Rent a Center Inc De (RCII)

Risks

• Risks Relating to Our Indebtedness and Other Financial Matters
• We are subject to the risk of pandemics and other threats to public health, such as the novel coronavirus (COVID-19) global pandemic, which could have an adverse effect on our business, financial condition and results of operations and lead to lasting changes in consumer behavior.
• The success of our business is dependent on factors affecting consumer spending that are not under our control.
• Disruptions in our supply chain and other factors affecting the distribution of our merchandise could materially and adversely affect our business.
• Our arrangements with our suppliers and vendors may be materially and adversely affected by changes in our financial results or financial position or changes in consumer demand, which could materially and adversely affect our business.
• We rely on the receipt of information from third party data vendors, and inaccuracies in or delay in receiving such information, or the termination of our relationships with such vendors, could have a material adverse effect on our business, operating results and financial condition.
• We must successfully manage our inventory to reflect customer demand and anticipate changing consumer preferences and leasing trends or our revenue and profitability will be materially and adversely affected.
• Allegations of or actual product safety and quality control issues, including product recalls, could harm our reputation, divert resources, reduce sales and increase costs.
• Our success depends on the effective implementation and continued execution of our strategies.
• If we are unable to successfully appeal to and engage with our target consumers, our business and financial performance may be materially and adversely affected.
• We must maintain brands that are recognized and trusted by consumers.
• Our proprietary algorithms and customer lease decisioning tools used to approve customers are subject to unexpected changes in behavior caused by macroeconomic conditions which could cause these tools to no longer be indicative of our customers’ ability to perform under their lease agreements with us.
• We may take advantage of merger and acquisition opportunities from time to time with the intent of advancing our key initiatives, but such activities may not prove successful and may subject us to additional risks.
• Although we believe our Acima segment will be a higher growth business over the long term, we remain highly dependent on the financial performance of our Rent-A-Center Business segment.
• Failure to effectively manage our costs could have a material adverse effect on our profitability.
• We face risks in our Acima retail partner business and virtual locations that differ in some potentially significant respects from the risks of the traditional lease-to-own business conducted in Rent-A-Center Business store locations. These risks could have a material adverse effect on Acima, which could negatively impact our ability to grow the Acima segment and result in a material adverse effect on our results of operations.
• Our strategy to grow the retail partner business depends on our ability to develop and offer robust virtual lease-to-own technology, including algorithmic decisioning programs and waterfall integrations.
• If we are unable to compete effectively with the growing e-commerce sector, our business and results of operations may be materially and adversely affected.
• Our operations are dependent on effective information management systems. Failure of our systems or those of our host retailers could negatively impact our business, financial condition and results of operations.
• If we fail to protect the integrity and security of customer, employee and host retailer information or if our host retailers fail to protect the integrity and security of customer information, we could incur significant liability and damage our reputation and our business could be materially and adversely affected.
• Failure to achieve and maintain effective internal controls could have a material adverse effect on our business.
• The industries in which we operate are highly competitive, which could impede our ability to maintain sales volumes and pricing and have a material adverse effect on our operating results.
• We may be unable to retain key employees.
• If we are unable to attract, train and retain managerial personnel and hourly associates in our stores and staffed Acima locations, our reputation, sales and operating results may be materially and adversely affected.
• Acts of nature, whether due to climate change or otherwise, can disrupt our operations and those of our retail partners.
• The risks associated with climate change and other environmental impacts and increased focus by stakeholders on environmental issues, including those associated with climate change, could adversely affect our business, financial condition, and operating results.
• The success of our Franchising segment is dependent on the ability and success of our third party franchisees, over which we have limited control.
• Our current insurance program may expose us to unexpected costs and negatively affect our financial performance.
• If we were not able to send or accept electronic payments, our business and financial results could be adversely affected.
• We may be subject to legal or regulatory proceedings from time to time that result in damages, penalties or other material monetary obligations or material restrictions on our business operations, and our use of arbitration agreements may not allow us to avoid costly litigation.
• Federal and state regulatory authorities are increasingly focused on the lease‑to‑own industry and any negative change in these laws or regulations or the passage of unfavorable new laws or regulations or the manner in which any of these are enforced or interpreted could require us to alter our business practices in a manner that may be materially adverse to us.
• Our lease‑to‑own transactions are regulated by and subject to the requirements of federal and state laws and regulations that vary by jurisdiction, which requires significant compliance costs and exposes us to regulatory action or other litigation.
• Laws and regulations regarding information security and data collection, use and privacy are increasingly rigorous and subject to change, which may cause us to incur significant compliance costs.
• Our reputation, ability to do business and operating results may be impaired by improper conduct by any of our employees, agents or business partners, including retail partners.
• Our products and services may be negatively characterized by consumer advocacy groups, the media and certain Federal, state and local government officials, and if those negative characterizations become increasingly accepted by consumers and/or our retail partners, demand for our goods and the transactions we offer could decrease and our business could be materially and adversely affected.
• Disputes with or involving our franchisees may lead to litigation with our franchisees, which may materially and adversely affect our relationships with franchisees or our reputation, or cause us to incur significant expenses that materially and adversely affect our results of operations.
• We may face liability for the actions, omissions and liabilities of our franchisees, which could materially and adversely affect our results of operation.
• We may be unable to protect our intellectual property, or may be alleged to have infringed upon the intellectual property rights of others, which could result in a loss of our competitive advantage and a diversion of resources and a material adverse effect on our business and results of operations.
• The taxes applicable to our operations can be difficult to determine and are subject to change, and our failure to correctly calculate and pay such taxes could result in substantial tax liabilities and a material adverse effect on our results of operations.
• We have significant indebtedness and the level of our indebtedness could materially and adversely affect us.
• The amount of borrowings permitted under the ABL Credit Facility is limited to the value of certain of our assets, and Rent-A-Center relies in part on available borrowings under the ABL Credit Facility for cash to operate its business, which subjects it to market and counterparty risk, some of which is beyond Rent-A-Center’s control.
• We may not be able to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful. Our failure to meet our debt service obligations could have a material adverse effect on our business, financial condition and results of operations.
• Restrictive covenants in certain of the agreements and instruments governing our indebtedness may materially and adversely affect our financial and operational flexibility.
• Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.
• A change in control could accelerate our obligation to pay our outstanding indebtedness, and we may not have sufficient liquid assets at that time to repay these amounts.
• Our organizational documents and our current or future debt instruments contain or may contain provisions that may prevent or deter another group from paying a premium over the market price to Rent-A-Center’s stockholders to acquire its stock.
• We may be unable to realize the anticipated benefits of the Merger, including synergies, and expect to incur substantial expenses related to the Merger, which could have a material adverse effect on our business, financial condition and results of operations.
• We may be unable to successfully integrate Acima’s business and realize the anticipated benefits of the Merger.
• We are a holding company and are dependent on the operations and funds of our subsidiaries.
• Our stock price is volatile, and you may not be able to recover your investment if our stock price declines.
• There can be no assurance as to the dividends that we may pay on our common stock or as to future stock repurchases.
• A lowering or withdrawal of the ratings assigned to Rent-A-Center’s debt by rating agencies may increase our future borrowing costs and reduce our access to capital.