UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JuneSeptember 30, 2019
or 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission File Number: 001-38047
Rent-A-Center, Inc.
(Exact name of registrant as specified in its charter)
Delaware 45-0491516
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5501 Headquarters Drive
Plano, Texas 75024
(Address, including zip code of registrant’s principal executive offices)
Registrant’s telephone number, including area code: 972-801-1100
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, $.01 Par Value RCII New York Stock Exchange
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes     No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    
Yes       No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  Accelerated filer
      
Non-accelerated filer(Do not check if a smaller reporting company) Smaller reporting company
Emerging Growth Company    
      
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes      No  
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of August 5,October 29, 2019:
Class Outstanding
Common stock, $.01 par value per share 54,270,02654,754,436



TABLE OF CONTENTS
 
   
  Page No.
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
   
   
   
 
   
   
   
   
   
   
   
  
 
 



i


Item 1. Condensed Consolidated Financial Statements.
RENT-A-CENTER, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
Three Months Ended June 30, Six Months Ended June 30,Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 20182019 2018 2019 2018
(In thousands, except per share data)      
Revenues              
Store              
Rentals and fees$551,680
 $562,403
 $1,115,034
 $1,127,117
$550,795
 $552,580
 $1,665,829
 $1,679,697
Merchandise sales70,842
 64,990
 175,312
 172,346
65,552
 67,141
 240,864
 239,487
Installment sales17,270
 17,374
 32,706
 33,778
16,952
 15,681
 49,658
 49,459
Other1,244
 2,271
 1,908
 4,855
1,054
 2,140
 2,962
 6,995
Total store revenues641,036
 647,038
 1,324,960
 1,338,096
634,353
 637,542
 1,959,313
 1,975,638
Franchise              
Merchandise sales10,673
 4,880
 19,129
 8,514
11,178
 4,135
 30,307
 12,649
Royalty income and fees4,216
 3,812
 8,530
 7,163
3,840
 3,265
 12,370
 10,428
Total revenues655,925

655,730
 1,352,619
 1,353,773
649,371

644,942
 2,001,990
 1,998,715
Cost of revenues              
Store              
Cost of rentals and fees155,658
 156,041
 311,030
 312,136
161,971
 153,716
 473,001
 465,852
Cost of merchandise sold76,034
 65,562
 179,425
 161,915
70,575
 74,340
 250,000
 236,255
Cost of installment sales5,682
 5,617
 10,606
 10,859
5,527
 5,244
 16,133
 16,103
Total cost of store revenues237,374
 227,220
 501,061
 484,910
238,073
 233,300
 739,134
 718,210
Franchise cost of merchandise sold10,480
 4,624
 18,621
 7,999
11,302
 3,902
 29,923
 11,901
Total cost of revenues247,854
 231,844
 519,682
 492,909
249,375
 237,202
 769,057
 730,111
Gross profit408,071
 423,886
 832,937
 860,864
399,996
 407,740
 1,232,933
 1,268,604
Operating expenses              
Store expenses              
Labor152,899
 164,172
 314,555
 345,246
158,666
 168,297
 473,221
 513,543
Other store expenses149,225
 156,854
 313,019
 342,803
150,366
 149,326
 463,385
 492,129
General and administrative expenses38,534
 41,792
 71,458
 86,662
34,364
 40,818
 105,822
 127,480
Depreciation and amortization15,121
 17,428
 30,894
 35,328
14,894
 16,946
 45,788
 52,274
Other (gains) and charges(77,537) 16,489
 (44,167) 33,944
Other charges and (gains)2,859
 6,721
 (41,308) 40,665
Total operating expenses278,242
 396,735
 685,759
 843,983
361,149
 382,108
 1,046,908
 1,226,091
Operating profit129,829
 27,151
 147,178
 16,881
38,847
 25,632
 186,025
 42,513
Debt refinancing charges2,168
 
 2,168
 
Interest expense10,092
 10,806
 19,481
 22,166
6,733
 10,496
 26,214
 32,662
Interest income(1,997) (202) (2,871) (411)(85) (345) (2,956) (756)
Earnings (loss) before income taxes121,734
 16,547
 130,568
 (4,874)
Income tax expense27,279
 2,794
 28,790
 1,216
Net earnings (loss)$94,455
 $13,753
 $101,778
 $(6,090)
Basic earnings (loss) per common share$1.74
 $0.26
 $1.88
 $(0.11)
Diluted earnings (loss) per common share$1.70
 $0.25
 $1.83
 $(0.11)
Earnings before income taxes30,031
 15,481
 160,599
 10,607
Income tax (benefit) expense(1,246) 2,563
 27,544
 3,779
Net earnings$31,277
 $12,918
 $133,055
 $6,828
Basic earnings per common share$0.57
 $0.24
 $2.46
 $0.13
Diluted earnings per common share$0.56
 $0.24
 $2.39
 $0.13
See accompanying notes to condensed consolidated financial statements.


1


RENT-A-CENTER, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
 
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
(In thousands)
  
Net earnings (loss)$94,455
 $13,753
 $101,778
 $(6,090)
Other comprehensive income (loss):       
Foreign currency translation adjustments, net of tax of $(57) and $(565), and $81 and $(127), for the three and six months ended 2019 and 2018, respectively(217) (2,125) 304
 (477)
Total other comprehensive income (loss)(217) (2,125) 304
 (477)
Comprehensive income (loss)$94,238
 $11,628
 $102,082
 $(6,567)
 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
(In thousands)
  
Net earnings$31,277
 $12,918
 $133,055
 $6,828
Other comprehensive (loss) income:       
Foreign currency translation adjustments, net of tax of $(91) and $239, and $(11) and $112, for the three and nine months ended 2019 and 2018, respectively(344) 900
 (40) 423
Total other comprehensive (loss) income(344) 900
 (40) 423
Comprehensive income$30,933
 $13,818
 $133,015
 $7,251
See accompanying notes to condensed consolidated financial statements.


2


RENT-A-CENTER, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED BALANCE SHEETS

 
June 30, 2019 December 31, 2018September 30, 2019 December 31, 2018
(In thousands, except share and par value data)Unaudited  Unaudited  
ASSETS      
Cash and cash equivalents$353,139
 $155,391
$73,682
 $155,391
Receivables, net of allowance for doubtful accounts of $4,349 and $4,883 in 2019 and 2018, respectively65,666
 69,645
Receivables, net of allowance for doubtful accounts of $5,981 and $4,883 in 2019 and 2018, respectively70,762
 69,645
Prepaid expenses and other assets36,251
 51,352
39,120
 51,352
Rental merchandise, net      
On rent625,865
 683,808
633,740
 683,808
Held for rent113,253
 123,662
109,931
 123,662
Merchandise held for installment sale3,874
 3,834
3,631
 3,834
Property assets, net of accumulated depreciation of $554,092 and $551,750 in 2019 and 2018, respectively197,750
 226,323
Property assets, net of accumulated depreciation of $564,062 and $551,750 in 2019 and 2018, respectively193,925
 226,323
Operating lease right-of-use assets265,767
 
268,101
 
Deferred tax asset25,568
 25,558
25,568
 25,558
Goodwill56,815
 56,845
71,749
 56,845
Other intangible assets, net265
 499
7,723
 499
Total assets$1,744,213
 $1,396,917
$1,497,932
 $1,396,917
LIABILITIES      
Accounts payable – trade$95,656
 $113,838
$105,042
 $113,838
Accrued liabilities314,415
 337,459
301,797
 337,459
Operating lease liabilities271,635
 
272,515
 
Deferred tax liability129,941
 119,061
135,837
 119,061
Senior debt, net251,001
 
Senior notes, net540,676
 540,042

 540,042
Total liabilities1,352,323
 1,110,400
1,066,192
 1,110,400
STOCKHOLDERS’ EQUITY      
Common stock, $.01 par value; 250,000,000 shares authorized; 110,562,098 and 109,909,504 shares issued in 2019 and 2018, respectively1,105
 1,099
Common stock, $.01 par value; 250,000,000 shares authorized; 111,105,930 and 109,909,504 shares issued in 2019 and 2018, respectively1,110
 1,099
Additional paid-in capital843,697
 838,436
866,316
 838,436
Retained earnings905,726
 805,924
923,296
 805,924
Treasury stock at cost, 56,369,752 shares in 2019 and 2018(1,347,677) (1,347,677)(1,347,677) (1,347,677)
Accumulated other comprehensive loss(10,961) (11,265)(11,305) (11,265)
Total stockholders' equity391,890
 286,517
431,740
 286,517
Total liabilities and stockholders' equity$1,744,213
 $1,396,917
$1,497,932
 $1,396,917
See accompanying notes to condensed consolidated financial statements.


3


RENT-A-CENTER, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
Common Stock 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Treasury
Stock
 Accumulated Other Comprehensive Income (Loss) TotalCommon Stock 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Treasury
Stock
 Accumulated Other Comprehensive Income (Loss) Total
Shares Amount Shares Amount 
(In thousands)                          
Balance at December 31, 2018109,910
 $1,099
 $838,436
 $805,924
 $(1,347,677) $(11,265) $286,517
109,910
 $1,099
 $838,436
 $805,924
 $(1,347,677) $(11,265) $286,517
Net earnings
 
 
 7,323
 
 
 7,323

 
 
 7,323
 
 
 7,323
Other comprehensive income
 
 
 
 
 521
 521

 
 
 
 
 521
 521
Exercise of stock options284
 3
 2,889
 
 
 
 2,892
284
 3
 2,889
 
 
 
 2,892
Vesting of restricted share units218
 2
 (2) 
 
 
 
218
 2
 (2) 
 
 
 
Shares withheld for employee taxes on awards vested & exercised
 
 (1,734) 
 
 
 (1,734)
 
 (1,734) 
 
 
 (1,734)
Stock-based compensation
 
 709
 
 
 
 709

 
 709
 
 
 
 709
ASC 842 adoption
 
 
 (1,976) 
 
 (1,976)
 
 
 (1,976) 
 
 (1,976)
Balance at March 31, 2019110,412
 1,104
 840,298
 811,271
 (1,347,677) (10,744) 294,252
110,412
 1,104
 840,298
 811,271
 (1,347,677) (10,744) 294,252
Net earnings
 
 
 94,455
 
 
 94,455

 
 
 94,455
 
 
 94,455
Other comprehensive loss
 
 
 
 
 (217) (217)
 
 
 
 
 (217) (217)
Exercise of stock options101
 1
 1,417
 
 
 
 1,418
101
 1
 1,417
 
 
 
 1,418
Vesting of restricted share units49
 
 
 
 
 
 
49
 
 
 
 
 
 
Stock-based compensation
 
 1,982
 
 
 
 1,982

 
 1,982
 
 
 
 1,982
Balance at June 30, 2019110,562
 $1,105
 $843,697
 $905,726
 $(1,347,677) $(10,961) $391,890
110,562
 1,105
 843,697
 905,726
 (1,347,677) (10,961) 391,890
Net earnings
 
 
 31,277
 
 
 31,277
Other comprehensive loss
 
 
 
 
 (344) (344)
Exercise of stock options105
 1
 1,502
 
 
 
 1,503
Stock-based compensation
 
 1,952
 
 
 
 1,952
Dividends declared
 
 
 (13,707) 
 
 (13,707)
Merchants Preferred acquisition439
 4
 19,165
 
 
 
 19,169
Balance at September 30, 2019111,106
 $1,110
 $866,316
 $923,296
 $(1,347,677) $(11,305) $431,740
See accompanying notes to consolidated financial statements.


4


RENT-A-CENTER, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - (Continued)
(Unaudited)
 Common Stock 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Treasury
Stock
 Accumulated Other Comprehensive Income (Loss) Total
 Shares Amount 
 (In thousands)             
Balance at December 31, 2017109,682
 $1,097
 $831,271
 $798,743
 $(1,347,677) $(10,991) $272,443
Net loss
 
 
 (19,843) 
 
 (19,843)
Other comprehensive income
 
 
 
 
 1,648
 1,648
Exercise of stock options36
 
 374
 
 
 
 374
Vesting of restricted share units66
 
 (1) 
 
 
 (1)
Shares withheld for employee taxes on awards vested & exercised
 
 (195) 
 
 
 (195)
Stock-based compensation
 
 1,862
 
 
 
 1,862
ASC 606 adoption
 
 
 (1,311) 
 
 (1,311)
Balance at March 31, 2018109,784
 1,097
 833,311
 777,589
 (1,347,677) (9,343) 254,977
Net earnings
 
 
 13,753
 
 
 13,753
Other comprehensive loss
 
 
 
 
 (2,125) (2,125)
Exercise of stock options61
 1
 596
 
 
 
 597
Vesting of restricted share units25
 
 
 
 
 
 
Stock-based compensation
 
 1,133
 
 
 
 1,133
Balance at June 30, 2018109,870
 $1,098
 $835,040
 $791,342
 $(1,347,677) $(11,468) $268,335

 Common Stock 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Treasury
Stock
 Accumulated Other Comprehensive Income (Loss) Total
 Shares Amount 
 (In thousands)             
Balance at December 31, 2017109,682
 $1,097
 $831,271
 $798,743
 $(1,347,677) $(10,991) $272,443
Net loss
 
 
 (19,843) 
 
 (19,843)
Other comprehensive income
 
 
 
 
 1,648
 1,648
Exercise of stock options36
 
 374
 
 
 
 374
Vesting of restricted share units66
 
 (1) 
 
 
 (1)
Shares withheld for employee taxes on awards vested & exercised
 
 (195) 
 
 
 (195)
Stock-based compensation
 
 1,862
 
 
 
 1,862
ASC 606 adoption
 
 
 (1,311) 
 
 (1,311)
Balance at March 31, 2018109,784
 1,097
 833,311
 777,589
 (1,347,677) (9,343) 254,977
Net earnings
 
 
 13,753
 
 
 13,753
Other comprehensive loss
 
 
 
 
 (2,125) (2,125)
Exercise of stock options61
 1
 596
 
 
 
 597
Vesting of restricted share units25
 
 
 
 
 
 
Stock-based compensation
 
 1,133
 
 
 
 1,133
Balance at June 30, 2018109,870
 1,098
 835,040
 791,342
 (1,347,677) (11,468) 268,335
Net earnings
 
 
 12,918
 
 
 12,918
Other comprehensive income
 
 
 
 
 900
 900
Exercise of stock options9
 
 94
 
 
 
 94
Vesting of restricted share units
 1
 
 
 
 
 1
Stock-based compensation
 
 1,498
 
 
 
 1,498
Balance at September 30, 2018109,879
 $1,099
 $836,632
 $804,260
 $(1,347,677) $(10,568) $283,746
See accompanying notes to consolidated financial statements.



45


RENT-A-CENTER, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Six Months Ended June 30,Nine Months Ended September 30,
2019 20182019 2018
(In thousands)

Cash flows from operating activities      
Net earnings (loss)$101,778
 $(6,090)
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities   
Net earnings$133,055
 $6,828
Adjustments to reconcile net earnings to net cash provided by operating activities   
Depreciation of rental merchandise309,211
 308,776
455,143
 461,484
Bad debt expense5,978
 5,846
11,591
 10,372
Stock-based compensation expense2,691
 2,995
4,644
 4,493
Depreciation of property assets30,809
 35,017
45,551
 51,778
Loss on sale or disposal of property assets1,472
 2,423
278
 2,529
Amortization of intangibles85
 310
237
 496
Amortization of financing fees1,958
 2,701
2,574
 4,074
Write-off of debt financing fees2,168
 
Deferred income taxes10,814
 1,492
16,629
 4,379
Changes in operating assets and liabilities, net of effects of acquisitions      
Rental merchandise(253,259) (229,068)(387,098) (375,013)
Receivables(2,995) (5,700)(11,891) (5,746)
Prepaid expenses and other assets15,384
 10,982
10,080
 (2,663)
Operating lease right-of-use assets and lease liabilities5,868
 
5,305
 
Accounts payable – trade(18,182) 2,044
(8,796) 7,711
Accrued liabilities(26,194) 11,178
(51,341) 13,133
Net cash provided by operating activities185,418
 142,906
228,129
 183,855
Cash flows from investing activities      
Purchase of property assets(5,088) (15,695)(12,010) (22,491)
Proceeds from sale of property assets13,792
 14,792
16,922
 16,474
Hurricane insurance recovery proceeds995
 
995
 
Acquisitions of businesses(155) (761)(28,722) (2,049)
Net cash provided by (used in) investing activities9,544
 (1,664)
Net cash used in investing activities(22,815) (8,066)
Cash flows from financing activities      
Exercise of stock options4,310
 970
5,813
 1,064
Shares withheld for payment of employee tax withholdings(1,733) (271)(1,733) (283)
Debt issuance costs(157) 
(8,454) 
Proceeds from debt5,400
 26,850
285,400
 27,060
Repayments of debt(5,400) (125,010)(568,140) (166,357)
Net cash provided by (used in) financing activities2,420
 (97,461)
Net cash used in financing activities(287,114) (138,516)
Effect of exchange rate changes on cash366
 84
91
 767
Net increase in cash and cash equivalents197,748
 43,865
Net (decrease) increase in cash and cash equivalents(81,709) 38,040
Cash and cash equivalents at beginning of period155,391
 72,968
155,391
 72,968
Cash and cash equivalents at end of period$353,139
 $116,833
$73,682
 $111,008
See accompanying notes to condensed consolidated financial statements.


56

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


Note 1 - Basis of Presentation
The interim condensed consolidated financial statements of Rent-A-Center, Inc. included herein have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to the SEC’s rules and regulations, although we believe the disclosures are adequate to make the information presented not misleading. We suggest these financial statements be read in conjunction with the financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2018. In our opinion, the accompanying unaudited interim financial statements contain all adjustments, consisting only of those of a normal recurring nature, necessary to present fairly our results of operations and cash flows for the periods presented. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.
These financial statements include the accounts of Rent-A-Center, Inc. and its direct and indirect subsidiaries. All intercompany accounts and transactions have been eliminated. Unless the context indicates otherwise, references to “Rent-A-Center” refer only to Rent-A-Center, Inc., the parent, and references to “we,” “us” and “our” refer to the consolidated business operations of Rent-A-Center and any or all of its direct and indirect subsidiaries. We report four operating segments: Core U.S., Acceptance Now, Mexico and Franchising.
Our Core U.S. segment consists of company-owned rent-to-own stores in the United States and Puerto Rico that lease household durable goods to customers on a rent-to-own basis. We also offer merchandise on an installment sales basis in certain of our stores under the names “Get It Now” and “Home Choice.”
Our Acceptance Now segment, which operates in the United States and Puerto Rico, and includes the recently acquired Merchants Preferred virtual business model, generally offers the rent-to-own transaction to consumers who do not qualify for financing from the traditional retailer through kiosks located within such retailers’ locations. Those kiosks can be staffed by an Acceptance Now employee (staffed locations) or employ a virtual solution where customers, either directly or with the assistance of a representative of the third-party retailer, initiate the rent-to-own transaction online in the retailers' locations using our virtual solutionsolutions (virtual locations).
Our Mexico segment consists of our company-owned rent-to-own stores in Mexico that lease household durable goods to customers on a rent-to-own basis.
Rent-A-Center Franchising International, Inc., an indirect, wholly owned subsidiary of Rent-A-Center, is a franchisor of rent-to-own stores. Our Franchising segment’s primary source of revenue is the sale of rental merchandise to its franchisees, who in turn offer the merchandise to the general public for rent or purchase under a rent-to-own transaction. The balance of our Franchising segment’s revenue is generated primarily from royalties based on franchisees’ monthly gross revenues.
Newly Adopted Accounting Pronouncements
In 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 of 12 months or less) 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. Adoption underof ASU 2016-02 requires the use of a modified retrospective transition method to measure leases at the beginning of the earliest period presented in the consolidated financial statements. In July 2018, the FASB issued ASU 2018-11, allowing companies to apply a transition method for adoption of the new standard as of the adoption date, with recognition of any cumulative-effects as adjustments to the opening balance of retained earnings in the period of adoption. We adopted these ASU'sASUs beginning January 1, 2019 and elected the transition method under ASU 2018-11.
The company'sOur rent-to-own agreements, which comprise the majority of our annual revenue, fall within the scope of ASU 2016-02 under lessor accounting,accounting; however, the new standard does not significantly affect the timing of recognition or presentation of revenue for our rental contracts.
As a lessee, the new standard affected a substantial portion of our lease contracts. As of JuneSeptember 30, 2019, we have $265.8$268.1 million operating lease right-of-use assets and $271.6$272.5 million operating lease liabilities in our condensed consolidated balance sheet. Upon adoption, we identified impairment losses related to closure of our product service centers and Core U.S. stores resulting in a cumulative-effect decrease of $2.0 million, net of tax, to our January 1, 2019 retained earnings balance. There were no significant effects to our condensed consolidated statements of operations or condensed consolidated statements of cash flows.


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

We elected a package of optional practical expedients in our adoption of the new standard, including the option to retain the current classification for leases entered into prior to the date of adoption; the option not to reassess initial direct costs for capitalization


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

for leases entered into prior to the date of adoption; and the option not to separate lease and non-lease components for our rent-to-own agreements as a lessor, and our real estate, and certain categories of equipment leases, as a lessee.
In conjunction with the adoption of the new lease accounting standard, we implemented a new back-office lease administration and accounting system to support the new accounting and disclosure requirements as a lessee. In addition, we implemented changes to our previous accounting policies, processes, and internal controls to ensure compliance with the new standard.
In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows a company to reclassify to retained earnings the disproportionate income tax effects of the Tax Act on items with accumulated other comprehensive income that the FASB refers to as having been stranded in accumulated other comprehensive income. The adoption of ASU 2018-02 was required for us beginning January 1, 2019. We elected not to exercise the option to reclassify stranded tax effects within accumulated other comprehensive income in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Act (or portion thereof) is recorded.
Note 2 - Acquisitions
On August 13, 2019, we completed the acquisition of substantially all of the assets of C/C Financial Corp. dba Merchants Preferred ("Merchants Preferred"), a nationwide provider of virtual rent-to-own services. The aggregate purchase price was approximately $46.6 million, including net cash consideration of approximately $28.0 million, and 701,918 shares of our common stock valued at $27.31 per share, as of the date of closing, less working capital adjustments of approximately $0.5 million.
Assets acquired and liabilities assumed in connection with the acquisition have been recorded at their fair values. The following table provides the preliminary estimated fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date:
(in thousands)August 13, 2019
Receivables$1,813
Prepaid expenses and other assets138
Rental merchandise17,903
Software4,300
Right of use operating leases404
Other intangible assets7,600
Goodwill14,934
Lease liabilities(487)
Net identifiable assets acquired$46,605

The fair value measurements were primarily based on significant unobservable inputs (level 3) developed using company-specific information. Certain fair value estimates were determined based on an independent valuation of the net assets acquired, including identifiable intangible assets, relating to dealer relationships, of $7.6 million, and software of $4.3 million. The fair value for dealer relationships and software were estimated using common industry valuation methods for similar asset types, based primarily on cost inputs and projected cash flows. The dealer relationships and software assets were both assigned remaining lives of 10 years.
In addition, we recorded goodwill of $14.9 million, which consists of the excess of the net purchase price over the fair value of the net assets acquired. The goodwill is not deductible for tax purposes.
The values reflected in the table above may change as we finalize our assessment of the acquired assets and liabilities. A change in these valuations may also impact the income tax related accounts and goodwill. Merchants Preferred results of operations are reflected in our unaudited Condensed Consolidated Statements of Operations from the date of acquisition.
In connection with this acquisition, we recorded approximately $1.1 million in acquisition-related expenses during the nine months ended September 30, 2019 including expenses related to legal, professional, and banking transaction fees. These costs were included in other charges and (gains) in our unaudited condensed consolidated statement of operations.


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

Note 3 - Revenues
The following table disaggregates our revenue for the periods ended JuneSeptember 30, 2019 and 2018:
Three Months Ended June 30, 2019Three Months Ended September 30, 2019
Core U.S. Acceptance Now Mexico Franchising ConsolidatedCore U.S. Acceptance Now Mexico Franchising Consolidated
(In thousands)  
Store                  
Rentals and fees$399,799
 $139,104
 $12,777
 $
 $551,680
$389,421
 $148,711
 $12,663
 $
 $550,795
Merchandise sales32,935
 37,140
 767
 
 70,842
29,185
 35,667
 700
 
 65,552
Installment sales17,270
 
 
 
 17,270
16,952
 
 
 
 16,952
Other1,092
 145
 7
 
 1,244
939
 108
 7
 
 1,054
Total store revenues451,096
 176,389
 13,551
 
 641,036
436,497
 184,486
 13,370
 
 634,353
Franchise                  
Merchandise sales
 
 
 10,673
 10,673

 
 
 11,178
 11,178
Royalty income and fees
 
 
 4,216
 4,216

 
 
 3,840
 3,840
Total revenues$451,096
 $176,389
 $13,551
 $14,889
 $655,925
$436,497
 $184,486
 $13,370
 $15,018
 $649,371
Six Months Ended June 30, 2019Nine Months Ended September 30, 2019
Core U.S. Acceptance Now Mexico Franchising ConsolidatedCore U.S. Acceptance Now Mexico Franchising Consolidated
(In thousands)  
Store                  
Rentals and fees$807,379
 $282,297
 $25,358
 $
 $1,115,034
$1,196,800
 $431,008
 $38,021
 $
 $1,665,829
Merchandise sales83,493
 90,296
 1,523
 
 175,312
112,678
 125,963
 2,223
 
 240,864
Installment sales32,706
 
 
 
 32,706
49,658
 
 
 
 49,658
Other1,575
 318
 15
 
 1,908
2,514
 426
 22
 
 2,962
Total store revenues925,153
 372,911
 26,896
 
 1,324,960
1,361,650
 557,397
 40,266
 
 1,959,313
Franchise                  
Merchandise sales
 
 
 19,129
 19,129

 
 
 30,307
 30,307
Royalty income and fees
 
 
 8,530
 8,530

 
 
 12,370
 12,370
Total revenues$925,153
 $372,911
 $26,896
 $27,659
 $1,352,619
$1,361,650
 $557,397
 $40,266
 $42,677
 $2,001,990
 Three Months Ended September 30, 2018
 Core U.S. Acceptance Now Mexico Franchising Consolidated
(In thousands) 
Store         
Rentals and fees$403,483
 $137,061
 $12,036
 $
 $552,580
Merchandise sales30,135
 36,264
 742
 
 67,141
Installment sales15,681
 
 
 
 15,681
Other2,021
 113
 6
 
 2,140
Total store revenues451,320
 173,438
 12,784
 
 637,542
Franchise         
Merchandise sales
 
 
 4,135
 4,135
Royalty income and fees
 
 
 3,265
 3,265
Total revenues$451,320
 $173,438
 $12,784
 $7,400
 $644,942


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

 Three Months Ended June 30, 2018
 Core U.S. Acceptance Now Mexico Franchising Consolidated
(In thousands) 
Store         
Rentals and fees$410,108
 $140,799
 $11,496
 $
 $562,403
Merchandise sales26,109
 38,077
 804
 
 64,990
Installment sales17,374
 
 
 
 17,374
Other2,129
 135
 7
 
 2,271
Total store revenues455,720
 179,011
 12,307
 
 647,038
Franchise         
Merchandise sales
 
 
 4,880
 4,880
Royalty income and fees
 
 
 3,812
 3,812
Total revenues$455,720
 $179,011
 $12,307
 $8,692
 $655,730
Six Months Ended June 30, 2018Nine Months Ended September 30, 2018
Core U.S. Acceptance Now Mexico Franchising ConsolidatedCore U.S. Acceptance Now Mexico Franchising Consolidated
(In thousands)  
Store                  
Rentals and fees$822,750
 $281,623
 $22,744
 $
 $1,127,117
$1,226,233
 $418,684
 $34,780
 $
 $1,679,697
Merchandise sales76,693
 94,083
 1,570
 
 172,346
106,828
 130,347
 2,312
 
 239,487
Installment sales33,778
 
 
 
 33,778
49,459
 
 
 
 49,459
Other4,540
 291
 24
 
 4,855
6,561
 404
 30
 
 6,995
Total store revenues937,761
 375,997
 24,338
 
 1,338,096
1,389,081
 549,435
 37,122
 
 1,975,638
Franchise                  
Merchandise sales
 
 
 8,514
 8,514

 
 
 12,649
 12,649
Royalty income and fees
 
 
 7,163
 7,163

 
 
 10,428
 10,428
Total revenues$937,761
 $375,997
 $24,338
 $15,677
 $1,353,773
$1,389,081
 $549,435
 $37,122
 $23,077
 $1,998,715

Rental-Purchase Agreements
Core U.S., Acceptance Now, and Mexico
Rentals and Fees. MerchandiseRental merchandise is leased to customers pursuant to rental purchase agreements, which provide for weekly, semi-monthly or monthly rental terms with non-refundable rental payments. At the expiration of each rental term, customers renew the rental agreement by pre-paying for the next rental term. Generally, the customer has the right to acquire title of the merchandise either through a purchase option or through payment of all required rental terms. Customers can terminate the agreement at the end of any rental term without penalty. Therefore rental transactions are accounted for as operating leasesleases.
Rental payments received at our Core U.S., ANOW (excluding Merchants Preferred) and rentalMexico locations must be prepaid and revenue is recognized over the rental term. Under Merchants Preferred virtual business model, revenues are earned prior to the rental payment due date. Therefore, revenue is accrued prior to receipt of the rental payment, net of estimated returns and uncollectible renewal payments. See Note 4 for additional information regarding accrued rental revenue and the related allowances for returns and uncollectible payments.
Cash received for rental payments, including processing fees, prior to the period in which it should be recognized, is deferred and recognized according to the rental term. At September 30, 2019 and December 31, 2018, we had $39.1 million and $42.1 million, respectively, in deferred revenue included in accrued liabilities related to our rental purchase agreements. Revenue related to various payment, reinstatement or late fees is recognized when paid by the customer at the point service is provided. Rental merchandise is depreciated using the income forecasting method and is recognized in cost of sales over the rental term.
We also offer additional product plans along with our rental agreements which provide customers with liability protection against significant damage or loss of a product, and club membership benefits, including various discount programs and product service and replacement benefits in the event merchandise is damaged or lost. Customers renew product plans in conjunction with their rental term renewals, and can cancel the plans at any time. Revenue for product plans is recognized over the term of the plan. Costs incurred related to product plans are primarily recognized in cost of sales. At June 30, 2019 and December 31, 2018, we had $41.6 million and $42.1 million, respectively, in deferred revenue included in accrued liabilities related to our rental purchase agreements.


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

Revenue from contracts with customers
Core U.S., Acceptance Now, and Mexico
Merchandise Sales. Merchandise sales include payments received for the exercise of the early purchase option offered through our rental purchase agreements or merchandise sold through point of sale transactions. Revenue for merchandise sales is recognized when payment is received and ownership of the merchandise passes to the customer. The remaining net value of merchandise sold is recorded to cost of sales at the time of the transaction.
Installment Sales. Revenue from the sale of merchandise in our retail installment stores is recognized when the installment note is signed and control of the merchandise has passed to the customer. The cost of merchandise sold through installment agreements is recognized in cost of sales at the time of the transaction. We offer extended service plans with our installment agreements which are administered by third parties and provide customers with product service maintenance beyond the term of the installment agreement. Payments received for extended service plans are deferred and recognized, net of related costs, when the installment payment plan is complete and the service plan goes into effect. Customers can cancel extended service plans at any time during the installment agreement and receive a refund for payments previously made towards the plan. At JuneSeptember 30, 2019 and


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

December 31, 2018, we had $2.8 million and $3.0 million, respectively, in deferred revenue included in accrued liabilities related to extended service plans.
Other. Other revenue primarily consisted of external maintenance and repair services provided by the Company’s service department, in addition to other miscellaneous product plans offered to our rental and installment customers. We completed the shut down of our service department operations early in the first quarter of 2019. Revenue for other product plans is recognized in accordance with the terms of the applicable plan agreement.
Franchising
Merchandise Sales. Revenue from the sale of rental merchandise is recognized upon shipment of the merchandise to the franchisee.
Royalty Income and Fees. Franchise royalties, including franchisee contributions to corporate advertising funds, represent sales-based royalties calculated as a percentage of gross rental payments and sales. Royalty revenue is recognized as rental payments and sales occur. Franchise fees are initial fees charged to franchisees for new or converted franchise stores. Franchise fee revenue is recognized on a straight-line basis over the term of the franchise agreement. At JuneSeptember 30, 2019 and December 31, 2018, we had $4.4 million and $4.1 million, respectively, in deferred revenue included in accrued liabilities related to franchise fees.
Note 34 - Receivables and Allowance for Doubtful Accounts
Installment sales receivables consist primarily of receivables due from customers for the sale of merchandise in our retail installment stores. Trade and notes receivables consist primarily of amounts due from our rental customers for renewal and uncollected rental payments; amounts owed from our franchisees for inventory purchases, earned royalties and other obligations; and other corporate related receivables.
Receivables consist of the following:
(In thousands)June 30, 2019 December 31, 2018September 30, 2019 December 31, 2018
Installment sales receivable$52,332
 $54,746
Installment sales receivables$52,163
 $54,746
Trade and notes receivables17,683
 19,782
24,580
 19,782
Total receivables70,015
 74,528
76,743
 74,528
Less allowance for doubtful accounts(4,349) (4,883)(5,981) (4,883)
Total receivables, net of allowance for doubtful accounts$65,666
 $69,645
$70,762
 $69,645

We maintain allowances against our receivable balances, primarily related to expected merchandise returns and uncollectible payments due from our virtual rental and installment customers. The allowance for doubtful accounts related to installment salestrade and notes receivable was $2.9$2.8 million and $3.6$1.3 million at JuneSeptember 30, 2019 and December 31, 2018, respectively. The allowance for doubtful accounts related to trade and notesinstallment sales receivable was $1.4$3.2 million and $1.3$3.6 million at JuneSeptember 30, 2019 and December 31, 2018, respectively.
Changes in our allowance for doubtful accounts are as follows: 
(In thousands)June 30, 2019
Beginning allowance for doubtful accounts$4,883
Bad debt expense5,978
Accounts written off(6,773)
Recoveries261
 Ending allowance for doubtful accounts$4,349
(In thousands)September 30, 2019
Beginning allowance for doubtful accounts$4,883
Bad debt expense (1)
10,198
Estimated returns and uncollectible rental payments (2)
1,393
Accounts written off(10,913)
Recoveries420
 Ending allowance for doubtful accounts$5,981

(1)
Bad debt expense is primarily related to uncollectible installment payments, franchisee obligations, and other corporate receivables, and is recognized in other store operating expenses in our condensed consolidated financial statements.

(2) Estimated returns and uncollectible rental payments is recognized as a reduction to rental revenue in our condensed consolidated financial statements.

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

Note 45 - Leases
We lease space for all of our Core U.S. and Mexico stores under operating leases expiring at various times through 2024. Most of our store leases are five year leases and contain renewal options for additional periods ranging from three to five years at rental rates adjusted according to agreed-upon formulas. We evaluate all leases to determine if it is likely that we will exercise future


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

renewal options and in most cases we are not reasonably certain of exercise due to competing market rental rates and lack of significant penalty or business disruption incurred by not exercising the renewal options. We have elected not to use the short-term lease exemption for our real estate leases. Therefore, we include month-to-month leases in operating lease right-of-use assets and operating lease liabilities onin our condensed consolidated balance sheet. In certain store sales, we enter into lease assignment agreements with the buyer, but remain as the primary obligor under the original lease for the remaining active term. These assignments are therefore classified as subleases and the original lease is included in our operating lease right-of-use assets and operating lease liabilities onin our condensed consolidated balance sheet.
We lease vehicles for all of our Core U.S. stores under operating leases with lease terms expiring twelve months after the start date of the lease. We classify these leases as short-term and have elected the short-term lease exemption for our vehicle leases, and have therefore excluded them from our operating lease right-of-use assets within our condensed consolidated balance sheet. We also lease vehicles for all of our Mexico stores which have terms expiring at various times through 2022 with rental rates adjusted periodically for inflation. Finally, we have a minimal number of equipment leases, primarily related to temporary storage and certain back office technology hardware assets.
For all of the leases described above, we have elected to use the practical expedient not to separate the lease and non-lease components and account for these as a single component. We have also elected the practical expedients that remove the requirement to reassess whether expired or existing contracts contain leases and the requirement to reassess the lease classification for any existing leases prior to the adoption date.
Operating lease right-of-use assets and operating lease liabilities are discounted using our incremental borrowing rate, since the implicit rate is not readily determinable. We do not currently have any financing leases.
Operating lease costs are recorded on a straight-line basis within other store expenses in our condensed consolidated statements of operations.
Total operating lease costs by expense type:
Three Months Ended Six Months EndedThree Months Ended Nine Months Ended
(in thousands)June 30, 2019 June 30, 2019September 30, 2019 September 30, 2019
Operating lease cost included in other store expenses(1)
$38,232
 $74,785
$36,441
 $111,226
Operating lease cost included in other (gains) and charges5,111
 7,252
Operating lease cost included in other charges2,933
 10,185
Sublease receipts(1,818) (3,494)(2,065) (5,559)
Total operating lease charges$41,525
 $78,543
$37,309
 $115,852
(1) Includes short-term lease costs, which are not significant.
Supplemental cash flow information related to leases:
Six Months EndedNine Months Ended
(in thousands)June 30, 2019September 30, 2019
Cash paid for amounts included in measurement of operating lease liabilities$61,333
$91,235
Cash paid for short-term operating leases not included in operating lease liabilities14,451
21,247
Right-of-use assets obtained in exchange for new operating lease liabilities10,540
36,371
Weighted-average discount rate and weighted-average remaining lease term:
(in thousands)JuneSeptember 30, 2019
Weighted-average discount rate(1)
8.07.9%
Weighted-average remaining lease term (in years)34
(1) January 1, 2019 incremental borrowing rate was used for leases in existence at the time of adoption of ASU 2016-02.


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

Reconciliation of undiscounted operating lease liabilities to the present value operating lease liabilities at JuneSeptember 30, 2019:
(In thousands)Operating LeasesOperating Leases
2019$61,288
$30,741
2020104,264
109,746
202172,264
78,774
202243,637
49,954
202319,536
24,887
Thereafter5,893
11,976
Total undiscounted operating lease liabilities306,882
306,078
Less: Interest(35,247)(33,563)
Total present value of operating lease liabilities$271,635
$272,515
 
In accordance with ASC 840, future minimum rental payments for operating leases with remaining lease terms in excess of one year, at December 31, 2018:
(In thousands)Operating LeasesOperating Leases
2019$145,345
$145,345
2020116,785
116,785
202180,362
80,362
202247,417
47,417
202316,460
16,460
Thereafter2,280
2,280
Total future minimum rental payments408,649
$408,649
 
Note 56 - Income Taxes
The effective tax rate was (4.15)% and 17.15% for the three and nine months ended September 30, 2019, compared to 16.56% and 35.63% for the respective periods in 2018. The effective tax rate for the three and nine months ended September 30, 2019 was lower than the expected statutory tax rate of 21%, primarily as a result of the reversal of previously recorded reserves for uncertain tax positions due to the lapse of the statute of limitations for certain years in certain jurisdictions.
Note 7 - Senior Debt, net
Until August 5, 2019, we were party to a Credit Agreement with BBVA Compass Bank, HSBC, and SunTrust Bank, as syndication agents, JPMorgan Chase Bank, N.A., as administrative agent (the "Agent"), and the several lenders from time to time parties thereto, dated March 19, 2014, as amended on February 1, 2016, September 30, 2016, March 31, 2017, June 6, 2017, and December 12, 2018 (the “Fifth Amendment”) and as so amended, (the "Prior Credit Agreement"), which provided prior to its termination a senior credit facility consisting of a $200 million revolving credit facility (the "Prior Revolving Facility").
There were no outstanding borrowings under the Prior Revolving Facility at June 30, 2019 or December 31, 2018. Total unamortized debt issuance costs reported in the Condensed Consolidated Balance Sheet at June 30, 2019 and December 31, 2018 were $1.4 million and $2.6 million, respectively. The Prior Revolving Facility was scheduled to mature on December 31, 2019. We also utilized the Prior Revolving Facility for the issuance of letters of credit. As of June 30, 2019, issued letters of credit under the Prior Revolving Facility amounted to $92 million in the aggregate.
Borrowings under the Prior Revolving Facility bore interest at varying rates equal to either the Eurodollar rate plus 1.50% to 3.00%, or the prime rate plus 0.50% to 2.00% (ABR), at our election. The margins on the Eurodollar loans and on the ABR loans for borrowings under the Prior Revolving Facility were 1.75% and 0.75%, respectively, at June 30, 2019. A commitment fee equal to 0.30% to 0.50% of the unused portion of the Prior Revolving Facility was payable quarterly and fluctuated dependent upon increases or decreases in our Consolidated Total Leverage Ratio as of the end of the previous quarter as defined by a pricing grid included in the Prior Credit Agreement. The commitment fee for the second quarter of 2019 was $0.6 million, equal to 0.40% of the unused portion of the Prior Revolving Facility based on our Total Leverage Ratio as of December 31, 2018.
In connection with entering into the Fifth Amendment to the Prior Credit Agreement, we recorded a write-down of previously unamortized debt issuance costs of approximately $0.5 million in the fourth quarter of 2018. In addition, we paid arrangement and amendment fees to the Agent and the lenders that provided their consent to the Fifth Amendment of approximately $2.1 million, which were capitalized in the fourth quarter of 2018 and will be amortized to interest expense over the remaining term of the Prior Credit Agreement.
On August 5, 2019, (the "Closing Date") we entered into a new a Term Loan Credit Agreement (the “Term Loan Credit Agreement”) providing for a seven-year $200 million senior secured term loan facility and an Asset Based Loan Credit Agreement (the “ABL Credit Agreement”) providing a five-year asset-based revolving credit facility (the “ABL Credit Facility”) with commitments of


11

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

$300 $300 million, the proceeds of which were used in part, to prepay in full and terminate commitments under the Prior Credit Agreement (the "Refinancing"). In connection with the Refinancing, we irrevocably deposited $551,019,061.81,for the redemption price forof all of our outstanding senior notes,notes. The amounts outstanding under the Term Loan Credit Agreement and ABL Credit Facility were $200.0 million and $60.0 million at September 30, 2019, respectively.
Proceeds from the Term Loan Credit Agreement were net of original issue discount of $2.0 million upon issuance from the lenders. In addition, in connection with the closing of the Term Loan Credit Agreement and the indentures under which the senior notes were issued were satisfiedABL Credit Facility, we incurred approximately $6.3 million in debt issuance costs. The original issue discount and discharged. The senior notesdebt issuance costs will be redeemed on August 15,amortized over the remaining terms of the respective credit agreements. As of September 30, 2019, at a price equalthe total unamortized balance of debt issuance costs relating to 100%our senior debt and original issue discount reported in the Condensed Consolidated Balance Sheet were $7.0 million and $2.0 million, respectively.
We also utilize the ABL Credit Facility for the issuance of their principalletters of credit. As of September 30, 2019, we have issued letters of credit in the aggregate amount plus accrued but unpaid interest.of $92 million.
Term Loan Credit Agreement
The Term Loan Credit Agreement, which matures on August 5, 2026, amortizes in equal quarterly installments at a rate of 1.00% per annum of the original principal amount thereof, with the remaining balance due at final maturity. Interest on the Term Loan Credit Agreement will accrue at the Eurodollar rate plus an applicable margin equal to 4.50%. The margin on the Term Loan Credit Agreement was 6.63% at September 30, 2019.


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

The Term Loan Credit Agreement permits the Company to prepay the term loans, in whole or in part, without penalty on or after the six-month anniversary of the Closing Date. It also permits the Company to incur incremental term loans in an aggregate amount equal to $150 million plus the amount of voluntary prepayments of the term loans and an unlimited amount subject to a pro forma consolidated senior secured leverage ratio of not greater than 2.00 to 1.00, subject to certain other conditions.
The obligations under the Term Loan Credit Agreement are guaranteed by certain of our subsidiaries. The Term Loan Credit Agreement and the guarantees are secured on a first-priority basis by substantially all of the tangible and intangible assets of the company and the guarantors, other than collateral subject to a first-priority lien under the ABL Credit Agreement, consisting of, among other things, accounts receivable, inventory and bank accounts (and funds on deposit therein), in which the Term Loan Credit Agreement and the guarantees have a second-priority security interest, in each case, subject to certain exceptions.
The Term Loan Credit Agreement contains covenants that are usual and customary for facilities and transactions of this type and that, among other things, restrict the ability of the company and its restricted subsidiaries to:
create certain liens and enter into certain sale and lease-back transactions;transactions, excluding the sale and lease-back of the company headquarters;
create, assume, incur or guarantee certain indebtedness;
pay dividends or make other distributions on, or repurchase or redeem, the company’s capital stock or certain other debt;
make other restricted payments; and
consolidate or merge with, or convey, transfer or lease all or substantially all of the company’s and its restricted subsidiaries’ assets, to another person.person
pay dividends or make other distributions on, or repurchase or redeem, the company’s capital stock or certain other debt; and
make other restricted payments.
These covenants are subject to a number of other limitations and exceptions set forth in the Term Loan Credit Agreement. We are currently permitted to pay dividends and repurchase the company's common stock without limitation.
The Term Loan Credit Agreement provides for customary events of default, including, but not limited to, failure to pay principal and interest, failure to comply with covenants, agreements or conditions, and certain events of bankruptcy or insolvency involving the Company and its significant subsidiaries.
ABL Credit Agreement
The ABL Credit Facility will mature on August 5, 2024.2024. The Borrowers (as defined in the ABL Credit Agreement) may borrow only up to the lesser of the level of the then-current borrowing baseBorrowing Base and the committed maximum borrowing capacity of $300 million. The Borrowing Base is tied to the Eligible Installment Sales Accounts, Inventory and Eligible Rental Contracts, reduced by Reserves, as defined in the ABL Credit Agreement. We provide to the Agent information necessary to calculate the Borrowing Base within 30 days of the end of each calendar month, unless liquidity is less than 15% of the maximum borrowing capacity of the ABL Credit Agreement or $45 million, in which case we must provide weekly information.
Interest is payable on the ABL Credit Facility at a fluctuating rate of interest determined by reference to the Eurodollar rate plus an applicable margin of 1.50% to 2.00%. The margin on the ABL Credit Facility was 3.63% at September 30, 2019. 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 ABL Credit Agreement. The commitment fee at September 30, 2019 was 0.375%. We paid $0.3 million of commitment fees during the third quarter of 2019.
Letters of credit are limited to the lesser of (x) $150 million, subject to certain limitations, and (y) the aggregate unused availability then in effect.
Subject to certain conditions, the ABL Credit Facility may be expanded by up to $100 million in additional commitments, subject to a pro forma fixed charge coverage ratio being greater than 1.10 to 1.00.
The obligations under the ABL Credit Agreement are guaranteed by the company and certain of the company’s subsidiaries. The ABL Credit Agreement and the guarantees are secured on a first-priority basis on all our and the guarantors’ accounts receivable, inventory and bank accounts (and funds on deposit therein) and a second-priority basis on all of the tangible and intangible assets (second in priority to the liens securing the Term Loan Credit Agreement) of such persons, in each case, subject to certain exceptions.
The ABL Credit Agreement contains covenants that are usual and customary for facilities and transactions of this type and are substantially the same as covenants in the Term Loan Credit Agreement. The ABL Credit Facility also requires the maintenance of a Consolidated Fixed Charge Coverage Ratio (as defined in the ABL Credit Agreement) of 1.10 to 1.00 at the end of each fiscal


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

quarter when either (i) certain specified events of default have occurred and are continuing or (ii) availability is less than or equal to the greater of $33.75 million and 15% of the line cap then in effect.


14

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

The ABL Credit Agreement provides for customary events of default that are substantially the same as events of default in the Term Loan Credit Agreement.
Liquidity
Our primary liquidity requirements are for rental merchandise purchases. Other capital requirements include expenditures for property assets and debt service. Our primary sources of liquidity have been cash provided by operations. We also utilize our ABL 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 our ABL 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 cash flow generated from operations and availability under our ABL Credit Facility, will be sufficient to fund our operations during the next 12 months.
Note 68 - Senior Notes
On November 2, 2010, we issued $300 million in senior unsecured notes due November 2020, bearing interest at 6.625%, pursuant to an indenture dated November 2, 2010, among Rent-A-Center, Inc., its subsidiary guarantors and The Bank of New York Mellon Trust Company, as trustee. A portion of the proceeds of this offering were used to repay approximately $200.0 million of outstanding term debt under a prior credit agreement. The remaining net proceeds were used to repurchase shares of our common stock. The principal amount of the 6.625% notes outstanding as of June 30, 2019 and December 31, 2018, was $292.7 million, reduced by $0.8 million and $1.2 million of unamortized issuance costs, respectively.
On May 2, 2013, we issued $250 million in senior unsecured notes due May 2021, bearing interest at 4.75%, pursuant to an indenture dated May 2, 2013, among Rent-A-Center, Inc., its subsidiary guarantors and The Bank of New York Mellon Trust Company, as trustee. A portion of the proceeds of this offering were used to repurchase shares of our common stock under a $200.0 million accelerated stock buyback program. The remaining net proceeds were used to repay outstanding revolving debt under a prior credit agreement. The principal amount of the 4.75% notes outstanding as of June 30, 2019 and December 31, 2018, was $250.0 million, reduced by $1.2 million and $1.5 million of unamortized issuance costs, respectively.
Certain of Rent-A-Center's subsidiaries 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. The only direct or indirect subsidiaries of Rent-A-Center that were not guarantors were minor subsidiaries. There were 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.
On July 15, 2019, Rent-A-Center instructed the trustee under the indentures governing the 6.625% and 4.75% senior notes to issue a conditional notice of full redemption to the holders of the outstanding 6.625% and 4.75% senior notes. On August 5, 2019, in connection with the Refinancing, Rent-A-Center irrevocably deposited the redemption price for the 6.625% and 4.75% senior notes with the trustee, and the indentures were satisfied and discharged. The 6.625% and 4.75% senior notes will bewere redeemed on August 15, 2019, at a price equal to 100% of their principal amount plus accrued and unpaid interest to, but excluding, the redemption date. As a result, Rent-A-Center and its subsidiary guarantors have beenwere released from their respective obligations under the 6.625% and 4.75% senior notes as of August 5, 2019. As of December 31, 2018, we had $540.0 million in senior notes outstanding, net of unamortized issuance costs.
In connection with redeeming the senior unsecured notes, we recorded a write-down of previously unamortized debt issuance costs of approximately $2.0 million in the third quarter of 2019.
Note 79 - 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 JuneSeptember 30, 2019, our financial instruments include cash and cash equivalents, receivables, payables, and senior notes.outstanding borrowings against our ABL and Term Loan Credit Facilities. The carrying amount of cash and cash equivalents, receivables and payables approximates fair value at JuneSeptember 30, 2019 and December 31, 2018, because of the short maturities of these instruments.


13

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

The fair In addition, the interest rates on our Term Loan and ABL Credit Facilities are variable and, therefore, the carrying value of our senior notes was based on Level 1 inputs and was as follows at June 30, 2019 and December 31, 2018:
 June 30, 2019 December 31, 2018
(in thousands)Carrying Value Fair Value Difference Carrying Value Fair Value Difference
6.625% senior notes$292,740
 $292,740
 $
 $292,740
 $285,509
 $(7,231)
4.75% senior notes250,000
 248,750
 (1,250) 250,000
 239,050
 (10,950)
Total senior notes$542,740
 $541,490
 $(1,250) $542,740
 $524,559
 $(18,181)

outstanding borrowings approximates their fair value.
Note 810 - Other (Gains)Charges and Charges(Gains)
Cost Savings Initiatives. During 2018, we began execution of multiple cost savings initiatives, including reductions in overhead and supply chain, resulting in pre-tax charges during the first halfnine months of 2019 consisting of $5.0$4.7 million in lease impairment charges, $2.8 million in severance and other payroll-related costs, $1.6$2.2 million in other miscellaneous shutdown and holding costs, and $0.4 million in disposal of fixed assets. Costs incurred during the first sixnine months of 2018 related to these initiatives included pre-tax charges of $6.8 million in contract termination fees, $6.2$7.0 million in severance and other payroll-related costs, $1.9 million in legal and advisory fees, $1.0$1.1 million in other miscellaneous shutdown costs, $0.9 million in lease obligation costs, $0.4 million related to the write-down of capitalized software, and $0.1 million in disposal of fixed assets.
Store Consolidation Plan. During the first halfnine months of 2019, we closed 6683 Core U.S. stores, resulting in pre-tax charges of $2.3$3.1 million in lease impairment charges, $0.9$1.7 million in other miscellaneous shutdown and holding costs, $0.7$0.8 million in disposal of fixed assets, and $0.3$0.4 million in severance and other payroll-related costs. During the first sixnine months of 2018, we closed 109129 Core U.S. stores and 89 locations in Mexico, resulting in pre-tax charges of $8.7$10.5 million, consisting of $7.0$7.9 million in lease obligation costs, $1.0$1.5 million in disposal of fixed assets, $0.5$0.9 million in other miscellaneous shutdown and holding costs, and $0.2 million in severance and other payroll-related costs.
Vintage Settlement. On April 22, 2019, we agreed to settle (the "Vintage Settlement") all litigation with Vintage Rodeo Parent, LLC, Vintage Rodeo Acquisition, Inc., Vintage Capital Management, LLC (collectively, "Vintage Capital") and B. Riley Financial, Inc. ("B. Riley") relating to our termination of the Agreement and Plan of Merger (the "Merger Agreement") among Vintage Rodeo Parent, LLC, Vintage Rodeo Acquisition, Inc. and Rent-A-Center, Inc. In the Vintage Settlement, we received a payment of $92.5 million in cash in May 2019, of which we retained net pre-tax proceeds of approximately $80 million following payment of all remaining costs, fees and expenses relating to the termination (the "Vintage Settlement Proceeds"). The Vintage Settlement was recorded as a pre-tax gain upon receipt.


15

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

Merchants Preferred Acquisition. On August 13, 2019, we completed the previously announced acquisition of substantially all of the assets of Merchants Preferred, a nationwide virtual rent-to-own provider. In connection with this acquisition, we recorded approximately $1.1 million in acquisition-related expenses during the nine months ended September 30, 2019 including expenses related to legal, professional, and banking transaction fees.
Write-down of Capitalized Software. During the first sixnine months of 2018, we discontinued certain IT software projects and as a result incurred pre-tax charges of $1.9 million, related to the write-down of capitalized assets.
Activity with respect to other charges and (gains) for the sixnine months ended JuneSeptember 30, 2019 is summarized in the below table:
(in thousands) Accrued Charges at December 31, 2018 Charges & Adjustments Payments & Adjustments  Accrued Charges at June 30, 2019 Accrued Charges at December 31, 2018 Charges & Adjustments Payments & Adjustments  Accrued Charges at September 30, 2019
Cash charges:              
Labor reduction costs$7,623
 $3,145
 $(8,525) $2,243
$7,623
 $3,160
 $(9,356) $1,427
Lease obligation costs(1)
4,882
 
 (4,882) 
4,882
 
 (4,882) 
Other miscellaneous
 2,565
 (2,565) 

 3,914
 (3,914) 
Total cash charges$12,505
 5,710
 $(15,972) $2,243
$12,505
 7,074
 $(18,152) $1,427
Non-cash charges:              
Asset impairments(2)
  8,283
      9,091
    
Other(3)
  (58,160)      (57,473)    
Total other (gains) and charges  $(44,167)    
Total other gains  $(41,308)    
(1) Upon adoption of ASU 2016-02, previously accrued lease obligation costs related to discontinued operations were eliminated and are now reflected as an adjustment to our operating lease right-of-use assets in our condensed consolidated balance sheet.
(2) Includes impairments of operating lease right-of-use assets and other property assets related to the closure of RTO stores and our product service centers in the first halfnine months of 2019.
(3) Other primarily includes the Vintage Settlement Proceeds and insurance proceeds related to the 2017 hurricanes, offset by the Blair class action settlement (refer to Note 1113 for additional details), incremental legal and professional fees related to the termination of the Merger Agreement and the Merchants Preferred acquisition, and state tax audit assessments.


14

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

Note 911 - 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. All operating segments offer merchandise from four basic product categories: consumer electronics, appliances, computers, furniture and accessories. Our Core U.S. and Franchising segments also offer smartphones.
Segment information for the three and sixnine months ended JuneSeptember 30, 2019 and 2018 is as follows: 
 Three Months Ended June 30, Six Months Ended June 30,
(in thousands)2019 2018 2019 2018
Revenues       
Core U.S.$451,096
 $455,720
 $925,153
 $937,761
Acceptance Now176,389
 179,011
 372,911
 375,997
Mexico13,551
 12,307
 26,896
 24,338
Franchising14,889
 8,692
 27,659
 15,677
Total revenues$655,925
 $655,730
 $1,352,619
 $1,353,773
 Three Months Ended June 30, Six Months Ended June 30,
(in thousands)2019 2018 2019 2018
Gross profit       
Core U.S.$313,871
 $325,219
 $638,511
 $661,460
Acceptance Now80,380
 86,050
 166,708
 174,855
Mexico9,411
 8,549
 18,680
 16,871
Franchising4,409
 4,068
 9,038
 7,678
Total gross profit$408,071
 $423,886
 $832,937
 $860,864
 Three Months Ended June 30, Six Months Ended June 30,
(in thousands)2019 2018 2019 2018
Operating profit       
Core U.S.$64,925
 $43,527
 $118,236
 $71,914
Acceptance Now22,734
 29,157
 44,247
 44,587
Mexico1,474
 887
 2,693
 1,384
Franchising1,803
 1,909
 3,581
 3,165
Total segments90,936
 75,480
 168,757
 121,050
Corporate38,893
 (48,329) (21,579) (104,169)
Total operating profit$129,829
 $27,151
 $147,178
 $16,881
Three Months Ended June 30, Six Months Ended June 30,Three Months Ended September 30, Nine Months Ended September 30,
(in thousands)2019 2018 2019 20182019 2018 2019 2018
Depreciation and amortization       
Revenues       
Core U.S.$5,110
 $6,440
 $10,582
 $13,266
$436,497
 $451,320
 $1,361,650
 $1,389,081
Acceptance Now313
 432
 661
 867
184,486
 173,438
 557,397
 549,435
Mexico95
 273
 235
 617
13,370
 12,784
 40,266
 37,122
Franchising9
 44
 39
 88
15,018
 7,400
 42,677
 23,077
Total segments5,527
 7,189
 11,517
 14,838
Corporate9,594
 10,239
 19,377
 20,490
Total depreciation and amortization$15,121
 $17,428
 $30,894
 $35,328
Total revenues$649,371
 $644,942
 $2,001,990
 $1,998,715


1516

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

Three Months Ended June 30, Six Months Ended June 30,Three Months Ended September 30, Nine Months Ended September 30,
(in thousands)2019 2018 2019 20182019 2018 2019 2018
Capital expenditures       
Gross profit       
Core U.S.$907
 $4,325
 $1,465
 $9,215
$306,881
 $313,771
 $945,392
 $975,231
Acceptance Now54
 35
 101
 80
80,113
 81,586
 246,821
 256,441
Mexico27
 35
 30
 38
9,286
 8,885
 27,966
 25,756
Total segments988
 4,395
 1,596
 9,333
Corporate1,592
 2,651
 3,492
 6,362
Total capital expenditures$2,580
 $7,046
 $5,088
 $15,695
Franchising3,716
 3,498
 12,754
 11,176
Total gross profit$399,996
 $407,740
 $1,232,933
 $1,268,604
Three Months Ended September 30, Nine Months Ended September 30,
(in thousands)June 30, 2019 December 31, 20182019 2018 2019 2018
On rent rental merchandise, net   
Operating profit       
Core U.S.$392,904
 $424,829
$52,175
 $43,221
 $170,411
 $115,135
Acceptance Now216,988
 242,978
21,830
 26,278
 66,077
 70,865
Mexico15,973
 16,001
1,213
 922
 3,906
 2,306
Total on rent rental merchandise, net$625,865
 $683,808
Franchising1,135
 522
 4,716
 3,687
Total segments76,353
 70,943
 245,110
 191,993
Corporate(37,506) (45,311) (59,085) (149,480)
Total operating profit$38,847
 $25,632
 $186,025
 $42,513
Three Months Ended September 30, Nine Months Ended September 30,
(in thousands)June 30, 2019 December 31, 20182019 2018 2019 2018
Held for rent rental merchandise, net   
Depreciation and amortization       
Core U.S.$107,778
 $117,294
$5,037
 $6,216
 $15,619
 $19,482
Acceptance Now982
 1,207
379
 421
 1,040
 1,288
Mexico4,493
 5,161
82
 222
 317
 839
Total held for rent rental merchandise, net$113,253
 $123,662
Franchising3
 45
 42
 133
Total segments5,501
 6,904
 17,018
 21,742
Corporate9,393
 10,042
 28,770
 30,532
Total depreciation and amortization$14,894
 $16,946
 $45,788
 $52,274
(in thousands)June 30, 2019 December 31, 2018
Assets by segment   
Core U.S.$922,482
 $714,914
Acceptance Now281,835
 312,151
Mexico36,605
 29,321
Franchising7,159
 4,287
Total segments1,248,081
 1,060,673
Corporate496,132
 336,244
Total assets$1,744,213
 $1,396,917
 Three Months Ended September 30, Nine Months Ended September 30,
(in thousands)2019 2018 2019 2018
Capital expenditures       
Core U.S.$4,129
 $3,586
 $5,594
 $12,801
Acceptance Now24
 76
 125
 156
Mexico35
 113
 65
 151
Total segments4,188
 3,775
 5,784
 13,108
Corporate2,734
 3,021
 6,226
 9,383
Total capital expenditures$6,922
 $6,796
 $12,010
 $22,491


17

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

(in thousands)September 30, 2019 December 31, 2018
On rent rental merchandise, net   
Core U.S.$377,101
 $424,829
Acceptance Now241,591
 242,978
Mexico15,048
 16,001
Total on rent rental merchandise, net$633,740
 $683,808
(in thousands)September 30, 2019 December 31, 2018
Held for rent rental merchandise, net   
Core U.S.$104,341
 $117,294
Acceptance Now1,151
 1,207
Mexico4,439
 5,161
Total held for rent rental merchandise, net$109,931
 $123,662
(in thousands)September 30, 2019 December 31, 2018
Assets by segment   
Core U.S.$887,795
 $714,914
Acceptance Now(1)
330,727
 312,151
Mexico30,616
 29,321
Franchising8,412
 4,287
Total segments1,257,550
 1,060,673
Corporate240,382
 336,244
Total assets$1,497,932
 $1,396,917

(1) Includes $14.9 million of goodwill recorded in the third quarter of 2019 related to the acquisition of Merchants Preferred.
Note 1012 - Stock-Based Compensation
We recognized $2.0 million and $1.1$1.5 million in pre-tax compensation expense related to stock options and restricted stock units during the three months ended JuneSeptember 30, 2019 and 2018, respectively, and $2.7$4.6 million and $3.0$4.5 million during the sixnine months ended JuneSeptember 30, 2019 and 2018, respectively. During the sixnine months ended JuneSeptember 30, 2019, we granted approximately 255,000277,000 stock options, 278,000 market-based performance restricted stock units and 193,000199,000 time-vesting restricted stock units. The stock options granted were valued using a Black-Scholes pricing model with the following assumptions: an expected volatility of 48.28% to 55.17%, a risk-free interest rate of 2.30%1.75% to 2.34%, an expected dividend yield of 0% to 3.76%, and an expected term of 3.50 to 5.75 years. The weighted-average exercise price of the options granted during the sixnine months ended JuneSeptember 30, 2019 was $20.87$21.34 and the weighted-average grant-date fair value was $9.33.$9.27. Performance-based restricted stock units are valued using a Monte Carlo simulation. Time-vesting restricted stock units are valued using the closing price on the trading day immediately preceding the day of the grant. The weighted-average grant date fair value of the market-based performance and time-vesting restricted stock units granted during the sixnine months ended JuneSeptember 30, 2019 was $15.83$33.70 and $11.42,$21.05, respectively.


16

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

Note 1113 - Contingencies
From time to time, the Company, along with our subsidiaries, is party to various legal proceedings 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 expect these losses to have a material impact on our condensed consolidated financial statements if and when such losses are incurred.
We are subject to unclaimed property audits by states in the ordinary course of business. The property subject to review in the audit process include 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 in compliance with applicable escheat laws.
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


18

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

rent to own prices exceed the pricing permitted under the Karnette Rental-Purchase Act. Following a court-ordered mediation on March 28, 2019, we reached an agreement in principle to settle this matter for a total of $13 million, including attorneys’ fees. The settlement is in the documentation process and is subject to approvalwas approved by the court.court in October 2019. We have denied any liability in the settlement and agreed to the settlement in order to avoid additional expensive, time-consuming litigation. We recorded the pre-tax charge for this settlement in the first quarter of 2019.
Vintage Rodeo Parent, LLC, Vintage Rodeo Acquisition, Inc.2019, and Vintage Capital Management, LLC, and B. Riley Financial, Inc. v. Rent-A-Center, Inc. As announced on April 22, 2019, we agreed to settle all litigation with Vintage Capital and B. Riley relating to our termination of the Merger Agreement. In the settlement we received a payment of $92.5 millionamount will be paid in cash in MayNovember 2019. The Vintage Settlement was recorded as a pre-tax gain upon receipt.
Velma Russell v. Acceptance Now. This purported class action arising out of calls made by Acceptance Now to customers’ reference (s)reference(s) was filed on January 29, 2019 in Massachusetts state court. Specifically, plaintiffs seek to certify a class representing any references of customers (within the state of Massachusetts) during the 4 years prior to the filing date that were contacted by Acceptance Now more frequently during a 12 month period than is permitted by Massachusetts state law. The plaintiffs are seeking injunctive relief and statutory damages of $25 per reference which may be tripled to $75 per reference. References are not parties to our consumer arbitration agreement. We operate 12 Acceptance Now locations in Massachusetts. Discovery has commenced and a mediation took place in September 2019. We intend to continue to vigorously defend these claims;claims, however, we cannot assure you that we will be found to have no liability in this matter.
Federal Trade Commission civil investigative demand. In April 2019, along with other rent-to-own companies, we received a civil investigative demand from the Federal Trade Commission ("FTC") seeking information regarding certain transactions involving the purchase and sale of customer lease agreements, and whether such transactions violated the FTC Act. Although we believe such transactions were in compliance with the FTC Act, this inquiry could lead to an enforcement action and/or a consent order, and substantial costs. The Company ishas provided substantial information in the process of respondingresponse to this inquiry fromand continues to work with the FTC.FTC to resolve this matter.


17

RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNote 14 - (Continued)
(Unaudited)

Note 12 - Earnings (Loss) Per Common Share
Summarized basic and diluted earnings per common share were calculated as follows:
Three Months Ended June 30, Six Months Ended June 30,Three Months Ended September 30, Nine Months Ended September 30,
(in thousands, except per share data)2019 2018 2019 20182019 2018 2019 2018
Numerator:              
Net earnings (loss)$94,455
 $13,753
 $101,778
 $(6,090)
Net earnings$31,277
 $12,918
 $133,055
 $6,828
Denominator:              
Weighted-average shares outstanding54,153
 53,450
 54,042
 53,428
54,487
 53,508
 54,190
 53,455
Effect of dilutive stock awards(1)
1,553
 845
 1,559
 
1,571
 1,404
 1,563
 946
Weighted-average dilutive shares55,706
 54,295
 55,601
 53,428
56,058
 54,912
 55,753
 54,401
              
Basic earnings (loss) per common share$1.74
 $0.26
 $1.88
 $(0.11)
Diluted earnings (loss) per common share$1.70
 $0.25
 $1.83
 $(0.11)
Basic earnings per common share$0.57
 $0.24
 $2.46
 $0.13
Diluted earnings per common share$0.56
 $0.24
 $2.39
 $0.13
Anti-dilutive securities excluded from diluted loss per common share:              
Anti-dilutive restricted share units
 
 
 797
Anti-dilutive performance share units263
 222
 263
 1,172
260
 211
 260
 211
Anti-dilutive stock options1,107
 2,411
 1,123
 2,801
974
 1,417
 1,047
 1,672

(1)
There was no dilutive effect to the loss per common share for the six months ended June 30, 2018 due to the net loss incurred for respective period.


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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. 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.” 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 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 depending on a variety of factors, including, but not limited to, the risks and uncertainties discussed under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 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. 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 general strength of the economy and other economic conditions affecting consumer preferences and spending;
factors affecting the disposable income available to our current and potential customers;
changes in the unemployment rate;
capital market conditions, including availability of funding sources for us;
changes in our credit ratings;
difficulties encountered in improving the financial and operational performance of our business segments, including our ability to execute our franchise strategy;
risks associated with pricing changes and strategies being deployed in our 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 strategic initiatives;
failure to manage our store labor and other store expenses;
disruptions caused by the operation of our store information management system;
our ability to satisfy all conditions required to successfully complete the acquisition of substantially all the assets and assumptions of certain liabilities of C/C Financial Corp., a Delaware Corporation d/b/a Merchants Preferred ("Merchants Preferred" and the acquisition thereof, the "Merchants Preferred Acquisition");systems;
our ability to realize the strategic benefits from the Merchants Preferred Acquisition, including achieving expected synergies and operating efficiencies from the acquisition;
our ability to successfully integrate Merchants Preferred's operations which may be more difficult, time-consuming or costly than expected;
operating costs, loss of retail partners and business disruption arising from the Merchants Preferred Aquisition;Acquisition;
the ability to retain certain key employees at Merchants Preferred;
risks related to Merchants Preferred's virtual rent-to-own business;
our transition to more-readily scalable "cloud-based" solutions;
our ability to develop and successfully implement digital or E-commerce capabilities, including mobile applications;
disruptions in our supply chain;
limitations of, or disruptions in, our distribution network;
rapid inflation or deflation in the prices of our products;
our ability to execute and the effectiveness of a store consolidation, 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 and our ability to generate sufficient cash flow to pay dividends;


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RENT-A-CENTER, INC. AND SUBSIDIARIES


our ability to identify and successfully market products and services that appeal to our customer demographic;
consumer preferences and perceptions of our brand;brands;


20


RENT-A-CENTER, INC. AND SUBSIDIARIES


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;
the passage of legislation adversely affecting the Rent-to-Own industry;
our compliance with applicable statutes or regulations governing our transactions;
changes in interest rates;
changes in tariff policies;
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;
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;
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 furnished or filed with the Securities and Exchange Commission.
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, 2018, 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 one of the largest rent-to-own operators in North America, focused on improving the quality of life for our customers by providing them the opportunity to obtain ownership of high-quality durable products, such as consumer electronics, appliances, computers (including tablets), smartphones, and furniture (including accessories), under flexible rental purchase agreements with no long-term obligation. We were incorporated in the State of Delaware in 1986.
Our Strategy
Our strategy has threeis focused on growing our business model through emphasis on the following key pillars including optimizinginitiatives:
Accelerate our virtual growth strategy through investment in our virtual business and systems with a focus towards expanding in large under served markets, national accounts, and online retailers
Capitalizing on key differentiators in our Acceptance Now segment through our staffed, virtual and hybrid operations models
Profitably grow our business through expansion in our product verticals, e-commerce platform enhancements, new store concepts, selective refranchising, and continuing to optimize our cost structure enhancing
Improve our value proposition, and franchising.
Optimizing our cost structurecustomer experience by continuing to capitalize on recent initiatives targeting overhead, supply chain, and other store expenses; in addition to identifying future opportunities to efficiently manage cost within the business.
Enhance our value propositionserving through targeted pricing strategies across product categories aimed at improving traffic trends and increasing ownership.
Focus on franchising in underperforming markets and stabilizing our brick and mortar footprint.any business channel
Recent Developments
Merger Termination. Merchants Preferred Acquisition. On December 18, 2018, we terminated the Merger Agreement with Vintage Capital. On December 21, 2018, Vintage Capital and its affiliates filed a lawsuit in the Delaware Court of Chancery against Rent-A-Center, asserting that the Merger Agreement remained in effect, and that Vintage Capital did not owe Rent-A-Center the $126.5 million reverse breakup fee associated with our termination of the Merger Agreement. On February 11th and 12th of this year, a trial was held in the Delaware Court of Chancery in connection with the lawsuit brought by Vintage Capital (and joined by B Riley) against Rent-A-Center. On March 14, 2019, the Delaware Court of Chancery ruled that Rent-A-Center validly terminated the Merger Agreement. As announced on April 22,August 13, 2019, we agreed to settle all litigation with Vintage Capital and B. Riley relating to our terminationcompleted the previously announced acquisition of the Merger Agreement. In the Vintage Settlement, we received a payment of $92.5 million in cash in late May 2019, of which we retained net pre-tax proceeds of approximately $80 million following payment of all remaining costs, fees and expenses relating to the merger termination.


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RENT-A-CENTER, INC. AND SUBSIDIARIES


Dividends. On June 27, 2019, we announced that our Board of Directors approved initiation of a quarterly cash dividend of $0.25 per share on our common stock subject to completion of the refinancing of the Company’s existing revolving credit facility and outstanding senior notes, which occurred on August 5, 2019. Although the amount and timing of any dividends are subject to the discretion of our Board of Directors, the first quarterly dividend is expected to be declared in September 2019 and paid in October 2019.
Merchants Preferred Acquisition. On July 15, 2019, we announced that we had entered into an asset purchase agreement to acquire substantially all of the assets and assume certain liabilities of C/C Financial Corp d/b/a Merchants Preferred ("Merchants Preferred"), a nationwide virtual rent-to-own provider. The Merchants Preferred Acquisition is expected to close in the third quarter. Total consideration consists of $30approximately $46.6 million, consisted of cash consideration of approximately $30.0 million, offset by $2.0 million in cash-on-hand transferred from the seller at closing, and 701,918 shares of our common stock with a value equal to $15 million (but in no event fewer than 701,918 shares of our common stock). At closing, the sellers must transfer a minimum of $2 million in cash on hand. The acquisition is valued at approximately $47.5 million, based$27.31 per share on the closing stock pricedate of the date on which the asset purchase agreement was entered into.closing. We do not expect the impact to 2019 earnings from the acquisition to be material. See Note 2 to our unaudited condensed consolidated financial statements for further information relating to the Merchants Preferred acquisition.
Refinancing Update. On August 5, 2019, we terminated our Prior Revolving Facility and entered into a new $300 million asset based revolving credit facility and a $200 million senior secured term loan facility. In connection with the Refinancing, Rent-A-Center irrevocably deposited $551,019,061.81, the redemption price for the 6.625% and 4.75% senior notes with the trustee, and the indentures were satisfied and discharged. The 6.625% and 4.75% senior notes will be redeemed on August 15, 2019, at a price equal to 100% of their principal amount plus accrued and unpaid interest to, but excluding, the redemption date. As a result, Rent-A-Center and its subsidiary guarantors have been released from their respective obligations under the 6.625% and 4.75% senior notes as of August 5, 2019.

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RENT-A-CENTER, INC. AND SUBSIDIARIES


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 included elsewhere in this Quarterly Report on Form 10-Q.
Overview
During the first halfnine months of 2019, consolidated revenues decreased approximately $1.2$3.3 million, primarily driven by refranchising and closures of certain Core U.S. stores, partially offset by increased same store sales. Operating profit, however, increased approximately $130.3$143.5 million for the sixnine months ended JuneSeptember 30, 2019, primarily due to receipt of the Vintage Settlement Proceeds and reduction in operating expenses related to costs savings initiatives and store closures.
Revenues in our Core U.S. segment decreased approximately $12.6$27.4 million for the sixnine months ended JuneSeptember 30, 2019, primarily due todriven by the refranchising effortsof over 100 locations in the past 12 months and rationalization of the Core U.S. store base, partially offset by an increase in same store sales. Gross profit as a percentage of revenue decreased 1.5%0.8% primarily due to our continued strategy to enhance our value proposition. Operating profit increased $46.3$55.3 million for the sixnine months ended JuneSeptember 30, 2019, primarily due to decreases in store labor and other store expenses driven by lower store count and cost savings initiatives.
The Acceptance Now segment revenues decreasedincreased approximately $3.1$8.0 million for the sixnine months ended JuneSeptember 30, 2019, primarily due to store closuresthe acquisition of Merchants Preferred and partially offset by an increase in same store sales. Gross profit as a percent of revenue decreased 1.8%2.4% primarily due to our strategy to enhance our value proposition.
The Mexico segment revenues increased by 10.5%8.5% for the sixnine months ended JuneSeptember 30, 2019, driving an increase in operating profit of 94.6%69.4%, or $1.3$1.6 million.
Revenues for the Franchising segment increased $12.0$19.6 million for the sixnine months ended JuneSeptember 30, 2019, primarily due to an increase in franchise locations as a result of our refranchising initiative.
Cash flow from operations was $185.4$228.1 million for the sixnine months ended JuneSeptember 30, 2019,2019. In addition, we paid down debt by $282.7 million over the respective period, ending the period with $353.1$73.7 million of cash and cash equivalents and no outstanding borrowings under our Prior Revolving Facility.equivalents.



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RENT-A-CENTER, INC. AND SUBSIDIARIES


The following table is a reference for the discussion that follows.
Three Months Ended     Six Months Ended    Three Months Ended     Nine Months Ended    
June 30, Change June 30, ChangeSeptember 30, Change September 30, Change
(dollar amounts in thousands)2019 2018 $ % 2019 2018 $ %2019 2018 $ % 2019 2018 $ %
Revenues                              
Store                              
Rentals and fees$551,680
 $562,403
 $(10,723) (1.9)% $1,115,034
 $1,127,117
 $(12,083) (1.1)%$550,795
 $552,580
 $(1,785) (0.3)% $1,665,829
 $1,679,697
 $(13,868) (0.8)%
Merchandise sales70,842
 64,990
 5,852
 9.0 % 175,312
 172,346
 2,966
 1.7 %65,552
 67,141
 (1,589) (2.4)% 240,864
 239,487
 1,377
 0.6 %
Installment sales17,270
 17,374
 (104) (0.6)% 32,706
 33,778
 (1,072) (3.2)%16,952
 15,681
 1,271
 8.1 % 49,658
 49,459
 199
 0.4 %
Other1,244
 2,271
 (1,027) (45.2)% 1,908
 4,855
 (2,947) (60.7)%1,054
 2,140
 (1,086) (50.7)% 2,962
 6,995
 (4,033) (57.7)%
Total store revenue641,036
 647,038
 (6,002) (0.9)% 1,324,960
 1,338,096
 (13,136) (1.0)%634,353
 637,542
 (3,189) (0.5)% 1,959,313
 1,975,638
 (16,325) (0.8)%
Franchise                              
Merchandise sales10,673
 4,880
 5,793
 118.7 % 19,129
 8,514
 10,615
 124.7 %11,178
 4,135
 7,043
 170.3 % 30,307
 12,649
 17,658
 139.6 %
Royalty income and fees4,216
 3,812
 404
 10.6 % 8,530
 7,163
 1,367
 19.1 %3,840
 3,265
 575
 17.6 % 12,370
 10,428
 1,942
 18.6 %
Total revenues655,925
 655,730
 195
  % 1,352,619
 1,353,773
 (1,154) (0.1)%649,371
 644,942
 4,429
 0.7 % 2,001,990
 1,998,715
 3,275
 0.2 %
Cost of revenues                              
Store                              
Cost of rentals and fees155,658
 156,041
 (383) (0.2)% 311,030
 312,136
 (1,106) (0.4)%161,971
 153,716
 8,255
 5.4 % 473,001
 465,852
 7,149
 1.5 %
Cost of merchandise sold76,034
 65,562
 10,472
 16.0 % 179,425
 161,915
 17,510
 10.8 %70,575
 74,340
 (3,765) (5.1)% 250,000
 236,255
 13,745
 5.8 %
Cost of installment sales5,682
 5,617
 65
 1.2 % 10,606
 10,859
 (253) (2.3)%5,527
 5,244
 283
 5.4 % 16,133
 16,103
 30
 0.2 %
Total cost of store revenues237,374
 227,220
 10,154
 4.5 % 501,061
 484,910
 16,151
 3.3 %238,073
 233,300
 4,773
 2.0 % 739,134
 718,210
 20,924
 2.9 %
Franchise cost of merchandise sold10,480
 4,624
 5,856
 126.6 % 18,621
 7,999
 10,622
 132.8 %11,302
 3,902
 7,400
 189.6 % 29,923
 11,901
 18,022
 151.4 %
Total cost of revenues247,854
 231,844
 16,010
 6.9 % 519,682
 492,909
 26,773
 5.4 %249,375
 237,202
 12,173
 5.1 % 769,057
 730,111
 38,946
 5.3 %
Gross profit408,071
 423,886
 (15,815) (3.7)% 832,937
 860,864
 (27,927) (3.2)%399,996
 407,740
 (7,744) (1.9)% 1,232,933
 1,268,604
 (35,671) (2.8)%
Operating expenses                              
Store expenses                              
Labor152,899
 164,172
 (11,273) (6.9)% 314,555
 345,246
 (30,691) (8.9)%158,666
 168,297
 (9,631) (5.7)% 473,221
 513,543
 (40,322) (7.9)%
Other store expenses149,225
 156,854
 (7,629) (4.9)% 313,019
 342,803
 (29,784) (8.7)%150,366
 149,326
 1,040
 0.7 % 463,385
 492,129
 (28,744) (5.8)%
General and administrative expenses38,534
 41,792
 (3,258) (7.8)% 71,458
 86,662
 (15,204) (17.5)%34,364
 40,818
 (6,454) (15.8)% 105,822
 127,480
 (21,658) (17.0)%
Depreciation and amortization15,121
 17,428
 (2,307) (13.2)% 30,894
 35,328
 (4,434) (12.6)%14,894
 16,946
 (2,052) (12.1)% 45,788
 52,274
 (6,486) (12.4)%
Other (gains) and charges(77,537) 16,489
 (94,026) (570.2)% (44,167) 33,944
 (78,111) (230.1)%
Other charges and (gains)2,859
 6,721
 (3,862) (57.5)% (41,308) 40,665
 (81,973) (201.6)%
Total operating expenses278,242
 396,735
 (118,493) (29.9)% 685,759
 843,983
 (158,224) (18.7)%361,149
 382,108
 (20,959) (5.5)% 1,046,908
 1,226,091
 (179,183) (14.6)%
Operating profit129,829
 27,151
 102,678
 378.2 % 147,178
 16,881
 130,297
 771.9 %38,847
 25,632
 13,215
 51.6 % 186,025
 42,513
 143,512
 337.6 %
Debt refinancing charges2,168
 
 2,168
 100.0 % 2,168
 
 2,168
 100.0 %
Interest, net8,095
 10,604
 (2,509) (23.7)% 16,610
 21,755
 (5,145) (23.6)%6,648
 10,151
 (3,503) (34.5)% 23,258
 31,906
 (8,648) (27.1)%
Earnings (loss) before income taxes121,734
 16,547
 105,187
 635.7 % 130,568
 (4,874) 135,442
 2,778.9 %
Income tax expense27,279
 2,794
 24,485
 876.3 % 28,790
 1,216
 27,574
 2,267.6 %
Net earnings (loss)$94,455
 $13,753
 $80,702
 586.8 % $101,778
 $(6,090) $107,868
 1,771.2 %
Earnings before income taxes30,031
 15,481
 14,550
 94.0 % 160,599
 10,607
 149,992
 1,414.1 %
Income tax (benefit) expense(1,246) 2,563
 (3,809) (148.6)% 27,544
 3,779
 23,765
 628.9 %
Net earnings$31,277
 $12,918
 $18,359
 142.1 % $133,055
 $6,828
 $126,227
 1,848.7 %
Three Months Ended JuneSeptember 30, 2019, compared to Three Months Ended JuneSeptember 30, 2018
Store Revenue. Total store revenue decreased by $6.0$3.1 million, or 0.9%0.5%, to $641.0$634.4 million for the three months ended JuneSeptember 30, 2019, from $647.0$637.5 million for the three months ended JuneSeptember 30, 2018. This was primarily due to decreasesa decrease of approximately $4.6 million and $2.6$14.8 million in the Core U.S. andsegment, partially offset by an increase of $11.0 million in the Acceptance Now segments, respectively,segment, as discussed further in the segment performance section below.


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RENT-A-CENTER, INC. AND SUBSIDIARIES


Same store revenue is reported on a constant currency basis and generally represents revenue earned in 2,4502,418 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.


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RENT-A-CENTER, INC. AND SUBSIDIARIES


Receiving stores will be eligible for inclusion in the same store sales base in the twenty-fourth full month following the customer account transfers. In addition, due to the severity of the 2017 hurricane impacts, we instituted a change to the same store sales store selection criteria to exclude stores in those geographically impacted regions for 18 months. Same store revenues increased by $26.4$20.0 million, or 5.8%4.5%, to $479.5$468.0 million for the three months ended JuneSeptember 30, 2019, as compared to $453.1$448.1 million in 2018. The increase in same store revenues was primarily attributable to an increase 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 JuneSeptember 30, 2019, decreasedincreased by $0.3$8.3 million, or 0.2%5.4%, to $155.7$162.0 million as compared to $156.0$153.7 million in 2018. This decreaseincrease in cost of rentals and fees was primarily attributable to a decreasean increase of $4.1$12.7 million in the Core U.SAcceptance Now segment, partially offset by an increasea decrease of $3.3$4.8 million in Acceptance NowCore U.S. segment. Cost of rentals and fees expressed as a percentage of rentals and fees revenue was 28.2%29.4% for the three months ended JuneSeptember 30, 2019, as compared to 27.7%27.8% in 2018.
Cost of Merchandise Sold. Cost of merchandise sold increaseddecreased by $10.4$3.7 million, or 16.0%5.1%, to $76.0$70.6 million for the three months ended JuneSeptember 30, 2019, from $65.6$74.3 million in 2018, primarily attributable to an increasea decrease of $10.8$3.5 million in the Core U.S. segment, as discussed further in the segment performance section below. The gross margin percent of merchandise sales decreasedincreased to (7.3)(7.7)% for the three months ended JuneSeptember 30, 2019, from (0.9)(10.7)% in 2018.
Gross Profit. Gross profit decreased by $15.8$7.7 million, or 3.7%1.9%, to $408.1$400.0 million for the three months ended JuneSeptember 30, 2019, from $423.9$407.7 million in 2018, due primarily to decreases of $11.3$6.9 million and $5.7$1.5 million in the Core U.S. and Acceptance Now segments, respectively, as discussed further in the segment performance section below. Gross profit as a percentage of total revenue decreased to 62.2%61.6% for the three months ended JuneSeptember 30, 2019, as compared to 64.6%63.2% in 2018.
Store Labor. Store labor decreased by $11.3$9.6 million, or 6.9%5.7%, to $152.9$158.7 million, for the three months ended JuneSeptember 30, 2019, as compared to $164.2$168.3 million in 2018, primarily due to a decrease of $12.2$10.5 million in the Core U.S. segment, as a result of a lower Core U.S. store base and costs savings initiatives. Store labor expressed as a percentage of total store revenue was 23.9%25.0% for the three months ended JuneSeptember 30, 2019, as compared to 25.4%26.4% in 2018.
Other Store Expenses. Other store expenses decreasedincreased by $7.7$1.1 million, or 4.9%0.7%, to $149.2$150.4 million for the three months ended JuneSeptember 30, 2019, as compared to $156.9$149.3 million in 2018, primarily due to an increases of $3.2 million and $0.4 million in the Acceptance Now and Franchising segments, respectively, partially offset by a decrease of $11.6$2.8 million in the Core U.S. segment, partially offset by an increase of $2.8 million in the Acceptance Now segment. Other store expenses expressed as a percentage of total store revenue were 23.3%23.7% for the three months ended JuneSeptember 30, 2019, compared to 24.2%23.4% in 2018.
General and Administrative Expenses. General and administrative expenses decreased by $3.3$6.5 million, or 7.8%15.8%, to $38.5$34.4 million for the three months ended JuneSeptember 30, 2019, as compared to $41.8$40.8 million in 2018, primarily due to cost savings initiatives. General and administrative expenses expressed as a percentage of total revenue were 5.9%5.3% for the three months ended JuneSeptember 30, 2019, compared to 6.4%6.3% in 2018.
Other (Gains)Charges and Charges.(Gains). Other (gains)charges and charges(gains) decreased by $94.0$3.8 million, to $(77.5)$2.9 million for the three months ended JuneSeptember 30, 2019, as compared to $16.5$6.7 million in 2018,2018. Other charges for the three months ended September 30, 2019 primarily due to the Vintage Settlement Proceeds and insurance proceeds related to the 2017 hurricanes, partially offset bycosts associated merger termination legal and professional fees,with store closures state tax audit assessments, and cost savings initiatives.fees associated with the Merchants Preferred acquisition.
Operating Profit. Operating results increased by $102.6$13.2 million, to $129.8$38.8 million for the three months ended JuneSeptember 30, 2019, as compared to $27.2$25.6 million in 2018, primarily due to the Vintage Settlement Proceeds described above and reduction in operating expenses related to costs savings initiatives and store closures. Operating results expressed as a percentage of total revenue were 19.8%6.0% for the three months ended JuneSeptember 30, 2019, compared to 4.1%4.0% in 2018. Excluding other charges and (gains) & charges,, operating profit was $52.3$41.7 million, or 8.0%6.4% of revenue for the three months ended JuneSeptember 30, 2019, compared to $43.6$32.4 million, or 6.7%5.0% of revenue for the comparable period of 2018.
Income Tax Expense.Tax. Income tax expensebenefit for the three months ended JuneSeptember 30, 2019 was $27.3$(1.2) million, as compared to $2.8income tax expense of $2.6 million in 2018. Income tax benefit for the three months ended September 30, 2019 primarily related to the reversal of previously recorded reserves for uncertain tax positions due to the tax period no longer being subject to tax assessment in certain jurisdictions. The effective tax rate was 22.4%(4.2)% for the three months ended JuneSeptember 30, 2019, compared to 16.9%16.6% in 2018.
SixNine Months Ended JuneSeptember 30, 2019, compared to SixNine Months Ended JuneSeptember 30, 2018
Store Revenue. Total store revenue decreased by $13.1$16.3 million, or 1.0%0.8%, to $1,325.0$1,959.3 million for the sixnine months ended JuneSeptember 30, 2019, from $1,338.1$1,975.6 million for the threenine months ended JuneSeptember 30, 2018. This was primarily due to decreasesa decrease of approximately $12.6$27.4 million in the Core U.S. segment, partially offset by increases of $8.0 million and $3.1 million in the Core U.S.Acceptance Now and Acceptance NowMexico segments, respectively, as discussed further in the segment performance section below.
Same store revenue is reported on a constant currency basis and generally represents revenue earned in 2,6272,704 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 customer account transfers. In addition, due to the severity of the 2017 hurricane impacts, we instituted a change to


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following the same store sales store selection criteria to exclude stores in those geographically impacted regions for 18 months.customer account transfers. Same store revenues increased by $55.0$75.0 million, or 6.3%5.7%, to $929.1$1,397.1 million for the sixnine months ended JuneSeptember 30, 2019, as compared to $874.1$1,322.1 million in 2018. The increase in same store revenues was primarily attributable to an increase 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 sixnine months ended JuneSeptember 30, 2019, decreasedincreased by $1.1$7.1 million, or 0.4%1.5%, to $311.0$473.0 million as compared to $312.1$465.9 million in 2018. This decreaseincrease in cost of rentals and fees was primarily attributable to increases of $19.2 million and $1.1 million in the Acceptance Now and Mexico segments, respectively, partially offset by a decrease of $8.4$13.1 million in the Core U.S. segment, partially offset by an increase of $6.5 million in the Acceptance Now segment. Cost of rentals and fees expressed as a percentage of rentals and fees revenue increased to 27.9%28.4% for the sixnine months ended JuneSeptember 30, 2019 as compared to 27.7% in 2018.
Cost of Merchandise Sold. Cost of merchandise sold increased by $17.5$13.7 million, or 10.8%5.8%, to $179.4$250.0 million for the sixnine months ended JuneSeptember 30, 2019, from $161.9$236.3 million in 2018, primarily attributable to an increase of $19.0$15.5 million in the Core U.S. segment, as discussed further in the segment performance section below. The gross margin percent of merchandise sales decreased to (2.3)(3.8)% for the sixnine months ended JuneSeptember 30, 2019, from 6.1%1.3% in 2018.
Gross Profit. Gross profit decreased by $28.0$35.7 million, or 3.2%2.8%, to $832.9$1,232.9 million for the sixnine months ended JuneSeptember 30, 2019, from $860.9$1,268.6 million in 2018, due primarily to decreases of $22.9$29.8 million and $8.1$9.6 million in the Core U.S. and Acceptance Now segments, respectively, as discussed further in the segment performance section below. Gross profit as a percentage of total revenue decreased to 61.6% for the sixnine months ended JuneSeptember 30, 2019, as compared to 63.6%63.5% in 2018.
Store Labor. Store labor decreased by $30.6$40.3 million, or 8.9%7.9%, to $314.6$473.2 million, for the sixnine months ended JuneSeptember 30, 2019, as compared to $345.2 million in 2018, primarily attributable to decreases of $29.2 million and $1.7 million in the Core U.S. and Acceptance Now segments, respectively, as a result of a lower Core U.S. store base and the closure of our Acceptance Now collection centers. Store labor expressed as a percentage of total store revenue was 23.7% for the six months ended June 30, 2019, as compared to 25.8% in 2018.
Other Store Expenses. Other store expenses decreased by $29.8 million, or 8.7%, to $313.0 million for the six months ended June 30, 2019, as compared to $342.8$513.5 million in 2018, primarily attributable to a decrease of $32.1$39.7 million in the Core U.S. segment, as a result of a lower Core U.S. store base. Store labor expressed as a percentage of total store revenue was 24.2% for the nine months ended September 30, 2019, as compared to 26.0% in 2018.
Other Store Expenses. Other store expenses decreased by $28.7 million, or 5.8%, to $463.4 million for the nine months ended September 30, 2019, as compared to $492.1 million in 2018, primarily attributable to a decrease of $34.8 million in the Core U.S. segment, as a result of a lower Core U.S. store base, partially offset by increases of $4.1 million and $1.1 million in the Acceptance Now and Mexico segments, respectively. Other store expenses expressed as a percentage of total store revenue were 23.6%23.7% for the sixnine months ended JuneSeptember 30, 2019, compared to 25.6%24.9% in 2018.
General and Administrative Expenses. General and administrative expenses decreased by $15.2$21.7 million, or 17.5%17.0%, to $71.5$105.8 million for the sixnine months ended JuneSeptember 30, 2019, as compared to $86.7$127.5 million in 2018, primarily due to cost savings initiatives. General and administrative expenses expressed as a percentage of total revenue were 5.3% for the sixnine months ended JuneSeptember 30, 2019, compared to 6.4% in 2018.
Other (Gains)Charges and Charges.(Gains). Other (gains)charges and charges(gains) decreased by $78.1$82.0 million, to $(44.2)$(41.3) million for the sixnine months ended JuneSeptember 30, 2019, as compared to $33.9$40.7 million in 2018. Other gains for the sixnine months ended JuneSeptember 30, 2019 primarily related to the Vintage Settlement Proceeds, and insurance proceeds related to the 2017 hurricanes, partially offset by the Blair class action settlement costs, associated merger termination legal and professional fees, store closures, state tax audit assessments, and cost savings initiatives.initiatives, and fees associated with the Merchants Preferred acquisition.
Operating Profit. Operating profit increased by $130.3$143.5 million, to $147.2$186.0 million for the sixnine months ended JuneSeptember 30, 2019, as compared to $16.9$42.5 million in 2018, primarily due to the Vintage Settlement described above and reduction in operating expenses related to costs savings initiatives and store closures. Operating profit expressed as a percentage of total revenue was 10.9%9.3% for the sixnine months ended JuneSeptember 30, 2019, compared to 1.2%2.1% in 2018. Excluding other charges and (gains) & charges,, operating profit was $103.0$144.7 million, or 7.6%7.2% of revenue for the sixnine months ended JuneSeptember 30, 2019, compared to $50.8$83.2 million, or 3.8%4.2% of revenue for the comparable period of 2018.
Income Tax. Income tax expense for the sixnine months ended JuneSeptember 30, 2019 was $28.8$27.5 million, as compared to $1.2$3.8 million in 2018. The effective tax rate was 22.0%17.2% for the sixnine months ended JuneSeptember 30, 2019, compared to 24.9%35.6% in 2018.


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Segment Performance
Core U.S. segment
Three Months Ended     Six Months Ended    Three Months Ended     Nine Months Ended    
June 30, Change June 30, ChangeSeptember 30, Change September 30, Change
(dollar amounts in thousands)2019 2018 $ % 2019 2018 $ %2019 2018 $ % 2019 2018 $ %
Revenues$451,096
 $455,720
 $(4,624) (1.0)% $925,153
 $937,761
 $(12,608) (1.3)%$436,497
 $451,320
 $(14,823) (3.3)% $1,361,650
 $1,389,081
 $(27,431) (2.0)%
Gross profit313,871
 325,219
 (11,348) (3.5)% 638,511
 661,460
 (22,949) (3.5)%306,881
 313,771
 (6,890) (2.2)% 945,392
 975,231
 (29,839) (3.1)%
Operating profit64,925
 43,527
 21,398
 49.2 % 118,236
 71,914
 46,322
 64.4 %52,175
 43,221
 8,954
 20.7 % 170,411
 115,135
 55,276
 48.0 %
Change in same store revenue      5.6 %       5.7 %      3.7 %       5.0 %
Stores in same store revenue calculation      1,647       1,754      1,592       1,776
Revenues. The decrease in revenue for the three and sixnine months ended JuneSeptember 30, 2019 was driven primarily by a decrease in rentals and fees revenue of $10.3$14.1 million and $15.4$29.4 million, respectively, as compared to 2018. The decrease is primarily due to our refranchising efforts and the rationalization of our Core U.S. store base, partially offset by increases in same store sales.
Gross Profit. Gross profit decreased for the three and sixnine months ended JuneSeptember 30, 2019, as compared to 2018, primarily due to the decreases in revenue described above, partially offset by decreases in costs of rentals and fees. In addition gross profit for the nine months ended September 30, 2019 decreased due to increasesan increase in cost of merchandise sold of $10.8$15.5 million, and $19.0 million, respectively, related to our strategy to enhance our value proposition changes, partially offset by decreases in cost of rentals and fees.proposition. Gross profit as a percentage of segment revenues decreased to 69.6%was 70.3% and 69.0%69.4% for the three and sixnine months ended JuneSeptember 30, 2019, as compared to 71.4%69.5% and 70.5%70.2% for the respective periods in 2018.
Operating Profit. Operating profit as a percentage of segment revenues was 14.4%12.0% and 12.8%12.5% for the three and sixnine months ended JuneSeptember 30, 2019, compared to 9.6% and 7.7%8.3% for the respective periods in 2018, primarily due to decreases in store labor and other store expenses of $23.8$13.3 million and $61.2$74.5 million, respectively. Declines in store labor and other store expenses were driven primarily by lower store count and cost savings initiatives, partially offset by higher merchandise losses. Charge-offs in our Core U.S. rent-to-own stores due to customer stolen merchandise, expressed as a percentage of Core U.S. rent-to-own revenues, were approximately 3.2%4.1% and 3.4%3.7% for the three and sixnine months ended JuneSeptember 30, 2019, compared to 3.1%3.5% and 3.2% for the respective periods in 2018. Charge-offs in our Core U.S. rent-to-own stores due to other merchandise losses, expressed as a percentage of Core U.S. rent-to-own revenues, were approximately 1.1%1.4% and 1.2%1.3% for the three and sixnine months ended JuneSeptember 30, 2019, compared to 1.8%2.0% and 1.6% for the respective periods1.9% in 2018. Other merchandise losses include unrepairable and missing merchandise, and loss/damage waiver claims.
Acceptance Now segment
Three Months Ended     Six Months Ended    Three Months Ended     Nine Months Ended    
June 30, Change June 30, ChangeSeptember 30, Change September 30, Change
(dollar amounts in thousands)2019 2018 $ % 2019 2018 $ %2019 2018 $ % 2019 2018 $ %
Revenues$176,389
 $179,011
 $(2,622) (1.5)% $372,911
 $375,997
 $(3,086) (0.8)%$184,486
 $173,438
 $11,048
 6.4 % $557,397
 $549,435
 $7,962
 1.4 %
Gross profit80,380
 86,050
 (5,670) (6.6)% 166,708
 174,855
 (8,147) (4.7)%80,113
 81,586
 (1,473) (1.8)% 246,821
 256,441
 (9,620) (3.8)%
Operating profit22,734
 29,157
 (6,423) (22.0)% 44,247
 44,587
 (340) (0.8)%21,830
 26,278
 (4,448) (16.9)% 66,077
 70,865
 (4,788) (6.8)%
Change in same store revenue      6.0 %       7.7 %      6.2 %       7.2 %
Stores in same store revenue calculation      695
       765      718
       820
Revenues. Revenues for the three and sixnine months ended JuneSeptember 30, 2019 decreasedincreased compared to 2018, driven primarily by store closures, offset bydue to the acquisition of Merchants Preferred and an increase in same store sales.
Gross Profit. Gross profit decreased for the three and sixnine months ended JuneSeptember 30, 2019, compared to 2018, primarily due to our strategy to enhance our value proposition. Gross profit as a percentage of segment revenues decreased to 45.6%43.4% and 44.7%44.3% for the three and sixnine months ended JuneSeptember 30, 2019, compared to 48.1%47.0% and 46.5%46.7% for the respective periods in 2018.
Operating Profit. Operating profit decreased by 22.0%16.9% and 0.8%6.8% for the three and sixnine months ended JuneSeptember 30, 2019, respectively, as compared to 2018. The decreases in operating profit for the three and sixnine months ended JuneSeptember 30, 2019 were primarily due to increases in labor and other store expenses and increased merchandise losses. Charge-offs in our Acceptance Now locations due to customer stolen merchandise, expressed as a percentage of revenues, were approximately 9.6%8.9% and 9.8%9.5% for the three and six


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nine months ended JuneSeptember 30, 2019, compared to 7.7% and 8.2%8.3% for the respective periods in 2018. Charge-offs in our Acceptance Now locations due to other merchandise losses, expressed as a percentage of revenues, were approximately 0.2%0.5% and 0.3% for the three and sixnine months ended JuneSeptember 30, 2019, compared to 1.0%0.9% and 0.8% in 2018.
Mexico segment
Three Months Ended     Six Months Ended    Three Months Ended     Nine Months Ended    
June 30, Change June 30, ChangeSeptember 30, Change September 30, Change
(dollar amounts in thousands)2019 2018 $ % 2019 2018 $ %2019 2018 $ % 2019 2018 $ %
Revenues$13,551
 $12,307
 $1,244
 10.1% $26,896
 $24,338
 $2,558
 10.5%$13,370
 $12,784
 $586
 4.6% $40,266
 $37,122
 $3,144
 8.5%
Gross profit9,411
 8,549
 862
 10.1% 18,680
 16,871
 1,809
 10.7%9,286
 8,885
 401
 4.5% 27,966
 25,756
 2,210
 8.6%
Operating profit1,474
 887
 587
 66.2% 2,693
 1,384
 1,309
 94.6%1,213
 922
 291
 31.6% 3,906
 2,306
 1,600
 69.4%
Change in same store revenue      10.2%       11.6%      8.1%       10.4%
Stores in same store revenue calculation      108
       108
      108
       108
Revenues. Revenues for the three and nine months ended JuneSeptember 30, 2019 were positivelynegatively impacted by exchange rate fluctuations of approximately $0.2$0.3 million while revenues for the six months ended June 30, 2019 were minimally impacted by exchange rate fluctuations, as compared to the same periods in 2018. On a constant currency basis, revenues for the three and sixnine months ended JuneSeptember 30, 2019 increased approximately $1.0$0.9 million and $2.6$3.4 million, respectively.
Gross Profit. Gross profit for the three and nine months ended JuneSeptember 30, 2019 was positivelynegatively impacted by exchange rate fluctuations of approximately $0.1$0.2 million while gross profit for the six months ended June 30, 2019 was minimally impacted by exchange rate fluctuations, as compared to the same periods in 2018. On a constant currency basis, gross profit for the three and nine months ended September 30, 2019 increased by approximately $0.8$0.6 million for the three months ended June 30, 2019 and $1.8$2.4 million, for the six months ended June 30, 2019, compared to the same period in 2018.respectively. Gross profit as a percentage of segment revenues was 69.4% and 69.5% for the three and sixnine months ended JuneSeptember 30, 2019, compared to 69.5% and 69.3%69.4% for the respective periods in 2018.
Operating Profit. Operating profit for the three and sixnine months ended JuneSeptember 30, 2019 was minimally impacted by exchange rate fluctuations compared to 2018. Operating profit as a percentage of segment revenues increased to 10.9%was 9.1% and 10.0%9.7% for the three and sixnine months ended JuneSeptember 30, 2019, from 7.2% and 5.7%6.2% for the respective period in 2018, driven primarily by cost savings initiatives.
Franchising segment
Three Months Ended     Six Months Ended    Three Months Ended     Nine Months Ended    
June 30, Change June 30, ChangeSeptember 30, Change September 30, Change
(dollar amounts in thousands)2019 2018 $ % 2019 2018 $ %2019 2018 $ % 2019 2018 $ %
Revenues$14,889
 $8,692
 $6,197
 71.3 % $27,659
 $15,677
 $11,982
 76.4%$15,018
 $7,400
 $7,618
 102.9% $42,677
 $23,077
 $19,600
 84.9%
Gross profit4,409
 4,068
 341
 8.4 % 9,038
 7,678
 1,360
 17.7%3,716
 3,498
 218
 6.2% 12,754
 11,176
 1,578
 14.1%
Operating profit1,803
 1,909
 (106) (5.6)% 3,581
 3,165
 416
 13.1%1,135
 522
 613
 117.4% 4,716
 3,687
 1,029
 27.9%
Revenues. Revenues increased for the three and sixnine months ended JuneSeptember 30, 2019 compared to the respective period in 2018, primarily due to an increase in franchise locations as a result of our refranchising initiative resulting in higher merchandise sales.
Gross Profit. Gross profit as a percentage of segment revenues decreased to 29.6%24.7% and 32.7%29.9% for the three and sixnine months ended JuneSeptember 30, 2019, respectively, from 46.8%47.3% and 49.0%48.4% for the respective periods in 2018, primarily due to changes in our revenue mix of franchise royalties & fees and rental merchandise sales, related to the increase in franchise locations described above.
Operating Profit. Operating profit as a percentage of segment revenues decreased for the three and sixnine months ended JuneSeptember 30, 2019 to 12.1%7.6% and 12.9%11.1%, compared to 22.0%7.1% and 20.2%16.0% for the respective periods in 2018, primarily due to the decline in gross profit described above.
Liquidity and Capital Resources
Overview. For the sixnine months ended JuneSeptember 30, 2019, we generated $185.4$228.1 million in operating cash flow, including approximately $80 million of net pre-tax proceeds from the Vintage Settlement. We hadpaid down debt by $282.7 million and used cash in the amount of $28.7 million for acquisitions of businesses, and $12.0 million for capital expenditures. In addition, we received proceeds from the sale of property assets of $13.8$16.9 million, and used cash in the amount of $5.1 million for capital expenditures, ending the six-monthnine-month period with $353.1$73.7 million of cash and cash equivalents.


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Analysis of Cash Flow. Cash provided by operating activities increased $42.5$44.2 million to $185.4$228.1 million for the sixnine months ended JuneSeptember 30, 2019, from $142.9$183.9 million in 2018. This was primarily attributable to receipt of the Vintage Settlement Proceeds, partially offset by an increase in rental merchandise purchases during the sixnine months ended JuneSeptember 30, 2019 compared to the same period in 2018.
Cash provided byused in investing activities increased approximately $11.2$14.7 million to $9.5$22.8 million for the sixnine months ended JuneSeptember 30, 2019, from $(1.7)$8.1 million in 2018, due primarily to a decrease inthe acquisition of Merchants Preferred, partially offset by lower capital expenditures and proceeds from store sales.expenditures.
Cash provided byused in financing activities was $2.4$287.1 million for the sixnine months ended JuneSeptember 30, 2019, compared to $(97.5)$138.5 million in 2018, a change of $99.9$148.6 million, primarily driven by debt repayments of $98.2$282.7 million infor the first half ofnine months ended September 30, 2019, as compared to $139.3 million for the comparable period in 2018.
Liquidity Requirements. Our primary liquidity requirements are for rental merchandise purchases. Other capital requirements include expenditures for property assets and debt service. Our primary sources of liquidity have been cash provided by operations. In addition, on August 5, 2019, we terminated our Prior Revolving Facility and entered into a new $300 million ABL Credit Facility and a $200 million senior secured term loan facility. Should we require additional funding sources, we have access to themaintain revolving credit facilities, including a $300 million ABL Credit Facility, which we expect to use, as we did the Prior RevolvingFacility. We utilize our ABL 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 ABL 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. 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 cash flow generated from operations and availability under our ABL Credit Facility, will be sufficient to fund our operations during the next 12 months. At October 29, 2019, we had approximately $80.7 million in cash on hand and $148.0 million available under our ABL Credit Agreement at September 30, 2019.
Deferred Taxes. Certain federal tax legislation enacted during the period 2009 to 2017 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. The Protecting Americans from Tax Hikes Act of 2015 ("PATH") extended the 50% bonus depreciation to 2015 and through September 26, 2017, when it was updated by the Tax Act. The Tax Act allows 100% bonus depreciation for certain property placed in service between September 27, 2017 and December 31, 2022, at which point it will begin to phase out. The bonus depreciation provided by the Tax Act resulted in an estimated benefit of $174 million for us in 2018. We estimate the remaining tax deferral associated with bonus depreciation from the Tax Act is approximately $207 million at December 31, 2018, of which approximately 78%, or $161 million, will reverse in 2019, and the majority of the remainder will reverse between 2020 and 2021. The reversal of these benefits could result in the use of additional capital resources for cash taxes in future periods.
Merchandise Losses. Merchandise losses consist of the following:
Three Months Ended June 30, Six Months Ended June 30,Three Months Ended September 30, Nine Months Ended September 30,
(in thousands)2019 2018 2019 20182019 2018 2019 2018
Customer stolen merchandise$33,443
 $29,738
 $73,189
 $64,610
$37,110
 $32,613
 $110,299
 $97,223
Other merchandise losses (1)
5,467
 9,675
 12,304
 17,854
6,776
 8,404
 19,080
 26,258
Total merchandise losses$38,910
 $39,413
 $85,493
 $82,464
$43,886
 $41,017
 $129,379
 $123,481
(1) 
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 for new capital assets in new and acquired stores, and investments in information technology. We spent $5.1$12.0 million and $15.7$22.5 million on capital expenditures during the sixnine months ended JuneSeptember 30, 2019 and 2018, respectively.
Acquisitions and New Location Openings. DuringOn August 13, 2019, we completed the previously announced acquisition of substantially all of the assets, including approximately 2,500 locations, of C/C Financial Corp d/b/a Merchants Preferred ("Merchants Preferred"), a nationwide virtual rent-to-own provider, for total consideration of approximately $46.6 million. In addition, during the first sixnine months of 2019, we acquired twothree new locations and customer accounts for an aggregate purchase price of approximately $0.1$0.3 million in one transaction.two transactions.


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The table below summarizes the location activity for the six-monthnine-month period ended JuneSeptember 30, 2019.
Core U.S. Acceptance Now Staffed Acceptance Now Virtual Mexico Franchising TotalCore U.S. Acceptance Now Staffed 
Acceptance Now Virtual (1)
 Mexico Franchising Total
Locations at beginning of period2,158
 1,106
 96
 122
 281
 3,763
2,158
 1,106
 96
 122
 281
 3,763
New location openings
 81
 8
 
 
 89

 95
 10
 
 1
 106
Conversions and refranchising(57) (37) 37
 
 57
 
(64) (56) 56
 
 64
 
Closed locations                      
Merged with existing locations(63) (119) (29) 
 
 (211)(80) (136) (34) 
 
 (250)
Sold or closed with no surviving location(3) 
 
 
 (4) (7)(3) 
 
 
 (7) (10)
Locations at end of period2,035
 1,031
 112
 122
 334
 3,634
2,011
 1,009
 128
 122
 339
 3,609
Acquired locations closed and accounts merged with existing locations2
 
 
 
 
 2
3
 
 
 
 
 3
Total approximate purchase price of acquired stores (in millions)
$0.1
 $
 $
 $
 $
 $0.1
$0.3
 $
 $
 $
 $
 $0.3
(1) Does not include Merchants Preferred locations acquired in August 2019, or any new Merchants Preferred locations opened in the third quarter of 2019.
Senior Debt. As discussed in Note 57 to the condensed consolidated financial statements, on August 5, 2019, we completed the Refinancing of our Prior Revolving Facility and irrevocably deposited the amount necessary to redeem in full our unsecured senior notes using cash on hand and proceeds from our new $300 million revolving credit facility and $200 million term loan facility. We may use, subject to certain limitations and borrowing availability, $150 million of the new revolving credit facility for the issuance of letters of credit, of which $92 million had been so utilized as of August 5,October 29, 2019.
Store Leases. We lease space for all of our Core U.S. and Mexico stores under operating leases expiring at various times through 2024. 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.
Contractual Cash Commitments. The table below summarizes debt, lease and other minimum cash obligations outstanding as of JuneSeptember 30, 2019:
Payments Due by PeriodPayments Due by Period
(in thousands)Total 2019 2020-2021 2022-2023 ThereafterTotal 2019 2020-2021 2022-2023 Thereafter
6.625% Senior Notes(1)
$321,831
 $9,697
 $312,134
 $
 $
4.75% Senior Notes(2)
273,750
 5,937
 267,813
 
 
Term Loan(1)
$200,000
 $500
 $4,000
 $4,000
 $191,500
ABL Credit Agreement(2)
60,000
 
 
 
 60,000
Operating Leases306,882
 61,288
 176,528
 63,173
 5,893
306,078
 30,741
 188,520
 74,841
 11,976
Total(4)(3)
$902,463
 $76,922
 $756,475
 $63,173
 $5,893
$566,078
 $31,241
 $192,520
 $78,841
 $263,476
(1) 
IncludesDoes not include interest payments of $9.7 millionpayments. Our Term Loan bears interest at varying rates equal to the Eurodollar rate plus 4.50%. The Eurodollar rate on each May 15 and November 15 of each year.our Term Loans at September 30, 2019, was 6.63%.
(2) 
IncludesDoes not include interest payments of $5.9 millionpayments. Our ABL Credit Agreement bears interest at varying rates equal to the Eurodollar rate plus 1.50% to 2.00%. The weighted average Eurodollar rate on each May 1 and November 1 of each year.our ABL Credit Agreement at September 30, 2019, was 3.63%.
(3) 
As of JuneSeptember 30, 2019, we have recorded $35.6$26.0 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.
(4)
On July 15, 2019, Rent-A-Center instructed the trustee under the indentures governing the 6.625% and 4.75% senior notes to issue a conditional notice of full redemption to the holders of the outstanding 6.625% and 4.75% senior notes. On August 5, 2019, in connection with the Refinancing, Rent-A-Center irrevocably deposited the redemption price for the 6.625% and 4.75% senior notes with the trustee, and the indentures were satisfied and discharged. The 6.625% and 4.75% senior notes will be redeemed on August 15, 2019, at a price equal to 100% of their principal amount plus accrued and unpaid interest to, but excluding, the redemption date. As a result, Rent-A-Center and its subsidiary guarantors have been released from their respective obligations under the 6.625% and 4.75% senior notes as of August 5, 2019.
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. Generally, our customers will more frequently exercise the early purchase option on their existing rental purchase agreements or purchase pre-leased merchandise off the showroom floor during the first quarter of each fiscal year, primarily due to the receipt of federal income tax refunds.
New Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires immediate recognition of estimated current expected credit losses, rather than recognition when incurred. The adoption of ASU 2016-13 will be required for us beginning January 1, 2020, with early adoption permitted.2020. Adoption is required using a modified retrospective approach with a cumulative-effect adjustment to retained earnings in the year of adoption. We believe application of this ASU is limited to our installment notes receivables and trade receivables with our franchisees, primarily related to merchandise sales. Based on the limited scope in which we believe this ASU applies to our business, we do not expect the impact of adoption to be material to our financial statements. However, we are currentlystill in the process of determiningevaluating the potential impact the adoption of this ASU will have on our installment notes receivables. We do notnew pronouncement and expect to early adopt this ASU.complete our evaluation by the end of 2019.


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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.2020. We are currently determining what impact the adoption ofdo not believe this ASU will have a material impact on our financial statements upon adoption.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which removes, modifies, and adds certain disclosure requirements in ASC 820, to improve the effectiveness of the fair value measurement disclosures. The adoption of ASU 2018-13 will be required for us beginning January 1, 2020, with early adoption permitted.2020. We are currently in the process of determining the impact the adoption ofdo not believe this ASU will have a material impact on our financial statements. We do not anticipate early adopting this ASU.statements upon adoption.
In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40); Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement, which requires implementation costs incurred by customers in cloud computing arrangements (CCAs) to be deferred and recognized over the term of the arrangement, if those costs would be capitalized by the customer in a software licensing agreement under the internal-use software guidance in ASC 350-40. The adoption of ASU 2018-15 will be required for us beginning January 1, 2020, with early adoption permitted.2020. We are currently in the process of determining our adoption date and what impact the adoption ofdo not believe this ASU will have a material impact on our financial statements.statements upon adoption.
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, 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Interest Rate Sensitivity
As of JuneSeptember 30, 2019, we had $292.7$200.0 million outstanding in senior notesTerm Loan Credit Agreement and $60.0 million outstanding under our ABL Credit Agreement, each at a fixed interest rates indexed to the Eurodollar rate of 6.625%, and $250.0 million in senior notes outstanding at a fixed interest rate of 4.75%. Theor the prime rate. Carrying value approximates fair value of the 6.625% senior notes, based on the closing price at June 30, 2019, was $292.7 million. The fair value of the 4.75% senior notes, based on the closing price at June 30, 2019, was $248.8 million. The outstanding senior notes will be redeemed on August 15, 2019, at a price equal to 100% of their principal amount plus accrued and unpaid interest to, but excluding, the redemption date. As a result, Rent-A-Center and its subsidiary guarantors have been released from their respective obligations under the 6.625% and 4.75% senior notes as of August 5, 2019.for this 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
InterestWe have outstanding debt with variable interest rates on borrowings under our Credit Agreement are variable, indexed to prime or Eurodollar rates that exposeexposes us to the risk of increased interest costs if interest rates rise. As of JuneSeptember 30, 2019, we have not entered into any interest rate swap agreements. Based on our overall interest rate exposure at August 5,September 30, 2019, a hypothetical 1.0% increase or decrease in market interest rates would have the effect of causing a $2.8$2.6 million additional annualized pre-tax charge or credit to our consolidated statement of operations.
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.


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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 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 Chief Financial Officer, concluded that, as of JuneSeptember 30, 2019, 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.


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RENT-A-CENTER, INC. AND SUBSIDIARIES


Changes in internal controls over financial reporting. ForIn August 2019, we acquired Merchants Preferred. We are currently in the process of integrating Merchants Preferred into our assessment of our internal control over financial reporting. Because Merchants Preferred does not constitute a significant portion of our operations on a consolidated basis, we do not currently expect this integration effort to have a material effect on our internal control over financial reporting. Management's assessment and conclusions on the effectiveness of our disclosure controls and procedures as of September 30, 2019 excludes an assessment of the internal control over financial reporting of Merchants Preferred.
Other than as described above, for the quarter ended JuneSeptember 30, 2019, 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.


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RENT-A-CENTER, INC. AND SUBSIDIARIES


PART II – Other Information
Item 1. Legal Proceedings
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. Following a court-ordered mediation on March 28, 2019, we reached an agreement in principle to settle this matter for a total of $13 million, including attorneys’ fees. The settlement is in the documentation process and is subject to approvalwas approved by the court.court in October 2019. We have denied any liability in the settlement and agreed to the settlement in order to avoid additional expensive, time-consuming litigation. We recorded the impact ofpre-tax charge for this settlement in the first quarter of 2019.
Vintage Rodeo Parent, LLC, Vintage Rodeo Acquisition, Inc.2019, and Vintage Capital Management, LLC, and B. Riley Financial, Inc. v. Rent-A-Center, Inc. As announced on April 22, 2019, we agreed to settle all litigation with Vintage Capital and B. Riley relating to our termination of the Merger Agreement. In the Vintage Settlement, we received a payment of $92.5 millionsettlement amount will be paid in cash in MayNovember 2019. The Vintage Settlement was recorded as a pre-tax gain upon receipt.
Velma Russell v. Acceptance Now. This purported class action arising out of calls made by Acceptance Now to customers’ reference (s) was filed on January 29, 2019 in Massachusetts state court. Specifically, plaintiffs seek to certify a class representing any references of customers (within the state of Massachusetts) during the 4 years prior to the filing date that were contacted by Acceptance Now more frequently during a 12 month period than is permitted by Massachusetts state law. The plaintiffs are seeking injunctive relief and statutory damages of $25 per reference which may be tripled to $75 per reference. References are not parties to our consumer arbitration agreement.
We operate 12 Acceptance Now locations in Massachusetts. Discovery has commenced and a mediation took place in September 2019. We intend to continue to vigorously defend these claims;claims, however, we cannot assure you that we will be found to have no liability in this matter.
Federal Trade Commission civil investigative demand. In April 2019, along with other rent to ownrent-to-own companies, we received a civil investigative demand from the Federal Trade Commission ("FTC") seeking information regarding certain transactions involving the purchase and sale of customer lease agreements, and whether such transactions violated the FTC Act. Although we believe such transactions were in compliance with the FTC Act, this inquiry could lead to an enforcement action and/or a consent order, and substantial costs. The Company ishas provided substantial information in the process of respondingresponse to this inquiry fromand continues to work with the FTC.FTC to resolve this matter.
Item 1A. Risk Factors
There have been no material changes to the risk factors disclosed in Item 1A of Part 1, "Risk Factors," in our Form 10-K for the year ended December 31, 2018, except that we completed the Refinancing.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
On August 5, 2019 (the “Closing Date”), we entered into (i) a Term Loan Credit Agreement (the “Term Loan Credit Agreement”) providing for a seven-year $200 million senior secured term loan facility, among the Company, the several lenders from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent, and (ii) an ABL Credit Agreement (the “ABL Credit Agreement” and, together with the Term Loan Credit Agreement, the “Credit Agreements”) providing a five-year asset-based revolving credit facility (the “ABL Credit Facility”) with commitments of $300 million, among the Company, the several lenders from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent.
On the Closing Date, the Company borrowed the full $200 million of initial term loans available under the Term Loan Credit Agreement and drew $80 million under its ABL Credit Agreement. The proceeds of the borrowings on the Closing Date were used (i) to prepay in full and terminate commitments under the Company’s existing Credit Agreement, dated as of March 19, 2014 (as amended prior to the date of the refinancing), among the Company, the several lenders from time to time party thereto and JPMorgan Chase Bank, N.A., (ii) to satisfy and discharge the Company’s (x) 6.625% Senior Notes due 2020 (the “6.625% Notes”), issuedNone.


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RENT-A-CENTER, INC. AND SUBSIDIARIES


under the Company’s Indenture, dated as of November 2, 2010, among the Company, the guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee, and (y) 4.75% Senior Notes due 2021 (the “4.75% Notes” and, together with the 6.625% Notes, the “Notes”), issued under the Company’s Indenture, dated as of May 2, 2013, among the Company, the guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee, and (iii) for general corporate purposes. On August 15, 2019, all issued and outstanding Notes will be redeemed pursuant to the terms thereof.
Term Loan Credit Agreement
The Term Loan Credit Agreement will mature on August 5, 2026. The Term Loan Credit Agreement will amortize in equal quarterly installments at a rate of 1.00% per annum of the original principal amount thereof, with the remaining balance due at final maturity. Interest on the Term Loan Credit Agreement will accrue at the Eurodollar rate plus an applicable margin equal to 4.50%.
The Term Loan Credit Agreement permits the Company to prepay the term loans, in whole or in part, without penalty on or after the six-month anniversary of the Closing Date. It also permits the Company to incur incremental term loans in an aggregate amount equal to $150 million plus the amount of voluntary prepayments of the term loans and an unlimited amount subject to a pro forma consolidated senior secured leverage ratio of not greater than 2.00 to 1.00, subject to certain other conditions.
The obligations under the Term Loan Credit Agreement are guaranteed certain of the Company’s subsidiaries. The Term Loan Credit Agreement and the guarantees are secured on a first-priority basis by substantially all of the tangible and intangible assets of the Company and the guarantors, other than collateral subject to a first-priority lien under the ABL Credit Agreement, consisting of, among other things, accounts receivable, inventory and bank accounts (and funds on deposit therein), in which the Term Loan Credit Agreement and the guarantees have a second-priority security interest, in each case, subject to certain exceptions.
The Term Loan Credit Agreement contains covenants that are usual and customary for facilities and transactions of this type and that, among other things, restrict the ability of the Company and its restricted subsidiaries to:
create certain liens and enter into certain sale and lease-back transactions;
create, assume, incur or guarantee certain indebtedness;
pay dividends or make other distributions on, or repurchase or redeem, the Company’s capital stock or certain other debt;
make other restricted payments; and
consolidate or merge with, or convey, transfer or lease all or substantially all of the Company’s and its restricted subsidiaries’ assets, to another person.
These covenants are subject to a number of other limitations and exceptions set forth in the Term Loan Credit Agreement.
The Term Loan Credit Agreement provides for customary events of default, including, but not limited to, failure to pay principal and interest, failure to comply with covenants, agreements or conditions, and certain events of bankruptcy or insolvency involving the Company and its significant subsidiaries.
ABL Credit Agreement
The ABL Credit Facility will mature on August 5, 2024. The Borrowers may borrow only up to the lesser of the level of the then-current borrowing base and the committed maximum borrowing capacity of $300 million. Interest is payable on the ABL Credit Facility at a fluctuating rate of interest determined by reference to the Eurodollar rate plus an applicable margin of 1.50% to 2.00%. 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 ABL Credit Agreement.
Letters of credit are limited to the lesser of (x) $150 million, subject to certain limitations, and (y) the aggregate unused availability then in effect.
Subject to certain conditions, the ABL Credit Facility may be expanded by up to $100 million in additional commitments, subject to a pro forma fixed charge coverage ratio being greater than 1.10 to 1.00.
The obligations under the ABL Credit Agreement are guaranteed by the Company and certain of the Company’s subsidiaries. The ABL Credit Agreement and the guarantees are secured on a first-priority basis on all accounts receivable, inventory and bank accounts (and funds on deposit therein) of the Company and the guarantors and a second-priority basis on all of the tangible and intangible assets (second in priority to the liens securing the Term Loan Credit Agreement) of such persons, in each case, subject to certain exceptions.
The ABL Credit Agreement contains covenants that are usual and customary for facilities and transactions of this type and are substantially the same as covenants in the Term Loan Credit Agreement. The ABL Credit Facility also requires the maintenance of a Consolidated Fixed Charge Coverage Ratio (as defined in the ABL Credit Agreement) of 1.10 to 1.00 at the end of each fiscal


32


RENT-A-CENTER, INC. AND SUBSIDIARIES


quarter when either (i) certain specified events of default have occurred and are continuing or (ii) availability is less than or equal to the greater of $33.75 million and 15% of the line cap then in effect.
The ABL Credit Agreement provides for customary events of default that are substantially the same as events of default in the Term Loan Credit Agreement.


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RENT-A-CENTER, INC. AND SUBSIDIARIES


Item 6. Exhibits.
Exhibit No.Description
  
2.1
  
2.2
  
3.1
  
3.2
  
3.3
  
3.4
  
4.1
  
4.2
  
4.3
  
4.4
  
10.1†
  
10.2
  
10.3†
  
10.4†
  
10.5†
  
10.6†
  


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RENT-A-CENTER, INC. AND SUBSIDIARIES


10.7†
  
10.8†
  
10.9†
  
10.10†
  
10.11†
  
10.12†
  
10.13†
  
10.14†
  
10.15†
  
10.16†
  
10.17†
  
10.18†
  
10.19†
  
10.20†
  
10.21†
  
10.22
  
10.23†
  
10.24
  
10.25


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RENT-A-CENTER, INC. AND SUBSIDIARIES


  
10.26
  
10.27
  
10.28
  
10.29
  
10.30†
  
10.31†
  
10.32†
  
10.33
  
10.34
  
10.35
  
10.36
  
10.37
  
10.38
  
10.39
  
10.40
  


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RENT-A-CENTER, INC. AND SUBSIDIARIES


10.41
  
10.42*(1)
10.42
  
10.43*(1)
10.43
  
10.44*(1)
10.44
  
10.45*(1)
10.45
  
18.1
  
21.1
  
31.1*
  
31.2*
  
32.1*
  
32.2*
  
101.INS*XBRL Instance Document - The instance document does not appear in the interactive data files because its XBRL tags are embedded within the inline XBRL document
  
101.SCH*XBRL Taxonomy Extension Schema Document
  
101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document
  
101.DEF*XBRL Taxonomy Extension Definition Linkbase Document
  
101.LAB*XBRL Taxonomy Extension Label Linkbase Document
  
101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document
Management contract or compensatory plan or arrangement.
*Filed herewith.
(1)
Schedules and similar attachments have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant hereby undertakes to furnish copies of such omitted materials supplementally upon request by the SEC.



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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
   
 RENT-A-CENTER, INC.
  
 By:
/S/    MAUREEN B. SHORT      
  Maureen B. Short
  EVP, Chief Financial Officer
Date: August 8,November 7, 2019




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