RENT A CENTER INC DE - FORM 8-K/A - EX-99.3 - February 23, 2021

Attached files

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EX-99.2 - EX-99.2 - RENT A CENTER INC DEex-992_acima93020financials.htm
EX-99.1 - EX-99.1 - RENT A CENTER INC DEex-991_acima123119financia.htm
EX-23.1 - EX-23.1 - RENT A CENTER INC DEex-231_consentoftannerllc.htm
8-K/A - 8-K/A - RENT A CENTER INC DErcii-20210217.htm
Exhibit 99.3

Unaudited pro forma condensed combined financial information

On February 17, 2021, Rent-A-Center, Inc. (“Rent-A-Center) consummated the acquisition of Acima Holdings, LLC (“Acima”) contemplated by the Agreement and Plan of Merger dated December 20, 2020, by and among Rent-A-Center, Radalta, LLC, a Utah limited liability company and wholly owned subsidiary of Rent-A-Center, Acima, and Aaron Allred, solely in his capacity as the Member Representative (the “Merger Agreement”), pursuant to which Radalta, LLC merged with and into Acima, with Acima surviving as a wholly owned subsidiary of Rent‑A‑Center (the “Merger”). The unaudited pro forma condensed combined financial information and explanatory notes presented below show the impact of such acquisition, together with related financing transactions consummated by Rent‑A‑Center concurrent therewith (collectively, the “Transactions”), on the historical financial position and results of operations of Rent‑A‑Center and Acima.
The following unaudited pro forma condensed combined balance sheet as of September 30, 2020 and unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2020 and the year ended December 31, 2019 are based on the individual historical consolidated financial statements of Rent-A-Center and Acima, respectively, included in Rent‑A‑Center’s Annual Report on Form 10‑K for the year ended December 31, 2019 and Quarterly Report on Form 10‑Q for the nine months ended September 30, 2020, and the Current Report on Form 8‑K filed by Rent‑A‑Center on February 23, 2021, all of which financial statements are incorporated herein by reference. The unaudited pro forma condensed combined balance sheet gives effect to the Transactions as if they had occurred on September 30, 2020 and the unaudited pro forma condensed combined statement of operations gives effect to the Transactions as if they had occurred on January 1, 2019.
The unaudited pro forma condensed consolidated financial information was prepared in accordance with Article 11 of Regulation S-X as amended by the Securities and Exchange Commission (the “SEC”) Final Rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses,” using the assumptions set forth in the notes to the unaudited pro forma condensed consolidated financial information. The unaudited pro forma condensed consolidated financial information has been adjusted to include accounting policy alignment adjustments, transaction accounting adjustments and other transaction accounting adjustments, which reflect the application of the accounting required by generally accepted accounting principles in the United States (“GAAP”), linking the effects of the Transactions listed below to the pro forma consolidated financial statements.

The pro forma adjustments set forth in the unaudited pro forma condensed combined financial information reflect the following:

•the Transactions and changes in assets and liabilities to record the estimates
of their respective fair value in accordance with purchase accounting;

•changes in depreciation and amortization expense resulting from the fair
value adjustments to the identifiable net tangible assets and amortizable intangible
assets of Acima in the Transactions;

•changes in indebtedness incurred in connection with the Transactions;


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•certain transaction fees and debt issuance costs incurred in connection with the
Transactions;

•changes in interest expense resulting from the Transactions, including amortization of
debt issuance costs;

•changes in stock-based compensation expense resulting from the Transactions;

•estimates of the effect of the above adjustments on deferred income tax
assets, liabilities and related expense; and

•the equity impact of the Transactions and the corresponding elimination of historical equity balances of Acima.

The unaudited pro forma adjustments are based upon available information and reflects estimates and certain assumptions that Rent-A-Center believes is reasonable under the circumstances. Actual adjustments may differ materially from the information presented herein. The unaudited pro forma condensed combined financial information is presented for informational purposes only and does not purport to represent what the results of operations or financial condition would have been had the Transactions actually occurred on the dates indicated, nor do they purport to project the results of operations or financial condition for any future period or as of any future date. The unaudited pro forma condensed combined financial information should be read in conjunction with the audited and unaudited historical financial statements and related notes of each of Rent-A-Center and Acima included in the Form 8-K filed on February 23, 2021 or incorporated by reference in this filing. Assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the unaudited pro forma condensed combined financial information.

The unaudited pro forma condensed combined financial information does not reflect the realization of any expected operating efficiencies or other synergies that may result from the Transactions as a result of planned initiatives following the completion of the Transactions.



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Rent-A-Center
Unaudited pro forma condensed combined balance sheet
As of September 30, 2020
(Dollars in thousands)
Historical
 
Rent-A-
Center
 
Acima as presented (1)
 Accounting policy alignmentNoteTransaction accounting adjustments Note Other transaction accounting adjustments Note Pro forma combined
ASSETS             
Cash and cash equivalents$ 227,398 $ 25,408 $ -$(1,242,863) 4a $ 1,256,834 5l $ 266,777
Receivables, net of allowance for doubtful accounts75,471 25,477 --  -   100,948
Prepaid expenses and other assets40,172 851 (202)3-  -   40,821
Rental merchandise, net            
On rent
680,955 315,430 (3,216)3-  -   993,169
Held for rent
119,903 - --  -   119,903
Merchandise held for installment sale4,287 - --  -   4,287
Property assets, net of accumulated depreciation145,298 12,485 -169,034 4b -   326,817
Operating lease right-of-use280,845 - 9,1233-  -   289,968
Deferred tax asset14,889 - --  -   14,889
Goodwill70,217 - -307,133 4b -   377,350
Other intangible assets, net8,130 - -440,000 4b -   448,130
              
Total assets
$1,667,565 
 $ 379,651
 $ 5,705$ (326,696)   
$ 1,256,834
   $2,983,059
              
LIABILITIES             
Accounts payable - trade176,304 1,241 --   -   177,545
Accrued liabilities305,919 38,671 (373)330,400 4i -   374,617
Operating lease liabilities283,784 - 9,2943-  -   293,078
Deferred tax liability168,622 - -(111,115) 4e,4i -   57,507
Senior debt, net190,599 152,500 -(152,500) 4f 1,256,834 5l 1,447,433
              
Total liabilities
$1,125,228 
 $ 192,412
 $ 8,921$ (233,215)   $ 1,256,834   $2,350,180
              
STOCKHOLDERS' EQUITY             
Common stock, $0.01 par value1,103 - -27 4g -   1,130
Additional paid-in capital878,965 - -120,915 4g -   999,880
Retained earnings1,051,760 - -(30,400) 4i -   1,021,360
Treasury stock at cost(1,375,541) - --   -   (1,375,541)
Accumulated other comprehensive loss(13,950) - --   -   (13,950)
Equity- 187,239 (3,216)3(184,023) 4h -   -
Total stockholders' equity
$ 542,337 $ 187,239 $ (3,216)$ (93,481)   $ -   $ 632,879
Total liabilities and stockholders' equity
$1,667,565 
 $ 379,651
 $ 5,705$ (326,696)   $ 1,256,834   $2,983,059
(See the accompanying notes.)

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Rent-A-Center
Unaudited pro forma condensed combined statement of operations
For the nine months ended September 30, 2020
(Dollars in thousands)

Historical
Rent-A-
Center (1)
Acima as presented (2)
Accounting policy alignmentNoteTransaction accounting adjustmentsNoteOther transaction accounting adjustmentsNotePro forma combined
Revenues
Store             
Rentals and fees
$1,682,310 $672,539 $ -$ -   $ -   $2,354,849
Merchandise sales
300,693 241,573 --   -   542,266
Installment sales
48,970 - --   -   48,970
Other
2,341 - --   -   2,341
Total store revenues
2,034,314 914,112 --   -   2,948,426
Franchise
Merchandise sales49,553 - --   -   49,553
Royalty income and fees13,833 - --   -   13,833
Total revenues2,097,700914,112---3,011,812
Cost of revenues
Store             
Cost of rentals and fees
489,606 341,284 --  -   830,890
Cost of merchandise sold
296,894 308,286 --  -   605,180
Cost of installment sales
16,830 - --  -   16,830
Total cost of store revenues
803,330 649,570 --  -   1,452,900
Franchise cost of merchandise sold49,632 - --  -   49,632
Total cost of revenues
852,962 649,570 --  -   1,502,532
Gross profit1,244,738 264,542 --  -   1,509,280
Operating expenses
Store expenses             
    Labor
434,216 16,514 --  -   450,730
    Other store expenses
463,292 68,498 (308)3-  -   531,482
General and administrative expenses113,694 11,413 -103,515 4j -   228,622
Depreciation and amortization43,071 2,783 -43,503 4c,4d -   89,357
Other (gains) and charges7,768 - --  -  7,768
Total operating expenses
1,062,041 99,208 (308)147,018  -  1,307,959
Operating profit
182,697 165,334 308(147,018)  -  201,321
Interest expense11,958 9,121 --  41,106 5n 62,185
Interest income(561)----(561)
Earnings before income taxes171,300156,213308(147,018)(41,106)139,697
Income tax expense (benefit)19,485-39,1303(10,876)4k(10,277)5o37,462
Net earnings$ 151,815$ 156,213$ (38,822)$ (136,142)$ (30,829)$ 102,235
Earnings per share:
Basic earnings per share$ 2.80$ 1.70
Diluted earnings per share$ 2.73$ 1.54
Weighted average number of shares outstanding:
Basic54,186,00059,982,254
Diluted55,662,00066,442,185
(See the accompanying notes.)


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Rent-A-Center
Unaudited pro forma condensed combined statement of operations
For the year ended December 31, 2019
(Dollars in thousands)

Historical
Rent-A-
Center (1)
Acima as presented (2)
Accounting policy alignmentNoteTransaction accounting adjustmentsNoteOther transaction accounting adjustmentsNotePro forma combined
Revenues
Store             
Rentals and fees
$2,224,402 $668,022 $ -$ -   $ -   $2,892,424
Merchandise sales
304,630 198,435 --   -   503,065
Installment sales
70,434 - --   -   70,434
Other
4,795 - --   -   4,795
Total store revenues
2,604,261 866,457 --   -   3,470,718
Franchise
Merchandise sales49,135 - --   -   49,135
Royalty income and fees16,456 - --   -   16,456
Total revenues2,669,852866,457---3,536,309
Cost of revenues
Store             
Cost of rentals and fees
634,878 355,153 --  -   990,031
Cost of merchandise sold
319,006 254,893 --  -   573,899
Cost of installment sales
23,383 - --  -   23,383
Total cost of store revenues
977,267 610,046 --  -   1,587,313
Franchise cost of merchandise sold48,514 - --  -   48,514
Total cost of revenues
1,025,781 610,046 --  -   1,635,827
Gross profit1,644,071 256,411 --  -   1,900,482
Operating expenses
Store expenses             
    Labor
630,096 18,571 --  -   648,667
    Other store expenses
617,106 88,088 5003-  -   705,694
General and administrative expenses142,634 10,720 -168,420 4i,4j -   321,774
Depreciation and amortization61,104 2,868 -78,846 4c,4d -   142,818
Other (gains) and charges(60,728) - --  2,698 5n (58,030)
Total operating expenses
1,390,212 120,247 500247,266  2,698  1,760,923
Operating profit
253,859 136,164 (500)(247,266)  (2,698)  139,559
Debt refinancing charges2,168----2,168
Interest expense31,031 12,863 --  39,020 5n 82,914
Interest income(3,123)----(3,123)
Earnings before income taxes223,783123,301(500)(247,266)(41,718)57,600
Income tax expense (benefit)50,237-30,7003(27,312)4k(10,430)5o43,195
Net earnings$ 173,546$ 123,301$ (31,200)$ (219,954)$ (31,288)$ 14,405
Earnings per share:
Basic earnings per share$ 3.19$ 0.25
Diluted earnings per share$ 3.10$ 0.22
Weighted average number of shares outstanding:
Basic54,325,00056,949,541
Diluted55,955,00066,734,867
(See the accompanying notes.)


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Notes to unaudited pro forma condensed combined financial information

Note 1 - Basis of pro forma presentation

The Merger will be accounted for as an acquisition in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”) which requires the allocation of purchase consideration to the fair value of the identified assets acquired and liabilities assumed upon consummation of a business combination. The unaudited pro forma condensed combined balance sheet as of September 30, 2020 and unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2020 and the year ended December 31, 2019 have been derived by aggregating Rent-A-Center’s audited and unaudited historical consolidated financial statements and the audited and unaudited historical financial statements of Acima.

The preliminary purchase price for the Merger is listed below, subject to certain closing adjustments. The purchase price includes $1.22 billion in cash, net of cash acquired of $25.4 million, and 2.6 million shares of Rent-A-Center common shares issued in exchange for outstanding Class A and Class B units of Acima. These Rent-A-Center common shares included in the purchase price are issued to non-Acima employees and are subject to certain transfer restrictions post-Merger pursuant to the Lock-up Agreement. These Rent-A-Center shares subject to the Lock-up Agreement will be released from their transfer restrictions over a period of 18 months, in three tranches each in 6-month intervals after the closing date of the Merger. As each tranche of common shares is released based on the terms of the Lock-up Agreement, the fair value of the Rent-A-Center common shares issued at closing of the Merger have been adjusted to reflect the effects of the respective lockup periods. As part of the Transactions, Rent-A-Center issued approximately 8 million shares to Acima employees that are subject to certain vesting conditions over a 36-month period and thus have been excluded from the purchase price and instead are accounted for post-Merger as stock-based compensation expense subject to ASC Topic 718, “Stock-based Compensation” (“ASC 718”).

The purchase price allocated below has been developed based on preliminary estimates of fair value using the historical financial statements and information of Acima as of September 30, 2020. In addition, the allocation of the purchase price to acquired identifiable assets and assumed liabilities is based on the valuation of the tangible and identifiable intangible assets acquired and liabilities assumed by management to prepare the unaudited pro forma condensed combined financial information. The purchase price and purchase price allocation are presented as follows:
 Consideration Transferred Post-Combination Expense Total
(Dollars in thousands)
Cash consideration paid to unit holders $ 1,090,363   $ 1,090,363
Cash consideration paid to extinguish Acima historical debt152,500152,500
Equity consideration (subject to lock-up)1
     
Equity subject to 6 month lock-up period
 
          41,717
   
             41,717
Equity subject to 12 month lock-up period
 
        40,161
   40,161
Equity subject to 18 month lock-up period
 
      39,064
   
             39,064
Equity consideration (subject to restricted stock agreement)   414,060 414,060
Net of cash acquired(25,408)(25,408)
Total $ 1,338,397 $ 414,060 $ 1,752,457
1 The estimated fair value of the equity consideration subject to the Lock-up Agreement has been determined based on the closing price of Rent-A-Center common stock of $51.14 on the closing date of February 17, 2021, discounted to reflect the timing of the release of the shares from the Lock-Up Agreements.




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Purchase price allocation:
Consideration transferred:  
Purchase price (net of cash acquired) $ 1,338,397
   
Assets acquired:  
Receivables, net of allowance for doubtful accounts 
                               25,477
Prepaid expenses and other assets 649
Rental merchandise, net 
                             312,214
Property assets, net of accumulated depreciation 181,519
Intangible assets440,000
Operating lease right-of-use 9,123
Total assets acquired
 
                                             968,982
Liabilities assumed:  
Accounts payable – trade 1,241
Accrued liabilities 
                               38,298
Operating lease liability9,294
Deferred tax liability (111,115)
Total liabilities assumed
                                             (62,282)
 
  
Net assets acquired, excluding goodwill 
                             1,031,264
   
Goodwill (consideration transferred above net assets acquired)
 $ 307,133

Any difference between the fair value of the consideration transferred and the fair values of the assets acquired and liabilities assumed is presented as goodwill.

The unaudited pro forma condensed combined statement of operations also includes certain accounting adjustments related to the Transactions, including items that will impact the combined results, such as amortization expense on acquired intangible assets and stock-based compensation expense for Rent-A-Center shares issued as part of the Transactions.

The final allocation of the purchase price is dependent on a number of factors, including the final valuation of the fair value of tangible and identifiable intangible assets acquired and liabilities assumed as of the closing date of the Transactions, the final valuation of the Rent-A-Center shares issued and included in the purchase price as of the closing date and the resolution of any purchase price adjustments pursuant to the Merger Agreement. Accordingly, the final purchase price allocation and acquisition accounting may change upon the receipt of additional and more detailed information, and such changes could result in a material change to the unaudited pro forma condensed combined financial information. The acquisition accounting and related depreciation and amortization reflected in the unaudited pro forma condensed combined financial statements have been made solely for the purpose of preparing these statements and may change upon the receipt of additional and more detailed information. Such changes could result in a material change to the unaudited pro forma condensed combined financial information.

Additionally, the unaudited pro forma condensed combined statement of operations includes certain financing adjustments related to the Credit Agreement, dated February 17, 2021, among Rent-A-Center, as borrower, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (the “ABL Credit Facility”), the term loan credit agreement, dated February 17, 2021, among Rent-A-Center, as borrower, the lenders party thereto and JPMorgan Chase Bank, N.A. as administrative agent (the “Term Loan Facility”) and the $450,000,000 aggregate principal amount of 6.375% Senior Notes due 2029 issued on February 17, 2021 (the “Unsecured Notes), each of which has an effect on the combined results. The unaudited pro forma condensed combined statement of operations do not include the impacts of any

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revenue, cost or other operating synergies that may result from the Transactions or any related restructuring costs.

Acima’s accounting policies have been conformed to those of Rent-A-Center based upon currently available information and assumptions management believes to be reasonable. The unaudited pro forma condensed combined balance sheet and statement of operations have been adjusted to reflect these changes as further described in Note 3 - Accounting policy alignment adjustments.

We are not aware of any other material differences between the accounting policies of the two companies, except for the adjustments described in Note 3 - Accounting policy alignment adjustments and the adjustments described in Note 2 - Reclassifications to reclassify certain balances presented in the historical financial statements of Acima to conform their presentation to that of Rent-A-Center. Additional differences between the accounting policies of the two companies, when conformed, could have a material impact on these unaudited pro forma condensed combined financial statements.

Note 2 - Reclassifications

The unaudited condensed combined pro forma financial statements have been adjusted to reflect certain reclassifications of Acima’s financial statements to conform to Rent-A-Center’s financial statement presentation.

Financial information presented in the “Acima as presented” column in the unaudited condensed combined pro forma balance sheet as of September 30, 2020 has been reclassified to conform to the presentation of Rent-A-Center as indicated in the table below:

Presentation in Acima historical financial statementsPresentation in unaudited pro forma combined financial statementsAs of September 30, 2020
(Dollars in thousands)    
Lease receivables, net Receivables, net of allowance for doubtful accounts $ 24,960
 Accrued liabilities 5,324
Leased assets, net Rental merchandise, net - On rent 315,430
Intangible asset, net Property assets, net of accumulated depreciation 10,966
Other assets, net Property assets, net of accumulated depreciation 1,519
  Prepaid expenses and other assets 850
  Receivables, net of allowance for doubtful accounts 518
Lease liabilities Accrued liabilities 17,697
Operating liabilities Accounts payable - trade 1,241
  Accrued liabilities 2,444
Income tax distributions payable Equity 49,900
Sales tax obligation, net Equity 9,551
  Accrued liabilities 13,206
Senior debt Senior debt, net 150,000
Junior debt Senior debt, net 2,500


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Financial information presented in the “Acima as presented” column in the unaudited condensed combined pro forma statement of operations for the nine months ended September 30, 2020 and year ended December 31, 2019 have been reclassified to conform to that of Rent-A-Center as indicated in the table below:
Presentation in Acima historical financial statementsPresentation in unaudited pro forma combined financial statementNine months ended September 30, 2020Year ended December 30, 2019
(Dollars in thousands)      
Lease portfolio revenues, net
 
 Rentals and fees $ 672,539 $ 668,022
 Merchandise sales 241,573 198,435
Depreciation of leased assets
 
 
 Cost of rentals and fees 334,435 348,023
 Cost of merchandise sold 308,286 254,893
 Other store expenses 49,852 66,161
Direct lease costs Other store expenses 16,070 18,446
  Cost of rentals and fees 6,849 7,130
  Depreciation and amortization 2,473 2,582
Senior debt facility Interest expense 8,861 12,382
Junior debt Interest expense 260 481
Payroll costs, net Labor 16,514 18,571
  General and administrative expenses 4,809 4,777
Equity-based compensation General and administrative expenses 995 720
Other operating costs General and administrative expenses 5,609 5,223
  Other store expenses 2,576 3,482
  Depreciation and amortization 310 286

Note 3 - Accounting policy alignment adjustments

As stated in Note 1 - Basis of pro forma presentation, as part of preparing the unaudited pro forma condensed combined financial information, Rent-A-Center conducted a review of the accounting policies of Acima to determine if differences in accounting policies potentially required recasting of assets or liabilities to conform to Rent-A-Center’s accounting policies. Identified accounting policy adjustments are presented below.
Unaudited condensed combined pro forma balance sheet as of September 30, 2020

Presentation in Acima historical financial statementsPresentation in unaudited pro forma combined financial statementAs of September 30, 2020
(Dollars in thousands)    
Rental merchandise, net - On rent1
Equity
$ (3,216)
- 2
 Operating lease right-of-use 9,123
 Accrued liabilities (373)
Prepaid expenses and other assets(202)
 Operating lease liability 9,294
1 To reflect the expensing of previously capitalized direct lease cost out of Rental merchandise, net - On rent to Other store expenses
2 To reflect the adoption of ASC Topic 842 “Leases”


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Unaudited condensed combined pro forma statement of operations for the nine months ended September 30, 2020 and year ended December 31, 2019
Nine months ended September 30, 2020Year ended December 31, 2019
(Dollars in thousands)    
Other store expenses1
 $ (308) $ 500
Income tax expense (benefit)2
 39,130 30,700
1 To reflect the expensing of previously capitalized direct lease cost out of Rental merchandise, net - On rent to Other store expenses
2 To reflect the change in tax structure of Acima to a taxable entity

Note 4 - Transaction accounting pro forma adjustments

(a) Reflects the decrease in cash for cash consideration of $1.24 billion transferred as part of the Transactions.

(b) Includes adjustments to record acquired assets at estimated acquisition-date fair values. The estimated fair values of these assets are based on the valuations performed for the preparation of the pro forma financial information and are subject to the final valuations to be performed. The respective net adjustments have been calculated as follows:

Receivables Prepaid expenses and other assets 
Rental merchandise, net - On rent
 Property assets Operating lease right-of-use Other intangible assets
(Dollars in thousands)           
Fair value of acquired assets$ 25,477 $ 648 $ 312,214$ 181,519 $ 9,123 
$ 440,000
Elimination of pre-acquisition assets25,477 648 312,214 12,485 9,123 -
Net adjustment$ - 
 $ -
 
 $ -
 
 $ 169,034
 
 $ -
 
$ 440,000

   Goodwill
(Dollars in thousands)    
Goodwill in purchase price allocation $ 377,350
Elimination of Rent-A-Center's pre-acquisition goodwill (70,217)
Net adjustment   $ 307,133

(c) Amounts allocated to Other intangible assets, net, as well as the estimated useful lives are based on fair value estimates and are subject to change. The estimated fair value and useful life of Other intangible assets, net acquired are as follows:
 Asset class Estimated fair valueEstimated remaining useful life (in years)
(Dollars in thousands)
Trade name $ 40,0007
Merchant relationships 380,00010
Relationship with existing lessees20,0001
Estimated fair value of Other intangible assets, net$ 440,000



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Includes adjustments to amortization expense resulting from the change in the estimated fair value of Other intangible assets, net acquired in the Transactions. The net adjustment to amortization expense is presented within the unaudited condensed combined pro forma statements of operations as follows:
Nine months ended September 30, 2020
Year ended
December 31, 2019
 (Dollars in thousands)
    
Total depreciation and amortization $ 32,786 $ 63,714
Elimination of pre-acquisition historical depreciation and amortization - -
Net adjustment to property assets, net of accumulated depreciation $ 32,786$ 63,714

(d) Amounts allocated to Property assets, net of accumulated depreciation, as well as the estimated useful lives are based on fair value estimates and are subject to change. The estimated fair value and useful life of Property assets, net of accumulated depreciation acquired are as follows:
 Asset Class Estimated Fair ValueEstimated Remaining Useful Life (in years)
(Dollars in thousands)
Developed technology $ 180,00010
Estimated fair value of Property assets, net of accumulated depreciation$ 180,000

Includes adjustments to depreciation expense resulting from the change in the estimated fair value of Property assets, net of accumulated depreciation acquired in the Transactions. The net adjustment to depreciation expense is presented within the unaudited condensed combined pro forma statements of operations as follows:
Nine months ended September 30, 2020Year ended December 31, 2019
 (Dollars in thousands)
    
Total depreciation and amortization $ 13,500 $ 18,000
Elimination of pre-acquisition historical Depreciation and amortization (2,783) (2,868)
Net adjustment to Other intangible assets, net $ 10,717$ 15,132

(e) Reflects a $103.5 million decrease to Deferred tax liability based on a blended federal and state statutory rate of approximately 25% multiplied by the fair value adjustments related stock-based compensation that qualifies as post combination expense in accordance with ASC 718.

(f) Reflects the extinguishment of the historical Acima debt of $152.5 million that was settled upon the consummation of the Transactions.

(g) Reflects the increase in shares of Rent-A-Center common shares and capital in excess of par resulting from the issuance of shares of Rent-A-Center to Acima unit holders.

(h) Reflects the elimination of Acima’s historical equity balances at September 30, 2020 of $184.0 million and property assets of $11.0 million in accordance with the acquisition method of accounting.
(i) Reflects the $30.4 million expense incurred as part of the execution of the Transactions which includes, among others, fees paid for financial advisors, legal services, and professional accounting services, and the related deferred tax asset of $7.6 million at a statutory rate of approximately 25%, which is presented as a decrease to Deferred tax liability.

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(j) Reflects the pro forma adjustment for stock-based compensation related to the issuance of Rent-A-Center common shares to Class A and Class B Acima employee unit holders, which are subject to vesting over the continued employment, as follows:
Nine months ended September 30, 2020Year ended December 31, 2019
 (Dollars in thousands)
    
General and administrative expenses $ 103,515 $ 138,020 

(k) Reflects tax effect of the Transactions accounting pro forma adjustments above at the blended federal and state statutory rate of approximately 25%, as follows:
Nine months ended September 30, 2020Year ended December 31, 2019
     
Income tax expense (benefit) $ (10,876) $ (27,312)

Note 5 - Other transaction accounting pro forma adjustments

Pro Forma Condensed Combined Balance Sheet as of September 30, 2020:

(l) As part of the acquisition of Acima, Rent-A-Center incurred approximately $1.49 billion in new debt financing. This debt consisted of three individual debt arrangements: (i) the ABL Credit Facility, (ii) the Term Loan Facility and (iii) the Unsecured Notes. Such debt had an assumed blended weighted average interest rate of 5.0% as of February 17, 2021, the closing date of the Merger. These financing arrangements were used to pay the aggregate cash component of the merger consideration, settle Acima’s pre-existing debt obligations of $152.5 million, and settle Rent-A-Center’s pre-existing debt obligations of $190.6 million, net of unamortized issuance discount and debt issuance costs of $7.4 million.
 As of September 30, 2020
(Dollars in thousands)
Proceeds from the ABL Credit Facility $ 165,000
Proceeds from the Term Loan Facility 875,000
Proceeds from the Unsecured Notes 450,000
Total proceeds from Financing 1,490,000
Less: Debt issuance costs (42,567)
Less: Elimination of historical debt (190,599)
Net adjustment to Senior debt, net $ 1,256,834
(m) Reflects the increase to debt (net of $42.6 million of debt issuance costs) of the three individual financing arrangements incurred as part of the Transactions, less the effects of refinancing of Rent-A-Center’s pre-existing debt obligation of $190.6 million, net of unamortized issuance discount and debt issuance costs, upon consummation of the Transactions.
A sensitivity analysis on incremental interest expense related to the ABL Credit Facility and the Term Loan Facility incurred for purposes of financing the transaction has been performed to assess the effects that a change of 0.125% of the hypothetical assumed interest rate would have on the interest expense related to the financing arrangements. The table below sets forth the impact that a 0.125% increase or decrease in the hypothetical assumed interest rate would have on interest expense for the relevant periods.

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Nine months ended September 30, 2020Year ended December 31, 2019
 (Dollars in thousands)
    
1/8% increase $ 975 $ 1,300
1/8% decrease (155) (206)
Unaudited condensed combined pro forma statement of operations for the nine months ended September 30, 2020 and year ended December 31, 2019
(n) Reflects the net increase to interest resulting from interest on the new debt incurred to finance the acquisition of Acima, elimination of historical Acima and Rent-A-Center interest expense, loss on extinguishment of Acima’s pre-existing debt and the amortization of related debt issuance costs, as follows:
Nine months ended September 30, 2020
Year ended
December 31, 2019
 (Dollars in thousands)
    
Interest expense $ 41,106 $ 39,020
Other (gains) and charges - 2,698
Total adjustment $ 41,106$ 41,718

(o) Reflects tax effect of the Other transaction accounting pro forma adjustments above at the blended federal and state statutory rate of approximately 25% for the impact of the merger on Rent-A-Center, as follows:

Nine months ended September 30, 2020
Year ended
December 31, 2019
 (Dollars in thousands)
    
Income tax expense (benefit) $ (10,277) $ (10,430)


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RENT A CENTER INC DE Reports