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 September 30, 20202021
or 
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission File Number: 001-38047
Rent-A-Center, Inc.
(Exact name of registrant as specified in its charter)
Delaware45-0491516
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification No.)
5501 Headquarters Drive
Plano, Texas 75024
(Address, including zip code of registrant’s principal executive offices)
Registrant’s telephone number, including area code: 972-801-1100
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common stock, $.01 par valueRCIIThe Nasdaq Stock Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes ☒    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☐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 October 22, 2020:
29, 2021:
ClassOutstanding
Common stock, $.01 par value54,170,46666,140,238



TABLE OF CONTENTS
  Page No.
1
2
Condensed Consolidated Balance Sheets as of September 30, 20202021 and December 31, 20192020
3
4
6
7
2124
3236
3337
3337
3337
3337
Defaults Upon Senior Securities
3337
3338
3438
3539
 


i

Item 1. Condensed Consolidated Financial Statements.
RENT-A-CENTER, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
(In thousands, except per share data)
Revenues
Store
Rentals and fees$579,573 $550,795 $1,682,310 $1,665,829 
Merchandise sales91,233 65,552 300,693 240,864 
Installment sales16,580 16,952 48,970 49,658 
Other844 1,054 2,341 2,962 
Total store revenues688,230 634,353 2,034,314 1,959,313 
Franchise
Merchandise sales19,069 11,178 49,553 30,307 
Royalty income and fees4,716 3,840 13,833 12,370 
Total revenues712,015 649,371 2,097,700 2,001,990 
Cost of revenues
Store
Cost of rentals and fees167,027 161,971 489,606 473,001 
Cost of merchandise sold95,177 70,575 296,894 250,000 
Cost of installment sales5,713 5,527 16,830 16,133 
Total cost of store revenues267,917 238,073 803,330 739,134 
Franchise cost of merchandise sold19,070 11,302 49,632 29,923 
Total cost of revenues286,987 249,375 852,962 769,057 
Gross profit425,028 399,996 1,244,738 1,232,933 
Operating expenses
Store expenses
Labor150,493 158,666 434,216 473,221 
Other store expenses140,818 150,366 463,292 463,385 
General and administrative expenses41,576 34,364 113,694 105,822 
Depreciation and amortization13,810 14,894 43,071 45,788 
Other (gains) and charges(1,856)2,859 7,768 (41,308)
Total operating expenses344,841 361,149 1,062,041 1,046,908 
Operating profit80,187 38,847 182,697 186,025 
Debt refinancing charges0 2,168 0 2,168 
Interest expense3,350 6,733 11,958 26,214 
Interest income(152)(85)(561)(2,956)
Earnings before income taxes76,989 30,031 171,300 160,599 
Income tax expense (benefit)12,959 (1,246)19,485 27,544 
Net earnings$64,030 $31,277 $151,815 $133,055 
Basic earnings per common share$1.19 $0.57 $2.80 $2.46 
Diluted earnings per common share$1.15 $0.56 $2.73 $2.39 
 Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
(In thousands, except per share data)
Revenues
Store
Rentals and fees$930,849 $579,573 $2,592,788 $1,682,310 
Merchandise sales192,016 91,233 646,038 300,693 
Installment sales17,028 16,580 52,992 48,970 
Other1,082 844 3,035 2,341 
Total store revenues1,140,975 688,230 3,294,853 2,034,314 
Franchise
Merchandise sales33,671 19,069 96,342 49,553 
Royalty income and fees6,622 4,716 20,830 13,833 
Total revenues1,181,268 712,015 3,412,025 2,097,700 
Cost of revenues
Store
Cost of rentals and fees344,623 167,027 912,531 489,606 
Cost of merchandise sold228,024 95,177 717,983 296,894 
Cost of installment sales6,291 5,713 18,566 16,830 
Total cost of store revenues578,938 267,917 1,649,080 803,330 
Franchise cost of merchandise sold33,570 19,070 96,190 49,632 
Total cost of revenues612,508 286,987 1,745,270 852,962 
Gross profit568,760 425,028 1,666,755 1,244,738 
Operating expenses
Store expenses
Labor163,945 150,493 479,989 434,216 
Other store expenses189,553 140,818 540,698 463,292 
General and administrative expenses45,958 41,576 149,468 113,694 
Depreciation and amortization13,835 13,810 40,794 43,071 
Other charges (gains)88,323 (1,856)212,095 7,768 
Total operating expenses501,614 344,841 1,423,044 1,062,041 
Operating profit67,146 80,187 243,711 182,697 
Debt refinancing charges6,839 — 15,582 — 
Interest expense19,742 3,350 52,167 11,958 
Interest income(30)(152)(148)(561)
Earnings before income taxes40,595 76,989 176,110 171,300 
Income tax expense19,328 12,959 50,982 19,485 
Net earnings$21,267 $64,030 $125,128 $151,815 
Basic earnings per common share$0.36 $1.19 $2.17 $2.80 
Diluted earnings per common share$0.31 $1.15 $1.85 $2.73 
Cash dividends declared per common share$0.31 $0.29 $0.93 $0.87 
See accompanying notes to condensed consolidated financial statements.

1

RENT-A-CENTER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
(In thousands)
Net earnings$64,030 $31,277 $151,815 $133,055 
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax of $162 and $(91), $(872) and $(11) for the three and nine months ended September 30, 2020 and 2019, respectively609 (344)(3,280)(40)
Total other comprehensive income (loss)609 (344)(3,280)(40)
Comprehensive income$64,639 $30,933 $148,535 $133,015 
 Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
(In thousands)
Net earnings$21,267 $64,030 $125,128 $151,815 
Other comprehensive (loss) income:
Foreign currency translation adjustments, net of tax of $(251) and $162, $(240) and $(872) for the three and nine months ended September 30, 2021 and 2020, respectively(944)609 (901)(3,280)
Total other comprehensive (loss) income(944)609 (901)(3,280)
Comprehensive income$20,323 $64,639 $124,227 $148,535 
See accompanying notes to condensed consolidated financial statements.

2

RENT-A-CENTER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)
September 30, 2020December 31, 2019
(In thousands, except share and par value data)Unaudited
ASSETS
Cash and cash equivalents$227,398 $70,494 
Receivables, net of allowance for doubtful accounts of $7,916 and $5,601 in 2020 and 2019, respectively75,471 84,123 
Prepaid expenses and other assets40,172 46,043 
Rental merchandise, net
On rent680,955 697,270 
Held for rent119,903 138,418 
Merchandise held for installment sale4,287 4,878 
Property assets, net of accumulated depreciation of $550,958 and $522,826 in 2020 and 2019, respectively145,298 166,138 
Operating lease right-of-use assets280,845 281,566 
Deferred tax asset14,889 14,889 
Goodwill70,217 70,217 
Other intangible assets, net8,130 8,762 
Total assets$1,667,565 $1,582,798 
LIABILITIES
Accounts payable – trade$176,304 $168,120 
Accrued liabilities305,919 275,777 
Operating lease liabilities283,784 285,041 
Deferred tax liability168,622 163,984 
Senior debt, net190,599 230,913 
Total liabilities1,125,228 1,123,835 
STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value; 250,000,000 shares authorized; 112,023,559 and 111,166,229 shares issued in September 30, 2020 and December 31, 2019, respectively1,103 1,110 
Additional paid-in capital878,965 869,617 
Retained earnings1,051,760 947,875 
Treasury stock at cost, 57,889,659 and 56,428,482 shares in September 30, 2020 and December 31, 2019, respectively(1,375,541)(1,348,969)
Accumulated other comprehensive loss(13,950)(10,670)
Total stockholders' equity542,337 458,963 
Total liabilities and stockholders' equity$1,667,565 $1,582,798 
September 30, 2021December 31, 2020
(In thousands, except share and par value data)
ASSETS
Cash and cash equivalents$158,830 $159,449 
Receivables, net of allowance for doubtful accounts of $7,964 and $8,047 in 2021 and 2020, respectively131,930 90,003 
Prepaid expenses and other assets51,480 50,006 
Rental merchandise, net
On rent1,121,038 762,886 
Held for rent147,755 146,266 
Merchandise held for installment sale7,134 5,439 
Property assets, net of accumulated depreciation of $542,328 and $505,074 in 2021 and 2020, respectively309,316 141,641 
Operating lease right-of-use assets298,263 283,422 
Deferred tax asset41,042 33,782 
Goodwill332,210 70,217 
Other intangible assets, net454,672 7,869 
Total assets$3,053,670 $1,750,980 
LIABILITIES
Accounts payable – trade$150,232 $186,063 
Accrued liabilities360,573 320,583 
Operating lease liabilities300,410 285,354 
Deferred tax liability106,819 176,410 
Senior debt, net846,060 190,490 
Senior notes, net435,497 — 
Total liabilities2,199,591 1,158,900 
STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value; 250,000,000 shares authorized; 124,375,880 and 112,180,517 shares issued in 2021 and 2020, respectively1,141 1,105 
Additional paid-in capital1,106,425 886,902 
Retained earnings1,154,386 1,091,010 
Treasury stock at cost, 58,227,367 and 57,891,859 shares in 2021 and 2020, respectively(1,395,576)(1,375,541)
Accumulated other comprehensive loss(12,297)(11,396)
Total stockholders' equity854,079 592,080 
Total liabilities and stockholders' equity$3,053,670 $1,750,980 
See accompanying notes to condensed consolidated financial statements.

3

RENT-A-CENTER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
 Common StockAdditional
Paid-In
Capital		Retained
Earnings		Treasury
Stock		Accumulated Other Comprehensive (Loss) IncomeTotal
SharesAmount
 (In thousands)
Balance at December 31, 2020112,181 $1,105 $886,902 $1,091,010 $(1,375,541)$(11,396)$592,080 
Net earnings— — — 42,552 — — 42,552 
Other comprehensive loss— — — — — (853)(853)
Exercise of stock options330 3 8,941 — — — 8,944 
Vesting of restricted share units, net of shares withheld for employee taxes(1)
902 7 (20,910)— — — (20,903)
Stock-based compensation— — 20,148 — — — 20,148 
Dividends declared— — — (20,722)— — (20,722)
Acima acquisition10,780 27 120,914 — — — 120,941 
Balance at March 31, 2021124,193 1,142 1,015,995 1,112,840 (1,375,541)(12,249)742,187 
Net earnings— — — 61,309 — — 61,309 
Other comprehensive income— — — — — 896 896 
Exercise of stock options96 1 1,681 — — — 1,682 
Vesting of restricted share units, net of shares withheld for employee taxes58 1 — — — — 1 
Stock-based compensation— — 39,566 — — — 39,566 
Dividends declared— — — (20,477)— — (20,477)
Balance at June 30, 2021124,347 1,144 1,057,242 1,153,672 (1,375,541)(11,353)825,164 
 Net earnings— — — 21,267 — — 21,267 
 Other comprehensive loss— — — — — (944)(944)
 Purchase of treasury stock— (4)— — (20,035)— (20,039)
 Exercise of stock options29 1 741 — — — 742 
 Stock-based compensation— — 48,442 — — — 48,442 
 Dividends declared— — — (20,553)— — (20,553)
Balance at September 30, 2021124,376 $1,141 $1,106,425 $1,154,386 $(1,395,576)$(12,297)$854,079 
 Common StockAdditional
Paid-In
Capital		Retained
Earnings		Treasury
Stock		Accumulated Other Comprehensive (Loss) IncomeTotal
SharesAmount
 (In thousands)
Balance at December 31, 2019111,166 $1,110 $869,617 $947,875 $(1,348,969)$(10,670)$458,963 
Adoption of ASU 2016-13— — — (769)— — (769)
Net earnings— — — 49,292 — — 49,292 
Other comprehensive loss— — — — — (3,906)(3,906)
Purchase of treasury stock— (14)— — (26,511)— (26,525)
Exercise of stock options69 1 1,194 — — — 1,195 
Vesting of restricted share units434 4 (4)— — — 0 
Tax effect of stock awards vested and options exercised— — (5,270)— — — (5,270)
Stock-based compensation— — 3,043 — — — 3,043 
Balance at March 31, 2020111,669 $1,101 $868,580 $996,398 $(1,375,480)$(14,576)$476,023 
Net earnings— — — 38,493 — — 38,493 
Other comprehensive income— — — — — 17 17 
Exercise of stock options42 — 486 — — — 486 
Stock-based compensation— — 2,849 — — — 2,849 
Dividends declared— — — (31,292)— — (31,292)
Balance at June 30, 2020111,711 $1,101 $871,915 $1,003,599 $(1,375,480)$(14,559)$486,576 
Net earnings— — — 64,030 — — 64,030 
Other comprehensive income— — — — — 609 609 
Purchase of treasury stock— 0 — — (61)— (61)
Exercise of stock options226 2 4,053 — — — 4,055 
MP Acquisition Share Release87 0 0 — — — 0 
Stock-based compensation— — 2,997 — — — 2,997 
Dividends declared— — — (15,869)— — (15,869)
Balance at September 30, 2020112,024 $1,103 $878,965 $1,051,760 $(1,375,541)$(13,950)$542,337 
See accompanying notes(1)Includes shares released from escrow related to consolidated financial statements.the 2019 Merchant's Preferred acquisition.


4

RENT-A-CENTER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - (Continued)
(Unaudited)
Common StockAdditional
Paid-In
Capital		Retained
Earnings		Treasury
Stock		Accumulated Other Comprehensive Income (Loss)Total Common StockAdditional
Paid-In
Capital		Retained
Earnings		Treasury
Stock		Accumulated Other Comprehensive (Loss) IncomeTotal
SharesAmountSharesAmount
(In thousands) (In thousands) (In thousands)
Balance at December 31, 2018109,910 $1,099 $838,436 $805,924 $(1,347,677)$(11,265)$286,517 
ASC 842 adoption— — — (1,976)— — (1,976)
Balance at December 31, 2019Balance at December 31, 2019111,166 $1,110 $869,617 $947,875 $(1,348,969)$(10,670)$458,963 
ASC 326 adoptionASC 326 adoption— — — (769)— — (769)
Net earningsNet earnings— — — 49,292 — — 49,292 
Other comprehensive lossOther comprehensive loss— — — — — (3,906)(3,906)
Purchase of treasury stockPurchase of treasury stock— (14)— — (26,511)— (26,525)
Exercise of stock optionsExercise of stock options69 1 1,194 — — — 1,195 
Vesting of restricted share units, net of shares withheld for employee taxesVesting of restricted share units, net of shares withheld for employee taxes434 4 (5,274)— — — (5,270)
Stock-based compensationStock-based compensation— — 3,043 — — — 3,043 
Balance at March 31, 2020Balance at March 31, 2020111,669 $1,101 $868,580 $996,398 $(1,375,480)$(14,576)$476,023 
Net earningsNet earnings— — — 7,323 — — 7,323 Net earnings— — — 38,493 — — 38,493 
Other comprehensive incomeOther comprehensive income— — — — — 521 521 Other comprehensive income— — — — — 17 17 
Exercise of stock optionsExercise of stock options284 3 2,889 — — — 2,892 Exercise of stock options42 — 486 — — — 486 
Vesting of restricted share units218 2 (2)— — — 0 
Tax effect of stock awards vested and options exercised— — (1,734)— — — (1,734)
Stock-based compensationStock-based compensation— — 709 — — — 709 Stock-based compensation— — 2,849 — — — 2,849 
Balance at March 31, 2019110,412 $1,104 $840,298 $811,271 $(1,347,677)$(10,744)$294,252 
Dividends declaredDividends declared— — — (31,292)— — (31,292)
Balance at June 30, 2020Balance at June 30, 2020111,711 $1,101 $871,915 $1,003,599 $(1,375,480)$(14,559)$486,576 
Net earningsNet earnings— — — 94,455 — — 94,455 Net earnings— — — 64,030 — — 64,030 
Other comprehensive loss— — — — — (217)(217)
Other comprehensive incomeOther comprehensive income— — — — — 609 609 
Purchase of treasury stockPurchase of treasury stock— — — — (61)— (61)
Exercise of stock optionsExercise of stock options101 1 1,417 — — — 1,418 Exercise of stock options226 2 4,053 — — — 4,055 
Vesting of restricted share units49 — — — — — 0 
Stock-based compensation— — 1,982 — — — 1,982 
Balance at June 30, 2019110,562 $1,105 $843,697 $905,726 $(1,347,677)$(10,961)$391,890 
Net loss— — — 31,277 — — 31,277 
Other comprehensive loss— — — — — (344)(344)
Exercise of stock options105 1 1,502 — — — 1,503 
MP Acquisition Share ReleaseMP Acquisition Share Release87 — — — — — — 
Stock-based compensationStock-based compensation— — 1,952 — — — 1,952 Stock-based compensation— — 2,997 — — — 2,997 
Dividends DeclaredDividends Declared— — — (13,707)— — (13,707)Dividends Declared— — — (15,869)— — (15,869)
MP Acquisition439 4 19,165 — — — 19,169 
September 30, 2019111,106 $1,110 $866,316 $923,296 $(1,347,677)$(11,305)$431,740 
Balance at September 30, 2020Balance at September 30, 2020112,024 $1,103 $878,965 $1,051,760 $(1,375,541)$(13,950)$542,337 
See accompanying notes to consolidated financial statements.


5

RENT-A-CENTER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Nine Months Ended September 30,
 20202019
(In thousands)
Cash flows from operating activities
Net earnings$151,815 $133,055 
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation of rental merchandise471,530 455,143 
Bad debt expense10,959 11,591 
Stock-based compensation expense8,889 4,644 
Depreciation of property assets42,268 45,551 
Loss on sale or disposal of property assets1,067 278 
Amortization of intangibles810 237 
Amortization of financing fees1,186 2,574 
Write-off of debt financing fees0 2,168 
Deferred income taxes4,383 16,629 
Changes in operating assets and liabilities, net of acquired assets
Rental merchandise(435,722)(387,098)
Receivables(2,465)(11,891)
Prepaid expenses and other assets5,871 10,080 
Operating lease right-of-use assets and lease liabilities(536)5,305 
Accounts payable – trade8,184 (8,796)
Accrued liabilities27,987 (51,341)
Net cash provided by operating activities296,226 228,129 
Cash flows from investing activities
Purchase of property assets(22,557)(12,010)
Proceeds from sale of property assets196 16,922 
Hurricane insurance recovery proceeds158 995 
Acquisitions of businesses(700)(28,722)
Net cash used in investing activities(22,903)(22,815)
Cash flows from financing activities
Share repurchases(26,572)0 
Exercise of stock options5,737 5,813 
Shares withheld for payment of employee tax withholdings(5,270)(1,733)
Debt issuance costs0 (8,454)
Proceeds from debt198,000 285,400 
Repayments of debt(239,500)(568,140)
Dividends paid(47,329)0 
Net cash used in financing activities(114,934)(287,114)
Effect of exchange rate changes on cash(1,485)91 
Net increase (decrease) in cash and cash equivalents156,904 (81,709)
Cash and cash equivalents at beginning of period70,494 155,391 
Cash and cash equivalents at end of period$227,398 $73,682 
 Nine Months Ended September 30,
 20212020
(In thousands)
Cash flows from operating activities
Net earnings$125,128 $151,815 
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation of rental merchandise880,341 471,530 
Bad debt expense9,825 10,959 
Stock-based compensation expense108,156 8,889 
Depreciation of property assets49,335 42,268 
Loss on sale or disposal of property assets318 1,067 
Amortization of intangibles73,228 810 
Amortization of financing fees4,178 1,186 
Write-off of debt financing fees9,926 — 
Deferred income taxes32,752 4,383 
Changes in operating assets and liabilities, net of acquired assets
Rental merchandise(900,921)(435,722)
Receivables(21,286)(2,465)
Prepaid expenses and other assets(721)5,871 
Operating lease right-of-use assets and lease liabilities(339)(536)
Accounts payable – trade(51,853)8,184 
Accrued liabilities8,137 27,987 
Net cash provided by operating activities326,204 296,226 
Cash flows from investing activities
Purchase of property assets(45,876)(22,557)
Proceeds from sale of property assets3 196 
Hurricane insurance recovery proceeds— 158 
Acquisitions of businesses(1,273,542)(700)
Net cash used in investing activities(1,319,415)(22,903)
Cash flows from financing activities
Share repurchases(20,035)(26,572)
Exercise of stock options11,368 5,737 
Shares withheld for payment of employee tax withholdings(20,903)(5,270)
Debt issuance costs(47,622)— 
Proceeds from debt1,490,000 198,000 
Repayments of debt(366,875)(239,500)
Dividends paid(53,182)(47,329)
Net cash provided by (used in) financing activities992,751 (114,934)
Effect of exchange rate changes on cash(159)(1,485)
Net (decrease) increase in cash and cash equivalents(619)156,904 
Cash and cash equivalents at beginning of period159,449 70,494 
Cash and cash equivalents at end of period$158,830 $227,398 
See accompanying notes to condensed consolidated financial statements.

6
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 (the "SEC”“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP"(“GAAP”) have been condensed or omitted pursuant to the SEC’s rules and regulations, although we believe the disclosures are adequate to make the information presented not misleading. We suggest these financial statements be read in conjunction with the financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2019.2020. 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.
COVID-19
During the first quarter of 2020, the respiratory disease caused by a novel coronavirus (“COVID-19”) began to spread worldwide causing the World Health Organization to declare the outbreak a pandemic, and resulting in significant disruptions to the U.S. and world economies. In response to the issuance of U.S. federal guidelines to contain the spread of the COVID-19 virus, state and local jurisdictions implemented various containment measures, including temporary shelter-in-place orders and closure of non-essential businesses. The effects of these containment measures negatively impacted our operations resulting in the temporary or partial closure of certain locations in all of our U.S. operating segments during the first half of 2020. In addition, certain of our Mexico locations were also temporarily closed in accordance with jurisdictional ordinances issued in Mexico. In response to these restrictions and negative impacts to our operations, we implemented certain measures to reduce operating expenses and cash flow uses in order to mitigate these effects. In addition, we implemented additional electronic payment methods for our Rent-A-Center Business and Preferred Lease customers.
While the pandemic is ongoing and uncertainties remain that may not allow us to accurately predict the full impact that COVID-19 will ultimately have on our business, all locations in our Rent-A-Center Business, Franchising and Mexico operating segments, and staffed Preferred Lease locations temporarily or partially closed at the onset of the pandemic, were reopened in the second quarter of 2020 and continue to remain fully operational.
Use of Estimates
In preparing financial statements in conformity with U.S. generally accepted accounting principles, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent losses and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. In applying accounting principles, we must often make individual estimates and assumptions regarding expected outcomes or uncertainties. Our estimates, judgments and assumptions are continually evaluated based on available information and experience. However, uncertainties including future unknown impacts of the COVID-19 pandemic, may affect certain estimates and assumptions inherent in the financial reporting process, which may impact reported amounts of assets and liabilities in future periods and cause actual results to differ from those estimates.
Principles of Consolidation and Nature of Operations
These financial statements included herein include the accounts of Rent-A-Center, Inc. and its direct and indirect subsidiaries. All intercompany accounts and transactions have been eliminated. Unless the context indicates otherwise, references to “Rent-A-Center” refer only to Rent-A-Center, Inc., the parent, and references to the "Company"“Company”, “we,” “us” and “our” refer to the consolidated business operations of Rent-A-Center and any or all of its direct and indirect subsidiaries. We report four operating segments: Rent-A-Center Business, Acima (formerly Preferred Lease,Lease), Mexico, and Franchising.
Our Rent-A-Center Business segment consists of company-owned lease-to-own stores in the United States and Puerto Rico that lease household durable goods to customers on a lease-to-own basis. We also offer merchandise on an installment sales basis in certain of our stores under the names “Get It Now” and “Home Choice.” Our Rent-A-Center Business segment operates through our company-owned stores and e-commerce platform through rentacenter.com.
Our Preferred LeaseAcima segment, which operates in the United States and Puerto Rico and which, includes the operations of Merchants PreferredAcima Holdings (as defined in Note 2 below) acquired in August 2019,February 2021 and our Preferred Lease virtual and staffed locations, generally offers the lease-to-own transaction to consumers who do not qualify for financing from the traditional retailerretailer. The Acima segment offers the lease-to-own transaction through our virtual offering solutions across e-commerce, digital, and mobile channels, and through staffed and unstaffed kiosks located within such retailer's locations, including staffed options, unstaffed or virtual options, or a combination of the two (the hybrid model). The hybrid model can be staffed by a Preferred Lease employee (staffed locations) or employ a virtual solution where customers, either directly or with the

7
RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
assistance of a representative of the third-party retailer, initiate the lease-to-own transaction online in the retailers' locations using our virtual solutions (virtual locations).retailer’s locations.
Our Mexico segment consists of our company-owned lease-to-own stores in Mexico that lease household durable goods to customers on a lease-to-own basis.
Rent-A-Center Franchising International, Inc., an indirect wholly ownedwholly-owned subsidiary of Rent-A-Center, is a franchisor of lease-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 lease-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 June 2016,December 2019, the FASB issued ASU 2016-13,2019-12, Financial Instruments—Credit LossesIncome Taxes (Topic 326)740): Measurement of Credit Losses on Financial Instruments,Simplifying the Accounting for Income Taxes, which requires immediate recognition of estimated current expected credit losses, rather than recognition when incurred.is intended to simplify various aspects related to accounting for income taxes. The standard removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. We adopted ASU 2016-13 and all related amendments, including ASU 2020-02 and ASU 2020-03,2019-12 beginning January 1, 2020, using a modified retrospective approach. Under such approach, we recognized a cumulative-effect of the guidance as an adjustment to the opening balance of retained earnings for the quarter ended March 31, 2020. The application of this new methodology is limited to our installment notes receivables and trade receivables with our franchisees, primarily related to merchandise sales. The comparative information has not been restated and continues to be reported under the accounting standards in effect for periods ending prior to January 1, 2020.
The cumulative effect as of January 1, 2020 resulting from the adoption of ASU 2016-13 and related amendments was a net decrease to opening retained earnings in our condensed consolidated balance sheet of $0.8 million. See Note 4 for additional information regarding our trade and note receivables and related allowances for doubtful accounts.
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. We adopted ASU 2017-04 beginning January 1, 2020,2021 using a prospective approach. There was no impact on our financial statements for the nine months ended September 30, 2020 resulting from the adoption of this ASU.
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. We adopted ASU 2018-13 beginning January 1, 2020, using a prospective approach. There was no impact on our financial statements for the nine months ended September 30, 2020 resulting from the adoption of this ASU.
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 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. We adopted ASU 2018-15 beginning January 1, 2020, using a prospective approach. Following our adoption of this ASU, deferred implementation costs related to cloud computing arrangements are recorded to prepaid expenses and other assets in our condensed consolidated balance sheet and subsequently amortized to other store expenses in our condensed consolidated statement of operations. Impacts to our financial statements resulting from the adoption of this ASU were immaterial to our financial statements for the nine months ended September 30, 2020.2021 resulting from the adoption of this ASU were immaterial.

7
RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Note 2 - Acquisitions and Store SalesDivestitures
On August 13, 2019,December 20, 2020, we entered into the Merger Agreement (the “Merger”) with Radalta, LLC, a Utah limited liability company and wholly owned subsidiary of the company, Acima (“Acima Holdings”), and Aaron Allred, solely in his capacity as the representative of the former owners of Acima Holdings, providing for the merger of Radalta, LLC with and into Acima Holdings, with Acima Holdings surviving the Merger as a wholly owned subsidiary of the Company for total estimated consideration of $1.65 billion, including cash consideration of approximately $1.3 billion and approximately 10.8 million shares with an estimated value of approximately $377 million. On February 17, 2021, we completed the acquisition of substantially allthe membership interest of Acima Holdings, LLC. Acima Holdings is a leading platform offering customers virtual lease-to-own solutions at the point-of-sale via web and mobile technology.
In accordance with the Merger Agreement, we issued to the former owners of Acima Holdings an aggregate of 10,779,923 shares of our common stock (the “Aggregate Stock Consideration”) and paid to them aggregate cash consideration of $1.3 billion (the “Aggregate Cash Consideration”). In accordance with the terms of the assetsMerger Agreement, the portion of C/C Financial Corp. dba Merchants Preferred ("Merchants Preferred"),the Aggregate Stock Consideration issued to former owners of Acima Holdings who are also employees of Acima Holdings is subject to restricted stock agreements providing vesting conditions over a nationwide provider36-month period beginning upon closing of virtual lease-to-own services. the Merger. The portion of the Aggregate Stock Consideration issued to nonemployee former owners of Acima Holdings is subject to the terms of an 18-month lockup agreement, pursuant to which one-third of the aggregate shares of our common stock received by a non-employee former owner in the Merger becomes transferable after each six-month period following the closing of the Merger. We entered into a Registration Rights Agreement, dated as of February 17, 2021, pursuant to which certain former owners of Acima are entitled to registration rights in respect of the portion of the Aggregate Stock Consideration received by them in the Merger.
The aggregate purchase price was approximately $46.4 million,$1.4 billion, including net cash consideration of approximately $28.0 million,$1.3 billion, and 701,9182,683,328 shares of our common stockthe Aggregate Stock Consideration subject to 18-month lockup agreements valued at $27.31$51.14 per share, as of the date of closing, less working capital adjustmentsand adjusted by a discount for lack of marketability to account for the transfer restrictions in three tranches, each in 6-month intervals after the closing date. The Aggregate Cash Consideration for the acquisition was financed with a combination of cash on hand, borrowings under our ABL Credit Facility and proceeds from issuances under our Term Loan Facility, as defined in Note 7, in addition to proceeds from the issuance of new unsecured senior notes. See Note 7 and Note 8 for additional information.
The remaining 8,096,595 common shares included in the Aggregate Stock Consideration subject to restricted stock agreements and 36-month vesting conditions were valued at $414.1 million, as of the date of closing. These shares have been excluded from the aggregate purchase price and instead are being recognized as stock-based compensation expense subject to ASC Topic 718, “Stock-based Compensation”, over the required vesting period, and recorded to Other charges (gains) in our unaudited Condensed Consolidated Statements of Operations. However, for tax purposes the value of Aggregate Stock Consideration subject to restricted stock agreements is treated as goodwill. In addition, the total value of the common shares subject to restricted stock agreements noted above, resulted in a decrease in the deferred tax liability included in the net assets acquired of approximately $0.9 million.$103.5 million based on the fair value of the shares, as of the date of closing, multiplied by the blended federal and state statutory rate of approximately 24%, as included in the below net assets acquired table.

8
RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Assets acquired and liabilities assumed in connection with the acquisition have been recorded at their fair values. The following table provides the finalpreliminary estimated fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date:
(in thousands)August 13, 2019February 17, 2021
ReceivablesAggregate cash consideration$1,8131,273,263 
Aggregate stock consideration, subject to lockup agreements120,929 
Total Purchase price$1,394,192 
ASSETS ACQUIRED
Receivables, net(1)
$30,465 
Prepaid expenses and other assets154699 
Rental merchandise
17,904On rent340,575 
SoftwareProperty assets4,300171,455 
Right of use operating leasesOperating lease right-of-use assets4049,136 
Goodwill261,981 
Other intangible assets8,900520,000 
Goodwill13,403 
Lease liabilities(487)
Net identifiableTotal assets acquired$46,3911,334,311 
LIABILITIES ASSUMED
Accounts payable - trade16,023 
Accrued liabilities23,677 
Operating lease liabilities9,689 
Deferred income taxes(109,270)
Total liabilities assumed(59,881)
Total equity value$1,394,192 
(1) Includes gross contractual receivables of $65.2 million related to merchandise lease contracts, of which $35.5 million were estimated to be uncollectible.
Carrying value for assets and liabilities assumed as part of the acquisition, including receivables, prepaid expenses and other assets, rental merchandise, accounts payable and accrued liabilities were recorded as fair value, as of the date of acquisition, due to the short term nature of these balances. Operating lease right-of-use assets and liabilities were recorded as the discounted value of future obligations in accordance with ASC Topic 842, “Leases”. The fair value measurements for acquired intangible assets and developed technology 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 $520 million of identifiable intangible assets relating to dealer relationshipswith an estimated weighted average useful life of $8.98 years, as follows:
Asset ClassEstimated Fair Value
(in thousands)		Estimated Remaining Useful Life (in years)
Merchant relationships$380,000 10
Relationship with existing lessees60,000 1
Trade name40,000 7
Non-compete agreements40,000 3
Developed technology, included in Property assets, net, in line with our accounting policies, was also acquired with a value of $170.0 million and softwarean estimated remaining useful life of $4.3 million.10 years. The fair value for dealer relationshipsthese intangible and softwareproperty assets 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 $13.4$262.0 million in our Acima operating segment, which consists of the excess of the net purchase price over the fair value of the net assets acquired.acquired and assembled workforce of $10 million. Goodwill represents expected cost and revenue synergies and other benefits expected to result within our retail partner business from the acquisition of Acima Holdings. The total value of goodwill is not deductible for tax purposes.
California Refranchise Sale
On July 22, 2020, we entered into an asset purchase agreementpurposes, including our recorded goodwill, plus the value of Aggregate Stock Consideration subject to sell all 99 Rent-A-Center Business corporate stores in the state of California to an experienced franchisee. The sale was consummated on October 5, 2020 for cash consideration of approximately $16 million, including approximately $1 million paid for related franchise fees. In accordance with the criteria included in US GAAP, assets sold in connection with the sale were classified as assets held for salerestricted stock agreements described above, and reported at their net book value as of September 30, 2020, including idleacquisition-related expenses described below, is fully deductible and on-rent inventory of approximately $31.1 million and property assets of approximately $0.8 million.
Note 3 - Revenues
The following table disaggregates our revenue for the periods ended September 30, 2020 and 2019:
 Three Months Ended September 30, 2020
 Rent-A-Center BusinessPreferred LeaseMexicoFranchisingConsolidated
(In thousands)
Store
Rentals and fees$414,798 $153,306 $11,469 $0 $579,573 
Merchandise sales42,459 48,096 678 0 91,233 
Installment sales16,580 0 0 0 16,580 
Other386 257 12 189 844 
Total store revenues474,223 201,659 12,159 189 688,230 
Franchise
Merchandise sales0 0 0 19,069 19,069 
Royalty income and fees0 0 0 4,716 4,716 
Total revenues$474,223 $201,659 $12,159 $23,974 $712,015 

will be amortized over 15 years.

9
RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
 Nine Months Ended September 30, 2020
 Rent-A-Center BusinessPreferred LeaseMexicoFranchisingConsolidated
(In thousands)
Store
Rentals and fees$1,193,301 $454,744 $34,265 $0 $1,682,310 
Merchandise sales144,887 153,774 2,032 0 300,693 
Installment sales48,970 0 0 0 48,970 
Other1,222 511 19 589 2,341 
Total store revenues1,388,380 609,029 36,316 589 2,034,314 
Franchise
Merchandise sales0 0 0 49,553 49,553 
Royalty income and fees0 0 0 13,833 13,833 
Total revenues$1,388,380 $609,029 $36,316 $63,975 $2,097,700 
Acima Holdings results of operations are reflected in our unaudited condensed consolidated statements of operations from the date of acquisition.
In the third quarter of 2021, we recorded an adjustment to the fair value of rental merchandise increasing the value of the acquired assets by approximately $15.5 million with a corresponding decrease to goodwill. The recorded adjustment was based on further assessment of the carrying value of the assets and corresponding evaluation of related (Level 2) market inputs. In connection with the adjustment to increase the value of acquired rental merchandise we recorded a corresponding adjustment to increase rental merchandise depreciation by approximately $9.0 million, representing the period from the date of acquisition through September 30, 2021. The adjustment to rental merchandise depreciation is reflected in cost of rentals and fees in our condensed consolidated statement of operations. We believe the fair value measurements for acquired assets and liabilities is complete as of September 30, 2021, and we do not expect any additional adjustments to the purchase price allocation within the measurement period.
In connection with this acquisition, we incurred approximately $23.4 million in acquisition-related expenses including expenses related to legal, professional, and banking transaction fees, which are treated as an addition to goodwill for tax purposes. In addition, we recognized a decrease in deferred tax liability included in the net assets acquired of $7.6 million related to these expenditures. These costs were included in Other charges (gains) in our unaudited Condensed Consolidated Statements of Operations.
The following unaudited pro forma combined results of operations present our financial results as if the acquisition of Acima had been completed on January 1, 2020. These unaudited pro forma results may not necessarily reflect the actual results of operations that would have been achieved, nor are they necessarily indicative of future results of operations. The unaudited pro forma information reflects the step-up depreciation and amortization adjustments for the fair value of the assets acquired, adjustments to stock compensation expense as a result of Aggregate Stock Consideration subject to restricted stock awards, the adjustments in interest expense due to the elimination of historical debt and placement of the new debt, and the related adjustments to the income tax provision. In addition, the pro forma net income has been adjusted to include transaction expenses and other non-recurring costs as of January 1, 2020. The unaudited pro forma financial information is as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2021202020212020
(unaudited)(unaudited)(unaudited)(unaudited)
Pro Forma total revenues$1,181,268 $1,042,799 $3,606,629 $3,011,812 
Pro Forma net earnings(1)
36,320 32,004 158,181 31,160 
(1)Total pro forma adjustments to net earnings represented increases of $15.0 million and $5.9 million for the three and nine months ended September 30, 2021, and decreases of $98.9 million and $276.9 million for the three and nine months ended September 30, 2020, respectively.
The amounts of revenue and earnings of Acima Holdings included in our Condensed Consolidated Statements of Operations from the acquisition date of February 17, 2021 are as follows:
(in thousands)
February 17, 2021 -
September 30, 2021
February 17, 2020 -
September 30, 2020
(unaudited)(unaudited)
Total revenues$1,042,966 $772,743 
Net earnings(1)
102,063 137,276 
(1)Net Earnings for the period February 17, 2021 - September 30, 2021 includes amortization of intangible assets acquired upon closing of the Acima Holdings acquisition.

 Three Months Ended September 30, 2019
 Rent-A-Center BusinessPreferred LeaseMexicoFranchisingConsolidated
(In thousands)
Store
Rentals and fees$389,421 $148,711 $12,663 $0 $550,795 
Merchandise sales29,185 35,667 700 0 65,552 
Installment sales16,952 0 0 0 16,952 
Other939 108 7 0 1,054 
Total store revenues436,497 184,486 13,370 0 634,353 
Franchise
Merchandise sales0 0 0 11,178 11,178 
Royalty income and fees0 0 0 3,840 3,840 
Total revenues$436,497 $184,486 $13,370 $15,018 $649,371 

 Nine Months Ended September 30, 2019
 Rent-A-Center BusinessPreferred LeaseMexicoFranchisingConsolidated
(In thousands)
Store
Rentals and fees$1,196,800 $431,008 $38,021 $0 $1,665,829 
Merchandise sales112,678 125,963 2,223 0 240,864 
Installment sales49,658 0 0 0 49,658 
Other2,514 426 22 0 2,962 
Total store revenues1,361,650 557,397 40,266 0 1,959,313 
Franchise
Merchandise sales0 0 0 30,307 30,307 
Royalty income and fees0 0 0 12,370 12,370 
Total revenues$1,361,650 $557,397 $40,266 $42,677 $2,001,990 
10
RENT-A-CENTER, INC. AND SUBSIDIARIES
Rental-PurchaseNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Note 3 - Revenues
The following table disaggregates our revenue for the periods ended September 30, 2021 and 2020:
 Three Months Ended September 30, 2021
 Rent-A-Center BusinessAcimaMexicoFranchisingConsolidated
(In thousands)
Store
Rentals and fees$446,049 $469,692 $15,108 $— $930,849 
Merchandise sales37,515 153,725 776 — 192,016 
Installment sales17,028 — — — 17,028 
Other394 28 33 627 1,082 
Total store revenues500,986 623,445 15,917 627 1,140,975 
Franchise
Merchandise sales— — — 33,671 33,671 
Royalty income and fees— — — 6,622 6,622 
Total revenues$500,986 $623,445 $15,917 $40,920 $1,181,268 
 Nine Months Ended September 30, 2021
 Rent-A-Center BusinessAcimaMexicoFranchisingConsolidated
(In thousands)
Store
Rentals and fees$1,313,512 $1,236,059 $43,217 $— $2,592,788 
Merchandise sales163,943 479,701 2,394 — 646,038 
Installment sales52,992 — — — 52,992 
Other1,239 414 59 1,323 3,035 
Total store revenues1,531,686 1,716,174 45,670 1,323 3,294,853 
Franchise
Merchandise sales— — — 96,342 96,342 
Royalty income and fees— — — 20,830 20,830 
Total revenues$1,531,686 $1,716,174 $45,670 $118,495 $3,412,025 
 Three Months Ended September 30, 2020
 Rent-A-Center BusinessAcimaMexicoFranchisingConsolidated
(In thousands)
Store
Rentals and fees$414,798 $153,306 $11,469 $— $579,573 
Merchandise sales42,459 48,096 678 — 91,233 
Installment sales16,580 — — — 16,580 
Other386 257 12 189 844 
Total store revenues474,223 201,659 12,159 189 688,230 
Franchise
Merchandise sales— — — 19,069 19,069 
Royalty income and fees— — — 4,716 4,716 
Total revenues$474,223 $201,659 $12,159 $23,974 $712,015 
 Nine Months Ended September 30, 2020
 Rent-A-Center BusinessAcimaMexicoFranchisingConsolidated
(In thousands)
Store
Rentals and fees$1,193,301 $454,744 $34,265 $— $1,682,310 
Merchandise sales144,887 153,774 2,032 — 300,693 
Installment sales48,970 — — — 48,970 
Other1,222 511 19 589 2,341 
Total store revenues1,388,380 609,029 36,316 589 2,034,314 
Franchise
Merchandise sales— — — 49,553 49,553 
Royalty income and fees— — — 13,833 13,833 
Total revenues$1,388,380 $609,029 $36,316 $63,975 $2,097,700 
Lease Purchase Agreements
Rent-A-Center Business, Preferred Lease,Acima, and Mexico
Rentals and Fees. Rental 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

10
RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
may renew the rental agreement 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 rental agreement at the end of any rental term without penalty. Therefore, rental transactions are accounted for as operating leases.
Rental payments received at our Rent-A-Center Business, Preferred LeaseAcima (excluding virtual) and Mexico locations must be prepaid in advance of the next rental term. Under the virtual business model, revenues aremay be earned prior to the rental payment due date. Therefore, virtual businessdate, in which case revenue is accrued prior to receipt of the rental payment, net of estimated returns and uncollectible renewal payments. Under both models, rental revenue is recognized over the rental term. See Note 4 for additional information regarding accrued rental revenue and the related allowances for returns and uncollectible payments.revenue.
Cash received for rental payments, including fees, prior to the period in which it should be recognized, is deferred and recognized according to the rental term. At September 30, 20202021 and December 31, 2019,2020, we had $41.9$40.5 million and $39.9$45.8 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 in our Rent-A-Center Business, former Preferred Lease, and Mexico locations is depreciated using the income forecasting method and is recognized in cost of sales over the rental term. Rental merchandise in the recently acquired Acima Holdings is depreciated over the rental term using a straight-line depreciation method.
We also offer additional product plans along with our rental agreements which provide customers with liability protection against significant damage or loss of a product, and club membership benefits, including various discount programs and product service and replacement benefits in the event merchandise is damaged or lost, and payment insurance in the event eligible customers become unemployed. Customers renew product plans in conjunction with their rental term renewals, and can cancel the plans at any time. Revenue for product plans is recognized over the term of the plan. Costs incurred related to product plans are primarily recognized in cost of sales.
Revenue from contracts with customers
Rent-A-Center Business, Preferred Lease,Acima, 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

11
RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
agreements is recognized in cost of sales at the time of the transaction. We offer extended service plans with our installment agreements which are administered by third parties and provide customers with product service maintenance beyond the term of the installment agreement. Payments received for extended service plans are deferred and recognized, net of related costs, when the installment payment plan is complete and the service plan goes into effect. Customers can cancel extended service plans at any time during the installment agreement period and receive a refund for payments previously made towards the plan. At September 30, 20202021 and December 31, 2019,2020, we had $3.0$3.4 million and $2.9$3.1 million in deferred revenue included in accrued liabilities related to extended service plans.
Other. Other revenue primarily consists of revenue generated by other miscellaneous product plans offered to our rental and installment customers. Revenue for other product plans is recognized in accordance with the terms of the applicable plan agreement.
Franchising
Merchandise Sales. Revenue from the sale of rental merchandise is recognized upon shipment of the merchandise to the franchisee.
Royalty Income and Fees. Franchise royalties, including franchisee contributions to corporate advertising funds, represent sales-based royalties calculated as a percentage of gross rental payments and sales. Royalty revenue is accrued and recognized as rental payments and merchandise sales occur. Franchise fees are initial fees charged to franchisees for new or converted franchise stores. Franchise fee revenue is recognized on a straight-line basis over the term of the franchise agreement. At both September 30, 20202021 and December 31, 2019,2020, we had $4.2$4.3 million and $4.5$4.7 million respectively, in deferred revenue included in accrued liabilities related to franchise fees.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Note 4 - Receivables and Allowance for Doubtful Accounts
Installment sales receivables consist primarily of receivables due from customers for the sale of merchandise in our retail installment stores. Installment sales receivable associated with the sale of merchandise at our Get It Now and Home Choice stores generally consist of the sales price of the merchandise purchased and any additional fees for services the customer has chosen, less the customer’s down payment. No interest is accrued and interest income is recognized each time a customer makes a payment, generally on a monthly basis. Interest paid on installment agreements for the nine months ended September 30, 2021 and 2020 was $9.2 million and $8.5 million.million, respectively.
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. Credit is extended to franchisees based on an evaluation of aeach franchisee’s financial condition and collateral is generally not required. Trade receivables are generally due within 30 days.
Receivables consist of the following:
(In thousands)September 30, 2020December 31, 2019
Installment sales receivables$57,939 $56,370 
Trade and notes receivables25,448 33,354 
Total receivables83,387 89,724 
Less allowance for doubtful accounts(7,916)(5,601)
Total receivables, net of allowance for doubtful accounts$75,471 $84,123 
(In thousands)September 30, 2021December 31, 2020
Installment sales receivables$63,064 $61,794 
Trade and notes receivables76,830 36,256 
Total receivables139,894 98,050 
Less allowance for doubtful accounts(7,964)(8,047)
Total receivables, net of allowance for doubtful accounts$131,930 $90,003 
We have established an allowance for doubtful accounts for our installment notes receivable. Our policy for determining the allowance is primarily based on historical loss experience, as well as the results of management’s review and analysis of the payment and collection of the installment notes receivable within the previous year. We believe our allowance is adequate to absorb all expected losses. Our policy is to charge off installment notes receivable that are 120 days or more past due. Charge-offs are applied as a reduction to the allowance for doubtful accounts and any recoveries of previously charged off balances are applied as an increase to the allowance for doubtful accounts.
The allowance for our Franchising trade and notenotes receivables is determined by considering a number of factors, including the length of time receivables are past due, previous loss history, the franchisee’s current ability to pay its obligation, and the condition of the general economy and the industry as a whole. Trade receivables that are more than 90 days past due are either written-off or fully reserved in our allowance for doubtful accounts. Payments subsequently received on such receivables are credited to the allowance for doubtful accounts.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The allowance for doubtful accounts related to trade and notes receivable was $0.9 million and $1.5$1.0 million at September 30, 20202021 and December 31, 2019,2020, respectively. The allowance for doubtful accounts related to installment sales receivable was $7.0$7.1 million and $4.1$7.0 million at September 30, 20202021 and December 31, 2019,2020, respectively.
Changes in our allowance for doubtful accounts are as follows:
(In thousands)September 30, 20202021
Beginning allowance for doubtful accounts$5,6018,047 
Bad debt expense(1)
10,9599,825 
Accounts written off, net of recoveries(9,141)
Recoveries497 (9,908)
 Ending allowance for doubtful accounts$7,9167,964 
(1)Uncollectible installment payments, franchisee obligations, and other corporate receivables are recognized in other store operating expenses in our condensed consolidated financial statements.
Note 5 - Leases
We lease space for all of our Rent-A-Center Business and Mexico stores under operating leases expiring at various times through 2027. In addition, we lease space for certain support facilities under operating leases expiring at various times through 2032. Most of our store leases are five-yearfive 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 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 include month-to-month leases in operating lease right-of-use assets and operating lease liabilities in our condensed consolidated balance sheet. In

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
certain situations involving the sale of a Rent-A-Center Business corporate store to a franchisee, we enter into a lease assignment agreement with the buyer, but we remain the primary obligor under the original lease for the remaining active term. These assignments are therefore classified as subleases and the original lease is included in our operating lease right-of-use assets and operating lease liabilities in our condensed consolidated balance sheet.Condensed Consolidated Balance Sheets.
We lease vehicles for all of our Rent-A-Center Business stores under operating leases with lease terms expiring twelve months after the start date of the lease. We classify these leases as short-term and have elected the short-term lease exemption for our vehicle leases, and have therefore excluded them from our operating lease right-of-use assets within our condensed consolidated balance sheet.Condensed Consolidated Balance Sheets. We also lease vehicles for all of our Mexico stores which have terms expiring at various times through 20222025 with rental rates adjusted periodically for inflation. Finally, we have a minimal number of equipment leases, primarily related to temporary storage containers and certain back officeback-office technology hardware assets.
For all of the leases described above, we have elected not to separate the lease and non-lease components and instead account for these as a single component. WeIn addition, we have also elected to use theavailable practical expedients that removeeliminate the requirement to reassess whether expired or existing contracts containcontained leases and the requirement to reassess the lease classification for any existing leases prior to our adoption of ASU 2016-02.2016-02 on January 1, 2019.
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 statementsCondensed Consolidated Statements of operations.Operations.
Total operating lease costs by expense type:
Three Months EndedNine Months Ended
(in thousands)September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Operating lease cost included in other store expenses(1)
$34,682 $36,441 $106,559 $111,226 
Operating lease cost included in other charges121 2,933 1,081 10,185 
Sublease receipts(2,180)(2,065)(6,641)(5,559)
Total operating lease charges$32,623 $37,309 $100,999 $115,852 
Three Months EndedNine Months Ended
(in thousands)September 30, 2021September 30, 2020September 30, 2021September 30, 2020
Operating lease cost included in Other store expenses(1)(2)
$33,218 $34,682 $102,044 $106,559 
Operating lease cost included in Other charges (gains)(2)
16 121 260 1,081 
Sublease receipts(2,850)(2,180)(9,333)(6,641)
Total operating lease charges$30,384 $32,623 $92,971 $100,999 
(1) Includes short-term lease costs, which are not significant.
Supplemental cash flow information related(2) Excludes variable lease costs of $8.4 million and $25.4 million for the three and nine months ended September 30, 2021 compared to leases:
Nine Months Ended
(in thousands)September 30, 2020September 30, 2019
Cash paid for amounts included in measurement of operating lease liabilities$85,794 $91,235 
Cash paid for short-term operating leases not included in operating lease liabilities17,466 21,247 
Right-of-use assets obtained in exchange for new operating lease liabilities74,095 36,371 
Weighted-average discount rate$8.7 million and weighted-average remaining lease term:
(in thousands)September 30, 2020December 31, 2019
Weighted-average discount rate(1)
7.0 %7.7 %
Weighted-average remaining lease term (in years)44
(1) January 1, 2019 incremental borrowing rate was used$26.0 million for leases in existence at the time of adoption of ASU 2016-02.three and nine months ended September 30, 2020.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Supplemental cash flow information related to leases:
Nine Months Ended
(in thousands)September 30, 2021September 30, 2020
Cash paid for amounts included in measurement of operating lease liabilities$80,800 $85,794 
Cash paid for short-term operating leases not included in operating lease liabilities13,022 17,466 
Right-of-use assets obtained in exchange for new operating lease liabilities87,178 74,095 
Weighted-average discount rate and weighted-average remaining lease term:
(in thousands)September 30, 2021December 31, 2020
Weighted-average discount rate(1)
6.2 %6.8 %
Weighted-average remaining lease term (in years)44
(1) The January 1, 2019 incremental borrowing rate was used for leases in existence at the time of adoption of ASU 2016-02.
Reconciliation of undiscounted operating lease liabilities to the present value operating lease liabilities at September 30, 2020:
(In thousands)Operating Leases
2020$29,607 
2021101,986 
202273,861 
202348,490 
202431,687 
Thereafter34,289 
Total undiscounted operating lease liabilities319,920 
Less: Interest(36,136)
Total present value of operating lease liabilities$283,784 
2021:
(In thousands)Operating Leases
2021$37,919 
2022102,197 
202376,597 
202458,245 
202541,294 
Thereafter32,088 
Total undiscounted operating lease liabilities348,340 
Less: Interest(47,930)
Total present value of operating lease liabilities$300,410 
In response to the COVID-19 pandemic and related government restrictions negatively impacting our operations, we renegotiated certainapproximately 500 store lease agreements in the secondthird quarter of 2020 to obtain rent relief, in the near term, in order to help offset the negative financial impacts of COVID-19. AsLease amendments executed as a result of September 30, 2020, we have renegotiated approximately 500 lease agreements, receivingour renegotiations included near term rent abatements of approximately $2.3 million and rent deferrals of approximately $2.2$2.1 million. On April 10, 2020, the Financial Accounting Standards Board ("FASB") staff issued a question-and-answer document providing guidance for lease concessions provided to lessees in response to the effectsAs of COVID-19. Such guidance allows lessees to make an election not to evaluate whether a lease concession provided by a lessor should be accounted for as a lease modification in the event the concession does not result in a substantial increase in the rights of the lessor or the obligations of the lessee. We elected this practical expedient in our accounting for any lease concessions provided in connection with our renegotiated lease agreements that did not result in a substantial increase in the rights of or obligations to the lessor. As a result of this election, we recognized rent abatement credits of approximately $0.8 million for the nine-months ended September 30, 2020 in our condensed consolidated statement of operations.2021, we have repaid substantially all deferred rent associated with these lease amendments.
Note 6 - Income Taxes
On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act”), which includes modifications to the limitation on business interest expense deductions and net operating loss provisions. The effective tax rate was 47.6% and 28.9% for the three and nine months ended September 30, 2021, compared to 16.8% and 11.4% for the respective periods in 2020. The effective tax rate for the nine months ended September 30, 2021 was impacted by the tax effect of the equity consideration included in the Aggregate Stock Consideration subject to vesting conditions, discrete income tax items related to excess tax benefits from the vesting of our annual restricted stock award grants and stock option exercises, and the release of domestic and foreign tax valuation allowances. The effective tax rate for the nine months ended September 30, 2020 compared to 17.2% in 2019,was primarily as a result ofimpacted by the tax benefit of net operating loss carrybacks at a 35% tax rate, that became available as a result of the CARES Act.Coronavirus Aid, Relief, and Economic Security Act, enacted on March 27, 2020.
Note 7 - Senior Debt, net
On August 5, 2019,February 17, 2021, we entered into a new Term Loan Credit Agreement (the “Term Loan Credit Agreement”)credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and lenders party thereto, providing for a seven-year $200$875 million senior secured term loan facility (the “Term Loan Facility”) and an Asset Based Loan Credit AgreementFacility (the “ABL Credit Agreement”Facility”) providing for a five-year asset-based revolving credit facility (the “ABL Credit Facility”) with commitments of $550 million and a letter of credit sublimit of $150 million. Commitments under the ABL Credit Facility may be increased, at our option and under certain conditions, by up to $300an additional $125 million in the proceeds of which were used for the redemption of all of our outstanding senior notes.
The amount outstanding under the Term Loan Credit Agreement was $198.0 million at September 30, 2020. We had 0 amounts outstanding under our ABL Credit Agreement at September 30, 2020 and had $209.3 million available.aggregate.
Proceeds from the Term Loan Credit AgreementFacility were net of original issue discount of $2.0$4.4 million upon issuance from the lenders. In addition, in connection with the closing of the Term Loan Credit AgreementFacility and the ABL Credit Agreement,Facility, we incurred approximately $6.3$30.2 million in debt issuance costs.costs, including bank financing fees and third party legal and other professional fees, of which $25.3 million was capitalized in accordance with ASC Topic 470, “Debt” and recorded as a reduction of our outstanding senior debt, net in our Condensed Consolidated Balance Sheets. Remaining debt issuance costs incurred of $4.9 million were expensed and recorded to Other charges (gains) in our Condensed Consolidated Statement of Operations.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
On September 21, 2021 we entered into a First Amendment (the “First Amendment”) to the Term Loan Facility, effective as of September 21, 2021. The amendment effected a repricing of the applicable margin under the Term Loan Facility by reducing the LIBOR floor by 25 basis points from 0.75% to 0.50%, and the applicable margin, with respect to any initial term loans, by 75 basis points from 4.00% to 3.25%.
In connection with the execution of the First Amendment, we incurred approximately $1.5 million in debt issuance costs, including third party arrangement and other professional fees, of which approximately $1.4 million were expensed as debt refinance charges in our Condensed Consolidated Statement of Operations, and approximately $0.1 million were capitalized and recorded as a reduction to our outstanding senior debt in our Condensed Consolidated Balance Sheets. In addition, in accordance with ASC Topic 470, “Debt”, we recorded approximately $5.4 million in write-offs of unamortized debt issuance costs and original issue discount and debtpreviously capitalized upon the issuance costs will be amortized over the remaining terms of the respective credit agreements. Term Loan Facility on February 17, 2021. The write-offs were recorded as debt refinance charges in our Condensed Consolidated Statement of Operations.
As of September 30, 2020,2021, the total unamortizedremaining balance of unamortized debt issuance costs relatingand original issue discount related to our senior debt reported in the Condensed Consolidated Balance Sheets were approximately $21.3 million and $3.0 million, respectively. Remaining unamortized debt issuance costs and original issue discount reported inwill be amortized to interest expense over the condensed consolidated balance sheet were $5.7remaining term of the Term Loan Facility.
The amount outstanding under the Term Loan Facility was $870.6 million at September 30, 2021. We had no outstanding borrowings under our ABL Credit Facility at September 30, 2021 and $1.7 million, respectively.borrowing capacity of $463.6 million.
We also utilize the ABL Credit Facility for the issuance of letters of credit. As of September 30, 2020,2021, we have issued letters of credit in the aggregate outstanding amount of $90.7$86.4 million primarily relating to workers compensation insurance claims.
Term Loan Credit Agreement
The Term Loan Credit Agreement,Facility, which matures on August 5, 2026,February 17, 2028, amortizes in equal quarterly installments at a rate of 1.00% per annum of the original principal amount thereof, with the remaining balance due at final maturity. Interest onSubject in each case to certain restrictions and conditions, we may add up to $500 million of incremental term loan facilities to the Term Loan Credit Agreement will accrueFacility or utilize incremental capacity under the Term Loan Facility at any time by issuing or incurring incremental equivalent term debt.
Interest on borrowings under the EurodollarTerm Loan Facility is payable at a fluctuating rate of interest determined by reference to the eurodollar rate plus an applicable margin equalof 3.25%, subject to 4.50%. The margin ona 0.50% LIBOR floor. Borrowings under the Term Loan Credit Agreement was 4.69%Facility amortize in equal quarterly installments in an amount equal to 1.000% per annum of the original aggregate principal amount thereof, with the remaining balance due at September 30, 2020.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
final maturity.
The Term Loan Credit Agreement permits us to prepayFacility is secured by a first-priority security interest in substantially all of our present and future tangible and intangible personal property, including our subsidiary guarantors, other than the term loans,ABL Priority Collateral (as defined below), and by a second-priority security interest in whole or in part, without penalty on or after the six-month anniversary of the closing date of the Term Loan Credit Agreement. It also permits us 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,ABL Priority Collateral, subject to certain other conditions.
exceptions. The obligations under the Term Loan Credit AgreementFacility are guaranteed by certain ofus and our subsidiaries. The Term Loan Credit Agreement and the guarantees are secured on a first-priority basis by substantially all of our tangible and intangible assets, other than collateral subject to a first-priority lien undermaterial wholly-owned domestic restricted subsidiaries that also guarantee 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.Facility.
The Term Loan Credit AgreementFacility contains covenants that are usual and customary for similar facilities and transactions of this type and that, among other things, restrict our ability to:
•and our restricted subsidiaries to create certain liens and enter into certain sale and lease-back transactions;
•create, assume, incur or guarantee certain indebtedness;
•consolidate or merge with, or convey, transfer or lease all or substantially all of our and our restricted subsidiaries’ assets, to another person
•person; pay dividends or make other distributions on, or repurchase or redeem, our capital stock or certain other debt; and
•make other restricted payments.
The Term Loan Facility also includes mandatory prepayment requirements related to asset sales (subject to reinvestment), debt incurrence (other than permitted debt) and excess cash flow, subject to certain limitations described therein. These covenants are subject to a number of limitations and exceptions set forth in the documentation governing the Term Loan Credit Agreement. We are currently permitted to pay dividends and repurchase our common stock without limitation.Loan.
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.insolvency involving us and our significant subsidiaries.
The Term Loan Facility was fully drawn at the closing of the Acima Holdings acquisition to fund a portion of the Aggregate Cash Consideration payable in the transaction, repay certain of our outstanding indebtedness and that of our subsidiaries, repay all outstanding indebtedness of Acima Holdings and its subsidiaries and pay certain fees and expenses incurred in connection with the transaction. A portion of such proceeds were used to repay $197.5 million outstanding under the prior term loan facility, dated as of August 5, 2019, among us, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (the “Prior Term Loan Facility”).

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
ABL Credit Agreement
The ABL Credit Facility will mature on August 5, 2024. The Borrowers (as defined in the ABL Credit Agreement)February 17, 2026. We may borrow only up to the lesser of the level of the then-current Borrowing Baseborrowing base and the committed maximumaggregate amount of commitments under the ABL Credit Facility. The borrowing capacity of $300 million. The Borrowing Basebase is tied to the Eligible Installment Sales Accounts, Inventoryamount of eligible installment sales accounts, inventory and Eligible Rental Contracts,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.certain reserves.
Interest is payable on theThe ABL Credit Facility bears interest at a fluctuating rate of interest determined by reference to the Eurodollareurodollar rate plus an applicable margin of 1.50% to 2.00%. The margintotal interest rate on the ABL Credit Facility was 1.69% at September 30, 2020.2021 was 1.875%. A commitment fee equal to 0.250% to 0.375% of the unused portion of the ABL Credit Facility fluctuates dependent upon average utilization for the prior month as defined by a pricing grid included in the documentation governing the ABL Credit Agreement.Facility. The commitment fee at September 30, 20202021 was 0.375%. We paid $0.6$0.9 million of commitment fees during the third quarter of 2020.2021.
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,Loans under 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.
borrowed, repaid and re-borrowed until February 17, 2026, at which time all amounts borrowed must be repaid. The obligations under the ABL Credit AgreementFacility are guaranteed by us and certain of our subsidiaries.wholly owned domestic restricted subsidiaries, subject to certain exceptions. The obligations under the ABL Credit AgreementFacility and thesuch guarantees are secured on a first-priority basis onby all of our and theour subsidiary guarantors’ accounts, receivable, inventory, deposit accounts, securities accounts, cash and bank accounts (and funds on deposit therein)cash equivalents, rental agreements, general intangibles (other than equity interests in our subsidiaries), chattel paper, instruments, documents, letter of credit rights, commercial tort claims related to the foregoing and other related assets and all proceeds thereof related to the foregoing, subject to permitted liens and certain exceptions (such assets, collectively, the “ABL Priority Collateral”) and a second-priority basis onin substantially all of theother present and future tangible and intangible assets (second in priority topersonal property of ours and the liens securing the Term Loan Credit Agreement) of such persons, in each case,subsidiary guarantors, subject to certain exceptions.
The ABL Credit AgreementFacility contains covenants that are usual and customary for similar facilities and transactions and that, among other things, restrict our ability and our restricted subsidiaries to create certain liens and enter into certain sale and lease-back transactions; create, assume, incur or guarantee certain indebtedness; consolidate or merge with, or convey, transfer or lease all or substantially all of this typeour and are substantially the same as covenants in the Term Loan Credit Agreement. our restricted subsidiaries’ assets, to another person; pay dividends or make other distributions on, or repurchase or redeem, our capital stock or certain other debt; and make other restricted payments.
The ABL Credit Facility also requires the maintenance of a Consolidated Fixed Charge Coverage Ratio (as defined in the ABL Credit Agreement)consolidated fixed charge coverage ratio of 1.10 to 1.00 at the end of each fiscal 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$56.25 million and 15% of the line cap then in effect. These covenants are subject to a number of limitations and exceptions set forth in the documentation governing the ABL Credit Facility. The Fixed Charge Coverage Ratiofixed charge coverage ratio as of September 30, 20202021 was 1.581.66 to 1.00.
The documentation governing the ABL Credit Facility provides for customary events of default, including, but not limited to, failure to pay principal and interest, failure to comply with covenants, agreements or conditions, and certain events of bankruptcy or insolvency involving us and our significant subsidiaries.
The table below shows the scheduled maturity dates of our outstanding debt at September 30, 2021 for each of the years ending December 31:
(in thousands)Term Loan FacilityABL Credit FacilityTotal
2021$2,188 $— $2,188 
20228,750 — 8,750 
20238,750 — 8,750 
20248,750 — 8,750 
20258,750 — 8,750 
Thereafter833,437 — 833,437 
Total senior debt$870,625 $— $870,625 


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Note 8 -Senior Notes
On February 17, 2021, we issued $450 million in senior unsecured notes due February 15, 2029, at par value, bearing interest at 6.375% (the “Notes”), the proceeds of which were used to fund a portion of the Aggregate Cash Consideration upon closing of the Acima Holdings acquisition. Interest on the Notes is payable in arrears on February 15 and August 15 of each year, beginning on August 15, 2021. In connection with the issuance of the Notes, we incurred approximately $15.7 million in debt issuance costs, including bank financing fees and third party legal and other professional fees, which were capitalized in accordance with ASC Topic 470, “Debt” and recorded as a reduction of our outstanding Notes in our Condensed Consolidated Balance Sheets. Debt issuance costs will be amortized as interest expense over the term of the Notes.
We may redeem some or all of the Notes at any time on or after February 15, 2024 for cash at the redemption prices set forth in the indenture governing the Notes, plus accrued and unpaid interest to, but not including, the redemption date. Prior to February 15, 2024, we may redeem up to 40% of the aggregate principal amount of the Notes with the proceeds of certain equity offerings at a redemption price of 106.375% plus accrued and unpaid interest to, but not including, the redemption date. In addition, we may redeem some or all of the Notes prior to February 15, 2024, at a redemption price of 100% of the principal amount of the Notes plus accrued and unpaid interest to, but not including, the redemption date, plus a “make-whole” premium. If we experience specific kinds of change of control, we will be required to offer to purchase the Notes at a price equal to 101% of the principal amount thereof plus accrued and unpaid interest.
The Notes are our general unsecured senior obligations, and are effectively subordinated to all of our existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness, structurally subordinated to all existing and future indebtedness and other liabilities of our non-guarantor subsidiaries, equal in right of payment to all of our and our guarantor subsidiaries’ existing and future senior indebtedness and senior in right of payment to all of our future subordinated indebtedness, if any. The Notes are jointly and severally guaranteed on a senior unsecured basis by certain of our domestic subsidiaries that have outstanding indebtedness or guarantee other specified indebtedness, including the ABL Credit AgreementFacility and the Term Loan Facility.
The indenture governing the Notes contains covenants that limit, among other things, our ability and the ability of some of our restricted subsidiaries to create liens, transfer or sell assets, incur indebtedness or issue certain preferred stock, pay dividends, redeem stock or make other distributions, make other restricted payments or investments, create restrictions on payment of dividends or other amounts to us by our restricted subsidiaries, merge or consolidate with other entities, engage in certain transactions with affiliates and designate our subsidiaries as unrestricted subsidiaries. These covenants are subject to a number of exceptions and qualifications. The covenants limiting restricted payments, restrictions on payment of dividends or other amounts to us by our restricted subsidiaries, the ability to incur indebtedness, asset dispositions and transactions with affiliates will be suspended if and while the Notes have investment grade ratings from any two of Standard & Poor’s Ratings Services, Moody’s Investors Service, Inc. and Fitch, Inc.
The indenture governing the Notes also provides for customary events of default, that are substantiallywhich, if any of them occurs, would permit or require the same as events of default inprincipal, premium, if any, and interest on all the Term Loan Credit Agreement.
The table below shows the scheduled maturity dates of ourthen outstanding debt at September 30, 2020 for each of the years ending December 31: 
(in thousands)Term LoanABL Credit FacilityTotal
2020$500 $0 $500 
20212,000 0 2,000 
20222,000 0 2,000 
20232,000 0 2,000 
20242,000 0 2,000 
Thereafter189,500 0 189,500 
Total senior debt$198,000 $0 $198,000 

Notes to be due and payable.
Note 89 - 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.
Our financial instruments include cash and cash equivalents, receivables, payables, and borrowings against our ABL Credit Facility and Term Loan Facility.Facility, and outstanding Notes. The carrying amount of cash and cash equivalents, receivables and payables approximates fair value at September 30, 20202021 and December 31, 2019,2020, because of the short maturities of these instruments. In addition, the interest rates on our Term Loan Facility and ABL Credit Facility are variable and, therefore, we believe the carrying value of outstanding borrowings approximates their fair value.
Note 9 - Other Charges
Store Consolidations. During the first nine monthsThe fair value of 2020, we closed 25 Rent-A-Center Business stores, resulting in pre-tax charges of $1.2 million in other miscellaneous shutdownour Notes is based on Level 1 inputs and holding costs, $0.4 million in lease impairment charges, and $0.1 million in disposal of fixed assets. During the first nine months of 2019, we closed 83 Rent-A-Center Business stores, resulting in pre-tax charges of $3.1 million in lease impairment, $1.7 million in other miscellaneous shutdown and holding costs, $0.8 million in disposal of fixed assets, and $0.4 million in severance and other payroll-related costs.
Cost Savings Initiatives. During 2018, we began the execution of multiple cost savings initiatives, including reductions in overhead and supply chain operations. In connection with these initiatives, we recorded pre-tax charges during the nine months endedwas as follows at September 30, 2020 consisting of $1.1 million in severance and other payroll-related costs, $0.4 million in lease impairment charges, and $0.4 million in other miscellaneous shutdown and holding costs. Costs incurred during the first nine months of 2019 related to these initiatives included pre-tax charges of $4.7 million in lease impairment charges, $2.8 million in severance and other payroll-related costs, $2.2 million in other miscellaneous shutdown and holding costs, and $0.4 million in disposal of fixed assets.2021:
COVID-19 Pandemic. In March 2020, national efforts to contain the COVID-19 virus began to be implemented. In connection with COVID-19, during the first nine months of 2020, we incurred approximately $1.0 million in sanitization cleaning and personal protective equipment expenses, $0.4 million in payroll-related costs, and $0.2 million in lease expense related to closed stores and idled vehicles, partially offset by real estate lease abatement credits of $0.8 million for our Rent-A-Center Business stores.
Social Unrest. During the second quarter of 2020, we incurred expenses resulting from certain civil unrest that occurred in connection with efforts to institute law enforcement and other social and political reforms. In connection with this unrest, approximately 30 Rent-A-Center Business stores were looted and/or damaged, resulting in $0.7 million of inventory write-offs and $0.1 million in disposal of fixed assets during the first nine months of 2020.
September 30, 2021
(in thousands)Carrying ValueFair ValueDifference
Senior notes$450,000 $485,415 $35,415 

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RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Note 10 - Other Charges
Acima Holdings Acquisition. As described in Note 2, on February 17, 2021, we completed the acquisition of Acima Holdings, a leading provider of virtual lease-to-own solutions. Included in the aggregate consideration issued to the former owners of Acima Holdings was 8,096,595 of common shares, valued at $414.1 million, subject to 36-month vesting conditions under restricted stock agreements, which will be recognized over the vesting term as stock compensation expense. During the nine months ended September 30, 2021, we recognized approximately $93.1 million in stock compensation expense related to these restricted stock agreements.
The fair value of assets acquired as part of the transaction included $520 million in intangible assets and $170 million in developed technology. During the nine months ended September 30, 2021, we recognized approximately $72.4 million in amortization expense and $9.3 million in incremental depreciation expense related to these assets.
Furthermore, during the nine months ended September 30, 2021 we recognized approximately $17.3 million in transaction costs associated with the closing of the transaction, and approximately $7.9 million in post-acquisition integration costs, including $3.5 million in employee severance, $3.3 million in inventory losses, and $1.1 million in other integration costs, including reorganization advisory fees.
Activity with respect to otherOther charges for the nine months ended September 30, 20202021 is summarized in the below table:
(in thousands) Accrued Charges at December 31, 2019Charges & AdjustmentsPayments & Adjustments Accrued Charges at September 30, 2020
Cash charges:
Labor costs$738 $1,610 $(1,450)$898 
Lease obligations(1)
0 (645)645 0 
Shutdown and holding costs0 1,573 (1,573)0 
Total cash charges$738 2,538 $(2,378)$898 
Non-cash charges:
Rental merchandise losses(2)
721 
Asset impairments(3)
1,376 
Other(4)
3,133 
Total other charges$7,768 
(in thousands) Accrued Charges at December 31, 2020Charges & AdjustmentsPayments & Adjustments Accrued Charges at September 30, 2021
Cash charges:
Acima Holdings transaction costs$5,005 $17,336 $(22,341)$— 
Acima Holdings integration costs— 7,890 (5,749)2,141 
Other cash charges(1)
344 323 (667)— 
Total cash charges$5,349 25,549 $(28,757)$2,141 
Non-cash charges:
Depreciation and amortization of acquired assets(2)
81,725 
Acima Holdings restricted stock agreements(3)
93,121 
Asset impairments789 
Other(4)
10,911 
Total other charges$212,095 
(1) Includes lease abatement creditsRepresents employee severance, and shutdown and holding expenses related to renegotiated lease agreements in response to COVID-19.store closures.
(2) Reflects losses dueRepresents amortization of the total fair value of acquired intangible assets and incremental depreciation related to looting.the fair value increase over net book value of acquired software assets in connection with the acquisition of Acima Holdings as described in Note 2.
(3) Asset impairments primarily includes impairments of operating lease right-of-use assets and other property assetsRepresents stock compensation expense recognized for nine months ended September 30, 2021, related to common stock issued to Acima Holdings employees under restricted stock agreements as part of the closure of Rent-A-Center Business storesacquisition proceeds subject to vesting restrictions, as described in Note 2 and previously closed product service centers, damage related to looting, as well as a write-down of capitalized software in the first nine months of 2020.Note 12.
(4) Other primarily includesIncludes $10.7 million in legal settlement reserves and $0.2 million in state sales tax audit assessment reserves, expenses relatedreserves. Amounts accrued for potential settlements do not represent our maximum loss exposure. The amount of any loss ultimately incurred in relation to COVID-19, partially offset by proceeds received frommatters for which an accrual has been established may be significantly different than the sale of a class action claimamounts accrued for such matters due to the inherent uncertainty in litigation, regulatory and insurance proceeds related to Hurricane Maria in 2017.similar adversarial proceedings.
Note 1011 - Segment Information
The operating segments reported below are the segments for which separate financial information is available and for which segment results are evaluated by the chief operating decision makers. Our operating segments are organized based on factors including, but not limited to, type of business transactions, geographic location and store ownership. AllWithin our operating segments, we offer merchandise for lease from certain basic product categories: furniture, including mattresses, tires, consumer electronics, appliances, tools, handbags, computers, smartphones, and accessories. Smartphones are also offered in our Rent-A-Center Business stores and franchise locations. In addition, in the Rent-A-Center Business segment, we have recently expanded into other product categories including, tires, tools, handbags, jewelry and other accessories.
Segment information for the three and nine months ended September 30, 2020 and 2019 is as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2020201920202019
Revenues
Rent-A-Center Business$474,223 $436,497 $1,388,380 $1,361,650 
Preferred Lease201,659 184,486 609,029 557,397 
Mexico12,159 13,370 36,316 40,266 
Franchising23,974 15,018 63,975 42,677 
Total revenues$712,015 $649,371 $2,097,700 $2,001,990 

Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2020201920202019
Gross profit
Rent-A-Center Business$332,742 $306,881 $966,347 $945,392 
Preferred Lease78,727 80,113 238,433 246,821 
Mexico8,655 9,286 25,615 27,966 
Franchising4,904 3,716 14,343 12,754 
Total gross profit$425,028 $399,996 $1,244,738 $1,232,933 


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RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2020201920202019
Operating profit
Rent-A-Center Business$99,950 $52,175 $253,025 $170,411 
Preferred Lease16,073 21,830 40,528 66,077 
Mexico1,724 1,213 3,743 3,906 
Franchising3,146 1,135 8,694 4,716 
Total segments120,893 76,353 305,990 245,110 
Corporate(40,706)(37,506)(123,293)(59,085)
Total operating profit$80,187 $38,847 $182,697 $186,025 

Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2020201920202019
Depreciation and amortization
Rent-A-Center Business$4,926 $5,037 $14,759 $15,619 
Preferred Lease541 379 1,542 1,040 
Mexico104 82 292 317 
Franchising15 3 28 42 
Total segments5,586 5,501 16,621 17,018 
Corporate8,224 9,393 26,450 28,770 
Total depreciation and amortization$13,810 $14,894 $43,071 $45,788 

Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2020201920202019
Capital expenditures
Rent-A-Center Business$5,721 $4,129 $10,205 $5,594 
Preferred Lease20 24 106 125 
Mexico116 35 205 65 
Total segments5,857 4,188 10,516 5,784 
Corporate1,950 2,734 12,041 6,226 
Total capital expenditures$7,807 $6,922 $22,557 $12,010 

(in thousands)September 30, 2020December 31, 2019
On rent rental merchandise, net
Rent-A-Center Business$417,212 $411,482 
Preferred Lease249,266 268,845 
Mexico14,477 16,943 
Total on rent rental merchandise, net$680,955 $697,270 

(in thousands)September 30, 2020December 31, 2019
Held for rent rental merchandise, net
Rent-A-Center Business$112,176 $131,086 
Preferred Lease1,969 1,254 
Mexico5,758 6,078 
Total held for rent rental merchandise, net$119,903 $138,418 


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RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
(in thousands)September 30, 2020December 31, 2019
Assets by segment
Rent-A-Center Business$916,894 $953,151 
Preferred Lease337,752 357,859 
Mexico33,957 33,707 
Franchising12,044 11,095 
Total segments1,300,647 1,355,812 
Corporate366,918 226,986 
Total assets$1,667,565 $1,582,798 
Segment information for the three and nine months ended September 30, 2021 and 2020 is as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2021202020212020
Revenues
Rent-A-Center Business$500,986 $474,223 $1,531,686 $1,388,380 
Acima623,445 201,659 1,716,174 609,029 
Mexico15,917 12,159 45,670 36,316 
Franchising40,920 23,974 118,495 63,975 
Total revenues$1,181,268 $712,015 $3,412,025 $2,097,700 
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2021202020212020
Gross profit
Rent-A-Center Business$356,590 $332,742 $1,072,946 $966,347 
Acima193,527 78,727 539,181 238,433 
Mexico11,293 8,655 32,323 25,615 
Franchising7,350 4,904 22,305 14,343 
Total gross profit$568,760 $425,028 $1,666,755 $1,244,738 
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2021202020212020
Operating profit
Rent-A-Center Business$109,272 $99,950 $357,036 $253,025 
Acima51,884 16,073 144,797 40,528 
Mexico2,285 1,724 6,659 3,743 
Franchising4,816 3,146 15,495 8,694 
Total segments168,257 120,893 523,987 305,990 
Corporate(101,111)(40,706)(280,276)(123,293)
Total operating profit$67,146 $80,187 $243,711 $182,697 
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2021202020212020
Depreciation and amortization
Rent-A-Center Business$4,792 $4,926 $13,821 $14,759 
Acima(1)
570 541 1,568 1,542 
Mexico130 104 369 292 
Franchising24 15 58 28 
Total segments5,516 5,586 15,816 16,621 
Corporate(2)
8,319 8,224 24,978 26,450 
Total depreciation and amortization$13,835 $13,810 $40,794 $43,071 
(1)Excludes amortization expense of approximately $29.2 million and $72.4 million for the three and nine months ended September 30, 2021, recorded to Other charges (gains) in the Condensed Consolidated Statement of Operations, related to intangible assets acquired upon closing of the Acima Holdings acquisition
(2)Excludes depreciation expense of approximately $4.0 million and $9.3 million for the three and nine months ended September 30, 2021, recorded to Other charges (gains) in the Condensed Consolidated Statement of Operations, related to software acquired upon closing of the Acima Holdings acquisition

19
RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2021202020212020
Capital expenditures
Rent-A-Center Business$6,637 $5,721 $21,202 $10,205 
Acima276 20 945 106 
Mexico478 116 744 205 
Total segments7,391 5,857 22,891 10,516 
Corporate13,084 1,950 22,985 12,041 
Total capital expenditures$20,475 $7,807 $45,876 $22,557 
(in thousands)September 30, 2021December 31, 2020
On rent rental merchandise, net
Rent-A-Center Business$442,578 $444,945 
Acima659,534 299,660 
Mexico18,926 18,281 
Total on rent rental merchandise, net$1,121,038 $762,886 
(in thousands)September 30, 2021December 31, 2020
Held for rent rental merchandise, net
Rent-A-Center Business$139,441 $136,219 
Acima858 2,228 
Mexico7,456 7,819 
Total held for rent rental merchandise, net$147,755 $146,266 
(in thousands)September 30, 2021December 31, 2020
Assets by segment
Rent-A-Center Business$1,006,779 $999,252 
Acima1,525,741 389,650 
Mexico39,288 42,278 
Franchising16,151 14,729 
Total segments2,587,959 1,445,909 
Corporate465,711 305,071 
Total assets$3,053,670 $1,750,980 
Note 1112 - Common Stock and Stock-Based Compensation
In March 2020,early August 2021, our Board of Directors authorized a new stock repurchase program with respect to the purchase offor up to an aggregate$250 million, which superseded our previous stock repurchase program. Under the program, the Company may purchase shares of $75 million of Rent-A-Centerour common stock supersedingfrom time to time in the open market or privately negotiated transactions. The timing and exact amount of repurchases under the newly authorized repurchase program will be determined by the Company's management, and will be subject to our prior authorization. Duringcapital allocation strategy, market conditions and other factors. The Company is not obligated to acquire any shares under the program, and the program may be suspended or discontinued at any time. Under the program, 335,508 shares of our common stock were repurchased during the three and nine months ended September 30, 2020, the Company repurchased2021 for an aggregate purchase price of approximately $20.0 million. Under previous stock repurchase programs, 1,463,377 shares of our common stock were repurchased for an aggregate purchase price of $26.6 million which includes shares having aggregate purchase price of $10.0 million that were purchased under a former repurchase program that was previously authorized by our Board of Directors. NaN shares were repurchased during the nine months ended September 30, 2019. Under the March 2020 authorization, $58.4 million remains available for repurchases in the open market and privately negotiated transactions.2020.
We recognized $3.0$5.6 million and $2.0$3.0 million in compensation expense related to stock optionsawards issued under the Rent-A-Center 2016 Long-Term Incentive Plan (the “2016 Plan”) and restricted stock units2021 Long-Term Incentive Plan (the “2021 Plan”) during the three months ended September 30, 2021 and 2020, and 2019, respectively,$15.0 million and $8.9 million and $4.6 million during the nine months ended September 30, 20202021 and 2019, respectively.2020. During the nine months ended September 30, 2020,2021, we granted approximately 390,00097,000 stock options, 400,000299,000 market-based performance restricted stock units and 192,000180,000 time-vesting restricted stock units.units under the 2016 and 2021 Plans. The stock options granted were valued using a Black-Scholes pricing model with the following assumptions: an expected volatility of 45.62%47.54% to 54.72%53.21%, a risk-free interest rate of 0.22%0.21% to 1.72%1.08%, an expected dividend yield of 4.02%2.15% to 8.20%3.24%, and an expected term of 3.50 to 5.75 years. The weighted-average exercise price of the options granted during the nine months ended September 30, 20202021 was $24.47

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RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
$44.84 and the weighted-average grant-date fair value was $6.94.$14.94. Performance-based restricted stock units are valued using a Monte Carlo simulation. Time-vesting restricted stock units are valued using thebased on our closing stock price on the trading day immediately preceding the daydate of the grant.grant, or as of the date of modification in the event an award is modified. The weighted-average grant date fair value of the market-based performance and time-vesting restricted stock units granted during the nine months ended September 30, 2020 was $29.05$92.24 and $25.06,$59.22, respectively.
As described in Note 2, Aggregate Stock Consideration issued to the former owners of Acima Holdings included 10,779,923 of common shares valued at $51.14 per share, as of the date of closing. Of this total, 2,683,328 common shares were included in the aggregate purchase price of the transaction for financial reporting purposes, while 8,096,595 common shares, valued at $414.1 million, issued under restricted stock agreements and subject to vesting conditions, will be recognized as stock compensation expense over the vesting term in accordance with ASC Topic 718, “Stock-based Compensation”. We recognized $42.8 million and $93.1 million in stock compensation expense related to these restricted stock agreements during the three and nine months ended September 30, 2021, which was recorded to Other charges (gains) in our Condensed Consolidated Statements of Operations, as described in Note 10.
Note 1213 - Contingencies
From time to time, we, along with our subsidiaries, are a party to various legal proceedings and governmental inquiries arising in the ordinary course of business. We reserve for loss contingencies that are both probable and reasonably estimable. We regularly monitor developments related to these legal proceedings, and inquiries, and review the adequacy of our legal reserves on a quarterly basis. We do not currently expect these losses to have a material impact on our condensed consolidated financial statements if and when such losses are incurred. Nevertheless, we cannot predict the impact of future developments affecting our claims and lawsuits, and any resolution of a claim or lawsuit or reserve within a particular fiscal period may materially and adversely impact our results of operations for that period. In addition, claims and lawsuits against us may seek injunctive or other relief that requires changes to our business practices or operations and it is possible that any required changes may materially and adversely impact our business, financial condition, results of operations or reputation.
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.
Acima Consumer Financial Protection Bureau investigation. Prior to the execution of the definitive agreement to acquire Acima Holdings, Acima Holdings received a Civil Investigative Demand dated October 1, 2020 (the “CID”) from the Consumer Financial Protection Bureau (the “CFPB”) requesting certain information, documents and data relating to Acima Holding’s products, services and practices for the period from January 1, 2015 to the date on which responses to the CID are provided in full. The purpose of the CID is to determine whether Acima Holdings extends credit, offers leases, or otherwise offers or provides a consumer financial product or service and whether Acima Holdings complies with certain consumer financial protection laws. We are fully cooperating with the CFPB investigation. We completed our production of records in response to the initial requests of the CFPB at the end of March 2021. In July 2021, we received additional requests from the CFPB. We are currently in the process of responding to these additional requests. The CFPB has not made any allegations in the investigation, and we are currently unable to predict the eventual scope, ultimate timing or outcome of the CFPB investigation.
On the terms and subject to the conditions set forth in the definitive agreement to acquire Acima Holdings, the former owners of Acima Holdings have agreed to indemnify Rent-A-Center for certain losses arising after the consummation of the transaction with respect to the CID and certain pre-closing taxes. The indemnification obligations of the former owners of Acima Holdings are limited to an indemnity holdback in the aggregate amount of $50 million, which was escrowed at the closing of the transaction, and will be Rent-A-Center’s sole recourse against the former owners of Acima Holdings with respect to all of the indemnifiable claims under the definitive transaction agreement. Other than with respect to any pending or unresolved claims for indemnification submitted by Rent-A-Center prior to such time, and subject to other limited exceptions, the escrowed amount will be released to the former owners of Acima Holdings as follows: (i) in respect of the CID, on the earlier of February 17, 2024 and the date on which a final determination is entered providing for a resolution of the matters regarding the CID and (ii) in respect of certain pre-closing taxes, on August 18, 2022, the first business day following the date that is 18 months after the closing date of the transaction.
There can be no assurance that the CID will be finally resolved prior to the release to the former owners of Acima Holdings of the escrowed funds reserved therefor, or that such escrowed amount will be sufficient to address all covered losses or that the

21
RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
CFPB’s ongoing investigation or future exercise of its enforcement, regulatory, discretionary or other powers will not result in findings or alleged violations of consumer financial protection laws that could lead to enforcement actions, proceedings or litigation, whether by the CFPB, other state or federal agencies, or other parties, and the imposition of damages, fines, penalties, restitution, other monetary liabilities, sanctions, settlements or changes to Acima Holdings’ business practices or operations that could materially and adversely affect our business, financial condition, results of operations or reputation.
California Attorney General. The California Attorney General (“CAG”(the “CAG”) previously issued an investigative subpoena in 2018 seeking information with respect to certain of our Acceptance Now business practices (now part of the Preferred LeaseAcima segment). The request for documents and information was sought in connection with a broader investigation of the lease-to-own industry in California. Since receiving such demand, we have cooperated with the CAG in connection with its investigation and made several productions of requested documents. In March 2020, the CAG put forth proposed settlement terms to address alleged violations of California law. After several rounds of negotiations,The CAG’s allegations include those with respect to certain consumer fees, charges and communications in September 2020, the CAG proposed revised terms. In both cases, theconnection with our lease-to-own transactions. The CAG’s proposed settlement terms include civil penalties, disgorgement of certain revenues, additional training requirements, and recommended changes to Acceptance Nowcertain business practices. We believe that our business practices are in compliance with

19
RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
California law and are continuing to discuss resolution of the inquiry with the CAG. At this point, while we cannotWe are currently unable to predict the ultimate timing or outcome of the CAG investigation.
Massachusetts Attorney General. The Massachusetts Attorney General (the “MAG”) issued a civil investigative demand in 2018 seeking information with respect to certain of our business practices, including regarding account management and certain other business practices in connection with our lease-to-own transactions. Since receiving such demand, we dohave cooperated with the MAG in connection with its investigation. In June 2021, the MAG provided us with proposed settlement terms including a monetary payment, injunctive provisions regarding certain business practices and compliance requirements. We are continuing to cooperate with the MAG and to discuss resolution of the inquiry with the MAG. We are currently unable to predict the ultimate timing or outcome of the MAG investigation.
State Attorneys General Investigation. On November 1, 2021, Acima received a letter from the Nebraska Attorney General’s office stating that the Attorney General of Nebraska, along with a coalition of thirty-eight state Attorneys General, have initiated a multistate investigation into the business acts and practices of Acima and that a civil investigative demand(s) and/or subpoena(s) pursuant to respective state consumer protection laws will be forthcoming. As of the filing of this Form 10-Q, Acima has not believe any suchreceived the civil investigative demands or subpoenas relating to this matter. We are currently unable to predict the ultimate timing or outcome will have a material impact on our condensed consolidated financial statements.of this investigation.
Note 1314 - Earnings Per Common Share
Summarized basic and diluted earnings per common share were calculated as follows:
 Three Months Ended September 30,Nine Months Ended September 30,
(in thousands, except per share data)2021202020212020
Numerator:
Net earnings$21,267 $64,030 $125,128 $151,815 
Denominator:
Weighted-average shares outstanding(1)
58,267 53,985 57,603 54,186 
Effect of dilutive stock awards(2)
9,927 1,621 9,853 1,476 
Weighted-average dilutive shares68,194 55,606 67,456 55,662 
Basic earnings per common share$0.36 $1.19 $2.17 $2.80 
Diluted earnings per common share$0.31 $1.15 $1.85 $2.73 
Anti-dilutive securities excluded from diluted earnings per common share:
Anti-dilutive restricted share units— — 110 — 
Anti-dilutive performance share units295 — 295 324 
Anti-dilutive stock options33 907 33 1,238 
 Three Months Ended September 30,Nine Months Ended September 30,
(in thousands, except per share data)2020201920202019
Numerator:
Net earnings$64,030 $31,277 $151,815 $133,055 
Denominator:
Weighted-average shares outstanding53,985 54,487 54,186 54,190 
Effect of dilutive stock awards1,621 1,571 1,476 1,563 
Weighted-average dilutive shares55,606 56,058 55,662 55,753 
Basic earnings per common share$1.19 $0.57 $2.80 $2.46 
Diluted earnings per common share$1.15 $0.56 $2.73 $2.39 
Anti-dilutive securities excluded from diluted loss per common share:
Anti-dilutive performance share units0 260 324 260 
Anti-dilutive stock options907 974 1,238 1,047 
(1) Weighted-average shares outstanding for the nine months ended September 30, 2021 includes approximately 2.6 million common shares issued in connection with the acquisition of Acima Holdings in February 2021. See Note 2 for additional information.
(2) Weighted-average dilutive shares outstanding for the nine months ended September 30, 2021 includes approximately 8.1 million common shares issued in connection with the acquisition of Acima Holdings in February 2021, and subject to vesting conditions under restricted stock agreements.

2022

RENT-A-CENTER, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995.1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “seeks” or words of similar meaning, or future or conditional verbs, such as “will,” “should,” “could,” “may,” “aims,” “intends,” or “projects” and includes“projects.” These forward-looking statements, regardinginclude, without limitation, those relating to the potential effects of the COVID-19 pandemic of the respiratory disease caused by a novel coronavirus (“COVID-19”) on our business, operations, financial performance and prospects. prospects, the future business prospects and financial performance of our Company following the closing of our acquisition of Acima Holdings, LLC (“Acima Holdings”), cost and revenue synergies and other benefits expected to result from the Acima Holdings acquisition, our planned technologies and other enhancements to our lease-to-own solutions for consumers and retailers, our expectations, plans and strategy relating to our capital structure and capital allocation, including any share repurchases under the Company's share repurchase program, other statements regarding our strategy and plans, and other statements that are not historical facts.
A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. You should not place undue reliance on forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. These forward-looking statements are based on currently available operating, financial and competitive information and are subject to various risks and uncertainties. Our actual future results and trends may differ materially and adversely depending on a variety of factors, including, but not limited to, the risks and uncertainties discussed under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”Operations” below. Given these risks and uncertainties, you should not rely on forward-looking statements as a prediction of actual results. Any or all of the forward-looking statements contained in this Quarterly Report on Form 10-Q and any other public statement made by us, including by our management, may turn out to be incorrect. We are including this cautionary note to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for forward-looking statements. Except as required by law, we expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, changes in assumptions or otherwise. Factors that could cause or contribute to these differences include, but are not limited to:
•the possibility that the anticipated benefits from the Acima Holdings acquisition may not be fully realized or may take longer to realize than expected;
• the possibility that costs, difficulties or disruptions related to the integration of Acima Holdings operations into our other operations will be greater than expected;
• our ability to (i) effectively adjust to changes in the composition of our offerings and product mix as a result of acquiring Acima Holdings and continue to maintain the quality of existing offerings and (ii) successfully introduce other new product or service offerings on a timely and cost-effective basis;
• changes in our future cash requirements as a result of the Acima Holdings acquisition, whether caused by unanticipated increases in capital expenditures or working capital needs, unanticipated liabilities or otherwise;
• our ability to identify potential acquisition candidates, complete acquisitions and successfully integrate acquired companies;
•the impact of the COVID-19 pandemic and related government and regulatory restrictions issued to combat the pandemic, including adverse changes in such restrictions, and impacts on (i) demand for our lease-to-own products offered in our operating segments, (ii) our Preferred LeaseAcima retail partners, (iii) our customers and their willingness and ability to satisfy their lease obligations, (iv) our supplier'ssuppliers' ability to satisfy our merchandise needs and related supply chain disruptions, (v) our coworkers,employees, including our ability to adequately staff our operating locations, (vi) our financial and operational performance, and (vii) our liquidity;
•the general strength of the economy and other economic conditions affecting consumer preferences and spending;spending, including the availability of credit to our target consumers;
•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;

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•difficulties encountered in improving the financial and operational performance of our business segments;
•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 execute our strategic initiatives, including mitigating risks associated with any potential mergers and acquisitions, or refranchising opportunities;
•failure to manage our store labor and other store expenses, including merchandise losses;
•disruptions caused by the operation of our store information management systems;systems or disruptions in the systems of our host retailers;
•risks related to our virtual lease-to-own business, including our ability to continue to develop and successfully implement the necessary technologies;
•our ability to achieve the benefits expected from our integrated virtual and staffed retail partner offering, Preferred Lease, including our ability to integrate our historic, retail partner business (Acceptance Now) and the Merchants Preferred business under the Preferred Lease offering and to successfully grow this business segment;
•exposure to potential operating margin degradation due to the higher cost of merchandise in our Preferred LeaseAcima offering and potential for higher merchandise losses;
•our transition to more-readily scalable "cloud-based"“cloud-based” solutions;
•our ability to develop and successfully implement digital or E-commerce capabilities, including mobile applications;
•our ability to protect our proprietary intellectual property;
•disruptions in our supply chain;

21


•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 store consolidations, including our ability to retain the revenue from customer accounts merged into another store location as a result of a store consolidation;
•our available cash flow and our ability to generate sufficient cash flow to continue paying dividends;
•increased competition from traditional competitors, virtual lease-to-own competitors, online retailers, Buy-Now-Pay-Later and other Fintech companies and other competitors, including subprime lenders;
•our ability to identify and successfully market products and services that appeal to our current and future targeted customer segments;segments and to accurately estimate the size of the total addressable market;
•consumer preferences and perceptions of our brands;
•our ability to retain the revenue associated with acquired customer accounts and enhance the performance of acquired stores;
•our ability to enter into new and collect on our rental or lease purchase agreements;
•changes in the enforcement of existing laws and regulations and the enactment of new laws and regulations adversely affecting our business, including any legislative or regulatory enforcement efforts that seek to re-characterize store-based or virtual lease-to-own transactions as credit sales and to apply consumer credit laws and regulations to our business;
•our compliance with applicable statutes or regulations governing our businesses;
•the impact of any additional social unrest such as that experienced in 2020 or otherwise, and resulting damage to our inventory or other assets and potential lost revenues;
•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, employees and employees;retail partners;
•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;

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•our ability to maintain an effective system of internal controls;controls, including in connection with the integration of Acima;
•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 United States Securities and Exchange Commission.Commission (the “SEC”).
Additional important factors that could cause our actual results to differ materially from our expectations are discussed under the section “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and elsewhere in this Quarterly Report on Form 10-Q.
Our Business
We are an industrya leading omni-channel lease-to-own provider with operations in the United States, Puerto Rico and Mexico. We provide a critical service for the credit-constrained customer. We focus on improving the qualitya large portion of life for our customersunderserved consumers by providing them with access to, and the opportunity to obtain ownership of, high-quality, durable products via small payments over time under a flexible lease-purchase agreement andwith no long-term debt obligation. Preferred Lease provides virtualThrough our Rent-A-Center Business, we provide a fully integrated customer experience through our e-commerce platform and staffedbrick and mortar presence. Our Acima business offers lease-to-own solutions to retail partnersthrough retailers in stores and online enabling our partnerssuch retailers to grow sales by expanding their customer base utilizing our differentiated offering. We were incorporated in the State of Delaware in 1986, and our common stock is traded on the Nasdaq Global Select Market under the ticker symbol "RCII."“RCII.”
Executive Summary
Our Strategy
Our strategy is focused on growing our business model through emphasis on the following key initiatives:
•continuing positive trends inexecuting on market opportunities and enhancing our Rent-A-Center Business segment driven by competitive position across both traditional and virtual lease-to-own solutions;
•accelerating the shift to e-commerce, momentum, expanding product categories, including into emerging product categories, and improving the fully integrated customer experience;

•
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using technology to support frictionless retailer onboarding with seamless integration to retailer platforms;

•continuing to generate repeat business while expanding our potential customer base;
•leveraging the integration of the Acima Holdings decision engine and expanding digital payments and communication channels; and
•generating favorable adjusted EBITDA marginsmargin and strong free cash flow to fund strategic priorities and deliver and return capital to shareholders; and
•executing on large market opportunities using a virtual platform via our Preferred Lease offering and e-commerce.shareholders.
As we pursue our strategy, we may take advantage of merger and acquisition opportunities from time to time that advance our key initiatives, and engage in discussions regarding these opportunities, which could include mergers, consolidations or acquisitions or dispositions or other transactions, although there can be no assurance that any such activities will be consummated.
For additional information regarding the acquisition of Acima Holdings, see “Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation—Recent Developments”.
Recent Developments
California Refranchise Sale.Acima Acquisition. On July 22, 2020,February 17, 2021, we completed the acquisition of Acima Holdings and issued to the former owners of Acima an aggregate of 10,779,923 shares of our common stock (the “Aggregate Stock Consideration”), with a value of $51.14 per share based on the closing price of our common stock on the date of closing, and paid to them aggregate cash consideration of $1,273.3 million (the “Aggregate Cash Consideration”). Under the terms of the definitive agreement, $50 million of the Aggregate Cash Consideration was placed into escrow at closing to cover certain potential tax and regulatory indemnification obligations of the former owners of Acima Holdings under the agreement. Although we currently believe the escrow holdback amount, which serves as our sole recourse of with respect to any indemnifiable claims, will be sufficient to cover any such potential tax and regulatory matters, there is no assurance that any actual payments by us with respect to such matters will not exceed the escrow holdback amount.
The portion of the Aggregate Stock Consideration issued to former owners of Acima Holdings who are also employees of Acima is subject to restricted stock agreements providing vesting conditions over a 36-month period beginning upon closing of the acquisition. The portion of the Aggregate Stock Consideration issued to non-employee former owners of Acima Holdings is

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subject to the terms of an 18-month lockup agreement, pursuant to which one-third of the aggregate shares of our common stock received by a non-employee former owner of Acima Holdings becomes transferable after each six month period following the closing of the acquisition.
In connection with the acquisition, we entered into an asset purchase agreement to sell all 99 Rent-A-Center Business corporate stores inemployment agreements with certain executives of Acima Holdings, including Aaron Allred, Chairman and Founder of Acima Holdings, which became effective upon closing.
Dividends. On September 16, 2021, we announced that our board of directors approved a quarterly cash dividend of $0.31 per share for the statefourth quarter of California to an experienced franchisee.2021. The saledividend was consummatedpaid on October 5, 2020 for cash consideration19, 2021 to our common stockholders of approximately $16 million, including approximately $1 million paid for related franchise fees. In accordance withrecord as of the criteria provided by US GAAP, assets sold in connection withclose of business on September 28, 2021.
Term Loan Facility Amendment. On September 21, 2021 we entered into a First Amendment (the “First Amendment”) to the sale were classified as assets held for sale and reported at their net book valueTerm Loan Facility, effective as of September 30, 2020, including idle21, 2021. The amendment effected a repricing of the applicable margin under the Term Loan Facility by reducing the LIBOR floor by 25 basis points from 0.75% to 0.50%, and on-rent inventory of approximately $31.1 millionthe applicable margin, with respect to any initial term loans, by 75 basis points from 4.00% to 3.25%.
Business and property assets of approximately $0.8 million.Operational Trends
COVID-19 Pandemic. Beginning in the latter half of March 2020, the worldwide spread of the respiratory disease caused by a novel coronavirus (“COVID-19”)COVID-19 caused significant disruptions to the U.S. and world economies. On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a worldwide pandemic. On March 13, 2020, President Trump declared a national state of emergency for the United States. In response to the issuance of U.S. federal guidelines to contain the spread of the COVID-19 virus,economies, resulting in U.S. state and local jurisdictions implementedimplementing various containment or mitigation measures, including temporary shelter-in-place orders and the temporary closure of non-essential businesses.
See "Trends and Uncertainties - COVID-19 Pandemic" below, and "Risk Factors" in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 for an additional discussion of operational impacts to our business and additional risks associated with COVID-19.
Results of Operations
The following discussion focuses on our results of operations and our liquidity and capital resources. You should read this discussion in conjunction with the condensed consolidated financial statements and notes thereto for the three months ended September 30, 2020 included in Part I, Item I of this Quarterly Report on Form 10-Q.
Trends and Uncertainties
COVID-19 Pandemic
As a result of COVID-19 and related jurisdictional ordinances implemented in the United States beginning in the latter half of March 2020 to contain the spread of COVID-19 or mitigate its effects, beginning in the latter half of March 2020 a significant number of Preferred LeaseAcima retail partner locations were temporarily closed, resulting in the initial closure of approximately 65% of our staffed Preferred LeaseAcima locations, which operated within those stores. In addition, with respect toin our Rent-A-Center Business segment we temporarily shut down operations at a small number of stores and partially closed approximately 24% of stores. Ourour stores were partially closed, locations operatedoperating with closed showrooms and conducting business only through e-commerce web orders. Franchiseorders, and contactless curbside service or ship-from-store models. Some franchise locations and stores in our Mexico operating segment were also temporarily closed or had restricted operations due to COVID-19. SinceAll locations in our Rent-A-Center Business, Franchising and Mexico operating segments and staffed Acima locations, temporarily or partially closed at the onset of the pandemic, were reopened in the jurisdictional ordinances directly impacting our operations have been withdrawn and, assecond quarter of 2020.
Despite the date hereof,recent availability of COVID-19 vaccines in 2021, the number of COVID-19 cases has increased at various times throughout 2021 resulting in certain governmental authorities imposing or re-imposing certain restrictions on businesses. As of October 29, 2021, all of our staffed Preferred Lease locations and physical locations ofin our Rent-A-Center Business, MexicoFranchising and FranchisingMexico operating segments and staffed Acima locations are fully operational.providing full in-store services subject to local requirements for sanitization, social distancing, face masks and capacity limitations and, in Mexico, certain restrictions regarding hours of operation.
In response to the negative impacts to our business resulting from COVID-19, in 2020, we proactively implemented certain measures to reduce operating expenses and cash flow uses, including implementing temporary executive pay reductions, temporarily furloughing certain employees at our store locations and corporate headquarters, reducing store hours in certain locations, renegotiating real estate leases, reducing inventory purchases and capital expenditures, and, for a brief period of time, suspending further share repurchases. Nonetheless, there are no assurancesIn addition, we will not be subjectimplemented additional electronic payment methods for our Rent-A-Center Business and Acima customers to futurefacilitate contactless transactions. Separately, on March 27, 2020, the U.S. government actions negatively impacting ourenacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), providing U.S. citizens and business with various stimulus and income tax relief benefits throughout 2020 and early 2021 to help offset immediate negative financial impacts sustained as the pandemic progresses. However, while we may also be impacted by deteriorating worldwide economic conditions, including elevated unemployment rates throughout the United States, which could have a sustained impact on discretionary consumer spending, theresult of COVID-19.
The lease-to-own industry ishas remained a resilient business model throughout various economic cycles, because it provides credit constrained customers with a viable option to obtain merchandise they may not otherwise be able to obtain through other retailers offering more traditional financing options. However, there are no assurances we will not be subject to future government actions negatively impacting our business as the pandemic progresses. In addition, in the third quarter of 2021 we have seen a return to more normalized customer behavior following the expiration of government stimulus and relief programs, resulting in more normalized payment and loss activity; as well as certain negative trends in our business that we believe to be associated with macro-economic conditions resulting from COVID-19, including a condensed labor market, wage inflation, and global supply chain issues resulting in reduced product availability and rising product costs. At this time we are unable to predict the full extent to which consumer spending behavior, or other macro-economic trends associated with the pandemic, may impact our business in future periods.
See “Risk Factors” in Part I, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2020, for additional discussion of operational impacts to our business and additional risks associated with COVID-19.

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Virtual Business ModelResults of Operations
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 lease-to-own services, acceleratingThe following discussion focuses on our growth in the virtual lease-to-own industry. In January 2020, we announced plans for our new integrated retail partner offering under Preferred Lease, which combines our staffed and virtual lease-to-own business models to meet the needs and expectations of both our customers and retail partners. While we believe the acquisition of the Merchants Preferred virtual business model and rollout of our Preferred Lease integrated offering positions us for significant revenue and earnings growth, we are exposed to potential operating margin degradation due to the higher cost of merchandise in our retail partner business and potential for higher merchandise losses.
Cost Savings Initiatives
In 2018, we initiated and executed multiple cost savings initiatives, resulting in reductions in overhead and supply chain costs. While these initiatives have led to significant decreases in operating expenses and corresponding improvement in operating profit on a year-over-year basis in our 2018 and 2019 results of operations we do not expect to continue to realize cost reduction benefitsand our liquidity and capital resources. You should read this discussion in future periods atconjunction with the same annualized rate as past periods.condensed consolidated financial statements and notes thereto for the three and nine months ended September 30, 2021 included in Part I, Item I of this Quarterly Report on Form 10-Q.
Overview
The following briefly summarizes certain of our financial information for the nine months ended September 30, 20202021 as compared to the nine months ended September 30, 2019.2020.
During the first nine months of 2020,2021, consolidated revenues increased approximately $95.7$1,314.3 million, primarily due to increasesthe acquisition of Acima Holdings, in addition to an increase in same store sales in our Rent-A-Center Business and Mexico operating segments, and implementation and expansion of the Preferred Lease virtual solution following the acquisition of Merchants Preferred in August 2019, partially offset by store closures and refranchising of approximately 33 Rent-A-Center Business corporate stores since September 30, 2019.Business. Operating profit decreasedincreased approximately $3.3$61.0 million for the nine months ended September 30, 2020,2021, primarily due to our receipt during the second quarter of 2019 of $92.5 million in settlement of litigation relating to our terminationincreased operating profit of the merger agreement by and among Vintage Rodeo Parent, LLC, Vintage Rodeo Acquisition, Inc.Acima and Rent-A-Center Inc., 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"),Business segments, partially offset by decreases in labor in 2020, dueone-time transaction and integration costs, stock compensation expense related to previous store closuresequity consideration subject to vesting conditions, and refranchise sales, in additiondepreciation and amortization of acquired software and intangible assets related to temporary furloughs in response to COVID-19.the acquisition of Acima Holdings.
Revenues in our Rent-A-Center Business segment increased approximately $26.7$143.3 million for the nine months ended September 30, 2020, driven2021, primarily bydue to an increase in same store sales resulting fromrevenue driven by higher merchandise sales and growth in e-commerce sales. Gross profit as a percentagesales and strong lease portfolio performance, partially offset by the impact of revenue increased 0.2%.refranchising approximately 100 stores in California in the fourth quarter of 2020 which are no longer reflected in the Rent-A-Center Business segment revenues. Operating profit increased $82.6$104.0 million for the nine months ended September 30, 2020,2021, driven primarily driven by decreased laborincreased operating leverage as a result of higher revenues and lower operating expenses.
The Preferred LeaseAcima segment revenues increased approximately $51.6$1,107.1 million for the nine months ended September 30, 2020,2021, driven primarily due to the implementation and growth of the Preferred Lease virtual solution followingby the acquisition of Merchants Preferred in August 2019, despite negative impacts related to the temporary closure of stores due to the COVID-19 pandemic. GrossAcima Holdings. Operating profit as a percent of revenue decreased 5.2% and operating profit decreasedincreased approximately $25.5$104.3 million for the nine months ended September 30, 2020 primarily due to a2021, driven by higher number of early payouts, higher merchandise losses primarilyrevenue due to the COVID-19 pandemic,acquisition of Acima Holdings and investmentsstronger lease performance, partially offset by depreciation and amortization of acquired software and intangible assets related to support the growthacquisition of the business.Acima Holdings.
The Mexico segment revenues decreasedincreased by 9.8%25.8% for the nine months ended September 30, 2020, driving a decrease2021, contributing to an increase in gross profit of 8.4%26.2%, or $2.4$6.7 million.
Revenues for the Franchising segment Operating profit increased $21.3$2.9 million for the nine months ended September 30, 2020,2021.
Revenues for the Franchising segment increased $54.5 million for the nine months ended September 30, 2021, primarily due to a higher store count, resulting from the refranchising of Rent-A-Center Business corporateapproximately 100 California stores during the previous twelve months, as described above,fourth quarter of 2020 and higher inventory purchases by our franchisees.
Cash flow from operations was $296.2 Operating profit increased $6.8 million for the nine months ended September 30, 2020.2021.
Cash flow from operations was $326.2 million for the nine months ended September 30, 2021. As of September 30, 2020,2021, we held $227.4$158.8 million of cash and cash equivalents and outstanding indebtedness of $198.0 million.$1.32 billion.

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The following table is a reference for the discussion that follows.
Three Months EndedNine Months Ended
September 30,ChangeSeptember 30,Change
(dollar amounts in thousands)20202019$%20202019$%
Revenues
Store
Rentals and fees$579,573 $550,795 $28,778 5.2 %$1,682,310 $1,665,829 $16,481 1.0 %
Merchandise sales91,233 65,552 25,681 39.2 %300,693 240,864 59,829 24.8 %
Installment sales16,580 16,952 (372)(2.2)%48,970 49,658 (688)(1.4)%
Other844 1,054 (210)(19.9)%2,341 2,962 (621)(21.0)%
Total store revenue688,230 634,353 53,877 8.5 %2,034,314 1,959,313 75,001 3.8 %
Franchise
Merchandise sales19,069 11,178 7,891 70.6 %49,553 30,307 19,246 63.5 %
Royalty income and fees4,716 3,840 876 22.8 %13,833 12,370 1,463 11.8 %
Total revenues712,015 649,371 62,644 9.6 %2,097,700 2,001,990 95,710 4.8 %
Cost of revenues
Store
Cost of rentals and fees167,027 161,971 5,056 3.1 %489,606 473,001 16,605 3.5 %
Cost of merchandise sold95,177 70,575 24,602 34.9 %296,894 250,000 46,894 18.8 %
Cost of installment sales5,713 5,527 186 3.4 %16,830 16,133 697 4.3 %
Total cost of store revenues267,917 238,073 29,844 12.5 %803,330 739,134 64,196 8.7 %
Franchise cost of merchandise sold19,070 11,302 7,768 68.7 %49,632 29,923 19,709 65.9 %
Total cost of revenues286,987 249,375 37,612 15.1 %852,962 769,057 83,905 10.9 %
Gross profit425,028 399,996 25,032 6.3 %1,244,738 1,232,933 11,805 1.0 %
Operating expenses
Store expenses
Labor150,493 158,666 (8,173)(5.2)%434,216 473,221 (39,005)(8.2)%
Other store expenses140,818 150,366 (9,548)(6.3)%463,292 463,385 (93)— %
General and administrative expenses41,576 34,364 7,212 21.0 %113,694 105,822 7,872 7.4 %
Depreciation and amortization13,810 14,894 (1,084)(7.3)%43,071 45,788 (2,717)(5.9)%
Other (gains) and charges(1,856)2,859 (4,715)(164.9)%7,768 (41,308)49,076 118.8 %
Total operating expenses344,841 361,149 (16,308)(4.5)%1,062,041 1,046,908 15,133 1.4 %
Operating profit80,187 38,847 41,340 106.4 %182,697 186,025 (3,328)(1.8)%
Debt refinancing charges— 2,168 (2,168)(100.0)%— 2,168 (2,168)(100.0)%
Interest, net3,198 6,648 (3,450)(51.9)%11,397 23,258 (11,861)(51.0)%
Earnings before income taxes76,989 30,031 46,958 156.4 %171,300 160,599 10,701 6.7 %
Income tax expense (benefit)12,959 (1,246)14,205 1,140.0 %19,485 27,544 (8,059)(29.3)%
Net earnings$64,030 $31,277 $32,753 104.7 %$151,815 $133,055 $18,760 14.1 %

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Three Months EndedNine Months Ended
September 30,ChangeSeptember 30,Change
(dollar amounts in thousands)20212020$%20212020$%
Revenues
Store
Rentals and fees$930,849 $579,573 $351,276 60.6 %$2,592,788 $1,682,310 $910,478 54.1 %
Merchandise sales192,016 91,233 100,783 110.5 %646,038 300,693 345,345 114.8 %
Installment sales17,028 16,580 448 2.7 %52,992 48,970 4,022 8.2 %
Other1,082 844 238 28.2 %3,035 2,341 694 29.6 %
Total store revenue1,140,975 688,230 452,745 65.8 %3,294,853 2,034,314 1,260,539 62.0 %
Franchise
Merchandise sales33,671 19,069 14,602 76.6 %96,342 49,553 46,789 94.4 %
Royalty income and fees6,622 4,716 1,906 40.4 %20,830 13,833 6,997 50.6 %
Total revenues1,181,268 712,015 469,253 65.9 %3,412,025 2,097,700 1,314,325 62.7 %
Cost of revenues
Store
Cost of rentals and fees344,623 167,027 177,596 106.3 %912,531 489,606 422,925 86.4 %
Cost of merchandise sold228,024 95,177 132,847 139.6 %717,983 296,894 421,089 141.8 %
Cost of installment sales6,291 5,713 578 10.1 %18,566 16,830 1,736 10.3 %
Total cost of store revenues578,938 267,917 311,021 116.1 %1,649,080 803,330 845,750 105.3 %
Franchise cost of merchandise sold33,570 19,070 14,500 76.0 %96,190 49,632 46,558 93.8 %
Total cost of revenues612,508 286,987 325,521 113.4 %1,745,270 852,962 892,308 104.6 %
Gross profit568,760 425,028 143,732 33.8 %1,666,755 1,244,738 422,017 33.9 %
Operating expenses
Store expenses
Labor163,945 150,493 13,452 8.9 %479,989 434,216 45,773 10.5 %
Other store expenses189,553 140,818 48,735 34.6 %540,698 463,292 77,406 16.7 %
General and administrative expenses45,958 41,576 4,382 10.5 %149,468 113,694 35,774 31.5 %
Depreciation and amortization13,835 13,810 25 0.2 %40,794 43,071 (2,277)(5.3)%
Other charges (gains)88,323 (1,856)90,179 4,858.8 %212,095 7,768 204,327 2,630.4 %
Total operating expenses501,614 344,841 156,773 45.5 %1,423,044 1,062,041 361,003 34.0 %
Operating profit67,146 80,187 (13,041)(16.3)%243,711 182,697 61,014 33.4 %
Debt refinancing charges6,839 — 6,839 — %15,582 — 15,582 — %
Interest, net19,712 3,198 16,514 516.4 %52,019 11,397 40,622 356.4 %
Earnings before income taxes40,595 76,989 (36,394)(47.3)%176,110 171,300 4,810 2.8 %
Income tax expense19,328 12,959 6,369 49.1 %50,982 19,485 31,497 161.6 %
Net earnings$21,267 $64,030 $(42,763)(66.8)%$125,128 $151,815 $(26,687)(17.6)%
Three Months Ended September 30, 2020,2021, compared to Three Months Ended September 30, 20192020
Store Revenue. Total store revenue increased by $53.8$452.8 million, or 8.5%65.8%, to $1,141.0 million for the three months ended September 30, 2021, from $688.2 million for the three months ended September 30, 2020, from $634.4 million for the three months ended September 30, 2019.2020. This increase was primarily due to increases of approximately $37.7$421.8 million and $17.2$26.8 million in revenues in the Acima and Rent-A-Center Business and Preferred Lease segments, respectively, as discussed further in the section "Segment Performance"“Segment Performance” below.

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Cost of Rentals and Fees. Cost of rentals and fees consists primarily of depreciation of rental merchandise. Cost of rentals and fees for the three months ended September 30, 2020,2021, increased by $5.0$177.6 million, or 3.1%106.3%, to $167.0$344.6 million as compared to $162.0$167.0 million in 2019.2020. This increase in cost of rentals and fees was primarily attributable to an increaseincreases of $5.1$167.7 million and $9.0 million in the Acima and Rent-A-Center Business segment.segments, respectively, as discussed further in the section “Segment Performance” below. Cost of rentals and fees expressed as a percentage of rentals and fees revenue was 28.8%37.0% for the three months ended September 30, 2020,2021, as compared to 29.4%28.8% in 2019.2020.
Cost of Merchandise Sold. Cost of merchandise sold increased by $24.6$132.8 million, or 34.9%139.6%, to $95.2$228.0 million for the three months ended September 30, 2020,2021, from $70.6$95.2 million in 2019,2020, primarily attributable to increases of $18.1 and $6.6 million in the Preferred Lease and Rent-A-Center Business segments, respectively, as discussed further in the section "Segment Performance" below. The gross margin percent of merchandise sales increased to (4.3)% for the three months ended September 30, 2020, from (7.7)% in 2019.
Gross Profit. Gross profit increased by $25.0 million, or 6.3%, to $425.0 million for the three months ended September 30, 2020, from $400.0 million in 2019, due primarily to an increase of $25.9$139.2 million in the Acima segment, partially offset by a decrease of $6.6 million in the Rent-A-Center Business segment as discussed further in the section "Segment Performance"“Segment Performance” below. The gross margin percent of merchandise sales decreased to (18.8)% for the three months ended September 30, 2021, from (4.3)% in 2020.
Gross Profit. Gross profit increased by $143.8 million, or 33.8%, to $568.8 million for the three months ended September 30, 2021, from $425.0 million in 2020, due primarily to increases of $114.8 million and $23.8 million in the Acima and Rent-A-Center Business segments, respectively, as discussed further in the section “Segment Performance” below. Gross profit as a percentage of total revenue decreased to 59.7%48.1% for the three months ended September 30, 2020,2021, as compared to 61.6%59.7% in 2019.2020.
Store Labor. Store labor decreasedincreased by $8.2$13.4 million, or 5.2%8.9%, to $150.5$163.9 million, for the three months ended September 30, 2020,2021, as compared to $158.7$150.5 million in 2019,2020, primarily due to decreasesincreases of $4.2$7.0 million and $3.7$5.7 million in the Acima and Rent-A-Center Business and Preferred Lease segments, respectively, primarily as a result of a lower store base and a higher mix of virtual locations.discussed further in the section “Segment Performance” below. Store labor expressed as a percentage of total store revenue was 21.9%14.4% for the three months ended September 30, 2020,2021, as compared to 25.0%21.9% in 2019.2020.
Other Store Expenses. Other store expenses decreasedincreased by $9.6$48.8 million, or 6.3%34.6%, to $140.8$189.6 million for the three months ended September 30, 2020,2021, as compared to $150.4$140.8 million in 2019,2020, primarily due to a decreaseincreases of $15.4$39.7 million and $8.0 million in the Acima and Rent-A-Center Business segment, partially offset by an increase of $6.5 million in the Preferred Lease segment,segments, respectively, as discussed further in the section "Segment Performance"“Segment Performance” below. Other store expenses expressed as a percentage of total store revenue were 20.5%16.6% for the three months ended September 30, 2020,2021, compared to 23.7%20.5% in 2019.2020.
General and Administrative Expenses. General and administrative expenses increased by $7.2$4.4 million, or 21.0%10.5%, to $41.6$46.0 million for the three months ended September 30, 2020,2021, as compared to $34.4$41.6 million in 2019,2020, primarily due to higher labor overhead as a result of the acquisition of Acima Holdings and higher incentive compensation expenses.in 2021, combined with the impact of cost savings initiatives implemented in response to COVID-19 in 2020. General and administrative expenses expressed as a percentage of total revenue were 5.8%3.9% for the three months ended September 30, 2020,2021, compared to 5.3%5.8% in 2019.2020.
Other Charges (Gains) and Charges.. Other charges (gains) and charges decreasedincreased by $4.8$90.2 million, to $(1.9)$88.3 million for the three months ended September 30, 2020,2021, as compared to $2.9$(1.9) million in 2019.2020. Other gainscharges (gains) for the three months ended September 30, 2021 primarily included stock compensation expense related to the vesting of a portion of the equity consideration issued in the acquisition of Acima Holdings, depreciation and amortization of acquired software and intangible assets, legal settlement reserves, and other one-time transaction and integration costs related to the acquisition of Acima Holdings. Other charges (gains) for the three months ended September 30, 2020 primarily related to proceeds from the sale of a class action claim, partially offset by asset impairments, store closure impacts, and cost savings initiatives. Other charges for the three months ended September 30, 2019 primarily related to store closures, the associated Vintage merger termination legal and professional fees, and cost savings initiatives.
Operating Profit. Operating profit increaseddecreased by $41.4$13.1 million, to $80.2$67.1 million for the three months ended September 30, 2020,2021, as compared to $38.8$80.2 million in 2019,2020, primarily due to the increaseincreases in general and administrative expenses and other charges, partially offset by increases in gross profit, and decreases in store labor and other store expenses, in each case as described above. Operating profit expressed as a percentage of total revenue was 11.3%5.7% for the three months ended September 30, 2020,2021, compared to 6.0%11.3% in 2019.2020.
Income Tax Expense (Benefit).Expense. Income tax expense (benefit) for the three months ended September 30, 20202021 was $13.0$19.3 million, as compared to $(1.2)$13.0 million in 2019.2020. The effective tax rate was 16.8%47.6% for the three months ended September 30, 2020,2021, compared to (4.2)%16.8% in 2019.2020.
Nine Months Ended September 30, 2020,2021, compared to Nine Months Ended September 30, 20192020
Store Revenue. Total store revenue increased by $75.0$1,260.6 million, or 3.8%62.0%, to $3,294.9 million for the nine months ended September 30, 2021, from $2,034.3 million for the nine months ended September 30, 2020, from $1,959.3 million for the nine months ended September 30, 2019.2020. This increase was

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primarily due to increases of approximately $51.6$1,107.1 million and $26.7$143.3 million in the Preferred LeaseAcima and Rent-A-Center Business segments, respectively, as discussed further in the section "Segment Performance"“Segment Performance” below.

29


Cost of Rentals and Fees. Cost of rentals and fees consists primarily of depreciation of rental merchandise. Cost of rentals and fees for the nine months ended September 30, 2020,2021, increased by $16.6$422.9 million, or 3.5%86.4%, to $489.6$912.5 million as compared to $473.0$489.6 million in 2019.2020. This increase in cost of rentals and fees was primarily attributable to an increaseincreases of $20.8$388.4 million and $32.4 million in the Preferred Lease segment, partially offset by a decrease of $2.9 millionAcima and Rent-A-Center Business segments, respectively, as discussed further in the Rent-A-Center Business segment.section “Segment Performance” below. Cost of rentals and fees expressed as a percentage of rentals and fees revenue increased to 29.1%35.2% for the nine months ended September 30, 20202021 as compared to 28.4%29.1% in 2019.2020.
Cost of Merchandise Sold. Cost of merchandise sold increased by $46.9$421.1 million, or 18.8%141.8%, to $296.9$718.0 million for the nine months ended September 30, 2020,2021, from $250.0$296.9 million in 2019,2020, primarily attributable to increases of $39.2$418.0 million and $7.9$2.5 million in the Preferred LeaseAcima and Rent-A-Center Business segments, respectively, as discussed further in the section "Segment Performance"“Segment Performance” below. The gross margin percent of merchandise sales increaseddecreased to 1.3%(11.1)% for the nine months ended September 30, 2020,2021, from (3.8)%1.3% in 2019.2020.
Gross Profit. Gross profit increased by $11.8$422.1 million, or 1.0%33.9%, to $1,244.7$1,666.8 million for the nine months ended September 30, 2020,2021, from $1,232.9$1,244.7 million in 2019,2020, due primarily to an increaseincreases of $21.0$300.7 million and $106.6 million in the Acima and Rent-A-Center Business segment, partially offset by a decrease of $8.4 million in the Preferred Lease segment,segments, respectively, as discussed further in the section "Segment Performance"“Segment Performance” below. Gross profit as a percentage of total revenue decreased to 59.3%48.8% for the nine months ended September 30, 2020,2021, as compared to 61.6%59.3% in 2019.2020.
Store Labor. Store labor decreasedincreased by $39.0$45.8 million, or 8.2%10.5%, to $434.2$480.0 million, for the nine months ended September 30, 2020,2021, as compared to $473.2$434.2 million in 2019,2020, primarily attributable to decreasesincreases of $20.6$27.6 million and $17.8$16.3 million in the Acima and Rent-A-Center Business and Preferred Lease segments, respectively, as discussed further in the section "Segment Performance"“Segment Performance” below. Store labor expressed as a percentage of total store revenue was 21.3%14.6% for the nine months ended September 30, 2020,2021, as compared to 24.2%21.3% in 2019.2020.
Other Store Expenses. Other store expenses decreasedincreased by $0.1$77.4 million, to $463.3$540.7 million for the nine months ended September 30, 2020,2021, as compared to $463.4$463.3 million in 2019,2020, primarily attributable to decreasesan increase of $29.3$86.1 million and $1.7in the Acima segment, partially offset by a decrease of $11.3 million in the Rent-A-Center Business and Mexico segments, respectively, partially offset by an increase of $31.2 million in the Preferred Lease segment, as discussed further in the section "Segment Performance"“Segment Performance” below. Other store expenses expressed as a percentage of total store revenue were 22.8%16.4% for the nine months ended September 30, 2020,2021, compared to 23.7%22.8% in 2019.2020.
General and Administrative Expenses. General and administrative expenses increased by $7.9$35.8 million, or 7.4%31.5%, to $113.7$149.5 million for the nine months ended September 30, 2020,2021, as compared to $105.8$113.7 million in 2019.2020, primarily due to higher labor overhead as a result of the acquisition of Acima Holdings and higher incentive compensation in 2021, combined with the impact of cost savings initiatives implemented in response to COVID-19 in 2020. General and administrative expenses expressed as a percentage of total revenue were 5.4%4.4% for the nine months ended September 30, 2020,2021, compared to 5.3%5.4% in 2019.2020.
Other Charges (Gains) and Charges.. Other charges (gains) and charges increased by $49.1$204.3 million, to $7.8$212.1 million for the nine months ended September 30, 2020,2021, as compared to $(41.3)$7.8 million in 2019.2020. Other charges for the nine months ended September 30, 2021 primarily included stock compensation expense related to the vesting of a portion of the equity consideration issued in the acquisition of Acima Holdings, depreciation and amortization of acquired software and intangible assets, legal settlement reserves, and one-time transaction and integration costs related to the acquisition of Acima Holdings. Other charges (gains) for the nine months ended September 30, 2020 primarily related to legal settlement and state sales tax assessment reserves, cost savings initiatives, inventory losses resulting from damage related to looting,social unrest, employee payroll and sanitation costs in connection with COVID-19, and store closure impacts, and asset disposals, partially offset by proceeds from the sale of a legal antitrustclass action claim, rent abatements and insurance proceeds related to hurricane Maria in 2017. Other gains for the nine months ended September 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 Vintage merger termination legal and professional fees, store closures, state tax audit assessments, and cost savings initiativesproceeds.
Operating Profit. Operating profit decreasedincreased by $3.3$61.0 million, to $182.7$243.7 million for the nine months ended September 30, 2020,2021, as compared to $186.0$182.7 million in 2019,2020, primarily due to an increase in other (gains) and charges driven by the Vintage termination settlement received in 2019 documented above, partially offset by the increase in gross profit, partially offset by increases in general and administrative expenses and other charges, as described above. Operating profit expressed as a percentage of total revenue was 8.7%7.1% for the nine months ended September 30, 2020,2021, compared to 9.3%8.7% in 2019. Excluding other (gains) and charges, operating profit was $190.5 million, or 9.1% of revenue for the nine months ended September 30, 2020, compared to $144.7 million, or 7.2% of revenue for the comparable period of 2019.2020.
Income Tax Expense. Income tax expense for the nine months ended September 30, 20202021 was $19.5$51.0 million, as compared to $27.5$19.5 million in 2019.2020. The effective tax rate was 11.4%28.9% for the nine months ended September 30, 2020,2021, compared to 17.2%11.4% in 2019.2020. The decreaseincrease in incomethe effective tax expense for the nine months ended September 30, 2020 compared to 2019 wasrate is primarily related to the tax benefit of net operating loss carrybacks at a 35% tax rate as a result of changes from the Coronavirus Aid, Relief, and Economic Security Act enacted on March 27,(the “CARES Act”) in 2020 (the "CARES Act").in response to COVID-19.

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Segment Performance
Rent-A-Center Business segment
Three Months EndedNine Months Ended
September 30,ChangeSeptember 30,Change
(dollar amounts in thousands)20202019$%20202019$%
Revenues$474,223 $436,497 $37,726 8.6 %$1,388,380 $1,361,650 $26,730 2.0 %
Gross profit332,742 306,881 25,861 8.4 %966,347 945,392 20,955 2.2 %
Operating profit99,950 52,175 47,775 91.6 %253,025 170,411 82,614 48.5 %
Change in same store revenue12.9 %7.3 %
Stores in same store revenue calculation(1)
1,5441,611
Three Months EndedNine Months Ended
September 30,ChangeSeptember 30,Change
(dollar amounts in thousands)20212020$%20212020$%
Revenues$500,986 $474,223 $26,763 5.6 %$1,531,686 $1,388,380 $143,306 10.3 %
Gross profit356,590 332,742 23,848 7.2 %1,072,946 966,347 106,599 11.0 %
Operating profit109,272 99,950 9,322 9.3 %357,036 253,025 104,011 41.1 %
Change in same store revenue12.3 %17.3 %
Stores in same store revenue calculation(1)
1,6321,632
(1) Same store sales generally represents revenue earned in stores that were operated by us for 13 months or more and are reported on a constant currency basis as a percentage of total revenue earned in stores of the segment during the indicated period. We exclude from the same store sales base any store that receives a certain level of customer accounts from closed stores or acquisitions. The receiving store will be eligible for inclusion in the same store sales base in the 24th30th full month following account transfer. Due to the COVID-19 pandemic and related temporary store closures, all 32 stores in Puerto Rico were excluded starting in March 2020 and will remain excluded through September 2021.
Revenues. The increase in revenue for the three and nine months ended September 30, 2021, as compared to 2020, was driven primarily bydue to an increase in same store sales resulting from higher merchandise sales andrevenue driven by growth in e-commerce sales which were positively impacted by government stimulus and supplemental unemployment benefits issued by the federal government in response to the COVID-19 pandemic, as compared to 2019,higher portfolio balance, partially offset by decreasesthe impact of refranchising approximately 100 stores in revenue due to our refranchising efforts andCalifornia in the rationalizationfourth quarter of our Rent-A-Center Business store base.2020.
Gross Profit. Gross profit increased for the three and nine months ended September 30, 2020,2021, as compared to 2019,2020, driven primarily due to the increases inby increased segment revenue described above, partially offset by increases in the cost of merchandise sold.as discussed above. Gross profit as a percentage of segment revenues was 70.2%71.2% and 69.6%70.0% for the three and nine months ended September 30, 2020,2021, as compared to 70.3%70.2% and 69.4%69.6% for the respective periodscorresponding period in 2019.2020.
Operating Profit. Operating profit as a percentage of segment revenues was 21.1%21.8% and 18.2%23.3% for the three and nine months ended September 30, 2020,2021, compared to 12.0%21.1% and 12.5%18.2% for the respective periods in 2019.2020. The increase in operating profitmargin for the three and nine months ended September 30, 2020,2021, as compared to 20192020, was partially due to the increase in gross profit described above, in addition to decreases in store labor and other store expenses. Declines in store labor and other store expenses were driven primarily by lower store counthigher revenues, partially offset by higher loss rates and a decrease in customer stolen merchandise.higher labor expense. Charge-offs in our Rent-A-Center Business lease-to-own stores due to customer stolen merchandise, expressed as a percentage of Rent-A-Center Business lease-to-own revenues, were approximately 2.0%3.4% and 3.2%3.1% for the three and nine months ended September 30, 2020,2021, compared to 4.1%2.0% and 3.7%3.2% for the respective periods in 2019.2020. Charge-offs in our Rent-A-Center Business lease-to-own stores due to other merchandise losses, expressed as a percentage of Rent-A-Center Business lease-to-own revenues, were approximately 1.4%1.8% and 1.5% for both the three and nine months ended September 30, 2020,2021, compared to approximately 1.4% and 1.3% for both the respective periods in 2019.2020. Other merchandise losses include unrepairable and missing merchandise, and loss/damage waiver claims.
Preferred LeaseAcima segment
Three Months EndedNine Months Ended
September 30,ChangeSeptember 30,Change
(dollar amounts in thousands)20202019$%20202019$%
Revenues$201,659 $184,486 $17,173 9.3 %$609,029 $557,397 $51,632 9.3 %
Gross profit78,727 80,113 (1,386)(1.7)%238,433 246,821 (8,388)(3.4)%
Operating profit16,073 21,830 (5,757)(26.4)%40,528 66,077 (25,549)(38.7)%
Three Months EndedNine Months Ended
September 30,ChangeSeptember 30,Change
(dollar amounts in thousands)20212020$%20212020$%
Revenues$623,445 $201,659 $421,786 209.2 %$1,716,174 $609,029 $1,107,145 181.8 %
Gross profit193,527 78,727 114,800 145.8 %539,181 238,433 300,748 126.1 %
Operating profit51,884 16,073 35,811 222.8 %144,797 40,528 104,269 257.3 %
Revenues. The increase in revenue for the three and nine months ended September 30, 20202021 compared to 2019,2020, was driven primarily due to the implementation and expansion of the Preferred Lease virtual solution followingby the acquisition of Merchants Preferred in August 2019.Acima Holdings.
Gross Profit. Gross profit as a percentage of segment revenues decreased to 31.0% and 31.4% for the three and nine months ended September 30, 2021, compared to 39.0% and 39.1% for the respective periods in 2020. Gross profit margin decreased for the three and nine months ended September 30, 2020,2021, compared to 2019,2020, primarily due to a higher mix of rental agreements generated from our virtual business model, driven by a higher numberthe acquisition of early payouts resulting from government stimulus and supplemental unemployment benefits issued by the federal government in response to the COVID-19 pandemic. GrossAcima Holdings.
Operating Profit. Operating profit as a percentage of segment revenues decreasedincreased to 39.0%8.3% and 39.1%8.4% for the three and nine months ended September 30, 2020,2021, compared to 43.4%8.0% and 44.3%6.7% for the respective periods in 2019.

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Operating Profit. 2020. Operating profit decreased by 26.4% and 38.7%margin increased for the three and nine months ended September 30, 2020,2021, as compared to 2019. The decreases2020, primarily driven by higher revenues and lower merchandise losses; partially offset by increases in operating profitexpenses due to the acquisition of Acima Holdings, including amortization of acquired intangible assets. Charge-offs in our Acima locations due to customer stolen merchandise,

31


expressed as a percentage of revenues, were approximately 9.3% and 8.9% for the three and nine months ended September 30, 2020 were primarily due2021, compared to increases11.3% and 13.9% for the respective periods in other store expenses. The increase in other store expenses was primarily due2020. Excluding incremental charge-offs recorded to higher merchandise losses, primarily relatedOther Charges, attributable to COVID-19, a higher mixthe conversion of virtual locations, and investments to support expected revenue growth. Charge-offs in our Preferred Lease locations to the Acima platform, charge-offs due to customer stolen merchandise expressed as a percentagewere 8.7% of revenues, were approximately 11.3% and 13.9%segment revenue for the three and nine months ended September 30, 2020, compared to 8.9% and 9.5% for the respective periods in 2019.quarter. Charge-offs in our Preferred LeaseAcima locations due to other merchandise losses, expressed as a percentage of revenues, were approximately 0.0% and 0.1% for the nine months ended September 30, 2021, compared to 0.5% and 0.4% for the three and nine months ended September 30, 2020, compared to 0.5% and 0.3% in 2019. Operating profit as a percentage of segment revenues decreased to 8.0% and 6.7% for the three and nine months ended September 30, 2020, compared to 11.8% and 11.9% for the respective periods in 2019.2020.
Mexico segment
Three Months EndedNine Months Ended
September 30,ChangeSeptember 30,Change
(dollar amounts in thousands)20202019$%20202019$%
Revenues$12,159 $13,370 $(1,211)(9.1)%$36,316 $40,266 $(3,950)(9.8)%
Gross profit8,655 9,286 (631)(6.8)%25,615 27,966 (2,351)(8.4)%
Operating profit1,724 1,213 511 42.1 %3,743 3,906 (163)(4.2)%
Change in same store revenue4.3 %3.2 %
Stores in same store revenue calculation(1)
115122 
Three Months EndedNine Months Ended
September 30,ChangeSeptember 30,Change
(dollar amounts in thousands)20212020$%20212020$%
Revenues$15,917 $12,159 $3,758 30.9 %$45,670 $36,316 $9,354 25.8 %
Gross profit11,293 8,655 2,638 30.5 %32,323 25,615 6,708 26.2 %
Operating profit2,285 1,724 561 32.5 %6,659 3,743 2,916 77.9 %
Change in same store revenue15.3 %15.4 %
Stores in same store revenue calculation(1)
112112 
1)(1) Same store sales generally represents revenue earned in stores that were operated by us for 13 months or more and are reported on a constant currency basis as a percentage of total revenue earned in stores of the segment during the indicated period. We exclude from the same store sales base any store that receives a certain level of customer accounts from closed stores or acquisitions. The receiving store will be eligible for inclusion in the same store sales base in the 24th30th full month following account transfer.
Revenues. RevenuesExchange rate fluctuations resulted in positive impacts on revenues of approximately $1.5 million and $3.1 million for the three and nine months ended September 30, 2020 were negatively impacted by exchange rate fluctuations of approximately $1.7 million and $4.6 million2021, as compared to the same periods in 2019.2020. On a constant currency basis, revenues for the three and nine months ended September 30, 20202021 increased approximately $0.5$2.3 million and $0.6$6.3 million, compared to the same periods in 2019.2020.
Gross Profit. GrossExchange rate fluctuations resulted in positive impacts on gross profit of approximately $1.1 million and $2.2 million for the three and nine months ended September 30, 2020 was negatively impacted by exchange rate fluctuations of approximately $1.2 million and $3.2 million2021, as compared to the same periods in 2019.2020. On a constant currency basis, gross profit for the three and nine months ended September 30, 20202021 increased by approximately $0.6$1.6 million and $0.8$4.5 million as compared to the same periods in 2019.2020. Gross profit as a percentage of segment revenues was 71.2%70.9% and 70.5%70.8% for the three and nine months ended September 30, 2020,2021, compared to 69.5%71.2% and 70.5% for both of the respective periods in 2019.2020.
Operating Profit. OperatingExchange rate fluctuations resulted in positive impacts to operating profit of approximately $0.2 million and $0.4 million for the three and nine months ended September 30, 2021, as compared to the same periods in 2020. On a constant currency basis, operating profit for the three and nine months ended September 30, 2020 were each negatively impacted2021 increased by exchange rate fluctuations of approximately $0.2$0.6 million and $0.4$2.7 million, respectively, as compared to the same periods in 2019.2020. Operating profit as a percentage of segment revenues increased to 14.2%14.4% and 10.3%14.6% for the three and nine months ended September 30, 2020, from 9.1%2021, compared to 14.2% and 9.7%10.3% for the respective periods in 2019.2020.
Franchising segment
Three Months EndedNine Months Ended
September 30,ChangeSeptember 30,Change
(dollar amounts in thousands)20202019$%20202019$%
Revenues$23,974 $15,018 $8,956 59.6 %$63,975 $42,677 $21,298 49.9 %
Gross profit4,904 3,716 1,188 32.0 %14,343 12,754 1,589 12.5 %
Operating profit3,146 1,135 2,011 177.2 %8,694 4,716 3,978 84.4 %
Three Months EndedNine Months Ended
September 30,ChangeSeptember 30,Change
(dollar amounts in thousands)20212020$%20212020$%
Revenues$40,920 $23,974 $16,946 70.7 %$118,495 $63,975 $54,520 85.2 %
Gross profit7,350 4,904 2,446 49.9 %22,305 14,343 7,962 55.5 %
Operating profit4,816 3,146 1,670 53.1 %15,495 8,694 6,801 78.2 %
Revenues. Revenues increased for the three and nine months ended September 30, 20202021 compared to the respective periods in 2019,2020, primarily due to an increase in franchise locations as a resulthigher store count, resulting from the refranchising of refranchising Rent-A-Center Business corporateapproximately 100 California stores during 2020 and higher inventory purchases by our franchisees.
Gross Profit. Gross profit as a percentage of segment revenues decreased to 20.5%was 18.0% and 22.4%18.8% for the three and nine months ended September 30, 2020, from 24.7%2021, compared to 20.5% and 29.9%22.4% for the respective periods in 2019,2020. The decrease for the three and nine months ended September 30, 2021 was primarily due to changes in our revenue mixa lower percentage of franchise royaltiesroyalty income and fees and rental merchandise sales, relatedincluded in the revenues, compared to the increaserespective period in franchise locations described above.2020.

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Operating Profit. Operating profit as a percentage of segment revenues increasedwas 11.8% and 13.1%, for the three and nine months ended September 30, 20202021 compared to 13.1% and 13.6%, compared to 7.6% and 11.1% for the respective periods in 2019,2020. The decrease for the three and nine months ended September 30, 2021, compared to the respective period in 2020 was primarily due to athe decrease in gross profit as a percentage of segment revenues described above, in addition to an increase in operating expenses.expenses compared to the respective period in 2020.
Liquidity and Capital Resources
Overview. For the nine months ended September 30, 2020,2021, we generated $296.2$326.2 million in operating cash flow. We paid down $41.5 million of debt using cash generated from operations, and used cash in the amount of $47.3$(1,273.5) million for acquisitions, $(53.2) million for dividends, $26.6$(47.6) million for share repurchases,debt issuance costs, and $22.6$(45.9) million for capital expenditures. We ended the third quarter of 20202021 with $227.4$158.8 million of cash and cash equivalents and outstanding indebtedness of $198.0 million.$1.32 billion.
Analysis of Cash Flow. Cash provided by operating activities increased $68.1by $30.0 million to $296.2$326.2 million for the nine months ended September 30, 2020,2021, from $228.1$296.2 million in 2019. This increase was2020, primarily attributable to a decrease in rental merchandise purchases during the nine months ended September 30, 2020 compareddue to the same periodacquisition of Acima Holdings, partially offset by cost savings initiatives implemented by the Company in 2019, receipt of our federal tax refund of approximately $30 million,response to COVID-19 and other net changesbenefits stemming from the CARES Act in operating assets and liabilities.2020.
Cash used in investing activities was $22.9$(1,319.4) million for the nine months ended September 30, 2020,2021, compared to $22.8$(22.9) million in 2019,2020, a change of $0.1$1,296.5 million, primarily due to an increase in capital expenditures and lower proceeds from the sale of property assets, offset by cash consideration paid for the acquisition of Merchants PreferredAcima Holdings in 2019.February 2021.
Cash used inprovided by (used in) financing activities was $114.9$992.8 million for the nine months ended September 30, 2020,2021, compared to $287.1$(114.9) million in 2019,2020, representing a decreasechange of $172.2$1,107.7 million, primarily due to a net decreasean increase in debt repayments compared to debt proceeds of $241.2$1,292.0 million partially offset by increases in dividends paid of $47.3 million, and share repurchases of $26.6 million forduring the nine months ended September 30, 2020.2021 used to fund the acquisition of Acima Holdings in February 2021.
Liquidity Requirements. Our primary liquidity requirements are for rental merchandise purchases and other operating expenses.purchases. Other capital requirements include expenditures for property assets, including rental expense, debt service, and dividends. Historically, ourOur primary sourcesources of liquidity hashave been cash provided by operations. Should we require additional funding sources, we maintain our ABL Credit Facility with commitments of up to $300 million, subject to the terms and availability of our ABL Credit Facility.
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 March 2020, as a precautionary measure in responsethat regard, we may from time to negative impacts to our operations stemming fromtime draw funds under the COVID-19 pandemic, we drew down approximately $118.0 million against our ABL Credit Facility for general corporate purposes. Amounts are drawn as needed due to enhancethe timing of cash flows and are generally paid down as cash is generated by our financial flexibility and increase our available cash on hand. Withoperating activities. We believe cash flow generated from operations we repaid the full outstanding balance of approximately $163.0 million borrowed against our ABL Credit Facility in the second quarter of 2020, and had no outstanding borrowings as of September 30, 2020.
In response to the negative impacts to our business resulting from COVID-19, we proactively implemented certain measures to reduce operating expenses and cash flow uses, including implementing temporary executive pay reductions, temporarily furloughing certain employees at our store locations and corporate headquarters, reducing store hours in certain locations, renegotiating real estate leases, reducing inventory purchases and capital expenditures, and, for a brief period of time, suspending further share repurchases. In addition, we received approximately $30 million in federal tax refunds described above, including $12 million related to net operating loss carrybacks at a 35% tax rate in connection with the CARES Act, and expect to defer approximately $19 million in employer payroll taxes to future periods.
Taking into consideration our efforts to minimize expenses in response to COVID-19 and benefits from the CARES Act, and based on current assumptions and expectations, we believe the cash flow generated from operations and other sources of liquidity including availability under our ABL Credit Facility will be sufficient to fund our operations overduring the next 12 months.
At October 22, 2020,29, 2021, we had approximately $204.4$95.9 million in cash on hand, and at September 30, 2020, we had $209.3$463.6 million available under our ABL Credit Agreement. In addition,Facility.
We deferred approximately $23 million in September 2020,employer payroll taxes to future periods as part of the Rent-A-Center Board of Directors declared a cash dividend of $0.29 per share forbenefits received from the fourthCARES Act passed by the U.S. Federal government in response to COVID-19. We expect to repay approximately $12 million in deferred employer taxes during the last quarter of 2020, which was paid on October 26, 2020 to stockholders of record at the close of business on October 7, 2020.2021.
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"(“PATH”) extended the 50% bonus depreciation to 2015 and through September 26, 2017, when it was updated by the Tax Cuts and Jobs Act of 2017 (“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 $194$211 million for us in 2019.2020. We estimate the remaining tax deferral associated with

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bonus depreciation from the Tax Act wasthese Acts is approximately $239$260 million at December 31, 2019,2020, of which approximately 78%80%, or $189$207 million, will reverse in 2020,2021, and the majority of the remainder will reverse between 20212022 and 2022.2023.
Merchandise Losses. Merchandise losses consist of the following:
Three Months Ended September 30,Nine Months Ended September 30, Three Months Ended September 30,Nine Months Ended September 30,
(in thousands) (in thousands)2020201920202019 (in thousands)2021202020212020
Customer stolen merchandise (1)(2)
Customer stolen merchandise (1)(2)
$34,677 $37,110 $136,106 $110,299 
Customer stolen merchandise (1)(2)
$77,233 $34,677 $202,909 $136,106 
Other merchandise losses (2)(3)
Other merchandise losses (2)(3)
7,706 6,776 21,950 19,080 
Other merchandise losses (2)(3)
8,079 7,706 24,839 21,950 
Total merchandise lossesTotal merchandise losses$42,383 $43,886 $158,056 $129,379 Total merchandise losses$85,312 $42,383 $227,748 $158,056 
(1)Includes incremental losses Increase in customer stolen merchandise for the three and nine months ended September 30, 2021 is primarily related to COVID-19the acquisition of Acima Holdings in the first quarter of 2021.
(2) Includes incremental merchandise losses related to the conversion of Preferred Lease locations to Acima Holdings software for the nine-months ended September 30, 2021, and impacts of COVID-19 for the nine-months ended September 30, 2020.
(3)Other merchandise losses include unrepairable and missing merchandise, and loss/damage waiver claims.

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Capital Expenditures. We make capital expenditures in order to maintain our existing operations, acquire new capital assets in new and acquired stores and invest in information technology. We spent $22.6$45.9 million and $12.0$22.6 million on capital expenditures during the nine months ended September 30, 20202021 and 2019,2020, respectively.
Acquisitions and New Location Openings. During the first nine months of 2020,2021, we acquired twoone rent-to-own store locationslocation and customer accounts for an aggregate purchase price of approximately $0.7 million in two separate transactions.$0.3 million. The store locations were closedlocation remained open upon acquisition and consolidated into existing store operations inas part of our Rent-A-Center Business segment.
The table below summarizes the store location activity for the nine-month period ended September 30, 20202021 for our Rent-A-Center Business, Mexico and Franchising operating segments.
 Rent-A-Center BusinessMexicoFranchisingTotal
Locations at beginning of period1,973 123 372 2,468 
New location openings— — — — 
Conversions— — — — 
Closed locations
Merged with existing locations(25)(2)— (27)
Sold or closed with no surviving location(1)— (9)(10)
Locations at end of period1,947 121 363 2,431 
 Rent-A-Center BusinessMexicoFranchisingTotal
Locations at beginning of period1,845 121 462 2,428 
New location openings1 1 7 9 
Conversions1 — (1)— 
Closed locations
Merged with existing locations(5)— — (5)
Sold or closed with no surviving location— — (3)(3)
Locations at end of period1,842 122 465 2,429 

(1) Does not include locations in our Acima segment.
Senior Debt. As discussedOn February 17, 2021, we entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and lenders party thereto, that provides for a five-year asset-based revolving credit facility with commitments of $550 million and a letter of credit sublimit of $150 million, which commitments may be increased, at our option and under certain conditions, by up to an additional $125 million in the aggregate (the “ABL Credit Facility”). Under the ABL Credit Facility, we may borrow only up to the lesser of the level of the then-current borrowing base and the aggregate amount of commitments under the ABL Credit Facility. The borrowing base is tied to the amount of eligible installment sales accounts, inventory and eligible rental contracts, reduced by reserves. The ABL Credit Facility bears interest at a fluctuating rate determined by reference to the eurodollar rate plus an applicable margin of 1.50% to 2.00%, which margin, as of February 19, 2021, was 2.125%. A commitment fee equal to 0.250% to 0.375% of the unused portion of the ABL Credit Facility fluctuates dependent upon average utilization for the prior month as defined by a pricing grid included in the documentation governing the ABL Credit Facility. Loans under the ABL Credit Facility may be borrowed, repaid and re-borrowed until February 17, 2026, at which time all amounts borrowed must be repaid.
On February 17, 2021, we also entered into a term loan credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and lenders party thereto, that provides for a seven-year $875 million senior secured term loan facility (the “Term Loan Facility”). Subject in each case to certain restrictions and conditions, we may add up to $500 million of incremental term loan facilities to the Term Loan Facility or utilize incremental capacity under the Term Loan Facility at any time by issuing or incurring incremental equivalent term debt. Interest on borrowings under the Term Loan Facility is payable at a fluctuating rate of interest determined by reference to the eurodollar rate plus an applicable margin of 3.25%, subject to a 0.50% LIBOR floor. Borrowings under the Term Loan Facility amortize in equal quarterly installments in an amount equal to 1.000% per annum of the original aggregate principal amount thereof, with the remaining balance due at final maturity.
The Term Loan Facility was fully drawn at the closing of the Acima Holdings acquisition to fund a portion of the Aggregate Cash Consideration, repay certain of our outstanding indebtedness and our subsidiaries, repay all outstanding indebtedness of Acima and its subsidiaries and pay certain fees and expenses incurred in connection with the Acima Holdings acquisition. A portion of such proceeds were used to repay $197.5 million outstanding under our prior term loan facility, dated as of August 5, 2019, among us, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (the “Prior Term Loan Facility”), which Prior Term Loan Facility was terminated in connection with such repayment. At February 19, 2021, we had outstanding borrowings of $875 million under the Term Loan Facility.
At October 29, 2021, we had outstanding borrowings of $870.6 million under our Term Loan Facility and available commitments of $463.6 million under our ABL Credit Facility, net of letters of credit.
See Note 7 to theof our condensed consolidated financial statements included in Part I, Item Ithis report for additional information regarding our senior debt.
Senior Notes. On February 17, 2021, we issued $450.0 million in senior unsecured notes due February 15, 2029, at par value, bearing interest at 6.375% (the “Notes”), the proceeds of this Quarterly Reportwhich were used to fund a portion of the Aggregate Cash Consideration upon closing of the Acima Holdings acquisition. Interest on Form 10-Q,the Notes is payable in arrears on February 15 and

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August 2019, we completed the refinancing15 of our prior revolving facility and, effectiveeach year, beginning on August 5, 2019, redeemed in full our unsecured senior notes using cash on hand and proceeds from our new $300 million ABL Credit Facility and $200 million from a new term loan under our ABL Credit Agreement.15, 2021. We may use, subjectredeem some or all of the Notes at any time on or after February 15, 2024 for cash at the redemption prices set forth in the indenture governing the Notes, plus accrued and unpaid interest to, but not including, the redemption date. Prior to February 15, 2024, we may redeem up to 40% of the aggregate principal amount of the Notes with the proceeds of certain limitationsequity offerings at a redemption price of 106.375% plus accrued and borrowing availability, $150 million under our ABL Credit Agreement forunpaid interest to, but not including, the issuanceredemption date. In addition, we may redeem some or all of lettersthe Notes prior to February 15, 2024, at a redemption price of credit,100% of which $90.7 million, primarily relatingthe principal amount of the Notes plus accrued and unpaid interest to, workers compensation, had been so utilized asbut not including, the redemption date, plus a “make-whole” premium. If we experience specific kinds of October 22, 2020. The ABL Credit Agreement haschange of control, it will be required to offer to purchase the Notes at a scheduled maturity dateprice equal to 101% of August 5, 2024.the principal amount thereof plus accrued and unpaid interest.
StoreOperating Leases. We lease space for all of our Rent-A-Center Business and Mexico stores under operating leases expiring at various times through 2027. In addition we lease space for certain support facilities under operating leases expiring at various times through 2032. Most of our store leases are five-yearfive year leases and contain renewal options for additional periods ranging from three to five years at rental rates adjusted according to agreedagreed-upon formulas.

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Contractual Cash Commitments. The table below summarizes debt, lease and other minimum cash obligations outstanding as of September 30, 2020:
 Payments Due by Period
(in thousands)Total20202021-20222023-2024Thereafter
Term Loan(1)
$198,000 $500 $4,000 $4,000 $189,500 
ABL Credit Agreement(2)
— — — — — 
Operating Leases319,920 29,607 175,847 80,177 34,289 
Total(3)
$517,920 $30,107 $179,847 $84,177 $223,789 
(1)Does not include interest payments. Our Term Loan bears interest at varying rates equal to the Eurodollar rate plus 4.50%. The Eurodollar rate on our Term Loan at September 30, 2020, was 4.69%.
(2)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 our ABL Credit Agreement at September 30, 2020, was 1.69%.
(3)As of September 30, 2020,2021, our total remaining obligation for existing store lease contracts was approximately $347.2 million.
We lease vehicles for all of our Rent-A-Center Business stores under operating leases with lease terms expiring 12 months after the start date of the lease. We classify these leases as short-term and have elected the short-term lease exemption for our vehicle leases, and have therefore excluded them from our operating lease right-of-use assets within our Condensed Consolidated Balance Sheets. As of September 30, 2021, our total remaining minimum obligation for existing Rent-A-Center Business vehicle lease contracts was approximately $1.6 million.
We also lease vehicles for all of our Mexico stores which have terms expiring at various times through 2025 with rental rates adjusted periodically for inflation. As of September 30, 2021, our total remaining obligation for existing Mexico vehicle lease contracts was approximately $1.1 million.
See Note 5 of our condensed consolidated financial statements included in this report for additional discussion of our store operating leases.
Uncertain Tax Position. As of September 30, 2021, we have recorded $24.1$22.0 million in uncertain tax positions. Because of the uncertainty ofAlthough these positions represent a potential future cash liability to us, the amounts to be ultimately paid as well as theand timing of such payments uncertain tax positions are not reflected in the contractual obligations table.uncertain.
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. Furthermore, we tend to experience slower growth in the number of rental purchase agreements in the third quarter of each fiscal year when compared to other quarters throughout the year.
New Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. The standard removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The adoption of ASU 2019-12 will be required for us beginning January 1, 2021. We do not believe this ASU will have a material impact on our financial 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,As of September 30, 2021, 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 September 30, 2020, we had $198.0 million outstanding under our term loan credit agreement at interest rates indexed to the Eurodollar rate or the prime rate. Carrying value approximates fair value 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
We haveAs of September 30, 2021, we had $870.6 million outstanding debt with variableunder our term loan credit agreement at an interest ratesrate indexed to prime or Eurodollar rates thatthe eurodollar rate, which exposes us to the risk of increased interest costs if interest rates rise. As of September 30, 2020, we have not entered into any interest rate swap agreements. Based on our overall interest rate exposure at September 30, 2020,2021, a hypothetical 1.0% increase or decrease in market interest rates would have the effect of causing an additional $2.0$8.8 million annualized pre-tax charge or credit to interest expense in our condensed consolidated statement of operations. We have not entered into any interest rate swap agreements as of September 30, 2021.

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Foreign Currency Translation
We are exposed to market risk from foreign exchange rate fluctuations of the Mexican peso to the U.S. dollar as the financial position and operating results of our stores in Mexico are translated into U.S. dollars for consolidation. Resulting translation adjustments are recorded as a separate component of stockholders’ equity.
Item 4. Controls and Procedures.
Disclosure controlscontrol 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 September 30, 2020,2021, our disclosure controls and procedures (as defined in Rules 13a–15(e) and 15d–15(e) under the Securities Exchange Act of 1934) were effective.
Changes in internal controls over financial reporting. In February 2021, we acquired Acima Holdings. We are currently in the process of integrating Acima Holdings into our assessment of our internal control over financial reporting. Management's assessment and conclusions on the effectiveness of our disclosure controls and procedures as of September 30, 2021 excludes an assessment of the internal control over financial reporting of Acima Holdings. Acima Holdings represents approximately 36% and 31% of the Company's total revenues for the three and nine months ended September 30, 2021, respectively.
For the quarter ended September 30, 2020,2021, there have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) that in the aggregate, have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – Other Information
Item 1. Legal Proceedings
California Attorney General. The California Attorney General (“CAG”) previously issued an investigative subpoena seeking informationFrom time to time, we, along with respectour subsidiaries, are party to various legal proceedings and governmental inquiries arising in the ordinary course of business. We reserve for loss contingencies that are both probable and reasonably estimable. We regularly monitor developments related to these legal proceedings, and review the adequacy of our Acceptance Now business practices (now part of the Preferred Lease segment). The request for documents and information was sought in connection withlegal reserves on a broader investigation of the lease-to-own industry in California. Since receiving such demand, we have cooperated with the CAG in connection with its investigation and made several productions of requested documents. In March 2020, the CAG put forth proposed settlement terms to address alleged violations of California law. After several rounds of negotiations, in September 2020, the CAG proposed revised terms. In both cases, the proposed settlement terms include civil penalties, disgorgement of certain revenues, additional training requirements, and recommended changes to Acceptance Now business practices.quarterly basis. We believe that our business practices are in compliance with California law and are continuing to discuss resolution of the inquiry with the CAG. At this point, while we cannot predict the ultimate outcome, we do not believe any such outcome willcurrently expect these losses to have a material impact on our consolidated financial statements if and when such losses are incurred. Nevertheless, we cannot predict the impact of future developments affecting our claims and lawsuits, and any resolution of a claim or lawsuit or reserve within a particular fiscal period may materially and adversely impact our results of operations for that period. In addition, claims and lawsuits against us may seek injunctive or other relief that requires changes to our business practices or operations and it is possible that any required changes may materially and adversely impact our business, financial condition, results of operations or reputation. Please see note 13 of our condensed consolidated financial statements.statements included in this report for additional discussion of our legal proceedings.
Item 1A. Risk Factors
There have been no material changes to the risk factors disclosed in Item 1A of Part 1, "Risk Factors"“Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2019 and in Item 1A of Part II, "Risk Factors" of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table presents information with respect to purchases of our common stock the Company made during the three months ended September 30, 2020:
PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal number of shares purchased as part of publicly announced plans or programs
Maximum dollar value of shares that may yet be purchased under publicly
announced plans or
programs (in millions)
July 1, 2020 - September 30, 20202,200$27.89 2,200(1)$58.4(1)
2021:
PeriodTotal Number of Shares PurchasedAverage Price Paid per Share
Total number of shares purchased as part of publicly announced plans or programs(1)
Maximum dollar value of shares that may yet be purchased under publicly
announced plans or
programs (in millions)(1)
August 1, 2021 - August 31, 2021160,408$59.12 160,408$240.5
September 1, 2021 - September 30, 2021175,100$60.25 175,100$230.0
(1) Shares repurchased pursuant to the share repurchase program publicly announced on May 11, 2020August 2021 that allows for the repurchase of an aggregate of up to $75.0$250.0 million of shares of our common stock through open market and privately negotiated transactions from time to time.
Item 3. Defaults Upon Senior Securities
None.

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Item 4. Mine Safety Disclosures
Not applicable.

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Item 5. Other Information
None.


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Item 6. Exhibits.
Exhibit No.Description
3.1
Certificate of Incorporation of Rent-A-Center, Inc., as amended (incorporated herein by reference to Exhibit 3.1 to the registrant's Current Report on Form 8-K dated as of December 31, 2002)
3.2
Certificate of Amendment to the Certificate of Incorporation of Rent-A-Center, Inc., dated May 19, 2004 (incorporated herein by reference to Exhibit 3.2 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2004)
3.3
Amended and Restated BylawsCertificate of Amendment to the Certificate of Incorporation of Rent-A-Center, Inc., dated June 8, 2021 (incorporated herein by reference to Exhibit 3.1 to the registrant's Current Report on Form 8-K dated as of September 28, 2011)June 8, 2021)
3.4
Certificate of Designations of Series D Preferred Stock of Rent-A-Center, Inc. (incorporated herein by reference to Exhibit 3.1 to the registrant's Current Report on Form 8-K dated as of March 29, 2017)
4.13.5
FormAmended and Restated Bylaws of Certificate evidencing Common StockRent-A-Center, Inc. (incorporated herein by reference to Exhibit 4.13.2 to the registrant's Current Report on Form 10-Q for8-K dated as of December 1, 2020)
10.1
First Amendment to Term Loan Credit Agreement, dated as of September 21, 2021, by and among Rent-A-Center, Inc., the quarter ended March 31, 2017)other Loan Parties party thereto, the Lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated herein by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K dated as of September 21, 2021.)
31.1*
Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 implementing Section 302 of the Sarbanes-Oxley Act of 2002 by Mitchell E. Fadel
31.2*
Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 implementing Section 302 of the Sarbanes-Oxley Act of 2002 by Maureen B. Short
32.1*
Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Mitchell E. Fadel
32.2*
Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Maureen B. Short
101.INS*XBRL Instance Document - The instance document does not appear in the interactive data files because its XBRL tags are embedded within the inline XBRL document
101.SCH*XBRL Taxonomy Extension Schema Document
101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*XBRL Taxonomy Extension Label Linkbase Document
101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document
104*Cover page Interactive Data File (embedded within the inline XBRL document contained in Exhibit 101)

*Filed herewith.


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SIGNATURE
Pursuant to the requirements 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: October 30, 2020November 4, 2021



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