rcii-20210630
RENT A CENTER INC 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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 June 30, 2021
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 filerAccelerated filer
Non-accelerated filerSmaller 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 July 29, 2021:
ClassOutstanding
Common stock, $.01 par value66,461,677




TABLE OF CONTENTS
 
  Page No.
Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020
 


i


Item 1. Condensed Consolidated Financial Statements.
RENT-A-CENTER, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
(In thousands, except per share data)
Revenues
Store
Rentals and fees$916,405 $534,737 $1,661,939 $1,102,737 
Merchandise sales221,229 108,080 454,022 209,460 
Installment sales18,191 17,643 35,964 32,390 
Other1,035 775 1,953 1,497 
Total store revenues1,156,860 661,235 2,153,878 1,346,084 
Franchise
Merchandise sales29,616 18,047 62,671 30,484 
Royalty income and fees7,499 4,464 14,208 9,117 
Total revenues1,193,975 683,746 2,230,757 1,385,685 
Cost of revenues
Store
Cost of rentals and fees320,873 157,124 567,908 322,579 
Cost of merchandise sold249,853 102,960 489,959 201,717 
Cost of installment sales6,234 6,092 12,275 11,117 
Total cost of store revenues576,960 266,176 1,070,142 535,413 
Franchise cost of merchandise sold29,543 18,038 62,620 30,562 
Total cost of revenues606,503 284,214 1,132,762 565,975 
Gross profit587,472 399,532 1,097,995 819,710 
Operating expenses
Store expenses
Labor159,337 129,929 316,044 283,723 
Other store expenses181,012 160,756 351,145 322,474 
General and administrative expenses54,385 32,943 103,510 72,118 
Depreciation and amortization
13,566 14,348 26,959 29,261 
Other charges72,653 7,921 123,772 9,624 
Total operating expenses480,953 345,897 921,430 717,200 
Operating profit106,519 53,635 176,565 102,510 
Debt refinancing charges  8,743  
Interest expense20,435 4,161 32,425 8,608 
Interest income(44)(265)(118)(409)
Earnings before income taxes86,128 49,739 135,515 94,311 
Income tax expense24,819 11,246 31,654 6,526 
Net earnings$61,309 $38,493 $103,861 $87,785 
Basic earnings per common share$1.05 $0.72 $1.81 $1.62 
Diluted earnings per common share$0.90 $0.70 $1.55 $1.58 
Cash dividends declared per common share$0.31 $0.58 $0.62 $0.58 
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 June 30,Six Months Ended June 30,
 2021202020212020
(In thousands)
Net earnings$61,309 $38,493 $103,861 $87,785 
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax of $238 and $5, $11 and $(1,034) for the three and six months ended June 30, 2021 and 2020, respectively
896 17 43 (3,889)
Total other comprehensive income (loss)896 17 43 (3,889)
Comprehensive income$62,205 $38,510 $103,904 $83,896 
See accompanying notes to condensed consolidated financial statements.

2


RENT-A-CENTER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
June 30, 2021December 31, 2020
(In thousands, except share and par value data)
ASSETS
Cash and cash equivalents$145,072 $159,449 
Receivables, net of allowance for doubtful accounts of $7,763 and $8,047 in 2021 and 2020, respectively
120,795 90,003 
Prepaid expenses and other assets46,834 50,006 
Rental merchandise, net
On rent1,122,057 762,886 
Held for rent120,784 146,266 
Merchandise held for installment sale5,826 5,439 
Property assets, net of accumulated depreciation of $530,137 and $505,074 in 2021 and 2020, respectively
306,466 141,641 
Operating lease right-of-use assets297,317 283,422 
Deferred tax asset41,940 33,782 
Goodwill344,023 70,217 
Other intangible assets, net484,188 7,869 
Total assets$3,035,302 $1,750,980 
LIABILITIES
Accounts payable – trade$174,056 $186,063 
Accrued liabilities366,681 320,583 
Operating lease liabilities299,537 285,354 
Deferred tax liability92,815 176,410 
Senior debt, net842,047 190,490 
Senior notes, net435,002  
Total liabilities2,210,138 1,158,900 
STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value; 250,000,000 shares authorized; 124,347,073 and 112,180,517 shares issued in June 30, 2021 and December 31, 2020, respectively
1,144 1,105 
Additional paid-in capital1,057,242 886,902 
Retained earnings1,153,672 1,091,010 
Treasury stock at cost, 57,891,859 shares in June 30, 2021 and December 31, 2020
(1,375,541)(1,375,541)
Accumulated other comprehensive loss(11,353)(11,396)
Total stockholders' equity825,164 592,080 
Total liabilities and stockholders' equity$3,035,302 $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 LossTotal
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 
(1)Includes shares released from escrow related to the 2019 Merchant's Preferred acquisition
 Common StockAdditional
Paid-In
Capital
Retained
Earnings
Treasury
Stock
Accumulated Other Comprehensive LossTotal
SharesAmount
 (In thousands)
Balance at December 31, 2019111,166 $1,110 $869,617 $947,875 $(1,348,969)$(10,670)$458,963 
ASC 326 adoption— — — (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 units, net of shares withheld for employee taxes434 4 (5,274)— — — (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 
See accompanying notes to consolidated financial statements.


4


RENT-A-CENTER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 Six Months Ended June 30,
 20212020
(In thousands)
Cash flows from operating activities
Net earnings$103,861 $87,785 
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation of rental merchandise547,034 310,810 
Bad debt expense6,058 7,900 
Stock-based compensation expense59,714 5,892 
Depreciation of property assets31,782 28,706 
Loss on sale or disposal of property assets249 698 
Amortization of intangibles43,712 561 
Amortization of financing fees2,917 795 
Write-off of debt financing fees4,546  
Deferred income taxes21,320 2,146 
Changes in operating assets and liabilities, net of acquired assets
Rental merchandise(555,856)(211,865)
Receivables(6,384)(918)
Prepaid expenses and other assets4,524 12,190 
Operating lease right-of-use assets and lease liabilities(265)4,726 
Accounts payable – trade(28,030)(22,250)
Accrued liabilities15,336 27,543 
Net cash provided by operating activities250,518 254,719 
Cash flows from investing activities
Purchase of property assets(25,401)(14,750)
Proceeds from sale of property assets 187 
Hurricane insurance recovery proceeds 158 
Acquisitions of businesses(1,273,542) 
Net cash used in investing activities(1,298,943)(14,405)
Cash flows from financing activities
Share repurchases (26,511)
Exercise of stock options10,626 1,682 
Shares withheld for payment of employee tax withholdings(20,903)(5,270)
Debt issuance costs(46,085) 
Proceeds from debt1,490,000 198,000 
Repayments of debt(364,688)(239,000)
Dividends paid(35,054)(31,554)
Net cash provided by (used in) financing activities1,033,896 (102,653)
Effect of exchange rate changes on cash152 (1,729)
Net (decrease) increase in cash and cash equivalents(14,377)135,932 
Cash and cash equivalents at beginning of period159,449 70,494 
Cash and cash equivalents at end of period$145,072 $206,426 
See accompanying notes to condensed consolidated financial statements.

5

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”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to the SEC’s rules and regulations, although we believe the disclosures are adequate to make the information presented not misleading. We suggest these financial statements be read in conjunction with the financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 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.
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 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”, “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), 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 Acima segment, which operates in the United States and Puerto Rico and which, includes the operations of Acima Holdings (as defined in Note 2 below) acquired in 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 retailer. 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.
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-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 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. We adopted ASU 2019-12 beginning January 1, 2021 using a prospective approach. Impacts to our financial statements for the six months ended June 30, 2021 resulting from the adoption of this ASU were immaterial.

6

RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Note 2 - Acquisitions and Divestitures
On 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 the 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 Merger Agreement, the portion of 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 36-month period beginning upon closing of 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 $1.4 billion, including net cash consideration of approximately $1.3 billion, and 2,683,328 shares of the Aggregate Stock Consideration subject to 18-month lockup agreements valued at $51.14 per share, as of the date of closing, and 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 will be recognized as stock-based compensation expense subject to ASC Topic 718, “Stock-based Compensation” over the required vesting period, and recorded to Other charges 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 $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.

7

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 preliminary estimated fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date:
(in thousands)February 17, 2021
Aggregate cash consideration$1,273,263 
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 assets699 
Rental merchandise
On rent325,073 
Property assets171,455 
Operating lease right-of-use assets9,136 
Goodwill273,793 
Other intangible assets520,000 
Total assets acquired$1,330,621 
LIABILITIES ASSUMED
Accounts payable - trade16,023 
Accrued liabilities23,677 
Operating lease liabilities9,689 
Deferred income taxes(112,960)
Total liabilities assumed(63,571)
Total equity value$1,394,192 
(1) Includes gross contractual receivables of $65.2 million related to merchandise lease contracts, of which we have estimated $35.5 million are 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 842. 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 with an estimated weighted average useful life of 8 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 an estimated remaining useful life of 10 years. The fair value for these intangible and property assets were estimated using common industry valuation methods for similar asset types, based primarily on cost inputs and projected cash flows.
In addition, we recorded goodwill of $273.8 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 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 for tax purposes, including our recorded goodwill, plus the value of Aggregate Stock Consideration subject to restricted stock agreements described above, and acquisition-related expenses described below, is fully deductible and will be amortized over 15 years.

8

RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Acima Holdings results of operations are reflected in our unaudited condensed consolidated statements of operations from the date of acquisition.
In the second quarter of 2021, we recorded an adjustment to the fair value of rental merchandise reducing the value of the acquired assets by approximately $32.6 million with a corresponding increase 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 reduce the value of acquired rental merchandise we recorded a corresponding credit adjustment to rental merchandise depreciation of approximately $10.9 million, representing the period from the date of acquisition through June 30, 2021. The credit adjustment to rental merchandise depreciation is reflected in cost of rentals and fees in our condensed consolidated statement of operations.
Although we do not anticipate additional adjustments to the above values, we are still in the process of finalizing our assessments of the preliminary purchase price allocation and will record any additional necessary adjustments to acquired assets and liabilities within the allowable measurement period.
In connection with this acquisition, we incurred approximately $23.2 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 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 June 30,Six Months Ended June 30,
(in thousands)2021202020212020
(unaudited)(unaudited)(unaudited)(unaudited)
Pro Forma total revenues$1,193,975 $982,266 $2,425,361 $1,969,013 
Pro Forma net earnings(1)
65,448 16,122 121,861 (843)
(1)Total pro forma adjustments to net earnings represented an increase of $4.1 million for the three months ended June 30, 2021, a decrease of $106.2 million for the six months ended June 30, 2021, and $71.7 million and $177.9 million for the three and six months ended June 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 -
June 30, 2021
February 17, 2020 -
June 30, 2020
(unaudited)(unaudited)
Total revenues$615,646 $441,959 
Net earnings(1)
68,986 70,380 
(1)Net Earnings for the period February 17, 2021 - June 30, 2021 includes amortization of intangible assets acquired upon closing of the Acima Holdings acquisition








9

RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Note 3 - Revenues
The following table disaggregates our revenue for the periods ended June 30, 2021 and 2020:
 Three Months Ended June 30, 2021
 
Rent-A-Center Business
AcimaMexicoFranchisingConsolidated
(In thousands)
Store
Rentals and fees$438,162 $463,841 $14,402 $ $916,405 
Merchandise sales49,050 171,346 833  221,229 
Installment sales18,191    18,191 
Other431 93 20 491 1,035 
Total store revenues505,834 635,280 15,255 491 1,156,860 
Franchise
Merchandise sales   29,616 29,616 
Royalty income and fees   7,499 7,499 
Total revenues$505,834 $635,280 $15,255 $37,606 $1,193,975 
 Six Months Ended June 30, 2021
 
Rent-A-Center Business
AcimaMexicoFranchisingConsolidated
(In thousands)
Store
Rentals and fees$867,463 $766,367 $28,109 $ $1,661,939 
Merchandise sales126,428 325,976 1,618  454,022 
Installment sales35,964    35,964 
Other845 386 26 696 1,953 
Total store revenues1,030,700 1,092,729 29,753 696 2,153,878 
Franchise
Merchandise sales   62,671 62,671 
Royalty income and fees   14,208 14,208 
Total revenues$1,030,700 $1,092,729 $29,753 $77,575 $2,230,757 

10

RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
 Three Months Ended June 30, 2020
 
Rent-A-Center Business
AcimaMexicoFranchisingConsolidated
(In thousands)
Store
Rentals and fees$385,338 $139,440 $9,959 $ $534,737 
Merchandise sales55,741 51,690 649  108,080 
Installment sales17,643    17,643 
Other470 113 3 189 775 
Total store revenues459,192 191,243 10,611 189 661,235 
Franchise
Merchandise sales   18,047 18,047 
Royalty income and fees   4,464 4,464 
Total revenues$459,192 $191,243 $10,611 $22,700 $683,746 
 Six Months Ended June 30, 2020
 
Rent-A-Center Business
AcimaMexicoFranchisingConsolidated
(In thousands)
Store
Rentals and fees$778,503 $301,438 $22,796 $ $1,102,737 
Merchandise sales102,428 105,678 1,354  209,460 
Installment sales32,390    32,390 
Other836 254 7 400 1,497 
Total store revenues914,157 407,370 24,157 400 1,346,084 
Franchise
Merchandise sales   30,484 30,484 
Royalty income and fees   9,117 9,117 
Total revenues$914,157 $407,370 $24,157 $40,001 $1,385,685 
Lease Purchase Agreements
Rent-A-Center Business, 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 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, Acima (excluding virtual) and Mexico locations must be prepaid in advance of the next rental term. Under the virtual business model, revenues may be earned prior to the rental payment due date, 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.
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 June 30, 2021 and December 31, 2020, we had $47.2 million and $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.

11

RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
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, 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 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 June 30, 2021 and December 31, 2020, we had $3.0 million and $3.1 million in deferred revenue included in accrued liabilities related to extended service plans.
Other. Other revenue consisted 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 June 30, 2021 and December 31, 2020, we had $4.5 million and $4.7 million in deferred revenue included in accrued liabilities related to franchise fees.
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 six months ended June 30, 2021 and 2020 was $6.1 million and $5.6 million, respectively.
Trade and notes receivables consist 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 each franchisee’s financial condition and collateral is generally not required. Trade receivables are generally due within 30 days.

12

RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Receivables consist of the following:
(In thousands)June 30, 2021December 31, 2020
Installment sales receivables$62,309 $61,794 
Trade and notes receivables66,249 36,256 
Total receivables128,558 98,050 
Less allowance for doubtful accounts(7,763)(8,047)
Total receivables, net of allowance for doubtful accounts$120,795 $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 notes 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.
The allowance for doubtful accounts related to trade and notes receivable was $0.9 million and $1.0 million at June 30, 2021 and December 31, 2020, respectively. The allowance for doubtful accounts related to installment sales receivable was $6.9 million and $7.0 million at June 30, 2021 and December 31, 2020, respectively.
Changes in our allowance for doubtful accounts are as follows:
(In thousands)June 30, 2021
Beginning allowance for doubtful accounts$8,047 
Bad debt expense (1)
6,058 
Accounts written off, net of recoveries(6,342)
 Ending allowance for doubtful accounts$7,763 
(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 year leases and contain renewal options for additional periods ranging from three to five years at rental rates adjusted according to agreed 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 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.
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. 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. Finally, we have a minimal number of equipment leases, primarily related to temporary storage containers and certain back 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. In addition, we have elected to use available practical expedients that eliminate the requirement

13

RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
to reassess whether expired or existing contracts contained leases and the requirement to reassess the lease classification for any existing leases prior to our adoption of ASU 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 Statements of Operations.
Total operating lease costs by expense type:
Three Months EndedSix Months Ended
(in thousands)June 30, 2021June 30, 2020June 30, 2021June 30, 2020
Operating lease cost included in Other store expenses(1)(2)
$34,690 $34,438 $68,826 $71,877 
Operating lease cost included in Other charges(2)
78 191 244 960 
Sublease receipts(3,134)(2,144)(