10-Q 1 rcii-20220331.htm 10-Q rcii-20220331
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 March 31, 2022
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 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 April 27, 2022:
ClassOutstanding
Common stock, $.01 par value59,143,046




TABLE OF CONTENTS
 
  Page No.
Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021
 


i


Item 1. Condensed Consolidated Financial Statements.
RENT-A-CENTER, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 Three Months Ended March 31,
 20222021
(in thousands, except per share data)
Revenues
Store
Rentals and fees$883,047 $745,534 
Merchandise sales232,881 232,793 
Installment sales17,089 17,773 
Other1,290 918 
Total store revenues1,134,307 997,018 
Franchise
Merchandise sales18,521 33,055 
Royalty income and fees6,894 6,709 
Total revenues1,159,722 1,036,782 
Cost of revenues
Store
Cost of rentals and fees338,633 247,035 
Cost of merchandise sold250,331 240,106 
Cost of installment sales5,921 6,041 
Total cost of store revenues594,885 493,182 
Franchise cost of merchandise sold18,742 33,077 
Total cost of revenues613,627 526,259 
Gross profit546,095 510,523 
Operating expenses
Store expenses
Labor166,603 156,707 
Other store expenses227,369 170,133 
General and administrative expenses56,403 49,125 
Depreciation and amortization
14,529 13,393 
Other charges70,148 51,119 
Total operating expenses535,052 440,477 
Operating profit11,043 70,046 
Debt refinancing charges 8,743 
Interest expense18,970 11,990 
Interest income(45)(74)
(Loss) earnings before income taxes(7,882)49,387 
Income tax (benefit) expense(3,645)6,835 
Net (loss) earnings$(4,237)$42,552 
Basic (loss) earnings per common share$(0.08)$0.76 
Diluted (loss) earnings per common share$(0.08)$0.64 
Cash dividends declared per common share$0.34 $0.31 
See accompanying notes to condensed consolidated financial statements.

1


RENT-A-CENTER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited)
 
 Three Months Ended March 31,
 20222021
(in thousands)
Net (loss) earnings$(4,237)$42,552 
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax of $176 and $(227) for the three months ended March 31, 2022 and 2021, respectively
661 (853)
Total other comprehensive income (loss)661 (853)
Comprehensive (loss) income$(3,576)$41,699 
See accompanying notes to condensed consolidated financial statements.

2


RENT-A-CENTER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
March 31, 2022December 31, 2021
(in thousands, except share and par value data)
ASSETS
Cash and cash equivalents$95,684 $108,333 
Receivables, net of allowance for doubtful accounts of $8,826 and $8,479 in 2022 and 2021, respectively
121,185 126,378 
Prepaid expenses and other assets47,460 63,468 
Rental merchandise, net
On rent1,017,485 1,173,024 
Held for rent127,663 132,984 
Merchandise held for installment sale5,409 6,405 
Property assets, net of accumulated depreciation of $573,669 and $557,453 in 2022 and 2021, respectively
301,907 308,098 
Operating lease right-of-use assets299,109 291,338 
Deferred tax asset68,630 68,391 
Goodwill289,761 289,750 
Other intangible assets, net402,828 425,158 
Total assets$2,777,121 $2,993,327 
LIABILITIES
Accounts payable – trade$130,715 $135,666 
Accrued liabilities323,860 362,708 
Operating lease liabilities301,047 296,535 
Deferred tax liability97,868 113,943 
Senior debt, net964,113 1,135,207 
Senior notes, net436,460 435,992 
Total liabilities2,254,063 2,480,051 
STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value; 250,000,000 shares authorized; 124,844,162 and 124,398,373 shares issued in March 31, 2022 and December 31, 2021, respectively
1,070 1,065 
Additional paid-in capital1,179,925 1,146,509 
Retained earnings1,119,347 1,143,647 
Treasury stock at cost, 65,790,667 shares in March 31, 2022 and December 31, 2021
(1,765,574)(1,765,574)
Accumulated other comprehensive loss(11,710)(12,371)
Total stockholders' equity523,058 513,276 
Total liabilities and stockholders' equity$2,777,121 $2,993,327 
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, 2021124,398 $1,065 $1,146,509 $1,143,647 $(1,765,574)$(12,371)$513,276 
Net loss— — — (4,237)— — (4,237)
Other comprehensive income— — — — — 661 661 
Exercise of stock options22 1 476 — — — 477 
Vesting of restricted share units, net of shares withheld for employee taxes424 4 (4)— — —  
Tax effect of stock awards vested and options exercised— — (8,466)— — — (8,466)
Stock-based compensation— — 41,410 — — — 41,410 
Dividends declared— — — (20,063)— — (20,063)
Balance at March 31, 2022124,844 1,070 1,179,925 1,119,347 (1,765,574)(11,710)523,058 
 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 
(1)Includes shares released from escrow related to the 2019 Merchant's Preferred acquisition.
See accompanying notes to condensed consolidated financial statements.


4


RENT-A-CENTER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 Three Months Ended March 31,
 20222021
(in thousands)
Cash flows from operating activities
Net (loss) earnings$(4,237)$42,552 
Adjustments to reconcile net (loss) earnings to net cash provided by operating activities
Depreciation of rental merchandise327,439 237,636 
Bad debt expense4,973 3,449 
Stock-based compensation expense41,410 20,148 
Depreciation of property assets18,247 14,459 
Loss on sale or disposal of property assets4,341 165 
Amortization of intangibles22,373 14,192 
Amortization of financing fees1,562 1,117 
Write-off of debt financing fees 4,546 
Deferred income taxes(16,607)3,852 
Changes in operating assets and liabilities, net of acquired assets
Rental merchandise(165,303)(222,054)
Receivables220 1,674 
Prepaid expenses and other assets15,997 9,932 
Operating lease right-of-use assets and lease liabilities(3,259)(171)
Accounts payable – trade(4,951)(22,152)
Accrued liabilities(36,914)26,448 
Net cash provided by operating activities205,291 135,793 
Cash flows from investing activities
Purchase of property assets(16,403)(11,388)
Proceeds from sale of property assets6  
Acquisitions of businesses(324)(1,267,903)
Net cash used in investing activities(16,721)(1,279,291)
Cash flows from financing activities
Exercise of stock options477 8,944 
Shares withheld for payment of employee tax withholdings(8,467)(20,903)
Debt issuance costs (46,085)
Proceeds from debt 1,490,000 
Repayments of debt(172,188)(307,500)
Dividends paid(21,105)(17,116)
Net cash (used in) provided by financing activities(201,283)1,107,340 
Effect of exchange rate changes on cash64 (272)
Net decrease in cash and cash equivalents(12,649)(36,430)
Cash and cash equivalents at beginning of period108,333 159,449 
Cash and cash equivalents at end of period$95,684 $123,019 
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, 2021. 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, 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
The 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, generally offers the lease-to-own transaction to consumers who do not qualify for financing from the traditional retailer through kiosks located within such retailer’s locations, including staffed options and unstaffed or virtual options. Virtual locations employ a virtual solution where customers, either directly or with the assistance of a representative of the third-party retailer, initiate the lease-to-own transaction online in the retailers’ locations using our virtual solutions.
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.
Note 2 - Acquisitions and Divestitures
On February 17, 2021, we completed the acquisition of Acima Holdings, LLC (“Acima Holdings”). 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 agreement and plan of merger entered into in connection with the transaction (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 employee former owners of Acima Holdings is subject to restricted stock agreements providing vesting conditions over a 36-month period that began upon closing of the transaction. The portion of the Aggregate Stock Consideration issued to nonemployee former

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RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
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 transaction becomes transferable after each six-month period following the closing of the transaction. We entered into a Registration Rights Agreement at the closing of the transaction 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 transaction.
The aggregate purchase price was approximately $1.4 billion, including the Aggregate Cash Consideration, and the 2,683,328 shares of the Aggregate Stock Consideration issued to non-employee former owners of Acima Holdings, valued at $51.14 per share, as of the closing date and discounted for lack of marketability on account of the transfer restrictions described above. 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 aggregate purchase price excludes the remaining 8,096,595 shares of the Aggregate Stock Consideration issued to employee former owners of Acima Holdings. Such shares were valued at $414.1 million, based on the per share price of $51.14 as of the date of closing. These shares are instead 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 in our unaudited Condensed Consolidated Statements of Operations.
Assets acquired and liabilities assumed in connection with the acquisition have been recorded at their fair values. The following table provides the 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)
$25,255 
Prepaid expenses and other assets700 
Rental merchandise
On rent340,575 
Property assets171,455 
Operating lease right-of-use assets9,136 
Deferred income taxes28,559 
Goodwill219,530 
Other intangible assets520,000 
Total assets acquired$1,315,210 
LIABILITIES ASSUMED
Accounts payable - trade16,023 
Accrued liabilities11,716 
Operating lease liabilities9,689 
Deferred income taxes(116,410)
Total liabilities assumed(78,982)
Total equity value$1,394,192 
(1) Includes gross contractual receivables of $61.6 million related to merchandise lease contracts, of which $34.7 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, 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,

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
including $340.6 million of rental merchandise and $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 $219.5 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. 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, differs from recorded goodwill as a result of the Aggregate Stock Consideration subject to restricted stock agreements, differences in value assigned to other purchased assets, and acquisition-related expenses. Tax goodwill will be amortized over 15 years.
Acima Holdings results of operations are reflected in our unaudited Condensed Consolidated Statements of Operations from the date of acquisition.
Subsequent to the date of acquisition, we recorded certain adjustments to the purchase price allocation within the measurement period, including an adjustment to the fair value of rental merchandise decreasing the value of the acquired assets by approximately $17.1 million. The adjustment to the fair value of rental merchandise was based on further assessment of the carrying value of the assets and corresponding evaluation of related (Level 2) market inputs. Total cumulative measurement period adjustments resulted in a decrease to goodwill of approximately $(22.2) million. The purchase price allocation for the Acima Holdings acquisition was complete as of December 31, 2021.
In connection with this acquisition, we incurred approximately $23.9 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. 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 and step-down 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 March 31,
(in thousands)20212020
(unaudited)(unaudited)
Pro Forma total revenues$1,231,386 $986,747 
Pro Forma net earnings (loss)(1)
56,413 (12,687)
(1)Total pro forma adjustments to net earnings (loss) represented decreases of $13.2 million and $101.9 million for the three months ended March 31, 2021 and 2020, respectively. Pro forma adjustments to net loss in 2020 include retro-active impacts related to purchase price allocation adjustments recorded, subsequent to the date of acquisition, within the measurement period described above.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
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 -
March 31, 2021
February 17, 2020 -
March 31, 2020
(unaudited)(unaudited)
Total revenues$210,569 $143,439 
Net earnings(1)
19,006 21,025 
(1)Net earnings for the period February 17, 2021 - March 31, 2021 and 2020 includes amortization of intangible assets acquired upon closing of the Acima Holdings acquisition.
Note 3 - Revenues
The following table disaggregates our revenue for the periods ended March 31, 2022 and 2021:
 Three Months Ended March 31, 2022
 
Rent-A-Center Business
AcimaMexicoFranchisingConsolidated
(in thousands)
Store
Rentals and fees$442,695 $425,471 $14,881 $ $883,047 
Merchandise sales58,294 173,783 804  232,881 
Installment sales17,089    17,089 
Other427 123 27 713 1,290 
Total store revenues518,505 599,377 15,712 713 1,134,307 
Franchise
Merchandise sales   18,521 18,521 
Royalty income and fees   6,894 6,894 
Total revenues$518,505 $599,377 $15,712 $26,128 $1,159,722 
 Three Months Ended March 31, 2021
 
Rent-A-Center Business
AcimaMexicoFranchisingConsolidated
(in thousands)
Store
Rentals and fees$429,301 $302,526 $13,707 $ $745,534 
Merchandise sales77,378 154,630 785  232,793 
Installment sales17,773    17,773 
Other414 293 6 205 918 
Total store revenues524,866 457,449 14,498 205 997,018 
Franchise
Merchandise sales   33,055 33,055 
Royalty income and fees   6,709 6,709 
Total revenues$524,866 $457,449 $14,498 $39,969 $1,036,782 
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.

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RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Rental payments received at our Rent-A-Center Business lease-to-own stores, certain Acima staffed locations formerly operating under the Preferred Lease brand, and Mexico stores must be prepaid in advance of the next rental term. Under the Acima Holdings 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 March 31, 2022 and December 31, 2021, we had $36.3 million and $51.7 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 locations, and Mexico stores is depreciated using the income forecasting method and recognized in cost of sales over the rental term. Rental merchandise in 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, 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 March 31, 2022 and December 31, 2021, we had $2.4 million and $2.6 million in deferred revenue included in accrued liabilities related to extended service plans.
Other. Other revenue 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 March 31, 2022 and December 31, 2021, we had $3.9 million and $4.1 million, respectively, 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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
makes a payment, generally on a monthly basis. Interest paid on installment agreements for each of the three months ended March 31, 2022 and 2021 was $3.1 million.
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.
Receivables consist of the following:
(in thousands)March 31, 2022December 31, 2021
Installment sales receivables$65,243 $66,276 
Trade and notes receivables64,768 68,581 
Total receivables130,011 134,857 
Less allowance for doubtful accounts(8,826)(8,479)
Total receivables, net of allowance for doubtful accounts$121,185 $126,378 
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 $0.8 million and $0.9 million, and the allowance for doubtful accounts related to installment sales receivable was $8.0 million and $7.6 million at March 31, 2022 and December 31, 2021, respectively.
Changes in our allowance for doubtful accounts are as follows:
(in thousands)March 31, 2022
Beginning allowance for doubtful accounts$8,479 
Bad debt expense(1)
4,973 
Accounts written off, net of recoveries(4,626)
 Ending allowance for doubtful accounts$8,826 
(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 2030. 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 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.
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 Sheets.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
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 Sheets. We also lease vehicles for all of our Mexico stores which have terms expiring at various times through 2026 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.
In our calculation of operating lease right-of-use assets and operating lease liabilities we have elected not to separate the lease and non-lease components. Furthermore, operating lease right-of-use assets and operating lease liabilities are discounted using our incremental borrowing rate, since the implicit rate is not readily determinable. We do not currently have any financing leases.
Operating lease costs are recorded on a straight-line basis within other store expenses in our Condensed Consolidated Statements of Operations.
Total operating lease costs by expense type:
Three Months Ended
(in thousands)March 31, 2022March 31, 2021
Operating lease cost included in Other store expenses(1)(2)
$31,594 $34,136 
Operating lease cost included in Other charges(2)
23 166 
Sublease receipts(2,165)(3,349)
Total operating lease charges $29,452 $30,953 
(1) Includes short-term lease costs, which are not significant.
(2) Excludes variable lease costs of $8.7 million and $8.5 million for the three months ended March 31, 2022 and 2021, respectively.
Supplemental cash flow information related to leases:
Three Months Ended
(in thousands)March 31, 2022March 31, 2021
Cash paid for amounts included in measurement of operating lease liabilities$26,090 $26,572 
Cash paid for short-term operating leases not included in operating lease liabilities4,861 4,580 
Right-of-use assets obtained in exchange for new operating lease liabilities28,638 37,923 
Weighted-average discount rate and weighted-average remaining lease term:
(in thousands)March 31, 2022December 31, 2021
Weighted-average discount rate(1)
5.9 %6.0 %
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 March 31, 2022:
(in thousands)Operating Leases
2022$80,947 
202387,761 
202469,225 
202551,644 
202627,356 
Thereafter19,979 
Total undiscounted operating lease liabilities336,912 
Less: Interest(35,865)
Total present value of operating lease liabilities$301,047 

12

RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Note 6 - Income Taxes
The effective tax rate was 46.2% for the three months ended March 31, 2022, compared to 13.8% for the corresponding period in 2021. The effective tax rate for the three months ended March 31, 2022 was impacted by the difference between recorded goodwill and goodwill recognized for tax purposes, primarily as a result of the Aggregate Stock Consideration from the Acima Holdings transaction subject to restricted stock agreements. The effective tax rate for the three months ended March 31, 2021 was impacted by the difference between recorded goodwill and goodwill recognized for tax purposes, primarily as a result of the Aggregate Stock Consideration subject to restricted stock agreement, partially offset by 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.
Note 7 - Senior Debt
On February 17, 2021, we entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and lenders party thereto, providing for a seven-year $875 million senior secured term loan facility (the “Term Loan Facility”) and an Asset Based Loan Credit Facility (the “ABL Credit Facility”) providing for a five-year asset-based revolving 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 an additional $125 million in the aggregate.
Proceeds from the Term Loan Facility were net of original issue discount of $4.4 million upon issuance from the lenders. In addition, in connection with the closing of the Term Loan Facility and the ABL Credit Facility, we incurred approximately $30.2 million in debt issuance 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 in our Condensed Consolidated Statement of Operations.
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 previously capitalized upon the issuance of the 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 March 31, 2022, the total remaining balance of unamortized debt issuance costs and original issue discount related to our senior debt reported in the Condensed Consolidated Balance Sheets were approximately $19.3 million and $2.8 million, respectively. Remaining unamortized debt issuance costs and original issue discount will be amortized to interest expense over the remaining term of the Term Loan Facility.
The amount outstanding under the Term Loan Facility was $866.2 million at March 31, 2022. We had $120.0 million outstanding borrowings under our ABL Credit Facility at March 31, 2022 and borrowing capacity of $343.6 million.
We also utilize the ABL Credit Facility for the issuance of letters of credit. As of March 31, 2022, we have issued letters of credit in the aggregate outstanding amount of $86.4 million primarily relating to workers compensation insurance claims.
Term Loan Credit Agreement
The Term Loan Facility, which matures on 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. 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. The total interest rate on the Term Loan Facility was 3.81% at March 31, 2022. 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.

13

RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The Term Loan Facility 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 ABL Priority Collateral (as defined below), and by a second-priority security interest in the ABL Priority Collateral, subject to certain exceptions. The obligations under the Term Loan Facility are guaranteed by us and our material wholly-owned domestic restricted subsidiaries that also guarantee the ABL Credit Facility.
The Term Loan Facility 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 our and 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 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.
The Term Loan 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 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”).
ABL Credit Agreement
The ABL Credit Facility will mature on February 17, 2026. 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 certain 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%. The total interest rate on the ABL Credit Facility at March 31, 2022 was 2.250%. 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. The commitment fee at March 31, 2022 was 0.250%. We paid $0.6 million of commitment fees during the first quarter of 2022.
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. The obligations under the ABL Credit Facility are guaranteed by us and certain of our wholly owned domestic restricted subsidiaries, subject to certain exceptions. The obligations under the ABL Credit Facility and such guarantees are secured on a first-priority basis by all of our and our subsidiary guarantors’ accounts, inventory, deposit accounts, securities accounts, cash and 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 in substantially all other present and future tangible and intangible personal property of ours and the subsidiary guarantors, subject to certain exceptions.
The ABL Credit Facility 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 our and 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 of at least 1.10 to 1.00 at the end of each fiscal quarter only in the event either (i) certain specified events of default have occurred and are continuing or (ii) availability is less than or equal to the greater of $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 ratio as of March 31, 2022 was 0.94 to 1.00, however, neither of the conditions in (i) or (ii) described above were applicable. Therefore, the maintenance of the fixed charge coverage ratio as of March 31, 2022 was not required.

14

RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
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 March 31, 2022 for each of the years ending December 31:
(in thousands)Term Loan FacilityABL Credit FacilityTotal
2022$6,563 $ $6,563 
20238,750  8,750 
20248,750  8,750 
20258,750  8,750 
20268,750 120,000 128,750 
Thereafter824,687  824,687 
Total senior debt$866,250 $120,000 $986,250 

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 are amortized as interest expense over the term of the Notes. As of March 31, 2022, the total remaining balance of unamortized debt issuance costs related to our senior notes reported in the Condensed Consolidated Balance Sheets was approximately $13.5 million.
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 Facility 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 events of default, which, if any of them occurs, would permit or require the principal, premium, if any, and interest on all the then outstanding Notes to be due and payable.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Note 9 - 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.
Our financial instruments include cash and cash equivalents, receivables, payables, borrowings against our ABL Credit Facility and Term Loan Facility, and outstanding Notes. The carrying amount of cash and cash equivalents, receivables and payables approximates fair value at March 31, 2022 and December 31, 2021, 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.
The fair value of our Notes is based on Level 1 inputs and was as follows at March 31, 2022:
March 31, 2022
(in thousands)Carrying ValueFair ValueDifference
Senior notes$450,000 $411,030 $(38,970)
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 were 8,096,595 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 three months ended March 31, 2022 and 2021, we recognized approximately $36.6 million and $15.9 million in stock compensation expense related to these restricted stock agreement, respectively.
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 three months ended March 31, 2022 and 2021, we recognized approximately $22.1 million and $14.0 million in amortization expense and $4.0 million and $1.3 million in incremental depreciation expense related to these assets, respectively.
Furthermore, during the three months ended March 31, 2022 and 2021, we recognized approximately $0.2 million and $16.4 million in transaction costs associated with the closing of the transaction, respectively.
During the three months ended March 31, 2021 we recognized approximately $3.2 million in post-acquisition integration costs, including $2.8 million in employee severance and $0.4 million in reorganization advisory fees.


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RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Activity with respect to Other charges for the three months ended March 31, 2022 is summarized in the below table:
(in thousands)
 Accrued Charges at December 31, 2021
Charges & AdjustmentsPayments & Adjustments
 Accrued Charges at March 31, 2022
Cash charges:
Acima Holdings transaction costs$ $187 $(187)$ 
Labor reduction costs(1)
1,593 3,974 (305)5,262 
Other cash charges 83 (83) 
Total cash charges$1,593 4,244 $(575)$5,262 
Non-cash charges:
Acima Holdings restricted stock agreements(2)
36,558 
Depreciation and amortization of acquired assets(3)
26,092 
Asset impairments(4)
4,870 
Other(1,616)
Total other charges$70,148 
(1) Represents charges incurred for employee severance.
(2) Represents stock compensation expense related to common stock issued to Acima Holdings employees under restricted stock agreements as part of the acquisition proceeds subject to vesting restrictions, as described in Note 2 and Note 12.
(3) Represents amortization of the total fair value of acquired intangible assets and incremental depreciation related to 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.
(4) Primarily represents impairment of software assets.
Note 11 - 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. Within 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.
Segment information as of and for the three months ended March 31, 2022 and 2021 is as follows:
Three Months Ended March 31,
(in thousands)20222021
Revenues
Rent-A-Center Business
$518,505 $524,866 
Acima599,377 457,449 
Mexico15,712 14,498 
Franchising26,128 39,969 
Total revenues$1,159,722 $1,036,782 
Three Months Ended March 31,
(in thousands)20222021
Gross profit
Rent-A-Center Business$363,380 $359,169 
Acima164,228 134,250 
Mexico11,101 10,212 
Franchising7,386 6,892 
Total gross profit$546,095 $510,523 

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RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Three Months Ended March 31,
(in thousands)20222021
Operating profit
Rent-A-Center Business$100,176 $121,277 
Acima9,600 24,814 
Mexico2,066 1,954 
Franchising4,790 4,985 
Total segments116,632 153,030 
Corporate(1)
(105,589)(82,984)
Total operating profit$11,043 $70,046 
(1) Includes stock compensation expense of $36.6 million recognized for the three months ended March 31, 2021, related to common stock issued to Acima Holdings employees under restricted stock agreements as part of the acquisition consideration subject to vesting restrictions as described in Note 10.
Three Months Ended March 31,
(in thousands)20222021
Depreciation and amortization
Rent-A-Center Business$6,413 $4,577 
Acima(1)
582 474 
Mexico149 120 
Franchising37 16 
Total segments7,181 5,187 
Corporate(2)
7,348 8,206 
Total depreciation and amortization
$14,529 $13,393 
(1)Excludes amortization expense of approximately $22.1 million and $14.0 million for the three months ended March 31, 2022 and 2021, recorded to Other charges in the Condensed Consolidated Statement of Operations, related to intangible assets acquired upon closing of the Acima Holdings acquisition. See Note 10 for additional information.
(2)Excludes depreciation expense of approximately $4.0 million and $1.3 million for the three months ended March 31, 2022 and 2021, recorded to Other charges in the Condensed Consolidated Statement of Operations, related to software acquired upon closing of the Acima Holdings acquisition. See Note 10 for additional information.
Three Months Ended March 31,
(in thousands)20222021
Capital expenditures
Rent-A-Center Business$13,408 $6,257 
Acima46 154 
Mexico222 76 
Franchising112  
Total segments13,788 6,487 
Corporate2,615 4,901 
Total capital expenditures$