Other Charges and (Gains) (Notes)

12 Months Ended

Dec. 31, 2020

Other Charges - Operating Expenses [Abstract]

Other (Gains) and Charges [Text Block]

Other Charges (Gains)

Acima Holdings Acquisition. As described in Note B, 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 2021, we recognized approximately $127.1 million in stock compensation expense related to these restricted stock agreements.

The fair value of assets acquired as part of the transaction included $520 million in intangible assets and $170 million in developed technology. During 2021, we recognized approximately $101.7 million in amortization expense and $13.2 million in incremental depreciation expense related to these assets.

Furthermore, during 2021 we recognized approximately $17.7 million in transaction costs associated with the closing of the transaction, and approximately $10.3 million in post-acquisition integration costs, including $5.1 million in inventory losses, $3.7 million in employee severance, and $1.5 million in other integration costs, including reorganization advisory fees.

During 2020, we recorded approximately $6.4 million in expenses related to the acquisition, primarily consisting of legal and other professional fees.

Store Consolidations. During 2020, we closed 28 Rent-A-Center Business stores, resulting in pre-tax charges of $1.5 million in other miscellaneous shutdown and holding costs, $0.4 million in lease impairment charges, $0.1 million in disposal of fixed assets, and $0.1 million in severance and other payroll-related costs.

Cost Savings Initiatives. During 2018, we began the execution of multiple cost savings initiatives, including reductions in overhead and supply chain operations. In connection with these initiatives, we recorded pre-tax charges during 2020 consisting of $0.8 million in severance and other payroll-related costs, $0.4 million in lease impairment charges, and $0.4 million in other miscellaneous shutdown and holding costs.

COVID-19 Pandemic. In March 2020, national efforts to contain the COVID-19 virus began to be implemented. In connection with COVID-19, during 2020, we incurred approximately $1.4 million in sanitization cleaning and personal protective equipment expenses, $0.4 million in payroll-related costs, and $0.2 million in lease expense related to closed stores and idled vehicles, partially offset by real estate lease abatement credits of $0.8 million for our Rent-A-Center Business stores.

Social Unrest. During the second quarter of 2020, we incurred expenses resulting from certain civil unrest that occurred in connection with efforts to institute law enforcement and other social and political reforms. In connection with this unrest, approximately 30 Rent-A-Center Business stores were looted and/or damaged, resulting in $0.9 million of inventory write-offs and less than $0.1 million in disposal of fixed assets during 2020.

California Refranchise Sale. On October 5, 2020, we sold all 99 Rent-A-Center Business corporate stores in the state of California to an experienced franchisee. We received cash consideration of approximately $16 million, including approximately $1 million paid for related franchise fees. The sale included idle and on-rent inventory of approximately $30.0 million and property assets of approximately $0.8 million, resulting in a total loss on sale of approximately $16.6 million.

Activity with respect to Other charges for the years ended December 31, 2020 and 2021 is summarized in the below table:

(In thousands)	Accrued Charges at December 31, 2019		Charges & Adjustments		Payments & Adjustments		Accrued Charges at December 31, 2020		Charges & Adjustments		Payments & Adjustments		Accrued Charges at December 31, 2021
Cash:
Acima Holdings transaction costs	$	—	$	6,400	$	(1,395)	$	5,005	$	17,680	$	(22,685)	$	—
Acima Holdings integration costs	—		—		—		—		6,572		(6,572)		—
Labor reduction costs	738		1,334		(1,728)		344		3,751		(2,502)		1,593
Lease obligation costs(1)	—		(645)		645		—		—		—		—
Contract termination costs	—		—		—		—		—		—		—
Other cash charges(2)	—		1,889		(1,889)		—		658		(658)		—
Total cash charges	$	738	8,978		$	(4,367)	$	5,349	28,661		$	(32,417)	$	1,593
Non-cash:
Acima Holdings restricted stock agreements(3)			—						127,060
Depreciation and amortization of acquired assets(4)			—						114,959
Asset impairments(5)			2,749						1,572
Rental merchandise losses(6)			860						—
Other(7)			23,968						17,661
Total other charges			$	36,555					$	289,913

(1) Includes lease abatement credits in 2020 related to renegotiated lease agreements in response to COVID-19.

(2) Represents shutdown and holding expenses related to store closures.

(3) Represents stock compensation expense recognized in 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 B and Note O.

(4) 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 B.

(5) Asset impairments primarily includes store damage related to Hurricane Ida in 2021. Asset impairments in 2020 primarily include impairments of operating lease right-of-use assets and other property assets related to the closure of Rent-A-Center Business stores and previously closed product service centers, store damage related to looting, as well as a write-down of capitalized software.

(6) Reflects merchandise losses due to looting.

(7) Includes $17.5 million in legal settlement reserves and $0.2 million in state sales tax assessment reserves for 2021. Amounts accrued for potential settlements do not represent our maximum loss exposure. The amount of any loss ultimately incurred in relation to matters for which an accrual has been established may be significantly different than the amounts accrued for such matters due to the inherent uncertainty in litigation, regulatory and similar adversarial proceedings. For 2020, primarily includes a $16.6 million loss on the sale of our stores in California, $7.9 million for legal settlement reserves, $1.2 million for state tax audit assessment reserves, $1.4 million in expenses related to COVID-19, partially offset by $2.8 million in proceeds received from the sale of a class action claim and $0.3 million in insurance proceeds related to Hurricane Maria in 2017 for the year ended December 31, 2020.