation of the Aaron's Business segment (the "Aaron's Business") from its Progressive Leasing and Vive segments and changed its name to PROG Holdings, Inc. (referred to herein as "PROG Holdings" or "Former Parent"). The separation of the Aaron's Business segment was effected through a distribution (the "separation", the "separation and distribution", or the "spin-off transaction") of all outstanding shares of common stock of a newly formed company called The Aaron's Company, Inc., a Georgia corporation ("Aaron's", "The Aaron's Company" or "the Company"), a Georgia corporation, to the PROG Holdings shareholders of record as of November 27, 2020. Upon the separation and distribution, Aaron's, LLC became a wholly-owned subsidiary of The Aaron's Company. Shareholders of PROG Holdings received one share of The Aaron's Company for every two shares of PROG Holdings' common stock. Upon completion of the separation and distribution transaction, The Aaron's Company, Inc. became an independent, publicly traded company under the ticker "AAN" on the New York Stock Exchange ("NYSE").

Unless the context otherwise requires or we specifically indicate otherwise, references to "we," "us," "our," "our"the Company," and "the Company""Aaron's" refer to The Aaron's Company, Inc., which holds, directly or indirectly, the Aaron’s Business prior to the separation and distribution date. References to "the Company", "Aaron's, Inc.", or "Aaron's Holdings Company, Inc." for periods prior to

Further details of the separation and distribution date refer to transactions, events, and obligationsspin-off transaction are discussed in Part I, Item 1, of Aaron's, Inc. which took place prior to the separation and distribution. Historical amounts herein include revenues and costs directly attributable to The Aaron's Company, Inc. and an allocation to2021 Annual Report.

On April 1, 2022, the Company completed the previously announced transaction to acquire a 100% ownership of expensesInterbond Corporation of America, doing business as BrandsMart U.S.A. ("BrandsMart"). Founded in 1977, BrandsMart is one of the Aaron's Businessleading appliance and consumer electronics retailers in the southeast United States and one of the largest appliance retailers in the country with 10 stores in Florida and Georgia and a growing e-commerce presence on brandsmartusa.com. The Company paid total consideration of approximately $230 million in cash under the terms of the agreement and additional amounts for working capital adjustments and transaction related fees, subject to certain PROG Holdings' corporate functionsclosing adjustments. Refer to subsequent events further described in Note 6 to these condensed consolidated financial statements for additional information. The Company's financial results for the three months ended March 31, 2022 and comparable prior period do not include the results of BrandsMart, which will be included in the condensed consolidated financial statements during the second quarter of 2022.

Management believes that the acquisition will strengthen Aaron’s ability to the separationdeliver on its mission of enhancing people’s lives by providing easy access to high quality furniture, appliances, electronics, and distribution date.other home goods through affordable lease-to-own and retail purchase options. Management believes that value creation opportunities include leveraging Aaron’s lease-to-own expertise to provide BrandsMart's customers enhanced payment options and offering a wide selection of BrandsMart product assortment to millions of Aaron’s customers.

Description of Business

Aaron's is a leading, technology-enabled, omni-channel provider of lease-to-own ("LTO") and retail purchase solutions generally focused onof appliances, electronics, furniture, and other home goods. Since its founding in 1955, Aaron's has been committed to serving the large, credit-challenged segment ofoverlooked and underserved customer with a dedication to inclusion and improving the population.communities in which it operates. Through our portfolio of approximately 1,300 stores and our Aarons.com e-commerce platform, we provide consumers with LTO and purchase solutions for the products they need and want, with a focus on providing our customers with unparalleled customer service and an attractive value proposition, including furniture, appliances, electronics, computerscompetitive monthly payments and a varietytotal cost of ownership, as compared to other productsLTO providers, high approval rates, and accessories.lease plan flexibility. In addition, the CompanyCompany's business includes the operations of Woodhaven Furniture Industries ("Woodhaven"), which manufactures and supplies the majority of the bedding and a significant portion of the upholstered furniture leased and sold in company-operatedCompany-operated and franchised stores.

The following table presents store count by ownership type:

Basis of Presentation

The financial statements for periods prior to and through the date of the separation and distribution, November 30, 2020, were prepared on a combined standalone basis and were derived from the consolidated financial statements and accounting records of PROG Holdings. The financial statements for the period from December 1, 2020 through December 31, 2020, and three months ended March 31, 20212022 and comparable prior year period are consolidated financial statements of the Company and its subsidiaries, each of which is wholly-owned, and is based on the financial position and results of operations of the Company as a standalone company.Company. Intercompany balances and transactions between consolidated entities have been eliminated. These condensed consolidated and combined financial statements reflect the historical results of operations, financial position and cash flows of the Company in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). The historical results of operations and cash flows of the Company prior to the separation and distribution presented in these condensed consolidated and combined financial statements may not be indicative of what they would have been had the Company been an independent standalone entity, nor are they necessarily indicative of the Company's future results of operations, financial position and cash flows.

The preparation of the Company's condensed consolidated and combined financial statements in conformity with accounting principles generally accepted in the United States ("U.S. GAAP")GAAP for interim financial information requires management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates. Generally, actual experience has been consistent with management's prior estimates and assumptions. However, as described above, the extent to which the normalization of business trends since the start of the COVID-19 pandemic, and the resulting measures taken by Federalthe Company and Statefederal and state governments and the Company will impact the Company's business will depend on future developments. These developments which are uncertain and cannot be precisely predicted at this time. In many cases, management's estimates and assumptions are dependent on estimates of such future developments and may change significantly in the future due to unforeseen direct and indirect impacts of the COVID-19 pandemic.future.

The accompanying unaudited condensed consolidated and combined financial statements do not include all information required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included in the accompanying unaudited condensed consolidated and combined financial statements. These financial statements should be read in conjunction with the financial statements and notes thereto included in the 20202021 Annual Report. The results of operations for the three months ended March 31, 20212022 are not necessarily indicative of operating results that may be achieved for any other interim period or for the full year.

Accounting Policies and Estimates

See Note 1 to the consolidated and combined financial statements in the 20202021 Annual Report for an expanded discussion of accounting policies and estimates. Discussions of accounting estimates and application of accounting policies herein have also been updated as applicable to describe the uncertainty associated with theany impacts of the COVID-19 pandemic described above.

Earnings Per Share

Earnings per share is computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the period. The computation of earnings per share assuming dilution includes the dilutive effect of stock options, restricted stock units ("RSUs"), restricted stock awards ("RSAs"), performance share units ("PSUs") and other awards issuable under the Company's employee stock purchase plan ("ESPP") (collectively, "share-based awards") as determined under the treasury stock method, unless the inclusion of such awards would have been anti-dilutive.

The Company's basic earnings per share calculations for the periods prior to the separation and distribution assumes that the weighted average number of common shares outstanding was 33,841,624, which is the number of shares distributed to shareholders on the separation and distribution date, November 30, 2020. The same number of shares was used in the calculation of diluted earnings per share for the periods prior to the separation and distribution, as there were no equity awards of The Aaron's Company, Inc. outstanding prior to the distribution date.

Approximately 70,6000.5 million and 0.1 million weighted-average share-basedshares-based awards were excluded from the computation of earnings per share assuming dilution during the three months ended March 31, 2022 and March 31, 2021, respectively, as the awards would have been anti-dilutive for the periods presented.

Revenue Recognition

Accounts receivable consist primarily of receivables due from customers on lease agreements, corporate receivables incurred during the normal course of business (primarily for vendor consideration and real estate leasing activities) and franchisee obligations.

The Company maintains an accounts receivable allowance, under which the Company's policy is to record a provision for returns and uncollectible contractually due renewal payments based on historical payments experience, which is recognized as a reduction of lease and retail revenues within the condensed consolidated and combined statements of earnings. Other qualitative factors are considered in estimating the allowance, such as current and forecasted business trends including, but not limited to, the uncertainty of the impacts of the COVID-19 pandemic on our business.trends. The Company writes off customer lease receivables that are 60 days or more past due on pre-determined dates twice monthly.

The Company also maintains an allowance for outstanding franchisee accounts receivable. The Company's policy is to estimate a specific allowance on accounts receivable to estimate future losses related to certain franchisees that are deemed to have a higher risk of non-payment and a generalrecord an allowance based on historical losses as well as the Company's assessment of the financial health of all other franchisees.for these estimated losses. The estimated allowance on franchisee accounts receivable includes consideration of broad macroeconomic trends, such as the uncertainty surrounding the impacts of the normalization of current and future business trends associated with the COVID-19 pandemic on the franchisees' ability to satisfy their obligations. Accordingly, actual accounts receivable write-offs could differ from the allowance. The provision for uncollectible franchisee accounts receivable is recorded as bad debt expense in other operating expenses, net within the condensed consolidated and combined statements of earnings.

The following table shows the components of the accounts receivable allowance:

The following table shows the components of the accounts receivable provision, which includes amounts recognized for bad debt expense and the provision for returns and uncollected payments:

Lease Merchandise

The Company’s lease merchandise is recorded at the lower of depreciated cost or net realizable value. The cost of merchandise manufactured by our Woodhaven operations is recorded at cost and includes overhead from production facilities, shipping costs and warehousing costs. The Company begins depreciating merchandise at the earlier of 12 months and one day from its purchase of the merchandise or when the item is leased to customers. Lease merchandise depreciates to a 0% salvage value over the lease agreement period when on lease, generally 12 to 24 months, and generally 36 months when not on lease. Depreciation is accelerated upon early payout.

The following is a summary of lease merchandise, net of accumulated depreciation and allowances:

The Company's policies require weekly merchandise counts at its store-based operations, which include write-offs for unsalable, damaged, or missing merchandise inventories. In addition to monthlyMonthly cycle counting full physicalprocedures are performed at both the Company's fulfillment centers and manufacturing facilities. Physical inventories are generallyalso taken at the fulfillment and manufacturing facilities annually and appropriate provisions are made for missing, damaged and unsalable merchandise. In addition, theannually. The Company also monitors merchandise levels and mix by division, store, and fulfillment center, as well as the average age of merchandise on hand. If obsolete merchandise cannot be returned to vendors, its carrying amount is adjusted to its net realizable value or written off. Generally, all merchandise not on lease is available for lease or sale. On a monthly basis, all damaged, lost or unsalable merchandise identified is written off.

The Company records a provision for write-offs using the allowance method, which is included within lease merchandise, net within the condensed consolidated balance sheets. The allowance method for lease merchandise write-offs estimates the merchandise losses incurred but not yet identified by management as of the end of the accounting period based primarily on

historical write-off experience. Other qualitative factors are considered in estimating the allowance, such as currentseasonality and forecasted business trends including, but not limited to, uncertainties related touncertainty surrounding the impacts of the COVID-19 pandemic on our business. Given the significant uncertainty regarding the impactsnormalization of current and future business trends associated with the COVID-19 pandemic on our business, a high level of estimation was involved in determining the allowance as of March 31, 2021; therefore,pandemic. Therefore, actual lease merchandise write-offs could differ materially from the allowance. The provision for write-offs is included in provision for lease merchandise write-offs in the accompanying condensed consolidated and combined statements of earnings. The Company writes off lease merchandise on lease agreements that are 60 days or more past due on pre-determined dates twice monthly.

The following table shows the components of the allowance for lease merchandise write-offs:

Prepaid Expenses and Other Assets

Prepaid expenses and other assets consist of the following:

Assets Held for Sale

Certain properties, consisting of parcels of land and commercial buildings, and certain company-owned vehicles met the held for sale classification criteria as of March 31, 20212022 and December 31, 2020.2021. Assets held for sale are recorded at the lower of their carrying value or fair value less estimated cost to sell and are classified within prepaid expenses and other assets in the condensed consolidated balance sheets. Depreciation is suspended on assets upon classification to held for sale.

Gains and losses related to the sale of assets held for sale are recorded in other operating expenses, net or restructuring expenses, net (if the asset is a part of the Company's restructuring programs further described in Note 5)5 to these condensed consolidated financial statements) in the condensed consolidated and combined statements of earnings. Such gains and losses were not significant for the three months ended March 31, 20212022 and March 31, 2020.2021.

Management estimated the fair values of real estate properties using the market values for similar properties. Real estate properties represent $1.6 million and $1.2 million as of March 31, 2022 and December 31, 2021, respectively. These properties are considered Level 2 assets as defined below. The carrying amount of the propertiesall assets held for sale as of March 31, 20212022 and December 31, 20202021 is $8.9$1.9 million and $9.0$1.6 million, respectively.

During the three months ended March 31, 2022, the Company entered into a sale and Accrued Expenses

Estimated Claims Liability Costs

Estimated claims liability costs are accrued primarily for workers compensation and vehicle liability, as well as general liability and group health insurance benefits provided to employees.team members. These liabilities are recorded within estimated claims liability costs within accounts payable and accrued expenses in the condensed consolidated balance sheets. Estimates for these claims liabilities are made based on actual reported but unpaid claims and actuarial analysis of the projected claims run off for both reported and incurred but not reported claims. This analysis is based upon an assessment of the likely outcome or historical experience.experience and considers a variety of factors, including the actuarial loss forecasts, company-specific development factors, general industry loss development factors and third-party claim administrator loss estimates of individual claims. The Company makes periodic prepayments to its insurance carriers to cover the projected claims run off for both reported and incurred but not reported claims, considering its retention or stop loss limits. In addition, we have prefunding balances on deposit and other insurance receivables with the insurance carriers which are recorded within prepaid expenses and other assets in our condensed consolidated balance sheets.

As of March, 31 2020,2022, management of Aaron's, Inc determined its existing goodwill was fully impaired and recorded a goodwill impairment loss of $446.9 million during the three months ended March 31, 2020. Management engaged the assistance of a third-party valuation firm to perform the interim goodwill impairment test, which entailed an assessment of the Aaron's Business reporting unit’s fair value relative to the carrying value that was derived using a combination of both income and market approaches and performing a market capitalization reconciliation, which included an assessment of the control premium implied from the Company's estimated fair values of its reporting units. The fair value measurement involved significant unobservable inputs (Level 3 inputs, as discussed more fully below). The income approach utilized the discounted future expected cash flows, which required assumptions about short-term and long-term revenue growth or decline rates, operating margins, capital requirements, and a weighted-average cost of capital. The income approach reflected assumptions and estimates made by management regarding direct and indirect impacts of the COVID-19 pandemic on the short-term and long-term cash flows for the reporting unit. Due to the significant uncertainty associated with the impacts of the COVID-19 pandemic, the assumptions and estimates used by management were highly subjective. The weighted-average cost of capital used in the income approach was adjusted to reflect the specific risks and uncertainties associated with the COVID-19 pandemic in developing the cash flow projections. Given the uncertainty discussed above, the Company performed certain sensitivity analyses including considering reasonably possible alternative assumptions for short-term and long-term growth or decline rates, operating margins, capital requirements, and weighted-average cost of capital rates. Each of the sensitivity analyses performed supported the conclusion of a full impairment of the existing goodwill balance within the Aaron's reporting unit.

The Aaron's Company was a related partyCompany’s goodwill is not amortized but is subject to PROG Holdings prior toan impairment test at the separationreporting unit level annually as of October 1 and distribution date.

The Company considers these allocations to becompleted acquisitions of certain franchisees and third party rent-to-own stores throughout 2020 and 2021, which resulted in a reasonable reflectiongoodwill balance of the utilization$13.0 million and $13.1 million as of services or the benefit received. These allocated expenses are included within personnel costs and other operating expenses, net in the condensed consolidated and combined statements of earnings and as an increase to invested capital in the historical condensed combined balance sheets prior to the separation and distribution date. General corporate expenses allocated to the Company during the three months ended March 31, 2020 were $6.6 million.

Stockholders' Equity

Changes in stockholders' equity for the three months ended March 31, 20212022 and 20202021 are as follows:

Fair Value Measurement

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

The Company measures a liability related to its non-qualified deferred compensation plan, which represents benefits accrued for participants that are part of the plan and is valued at the quoted market prices of the participants' investment election, at fair value on a recurring basis. The Company measures assets held for sale at fair value on a nonrecurring basis and records impairment charges when they are deemed to be impaired.

The fair values of the Company's other current financial assets and liabilities, includingsuch as cash and cash equivalents, accounts receivable and accounts payable, approximate their carrying values due to their short-term nature. The Company's outstanding debt borrowings as of December 31, 2021 were subject to a variable interest rate and short term maturities. Therefore, the fair value of these borrowings also approximates its carrying value. These assets and liabilities are measured within Level 2 of the fair value hierarchy. The Company also measures certain non-financial assets at fair value on a nonrecurring basis, such as goodwill, intangible assets, operating lease right-of-use assets, and property, plant, and equipment, in connection with periodic evaluations for potential impairment.

Recent Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). The standard provides temporary guidance to ease the potential burden in accounting for reference rate reform primarily resulting from the discontinuationcessation of the publication of certain tenors of the London Interbank Overnight ("LIBO") rate which is currently expected to occur on December 31, 2021. The Company's $250.0 million senior unsecured revolving credit facility (the "Revolving Facility"), as further described in Note 8 to2021, with complete elimination of the consolidated and combined financial statements in the 2020 Annual Report, currently referencespublication of the LIBO rate for determining interest payable on outstanding borrowings.by June 30, 2023. The amendments in ASU 2020-04 are elective and apply to all entities that have contracts referencing the LIBO rate.

The new guidance providesCompany's outstanding debt borrowing as of December 31, 2021 included an expedient which simplifies accounting analyses under current GAAP for contract modifications if the change is directly related toelection of a change from the LIBO rate that has not yet eliminated. Also, as further described in Note 6 to a new interest rate index. The Company will adopt the standard in the first quarter of 2022, and is continuing to evaluate the provisions of ASU 2020–04 and the impacts of transitioning to an alternative rate; however, we do not expect it to have a material impact to the Company'sthese condensed consolidated financial statements, the Company modified its debt agreement in conjunction with the acquisition of BrandsMart. Borrowings under the new debt agreement bear interest at a rate per annum equal to, at the option of the Company, (i) the forward-looking term rate based on the Secured Overnight Financing Rate ("SOFR") plus an applicable margin ranging between 1.50% and 2.25%, based on the Company's Total Net Debt to EBITDA Ratio (as defined in the debt agreement), or to any key terms of our Revolving Facility other(ii) the base rate plus an applicable margin, which is 1.00% lower than the discontinuationapplicable margin for SOFR loans. Therefore, there is no impact on the consolidated financial statements of the LIBO rate.Company related to the adoption of ASU 2020-04.

NOTE 2. FAIR VALUE MEASUREMENT

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes financial liabilities measured at fair value on a recurring basis:

The Company maintains The Aaron's Company, Inc. Deferred Compensation Plan, which is an unfunded, nonqualified deferred compensation plan for a select group of management, highly compensated employees and non-employee directors. The liability represents benefits accrued for plan participants and is valued at the quoted market prices of the participants’ investment elections, which consist of equity and debt "mirror" funds. As such, the Company has classified the deferred compensation liability as a Level 2 liability, which is recorded in accounts payable and accrued expenses in the condensed consolidated balance sheets.

Non-Financial Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The following table summarizes non-financial assets measured at fair value on a nonrecurring basis:

Assets classified as held for sale are recorded at the lower of carrying value or fair value less estimated costs to sell, and any adjustment is recorded in other operating expenses, net or restructuring expenses, net (if the asset is a part of the Company's restructuring programs as described in Note 5)5 to these condensed consolidated financial statements) in the condensed consolidated and combined statements of earnings. The highest and best use of the primary components of assets held for sale isare as real estate land parcels for development or real estate properties for use or lease; however, the Company has chosen not to develop or use these properties, and plans to sell the properties to third parties as quickly as practicable.

NOTE 3: REVENUE RECOGNITION

The following table disaggregates revenue by source:

The Company provides lease merchandise, consisting primarily of furniture, home appliances, electronics, computers, and a variety of other products and accessories to its customers for lease under certain terms agreed to by the customer. The Company’s stores and its e-commerce platform offer leases with flexible ownership plans that can be renewed monthly up to 12, 18 or 24 months. The Company does not require deposits upon inception of customer agreements. The customer has the right to acquire ownership either through an early purchase option or through payment of all required lease payments through the end of the ownership plan. Our store-based operations also offer customers the option to obtain a membership in the Aaron’s Club Program.program. The benefits to customers of the Club Programprogram are separated into three general categories: (a) product protection benefits; (b) health & wellness discounts; and (c) dining, shopping and consumer savings. Lease agreements and Aaron's Club Programprogram memberships are cancelable at any time by either party without penalty, and as such, we consider these offerings to be to be month-to-month arrangements.

Lease revenues related to the leasing of merchandise net of related sales taxes, and Aaron's Club membership fees are recognized as revenue in the month they are earned. Payments received prior to the month earned are recorded as deferred lease revenue, and this amount is included in customer deposits and advance payments in the accompanying condensed consolidated balance sheets. Lease payments due but not received prior to month end are recorded as accounts receivable in the accompanying consolidated balance sheets. Lease revenues are recorded net of a provision for returns and uncollectible renewal payments.

All of the Company's customer lease agreements are considered operating leases. The Company maintains ownership of the lease merchandise until all payment obligations are satisfied under sales and lease ownership agreements. Initial direct costs related to customer agreements are expensed as incurred and have been classified as other operating expenses, net in the condensed consolidated and combined statements of earnings. The statement of earnings effects of expensing the initial direct costs as incurred are not materially different from amortizing initial direct costs over the lease ownership plan.

Revenues from the retail sale of merchandise to customersindividual consumers are recognized at the point of sale. Generally, the transfer of control occurs near or at the point of sale for retail sales. Revenues for the non-retail sale of merchandise to franchisees are recognized when control transfers to the franchisee, which is upon delivery of the merchandise.

Franchisees pay an ongoing royalty of 6% of the weekly cash revenue payments received, which is recognized as the fees become due. In response to the COVID-19 pandemic, the Company temporarily suspended, as opposed to deferring, the royalty fee obligation in March 2020, effectively forgiving the franchisee royalty payments that otherwise would have been due during the suspension period. The Company reinstated the requirement that franchisees make royalty payments during the second quarter of 2020.

The Company guarantees certain debt obligations of some of the franchisees and receives guarantee fees based on the outstanding debt obligations of such franchisees. Refer to Note 4 to these condensed consolidated and combined financial statements for additional discussion of the franchise-related guarantee obligation. The Company also charges fees for advertising efforts that benefit the franchisees, which are recognized at the time the advertising takes place.

NOTE 4. COMMITMENTS AND CONTINGENCIES

Guarantees

The Company has guaranteed certain debt obligations of some of its franchisees under a franchise loan program (the "Franchise Loan Facility") as described below with several of the banks in our Revolving Facility. In the event these franchisees are unable to meet their debt service payments or otherwise experience an event of default, the Company would be unconditionally liable for the outstanding balance of the franchisees’ debt obligations under the franchisee loan program, which would be due in full within 75 days of the event of default. The Franchise Loan Facility has a total commitment of $25.0 million and expires on November 16, 2021. We are able to request additional 364-day extensions of our franchise loan facility, as long as we are not in violation of any of the covenants under that facility or our Revolving Facility, and no event of default exists under those agreements, until such time as our Revolving Facility expires. We would expect to include a franchise loan facility as part of any future extension or renewal of our Revolving Facility. At March 31, 2021, the maximum amount that the Company would be obligated to repay in the event franchisees defaulted was $17.0 million. The Company is subject to financial covenants under the Franchise Loan Facility that are consistent with the Revolving Facility, which are more fully describedfurther detail in Note 89 to the consolidated and combined financial statements inof the 20202021 Annual Report.

The Company records a liability related to estimated future losses from repaying the franchisees' outstanding debt obligations upon any possible future events of default. This liability is included in accounts payable and accrued expenses in the condensed consolidated balance sheets and was $2.2$2.0 million and $2.4$2.2 million at March 31, 20212022 and December 31, 2020,2021, respectively. The balances at March 31, 20212022 and December 31, 20202021 included qualitative consideration of potential losses, due toincluding uncertainties related tosurrounding the normalization of current and forecastedfuture business trends including, but not limited to, the impacts ofassociated with the COVID-19 pandemic, and the corresponding unknown effect on the operations and liquidity of our franchisees.

Legal Proceedings

From time to time, the Company is party to various legal and regulatory proceedings arising in the ordinary course of business, certain of which have been described below. The Company establishes an accrued liability for legal and regulatory proceedings when it determines that a loss is both probable and the amount of the loss can be reasonably estimated. The Company continually monitors its litigation and regulatory exposure and reviews the adequacy of its legal and regulatory reserves on a quarterly basis. The amount of any loss ultimately incurred in relation to matters for which an accrual has been established may be higher or lower than the amounts accrued for such matters due to the inherent uncertainty in litigation, regulatory and similar adversarial proceedings, and substantial losses from these proceedings or the costs of defending them could have a material adverse impact upon the Company’s business, financial position, and results of operations.

At March 31, 20212022 and December 31, 2020,2021, the Company had accrued $0.5$1.7 million and $0.8 million, respectively, for pending legal and regulatory matters for which it believes losses are probable and is management’s best estimate of its exposure to loss. The Company records these liabilities in accounts payable and accrued expenses in the condensed consolidated balance sheets. The Company estimates that the aggregate range of reasonably possible loss in excess of accrued liabilities for such probable loss contingencies is between 0zero and $0.5$3.0 million.

Regulatory Inquiries

In the first quarter of 2021, Aaron's, LLC, along with a number of other lease-to-own companies, received a subpoena from the California Department of Financial Protection and Innovation (the "DFPI") requesting the production of documents regarding the Company’sCompany's compliance with state consumer protection laws. The Company is cooperatively engaging with the DFPI in response to its inquiry. Although the Company believes it is in compliance with all applicable consumer protection laws and regulations in California, this inquiry ultimately could lead to an enforcement action and/or a consent order, and substantial costs, including legal fees, fines, penalties, and remediation expenses.

Other Contingencies

Management regularly assesses the Company’sCompany's insurance deductibles, monitors litigation and regulatory exposure with the Company’sCompany's attorneys, and evaluates its loss experience. The Company also enters into various contracts in the normal course of business that may subject it to risk of financial loss if counterparties fail to perform their contractual obligations.

NOTE 5. RESTRUCTURING

Real Estate Repositioning and Optimization Restructuring Program

Total net restructuring expenses of $3.1$3.3 million were recorded for the three months ended March 31, 20212022, primarily all of which were incurred under the real estate repositioning and optimization restructuring program. Restructuring expenses were comprised mainly of operating lease right-of-use asset and fixed asset impairment charges related to the vacancy or planned vacancy of the stores identified for closure, as well as continuing variable occupancy costs incurred related to closed stores.

As management continues to execute on its long-term plan, additional restructuring charges willare expected to result from our real estate repositioning and optimization initiatives, primarily related to operating lease right-of-use asset and fixed asset impairments. However, the extent of future restructuring charges is not estimable at this time as the specific store locations to be closed and/or consolidated, beyondrelocation sites, with the storesexception of those sites noted above, have not yet been identified by management. Additionally, we expect future restructuring expenses (reversals) due to potential future early buyouts of leases with landlords, as well as continuing variable occupancy costs related to closed stores.

To date, the Company has incurred charges of $45.4 million under the 2019 restructuring program, and $37.1$44.7 million under the real estate repositioning and optimization restructuring program. These cumulative charges are primarily comprised of operating lease right-of-use asset and fixed impairment charges, losses recognized related to contractual lease obligations, and severance related to reductions in store support center and field support staff headcount.

The following table summarizes the balances of the accruals for the restructuring programs, which are recorded in accounts payable and accrued expenses in the condensed consolidated balance sheets, and the activity for the three months ended March 31, 2021:2022 and the corresponding accrual balance as of March 31, 2022 for the restructuring programs: