UPBOUND GROUP, INC.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes "forward-looking" statements within
the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements can be identified by the fact that they do not relate
strictly to historical or current facts. They often include words such as
"believes," "expects," "anticipates," "estimates," "intends," "plans," "seeks"
or words of similar meaning, or future or conditional verbs, such as "will,"
"should," "could," "may," "aims," "intends," or "projects" and includes
statements regarding the potential effects of the COVID-19 pandemic on our
business, operations, financial performance and prospects. A forward-looking
statement is neither a prediction nor a guarantee of future events or
circumstances, and those future events or circumstances may not occur. You
should not place undue reliance on forward-looking statements, which speak only
as of the date of this Quarterly Report on Form 10-Q. These forward-looking
statements are based on currently available operating, financial and competitive
information and are subject to various risks and uncertainties. Our actual
future results and trends may differ materially and adversely depending on a
variety of factors, including, but not limited to, the risks and uncertainties
discussed under "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations." Given these risks and
uncertainties, you should not rely on forward-looking statements as a prediction
of actual results. Any or all of the forward-looking statements contained in
this Quarterly Report on Form 10-Q and any other public statement made by us,
including by our management, may turn out to be incorrect. We are including this
cautionary note to make applicable and take advantage of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995 for
forward-looking statements. Except as required by law, we expressly disclaim any
obligation to update or revise any forward-looking statements, whether as a
result of new information, future events, changes in assumptions or otherwise.
Factors that could cause or contribute to these differences include, but are not
limited to:
•the impact of the COVID-19 pandemic and related government and regulatory
restrictions issued to combat the pandemic, including adverse changes in such
restrictions, and impacts on (i) demand for our lease-to-own products offered in
our operating segments, (ii) our Preferred Lease retail partners, (iii) our
customers and their willingness and ability to satisfy their lease obligations,
(iv) our supplier's ability to satisfy our merchandise needs, (v) our coworkers,
including our ability to adequately staff our operating locations, (vi) our
financial and operational performance, and (vii) our liquidity;
•the general strength of the economy and other economic conditions affecting
consumer preferences and spending;
•factors affecting the disposable income available to our current and potential
customers;
•changes in the unemployment rate;
•capital market conditions, including availability of funding sources for us;
•changes in our credit ratings;
•difficulties encountered in improving the financial and operational performance
of our business segments;
•risks associated with pricing changes and strategies being deployed in our
businesses;
•our ability to continue to realize benefits from our initiatives regarding
cost-savings and other EBITDA enhancements, efficiencies and working capital
improvements;
•our ability to continue to effectively execute our strategic initiatives,
including mitigating risks associated with any potential mergers and
acquisitions, or refranchising opportunities;
•failure to manage our store labor and other store expenses, including
merchandise losses;
•disruptions caused by the operation of our store information management
systems;
•risks related to our virtual lease-to-own business, including our ability to
continue to develop and successfully implement the necessary technologies;
•our ability to achieve the benefits expected from our integrated retail partner
offering, Preferred Lease, including our ability to integrate our historic,
retail partner business (Acceptance Now) and the Merchants Preferred business
under the Preferred Lease offering and to successfully grow this business
segment;
•exposure to potential operating margin degradation due to the higher cost of
merchandise in our Preferred Lease offering and potential for higher merchandise
losses;
•our transition to more-readily scalable "cloud-based" solutions;
•our ability to develop and successfully implement digital or E-commerce
capabilities, including mobile applications;
•our ability to protect our proprietary intellectual property;
•disruptions in our supply chain;
21
--------------------------------------------------------------------------------
•limitations of, or disruptions in, our distribution network;
•rapid inflation or deflation in the prices of our products;
•our ability to execute and the effectiveness of store consolidations, including
our ability to retain the revenue from customer accounts merged into another
store location as a result of a store consolidation;
•our available cash flow and our ability to generate sufficient cash flow to
continue paying dividends;
•increased competition from traditional competitors, virtual lease-to-own
competitors, online retailers and other competitors, including subprime lenders;
•our ability to identify and successfully market products and services that
appeal to our current and future targeted customer segments;
•consumer preferences and perceptions of our brands;
•our ability to retain the revenue associated with acquired customer accounts
and enhance the performance of acquired stores;
•our ability to enter into new and collect on our rental or lease purchase
agreements;
•changes in the enforcement of existing laws and regulations and the enactment
of new laws and regulations adversely affecting our business, including any
legislative or regulatory enforcement efforts that seek to re-characterize
store-based or virtual lease-to-own transactions as credit sales and to apply
consumer credit laws and regulations to our business;
•our compliance with applicable statutes or regulations governing our
businesses;
•the impact of any additional social unrest such as that experienced in 2020 or
otherwise, and resulting damage to our inventory or other assets and potential
lost revenues;
•changes in interest rates;
•changes in tariff policies;
•adverse changes in the economic conditions of the industries, countries or
markets that we serve;
•information technology and data security costs;
•the impact of any breaches in data security or other disturbances to our
information technology and other networks and our ability to protect the
integrity and security of individually identifiable data of our customers and
employees;
•changes in estimates relating to self-insurance liabilities and income tax and
litigation reserves;
•changes in our effective tax rate;
•fluctuations in foreign currency exchange rates;
•our ability to maintain an effective system of internal controls;
•litigation or administrative proceedings to which we are or may be a party to
from time to time; and
•the other risks detailed from time to time in our reports furnished or filed
with the Securities and Exchange Commission .
Additional important factors that could cause our actual results to differ
materially from our expectations are discussed under the section "Risk Factors"
in our Annual Report on Form 10-K for the year ended December 31, 2019 and in
our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 , and
elsewhere in this Quarterly Report on Form 10-Q.
Our Business
We are an industry leading omni-channel lease-to-own provider for the
credit-constrained customer. We focus on improving the quality of life for our
customers by providing access and the opportunity to obtain ownership of
high-quality, durable products via small payments over time under a flexible
lease-purchase agreement and no long-term debt obligation. Preferred Lease
provides virtual and staffed lease-to-own solutions to retail partners in stores
and online enabling our partners to grow sales by expanding their customer base
utilizing our differentiated offering. We were incorporated in the State of
Delaware in 1986, and our common stock is traded on the Nasdaq Global Select
Market under the ticker symbol "RCII."
Our Strategy
Our strategy is focused on growing our business model through emphasis on the
following key initiatives:
•continuing positive trends in our Rent-A-Center Business segment driven by
accelerating e-commerce momentum, expanding product categories, and improving
the customer experience;
22
--------------------------------------------------------------------------------
•generating favorable adjusted EBITDA margins and strong free cash flow to fund
strategic priorities and return capital to shareholders; and
•executing on large market opportunities using a virtual platform via our
Preferred Lease offering and e-commerce.
As we pursue our strategy, we may take advantage of merger and acquisition
opportunities from time to time that advance our key initiatives, and engage in
discussions regarding these opportunities, which could include mergers,
consolidations or acquisitions or dispositions or other transactions, although
there can be no assurance that any such activities will be consummated.
Recent Developments
California Refranchise Sale. On July 22, 2020 , we entered into an asset purchase
agreement to sell all 99 Rent-A-Center Business corporate stores in the state of
California to an experienced franchisee. The sale was consummated on October 5,
2020 for cash consideration of approximately $16 million , including
approximately $1 million paid for related franchise fees. In accordance with the
criteria provided by US GAAP, assets sold in connection with the sale were
classified as assets held for sale and reported at their net book value as of
September 30, 2020 , including idle and on-rent inventory of approximately
$31.1 million and property assets of approximately $0.8 million .
COVID-19 Pandemic. Beginning in the latter half of March 2020 , the worldwide
spread of the respiratory disease caused by a novel coronavirus ("COVID-19")
caused significant disruptions to the U.S. and world economies. On March 11,
2020 , the World Health Organization declared the COVID-19 outbreak a worldwide
pandemic. On March 13, 2020 , President Trump declared a national state of
emergency for the United States . In response to the issuance of U.S. federal
guidelines to contain the spread of the COVID-19 virus, U.S. state and local
jurisdictions implemented various containment or mitigation measures, including
temporary shelter-in-place orders and the temporary closure of non-essential
businesses.
See "Trends and Uncertainties - COVID-19 Pandemic" below, and "Risk Factors" in
Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended
March 31, 2020 for an additional discussion of operational impacts to our
business and additional risks associated with COVID-19.
Results of Operations
The following discussion focuses on our results of operations and our liquidity
and capital resources. You should read this discussion in conjunction with the
condensed consolidated financial statements and notes thereto for the three
months ended September 30, 2020 included in Part I, Item I of this Quarterly
Report on Form 10-Q.
Trends and Uncertainties
COVID-19 Pandemic
As a result of COVID-19 and related jurisdictional ordinances implemented in the
United States beginning in the latter half of March 2020 to contain the spread
of COVID-19 or mitigate its effects, a significant number of Preferred Lease
retail partner locations were temporarily closed, resulting in the initial
closure of approximately 65% of our staffed Preferred Lease locations, which
operated within those stores. In addition, with respect to our Rent-A-Center
Business, we temporarily shut down operations at a small number of stores and
partially closed approximately 24% of stores. Our partially closed locations
operated with closed showrooms, conducting business only through e-commerce web
orders. Franchise locations and stores in our Mexico operating segment were also
temporarily closed due to COVID-19. Since the onset of the pandemic, the
jurisdictional ordinances directly impacting our operations have been withdrawn
and, as of the date hereof, all of our staffed Preferred Lease locations and
physical locations of our Rent-A-Center Business, Mexico and Franchising
operating segments are fully operational.
In response to the negative impacts to our business resulting from COVID-19, we
proactively implemented certain measures to reduce operating expenses and cash
flow uses, including implementing temporary executive pay reductions,
temporarily furloughing certain employees at our store locations and corporate
headquarters, reducing store hours in certain locations, renegotiating real
estate leases, reducing inventory purchases and capital expenditures, and, for a
brief period of time, suspending further share repurchases. Nonetheless, there
are no assurances we will not be subject to future government actions negatively
impacting our business as the pandemic progresses. However, while we may also be
impacted by deteriorating worldwide economic conditions, including elevated
unemployment rates throughout the United States , which could have a sustained
impact on discretionary consumer spending, the lease-to-own industry is
resilient because it provides credit constrained customers with a viable option
to obtain merchandise they may not otherwise be able to obtain through other
retailers offering financing options.
23
--------------------------------------------------------------------------------
Virtual Business Model
On August 13, 2019 , we completed the acquisition of substantially all of the
assets of C/C Financial Corp. dba Merchants Preferred ("Merchants Preferred"), a
nationwide provider of virtual lease-to-own services, accelerating our growth in
the virtual lease-to-own industry. In January 2020 , we announced plans for our
new integrated retail partner offering under Preferred Lease, which combines our
staffed and virtual lease-to-own business models to meet the needs and
expectations of both our customers and retail partners. While we believe the
acquisition of the Merchants Preferred virtual business model and rollout of our
Preferred Lease integrated offering positions us for significant revenue and
earnings growth, we are exposed to potential operating margin degradation due to
the higher cost of merchandise in our retail partner business and potential for
higher merchandise losses.
Cost Savings Initiatives
In 2018, we initiated and executed multiple cost savings initiatives, resulting
in reductions in overhead and supply chain costs. While these initiatives have
led to significant decreases in operating expenses and corresponding improvement
in operating profit on a year-over-year basis in our 2018 and 2019 results of
operations, we do not expect to continue to realize cost reduction benefits in
future periods at the same annualized rate as past periods.
Overview
The following briefly summarizes certain of our financial information for the
nine months ended September 30, 2020 as compared to the nine
months ended September 30, 2019 .
During the first nine months of 2020, consolidated revenues increased
approximately $95.7 million , primarily due to increases in same store sales in
our Rent-A-Center Business and Mexico operating segments, and implementation and
expansion of the Preferred Lease virtual solution following the acquisition of
Merchants Preferred in August 2019 , partially offset by store closures and
refranchising of approximately 33 Rent-A-Center Business corporate stores since
September 30, 2019 . Operating profit decreased approximately $3.3 million for
the nine months ended September 30, 2020 , primarily due to our receipt during
the second quarter of 2019 of $92.5 million in settlement of litigation relating
to our termination of the merger agreement by and among Vintage Rodeo Parent,
LLC , Vintage Rodeo Acquisition, Inc. and Rent-A-Center, Inc. , of which we
retained net pre-tax proceeds of approximately $80 million following payment of
all remaining costs, fees and expenses relating to the termination (the "Vintage
Settlement Proceeds"), partially offset by decreases in labor in 2020, due to
previous store closures and refranchise sales, in addition to temporary
furloughs in response to COVID-19.
Revenues in our Rent-A-Center Business segment increased approximately $26.7
million for the nine months ended September 30, 2020 , driven primarily by an
increase in same store sales resulting from by higher merchandise sales and
growth in e-commerce sales. Gross profit as a percentage of revenue increased
0.2%. Operating profit increased $82.6 million for the nine
months ended September 30, 2020 , primarily driven by decreased labor and
operating expenses.
The Preferred Lease segment revenues increased approximately $51.6 million for
the nine months ended September 30, 2020 , primarily due to the implementation
and growth of the Preferred Lease virtual solution following the acquisition of
Merchants Preferred in August 2019 , despite negative impacts related to the
temporary closure of stores due to the COVID-19 pandemic. Gross profit as a
percent of revenue decreased 5.2% and operating profit decreased approximately
$25.5 million for the nine months ended September 30, 2020 primarily due to a
higher number of early payouts, higher merchandise losses primarily due to the
COVID-19 pandemic, and investments to support the growth of the business.
The Mexico segment revenues decreased by 9.8% for the nine
months ended September 30, 2020 , driving a decrease in gross profit of 8.4%, or
$2.4 million .
Revenues for the Franchising segment increased $21.3 million for the nine
months ended September 30, 2020 , primarily due to higher store count resulting
from the refranchising of Rent-A-Center Business corporate stores during the
previous twelve months, as described above, and higher inventory purchases by
our franchisees.
Cash flow from operations was $296.2 million for the nine months ended September
30, 2020 . As of September 30, 2020 , we held $227.4 million of cash and cash
equivalents and outstanding indebtedness of $198.0 million .
24
--------------------------------------------------------------------------------The following table is a reference for the discussion that follows.
Three Months Ended Nine Months Ended
September 30, Change September 30, Change
(dollar amounts in
thousands) 2020 2019 $ % 2020 2019 $ %
Revenues
Store
Rentals and fees $ 579,573 $ 550,795 $ 28,778 5.2 % $ 1,682,310 $ 1,665,829 $ 16,481 1.0 %
Merchandise sales 91,233 65,552 25,681 39.2 % 300,693 240,864 59,829 24.8 %
Installment sales 16,580 16,952 (372) (2.2) % 48,970 49,658 (688) (1.4) %
Other 844 1,054 (210) (19.9) % 2,341 2,962 (621) (21.0) %
Total store revenue 688,230 634,353 53,877 8.5 % 2,034,314 1,959,313 75,001 3.8 %
Franchise
Merchandise sales 19,069 11,178 7,891 70.6 % 49,553 30,307 19,246 63.5 % Royalty income and fees 4,716 3,840 876 22.8 % 13,833 12,370 1,463 11.8 % Total revenues 712,015 649,371 62,644 9.6 % 2,097,700 2,001,990 95,710 4.8 % Cost of revenues Store Cost of rentals and fees 167,027 161,971 5,056 3.1 % 489,606 473,001 16,605 3.5 % Cost of merchandise sold 95,177 70,575 24,602 34.9 % 296,894 250,000 46,894 18.8 % Cost of installment sales 5,713 5,527 186 3.4 % 16,830 16,133 697 4.3 % Total cost of store revenues 267,917 238,073 29,844 12.5 % 803,330 739,134 64,196 8.7 % Franchise cost of merchandise sold 19,070 11,302 7,768 68.7 % 49,632 29,923 19,709 65.9 % Total cost of revenues 286,987 249,375 37,612 15.1 % 852,962 769,057 83,905 10.9 % Gross profit 425,028 399,996 25,032 6.3 % 1,244,738 1,232,933 11,805 1.0 % Operating expenses Store expenses Labor 150,493 158,666 (8,173) (5.2) % 434,216 473,221 (39,005) (8.2) % Other store expenses 140,818 150,366 (9,548) (6.3) % 463,292 463,385 (93) - % General and administrative expenses 41,576 34,364 7,212 21.0 % 113,694 105,822 7,872 7.4 % Depreciation and amortization 13,810 14,894 (1,084) (7.3) % 43,071 45,788 (2,717) (5.9) % Other (gains) and charges (1,856) 2,859 (4,715) (164.9) % 7,768 (41,308) 49,076 118.8 % Total operating expenses 344,841 361,149 (16,308) (4.5) % 1,062,041 1,046,908 15,133 1.4 % Operating profit 80,187 38,847 41,340 106.4 % 182,697 186,025 (3,328) (1.8) % Debt refinancing charges - 2,168 (2,168) (100.0) % - 2,168 (2,168) (100.0) % Interest, net 3,198 6,648 (3,450) (51.9) % 11,397 23,258 (11,861) (51.0) % Earnings before income taxes 76,989 30,031 46,958 156.4 % 171,300 160,599 10,701 6.7 % Income tax expense (benefit) 12,959 (1,246) 14,205 1,140.0 % 19,485 27,544 (8,059) (29.3) % Net earnings$ 64,030 $ 31,277 $ 32,753 104.7 %$ 151,815 $ 133,055 $ 18,760 14.1 % 25
-------------------------------------------------------------------------------- Three Months EndedSeptember 30, 2020 , compared to Three Months EndedSeptember 30, 2019 Store Revenue. Total store revenue increased by$53.8 million , or 8.5%, to$688.2 million for the three months endedSeptember 30, 2020 , from$634.4 million for the three months endedSeptember 30, 2019 . This increase was primarily due to increases of approximately$37.7 million and$17.2 million in revenues in the Rent-A-Center Business and Preferred Lease segments, respectively, as discussed further in the section "Segment Performance" below. Cost of Rentals and Fees. Cost of rentals and fees consists primarily of depreciation of rental merchandise. Cost of rentals and fees for the three months endedSeptember 30, 2020 , increased by$5.0 million , or 3.1%, to$167.0 million as compared to$162.0 million in 2019. This increase in cost of rentals and fees was primarily attributable to an increase of$5.1 million in the Rent-A-Center Business segment. Cost of rentals and fees expressed as a percentage of rentals and fees revenue was 28.8% for the three months endedSeptember 30, 2020 , as compared to 29.4% in 2019. Cost of Merchandise Sold. Cost of merchandise sold increased by$24.6 million , or 34.9%, to$95.2 million for the three months endedSeptember 30, 2020 , from$70.6 million in 2019, primarily attributable to increases of$18.1 and$6.6 million in the Preferred Lease and Rent-A-Center Business segments, respectively, as discussed further in the section "Segment Performance" below. The gross margin percent of merchandise sales increased to (4.3)% for the three months endedSeptember 30, 2020 , from (7.7)% in 2019. Gross Profit. Gross profit increased by$25.0 million , or 6.3%, to$425.0 million for the three months endedSeptember 30, 2020 , from$400.0 million in 2019, due primarily to an increase of$25.9 million in theRent-A-Center Business segment, as discussed further in the section "Segment Performance" below. Gross profit as a percentage of total revenue decreased to 59.7% for the three months endedSeptember 30, 2020 , as compared to 61.6% in 2019. Store Labor. Store labor decreased by$8.2 million , or 5.2%, to$150.5 million , for the three months endedSeptember 30, 2020 , as compared to$158.7 million in 2019, primarily due to decreases of$4.2 million and$3.7 million in the Rent-A-Center Business and Preferred Lease segments, respectively, primarily as a result of a lower store base and a higher mix of virtual locations. Store labor expressed as a percentage of total store revenue was 21.9% for the three months endedSeptember 30, 2020 , as compared to 25.0% in 2019. Other Store Expenses. Other store expenses decreased by$9.6 million , or 6.3%, to$140.8 million for the three months endedSeptember 30, 2020 , as compared to$150.4 million in 2019, primarily due to a decrease of$15.4 million in the Rent-A-Center Business segment, partially offset by an increase of$6.5 million in the Preferred Lease segment, as discussed further in the section "Segment Performance" below. Other store expenses expressed as a percentage of total store revenue were 20.5% for the three months endedSeptember 30, 2020 , compared to 23.7% in 2019. General and Administrative Expenses. General and administrative expenses increased by$7.2 million , or 21.0%, to$41.6 million for the three months endedSeptember 30, 2020 , as compared to$34.4 million in 2019, primarily due to higher incentive compensation expenses. General and administrative expenses expressed as a percentage of total revenue were 5.8% for the three months endedSeptember 30, 2020 , compared to 5.3% in 2019. Other (Gains) and Charges. Other (gains) and charges decreased by$4.8 million , to$(1.9) million for the three months endedSeptember 30, 2020 , as compared to$2.9 million in 2019. Other gains for the three months endedSeptember 30, 2020 primarily related to proceeds from the sale of a class action claim, partially offset by asset impairments, store closure impacts, and cost savings initiatives. Other charges for the three months endedSeptember 30, 2019 primarily related to store closures, the associated Vintage merger termination legal and professional fees, and cost savings initiatives. Operating Profit. Operating profit increased by$41.4 million , to$80.2 million for the three months endedSeptember 30, 2020 , as compared to$38.8 million in 2019, primarily due to the increase in gross profit and decreases in store labor and other store expenses, in each case as described above. Operating profit expressed as a percentage of total revenue was 11.3% for the three months endedSeptember 30, 2020 , compared to 6.0% in 2019. Income Tax Expense (Benefit). Income tax expense (benefit) for the three months endedSeptember 30, 2020 was$13.0 million , as compared to$(1.2) million in 2019. The effective tax rate was 16.8% for the three months endedSeptember 30, 2020 , compared to (4.2)% in 2019. Nine Months EndedSeptember 30, 2020 , compared to Nine Months EndedSeptember 30, 2019 Store Revenue. Total store revenue increased by$75.0 million , or 3.8%, to$2,034.3 million for the nine months endedSeptember 30, 2020 , from$1,959.3 million for the nine months endedSeptember 30, 2019 . This increase was 26 -------------------------------------------------------------------------------- primarily due to increases of approximately$51.6 million and$26.7 million in the Preferred Lease and Rent-A-Center Business segments, respectively, as discussed further in the section "Segment Performance" below. Cost of Rentals and Fees. Cost of rentals and fees consists primarily of depreciation of rental merchandise. Cost of rentals and fees for the nine months endedSeptember 30, 2020 , increased by$16.6 million , or 3.5%, to$489.6 million as compared to$473.0 million in 2019. This increase in cost of rentals and fees was primarily attributable to an increase of$20.8 million in the Preferred Lease segment, partially offset by a decrease of$2.9 million in the Rent-A-Center Business segment. Cost of rentals and fees expressed as a percentage of rentals and fees revenue increased to 29.1% for the nine months endedSeptember 30, 2020 as compared to 28.4% in 2019. Cost of Merchandise Sold. Cost of merchandise sold increased by$46.9 million , or 18.8%, to$296.9 million for the nine months endedSeptember 30, 2020 , from$250.0 million in 2019, primarily attributable to increases of$39.2 million and$7.9 million in the Preferred Lease and Rent-A-Center Business segments, respectively, as discussed further in the section "Segment Performance" below. The gross margin percent of merchandise sales increased to 1.3% for the nine months endedSeptember 30, 2020 , from (3.8)% in 2019. Gross Profit. Gross profit increased by$11.8 million , or 1.0%, to$1,244.7 million for the nine months endedSeptember 30, 2020 , from$1,232.9 million in 2019, due primarily to an increase of$21.0 million in theRent-A-Center Business segment, partially offset by a decrease of$8.4 million in the Preferred Lease segment, as discussed further in the section "Segment Performance" below. Gross profit as a percentage of total revenue decreased to 59.3% for the nine months endedSeptember 30, 2020 , as compared to 61.6% in 2019. Store Labor. Store labor decreased by$39.0 million , or 8.2%, to$434.2 million , for the nine months endedSeptember 30, 2020 , as compared to$473.2 million in 2019, primarily attributable to decreases of$20.6 million and$17.8 million in the Rent-A-Center Business and Preferred Lease segments, respectively, as discussed further in the section "Segment Performance" below. Store labor expressed as a percentage of total store revenue was 21.3% for the nine months endedSeptember 30, 2020 , as compared to 24.2% in 2019. Other Store Expenses. Other store expenses decreased by$0.1 million , to$463.3 million for the nine months endedSeptember 30, 2020 , as compared to$463.4 million in 2019, primarily attributable to decreases of$29.3 million and$1.7 million in the Rent-A-Center Business andMexico segments, respectively, partially offset by an increase of$31.2 million in the Preferred Lease segment, as discussed further in the section "Segment Performance" below. Other store expenses expressed as a percentage of total store revenue were 22.8% for the nine months endedSeptember 30, 2020 , compared to 23.7% in 2019. General and Administrative Expenses. General and administrative expenses increased by$7.9 million , or 7.4%, to$113.7 million for the nine months endedSeptember 30, 2020 , as compared to$105.8 million in 2019. General and administrative expenses expressed as a percentage of total revenue were 5.4% for the nine months endedSeptember 30, 2020 , compared to 5.3% in 2019. Other (Gains) and Charges. Other (gains) and charges increased by$49.1 million , to$7.8 million for the nine months endedSeptember 30, 2020 , as compared to$(41.3) million in 2019. Other charges for the nine months endedSeptember 30, 2020 primarily related to legal settlement and state sales tax assessment reserves, cost savings initiatives, inventory losses resulting from damage related to looting, employee payroll and sanitation costs in connection with COVID-19, store closure impacts, and asset disposals, partially offset by proceeds from the sale of a legal antitrust claim, rent abatements, and insurance proceeds related to hurricane Maria in 2017. Other gains for the nine months endedSeptember 30, 2019 primarily related to the Vintage Settlement Proceeds, and insurance proceeds related to the 2017 hurricanes, partially offset by the Blair class action settlement costs, associated Vintage merger termination legal and professional fees, store closures, state tax audit assessments, and cost savings initiatives Operating Profit. Operating profit decreased by$3.3 million , to$182.7 million for the nine months endedSeptember 30, 2020 , as compared to$186.0 million in 2019, primarily due to an increase in other (gains) and charges driven by the Vintage termination settlement received in 2019 documented above, partially offset by the increase in gross profit, as described above. Operating profit expressed as a percentage of total revenue was 8.7% for the nine months endedSeptember 30, 2020 , compared to 9.3% in 2019. Excluding other (gains) and charges, operating profit was$190.5 million , or 9.1% of revenue for the nine months endedSeptember 30, 2020 , compared to$144.7 million , or 7.2% of revenue for the comparable period of 2019. Income Tax Expense. Income tax expense for the nine months endedSeptember 30, 2020 was$19.5 million , as compared to$27.5 million in 2019. The effective tax rate was 11.4% for the nine months endedSeptember 30, 2020 , compared to 17.2% in 2019. The decrease in income tax expense for the nine months endedSeptember 30, 2020 compared to 2019 was primarily related to the tax benefit of net operating loss carrybacks at a 35% tax rate as a result of changes from the Coronavirus Aid, Relief, and Economic Security Act, enacted onMarch 27, 2020 (the "CARES Act"). 27 -------------------------------------------------------------------------------- Segment Performance Rent-A-Center Business segment Three Months Ended Nine Months Ended September 30, Change September 30, Change (dollar amounts in thousands) 2020 2019 $ % 2020 2019 $ % Revenues$ 474,223 $ 436,497 $ 37,726 8.6 %$ 1,388,380 $ 1,361,650 $ 26,730 2.0 % Gross profit 332,742 306,881 25,861 8.4 % 966,347 945,392 20,955 2.2 % Operating profit 99,950 52,175 47,775 91.6 % 253,025 170,411 82,614 48.5 % Change in same store revenue 12.9 % 7.3 % Stores in same store revenue calculation(1) 1,544 1,611 (1) Same store sales generally represents revenue earned in stores that were operated by us for 13 months or more and are reported on a constant currency basis as a percentage of total revenue earned in stores of the segment during the indicated period. We exclude from the same store sales base any store that receives a certain level of customer accounts from closed stores or acquisitions. The receiving store will be eligible for inclusion in the same store sales base in the 24th full month following account transfer. Due to the COVID-19 pandemic and related temporary store closures, all 32 stores inPuerto Rico were excluded starting inMarch 2020 and will remain excluded throughSeptember 2021 . Revenues. The increase in revenue for the three and nine months endedSeptember 30, 2020 was driven primarily by an increase in same store sales resulting from higher merchandise sales and growth in e-commerce sales, which were positively impacted by government stimulus and supplemental unemployment benefits issued by the federal government in response to the COVID-19 pandemic, as compared to 2019, partially offset by decreases in revenue due to our refranchising efforts and the rationalization of our Rent-A-Center Business store base. Gross Profit. Gross profit increased for the three and nine months endedSeptember 30, 2020 , as compared to 2019, primarily due to the increases in revenue described above, partially offset by increases in the cost of merchandise sold. Gross profit as a percentage of segment revenues was 70.2% and 69.6% for the three and nine months endedSeptember 30, 2020 , as compared to 70.3% and 69.4% for the respective periods in 2019. Operating Profit. Operating profit as a percentage of segment revenues was 21.1% and 18.2% for the three and nine months endedSeptember 30, 2020 , compared to 12.0% and 12.5% for the respective periods in 2019. The increase in operating profit for the three and nine months endedSeptember 30, 2020 , as compared to 2019 was partially due to the increase in gross profit described above, in addition to decreases in store labor and other store expenses. Declines in store labor and other store expenses were driven primarily by lower store count and a decrease in customer stolen merchandise. Charge-offs in ourRent-A-Center Business lease-to-own stores due to customer stolen merchandise, expressed as a percentage of Rent-A-Center Business lease-to-own revenues, were approximately 2.0% and 3.2% for the three and nine months endedSeptember 30, 2020 , compared to 4.1% and 3.7% for the respective periods in 2019. Charge-offs in our Rent-A-Center Business lease-to-own stores due to other merchandise losses, expressed as a percentage of Rent-A-Center Business lease-to-own revenues, were approximately 1.4% for both the three and nine months endedSeptember 30, 2020 , compared to 1.4% and 1.3% for the respective periods in 2019. Other merchandise losses include unrepairable and missing merchandise, and loss/damage waiver claims. Preferred Lease segment Three Months Ended Nine Months Ended September 30, Change September 30, Change (dollar amounts in thousands) 2020 2019 $ % 2020 2019 $ % Revenues$ 201,659 $ 184,486 $ 17,173 9.3 %$ 609,029 $ 557,397 $ 51,632 9.3 % Gross profit 78,727 80,113 (1,386) (1.7) % 238,433 246,821 (8,388) (3.4) % Operating profit 16,073 21,830 (5,757) (26.4) % 40,528 66,077 (25,549) (38.7) % Revenues. The increase in revenue for the three and nine months endedSeptember 30, 2020 compared to 2019, was primarily due to the implementation and expansion of the Preferred Lease virtual solution following the acquisition of Merchants Preferred inAugust 2019 . Gross Profit. Gross profit decreased for the three and nine months endedSeptember 30, 2020 , compared to 2019, primarily driven by a higher number of early payouts resulting from government stimulus and supplemental unemployment benefits issued by the federal government in response to the COVID-19 pandemic. Gross profit as a percentage of segment revenues decreased to 39.0% and 39.1% for the three and nine months endedSeptember 30, 2020 , compared to 43.4% and 44.3% for the respective periods in 2019. 28 -------------------------------------------------------------------------------- Operating Profit. Operating profit decreased by 26.4% and 38.7% for the three and nine months endedSeptember 30, 2020 , as compared to 2019. The decreases in operating profit for the three and nine months endedSeptember 30, 2020 were primarily due to increases in other store expenses. The increase in other store expenses was primarily due to higher merchandise losses, primarily related to COVID-19, a higher mix of virtual locations, and investments to support expected revenue growth. Charge-offs in our Preferred Lease locations due to customer stolen merchandise, expressed as a percentage of revenues, were approximately 11.3% and 13.9% for the three and nine months endedSeptember 30, 2020 , compared to 8.9% and 9.5% for the respective periods in 2019. Charge-offs in our Preferred Lease locations due to other merchandise losses, expressed as a percentage of revenues, were approximately 0.5% and 0.4% for the three and nine months endedSeptember 30, 2020 , compared to 0.5% and 0.3% in 2019. Operating profit as a percentage of segment revenues decreased to 8.0% and 6.7% for the three and nine months endedSeptember 30, 2020 , compared to 11.8% and 11.9% for the respective periods in 2019. Mexico segment Three Months Ended Nine Months Ended September 30, Change September 30, Change (dollar amounts in thousands) 2020 2019 $ % 2020 2019 $ % Revenues$ 12,159 $ 13,370 $ (1,211) (9.1) %$ 36,316 $ 40,266 $ (3,950) (9.8) % Gross profit 8,655 9,286 (631) (6.8) % 25,615 27,966 (2,351) (8.4) % Operating profit 1,724 1,213 511 42.1 % 3,743 3,906 (163) (4.2) % Change in same store revenue 4.3 % 3.2 % Stores in same store revenue calculation(1) 115 122 1) Same store sales generally represents revenue earned in stores that were operated by us for 13 months or more and are reported on a constant currency basis as a percentage of total revenue earned in stores of the segment during the indicated period. We exclude from the same store sales base any store that receives a certain level of customer accounts from closed stores or acquisitions. The receiving store will be eligible for inclusion in the same store sales base in the 24th full month following account transfer. Revenues. Revenues for the three and nine months endedSeptember 30, 2020 were negatively impacted by exchange rate fluctuations of approximately$1.7 million and$4.6 million as compared to the same periods in 2019. On a constant currency basis, revenues for the three and nine months endedSeptember 30, 2020 increased approximately$0.5 million and$0.6 million , compared to the same periods in 2019. Gross Profit. Gross profit for the three and nine months endedSeptember 30, 2020 was negatively impacted by exchange rate fluctuations of approximately$1.2 million and$3.2 million as compared to the same periods in 2019. On a constant currency basis, gross profit for the three and nine months endedSeptember 30, 2020 increased by approximately$0.6 million and$0.8 million as compared to the same periods in 2019. Gross profit as a percentage of segment revenues was 71.2% and 70.5% for the three and nine months endedSeptember 30, 2020 , compared to 69.5% for both of the respective periods in 2019. Operating Profit. Operating profit for the three and nine months endedSeptember 30, 2020 were each negatively impacted by exchange rate fluctuations of approximately$0.2 million and$0.4 million as compared to the same periods in 2019. Operating profit as a percentage of segment revenues increased to 14.2% and 10.3% for the three and nine months endedSeptember 30, 2020 , from 9.1% and 9.7% for the respective periods in 2019. Franchising segment Three Months Ended Nine Months Ended September 30, Change September 30, Change (dollar amounts in thousands) 2020 2019 $ % 2020 2019 $ % Revenues$ 23,974 $ 15,018 $ 8,956 59.6 %$ 63,975 $ 42,677 $ 21,298 49.9 % Gross profit 4,904 3,716 1,188 32.0 % 14,343 12,754 1,589 12.5 % Operating profit 3,146 1,135 2,011 177.2 % 8,694 4,716 3,978 84.4 % Revenues. Revenues increased for the three and nine months endedSeptember 30, 2020 compared to the respective periods in 2019, primarily due to an increase in franchise locations as a result of refranchising Rent-A-Center Business corporate stores, and higher inventory purchases by our franchisees. Gross Profit. Gross profit as a percentage of segment revenues decreased to 20.5% and 22.4% for the three and nine months endedSeptember 30, 2020 , from 24.7% and 29.9% for the respective periods in 2019, primarily due to changes in our revenue mix of franchise royalties and fees and rental merchandise sales, related to the increase in franchise locations described above. 29 -------------------------------------------------------------------------------- Operating Profit. Operating profit as a percentage of segment revenues increased for the three and nine months endedSeptember 30, 2020 to 13.1% and 13.6%, compared to 7.6% and 11.1% for the respective periods in 2019, primarily due to a decrease in operating expenses. Liquidity and Capital Resources Overview. For the nine months endedSeptember 30, 2020 , we generated$296.2 million in operating cash flow. We paid down$41.5 million of debt using cash generated from operations, and used cash in the amount of$47.3 million for dividends,$26.6 million for share repurchases, and$22.6 million for capital expenditures. We ended the third quarter of 2020 with$227.4 million of cash and cash equivalents and outstanding indebtedness of$198.0 million . Analysis of Cash Flow. Cash provided by operating activities increased$68.1 million to$296.2 million for the nine months endedSeptember 30, 2020 , from$228.1 million in 2019. This increase was primarily attributable to a decrease in rental merchandise purchases during the nine months endedSeptember 30, 2020 compared to the same period in 2019, receipt of our federal tax refund of approximately$30 million , and other net changes in operating assets and liabilities. Cash used in investing activities was$22.9 million for the nine months endedSeptember 30, 2020 , compared to$22.8 million in 2019, a change of$0.1 million , primarily due to an increase in capital expenditures and lower proceeds from the sale of property assets, offset by cash consideration paid for the acquisition of Merchants Preferred in 2019. Cash used in financing activities was$114.9 million for the nine months endedSeptember 30, 2020 , compared to$287.1 million in 2019, a decrease of$172.2 million , primarily due to a net decrease in debt repayments compared to debt proceeds of$241.2 million , partially offset by increases in dividends paid of$47.3 million , and share repurchases of$26.6 million for the nine months endedSeptember 30, 2020 . Liquidity Requirements. Our primary liquidity requirements are for rental merchandise purchases and other operating expenses. Other capital requirements include expenditures for property assets, including rental expense, debt service, and dividends. Historically, our primary source of liquidity has been cash provided by operations. Should we require additional funding sources, we maintain our ABL Credit Facility with commitments of up to$300 million , subject to the terms and availability of our ABL Credit Facility. We utilize our ABL Credit Facility for the issuance of letters of credit, as well as to manage normal fluctuations in operational cash flow caused by the timing of cash receipts. InMarch 2020 , as a precautionary measure in response to negative impacts to our operations stemming from the COVID-19 pandemic, we drew down approximately$118.0 million against our ABL Credit Facility to enhance our financial flexibility and increase our available cash on hand. With cash flow generated from operations, we repaid the full outstanding balance of approximately$163.0 million borrowed against our ABL Credit Facility in the second quarter of 2020, and had no outstanding borrowings as ofSeptember 30, 2020 . In response to the negative impacts to our business resulting from COVID-19, we proactively implemented certain measures to reduce operating expenses and cash flow uses, including implementing temporary executive pay reductions, temporarily furloughing certain employees at our store locations and corporate headquarters, reducing store hours in certain locations, renegotiating real estate leases, reducing inventory purchases and capital expenditures, and, for a brief period of time, suspending further share repurchases. In addition, we received approximately$30 million in federal tax refunds described above, including$12 million related to net operating loss carrybacks at a 35% tax rate in connection with the CARES Act, and expect to defer approximately$19 million in employer payroll taxes to future periods. Taking into consideration our efforts to minimize expenses in response to COVID-19 and benefits from the CARES Act, and based on current assumptions and expectations, we believe the cash flow generated from operations and other sources of liquidity including availability under our ABL Credit Facility will be sufficient to fund our operations over the next 12 months. AtOctober 22, 2020 , we had approximately$204.4 million in cash on hand and, atSeptember 30, 2020 , we had$209.3 million available under our ABL Credit Agreement. In addition, inSeptember 2020 , the Rent-A-Center Board of Directors declared a cash dividend of$0.29 per share for the fourth quarter of 2020, which was paid onOctober 26, 2020 to stockholders of record at the close of business onOctober 7, 2020 . Deferred Taxes. Certain federal tax legislation enacted during the period 2009 to 2017 permitted bonus first-year depreciation deductions ranging from 50% to 100% of the adjusted basis of qualified property placed in service during such years. The depreciation benefits associated with these tax acts are now reversing. The Protecting Americans from Tax Hikes Act of 2015 ("PATH") extended the 50% bonus depreciation to 2015 and throughSeptember 26, 2017 , when it was updated by the Tax Cuts and Jobs Act of 2017 ("Tax Act"). The Tax Act allows 100% bonus depreciation for certain property placed in service betweenSeptember 27, 2017 andDecember 31, 2022 , at which point it will begin to phase out. The bonus depreciation provided by the Tax Act resulted in an estimated benefit of$194 million for us in 2019. We estimate the remaining tax deferral associated with 30 -------------------------------------------------------------------------------- bonus depreciation from the Tax Act was approximately$239 million atDecember 31, 2019 , of which approximately 78%, or$189 million , will reverse in 2020, and the majority of the remainder will reverse between 2021 and 2022. Merchandise Losses. Merchandise losses consist of the following: Three Months Ended September
30, Nine Months Ended
(in thousands) 2020 2019 2020 2019 Customer stolen merchandise (1)$ 34,677 $ 37,110 $ 136,106 $ 110,299 Other merchandise losses (2) 7,706 6,776 21,950 19,080 Total merchandise losses$ 42,383 $ 43,886 $ 158,056 $ 129,379 (1)Includes incremental losses related to COVID-19 (2)Other merchandise losses include unrepairable and missing merchandise, and loss/damage waiver claims. Capital Expenditures. We make capital expenditures in order to maintain our existing operations, acquire new capital assets in new and acquired stores and invest in information technology. We spent$22.6 million and$12.0 million on capital expenditures during the nine months endedSeptember 30, 2020 and 2019, respectively. Acquisitions and New Location Openings. During the first nine months of 2020, we acquired two rent-to-own store locations and customer accounts for an aggregate purchase price of approximately$0.7 million in two separate transactions. The store locations were closed upon acquisition and consolidated into existing store operations in our Rent-A-Center Business segment. The table below summarizes the store location activity for the nine-month period endedSeptember 30, 2020 for our Rent-A-Center Business,Mexico and Franchising operating segments. Rent-A-Center Business Mexico Franchising Total Locations at beginning of period 1,973 123 372 2,468 New location openings - - - - Conversions - - - - Closed locations Merged with existing locations (25) (2) - (27) Sold or closed with no surviving location (1) - (9) (10) Locations at end of period 1,947 121 363 2,431 Senior Debt. As discussed in Note 7 to the condensed consolidated financial statements included in Part I, Item I of this Quarterly Report on Form 10-Q, inAugust 2019 , we completed the refinancing of our prior revolving facility and, effectiveAugust 5, 2019 , redeemed in full our unsecured senior notes using cash on hand and proceeds from our new$300 million ABL Credit Facility and$200 million from a new term loan under our ABL Credit Agreement. We may use, subject to certain limitations and borrowing availability,$150 million under our ABL Credit Agreement for the issuance of letters of credit, of which$90.7 million , primarily relating to workers compensation, had been so utilized as ofOctober 22, 2020 . The ABL Credit Agreement has a scheduled maturity date ofAugust 5, 2024 . Store Leases. We lease space for all of our Rent-A-Center Business andMexico stores under operating leases expiring at various times through 2027. In addition, we lease space for certain support facilities under operating leases expiring at various times through 2032. Most of our store leases are five-year leases and contain renewal options for additional periods ranging from three to five years at rental rates adjusted according to agreed formulas. 31 --------------------------------------------------------------------------------
Contractual Cash Commitments. The table below summarizes debt, lease and other
minimum cash obligations outstanding as of
Payments Due by Period
(in thousands) Total 2020 2021-2022 2023-2024 Thereafter
Term Loan(1) $ 198,000 $ 500 $ 4,000 $ 4,000 $ 189,500
ABL Credit Agreement(2) - - - - -
Operating Leases 319,920 29,607 175,847 80,177 34,289
Total(3) $ 517,920 $ 30,107 $ 179,847 $ 84,177 $ 223,789
(1)Does not include interest payments. Our Term Loan bears interest at varying
rates equal to the Eurodollar rate plus 4.50%. The Eurodollar rate on our Term
Loan at September 30, 2020 , was 4.69%.
(2)Our ABL Credit Agreement bears interest at varying rates equal to the
Eurodollar rate plus 1.50% to 2.00%. The weighted average Eurodollar rate on our
ABL Credit Agreement at September 30, 2020 , was 1.69%.
(3)As of September 30, 2020 , we have recorded $24.1 million in uncertain tax
positions. Because of the uncertainty of the amounts to be ultimately paid as
well as the timing of such payments, uncertain tax positions are not reflected
in the contractual obligations table.
Seasonality. Our revenue mix is moderately seasonal, with the first quarter of
each fiscal year generally providing higher merchandise sales than any other
quarter during a fiscal year. Generally, our customers will more frequently
exercise the early purchase option on their existing rental purchase agreements
or purchase pre-leased merchandise off the showroom floor during the first
quarter of each fiscal year, primarily due to the receipt of federal income tax
refunds. Furthermore, we tend to experience slower growth in the number of
rental purchase agreements in the third quarter of each fiscal year when
compared to other quarters throughout the year.
New Accounting Pronouncements
In December 2019 , the FASB issued ASU 2019-12, Income Taxes (Topic 740):
Simplifying the Accounting for Income Taxes, which is intended to simplify
various aspects related to accounting for income taxes. The standard removes
certain exceptions to the general principles in Topic 740 and also clarifies and
amends existing guidance to improve consistent application. The adoption of ASU
2019-12 will be required for us beginning January 1, 2021 . We do not believe
this ASU will have a material impact on our financial statements upon adoption.
From time to time, new accounting pronouncements are issued by the FASB or other
standards setting bodies that we adopt as of the specified effective date.
Unless otherwise discussed, we believe the impact of any other recently issued
standards that are not yet effective are either not applicable to us at this
time or will not have a material impact on our consolidated financial statements
upon adoption.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Interest Rate Sensitivity
As of September 30, 2020 , we had $198.0 million outstanding under our term loan
credit agreement at interest rates indexed to the Eurodollar rate or the prime
rate. Carrying value approximates fair value for this indebtedness.
Market Risk
Market risk is the potential change in an instrument's value caused by
fluctuations in interest rates. Our primary market risk exposure is fluctuations
in interest rates. Monitoring and managing this risk is a continual process
carried out by our senior management. We manage our market risk based on an
ongoing assessment of trends in interest rates and economic developments, giving
consideration to possible effects on both total return and reported earnings. As
a result of such assessment, we may enter into swap contracts or other interest
rate protection agreements from time to time to mitigate this risk.
Interest Rate Risk
We have outstanding debt with variable interest rates indexed to prime or
Eurodollar rates that exposes us to the risk of increased interest costs if
interest rates rise. As of September 30, 2020 , we have not entered into any
interest rate swap agreements. Based on our overall interest rate exposure at
September 30, 2020 , a hypothetical 1.0% increase or decrease in market interest
rates would have the effect of causing an additional $2.0 million annualized
pre-tax charge or credit to our consolidated statement of operations.
32
--------------------------------------------------------------------------------
Foreign Currency Translation
We are exposed to market risk from foreign exchange rate fluctuations of the
Mexican peso to the U.S. dollar as the financial position and operating results
of our stores in Mexico are translated into U.S. dollars for consolidation.
Resulting translation adjustments are recorded as a separate component of
stockholders' equity.
Item 4. Controls and Procedures.
Disclosure controls and procedures. In accordance with Rule 13a-15(b) under the
Securities Exchange Act of 1934, an evaluation was performed under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of
the end of the period covered by this Quarterly Report on Form 10-Q. Based on
this evaluation, our management, including our Chief Executive Officer and our
Chief Financial Officer, concluded that, as of September 30, 2020 , our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934) were effective.
Changes in internal controls over financial reporting. For the quarter
ended September 30, 2020 , there have been no changes in our internal control
over financial reporting (as defined in Rule 13a-15(f) under the Securities
Exchange Act of 1934) that, in the aggregate, have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
PART II - Other Information
Item 1. Legal Proceedings
California Attorney General. The California Attorney General ("CAG") previously
issued an investigative subpoena seeking information with respect to our
Acceptance Now business practices (now part of the Preferred Lease segment). The
request for documents and information was sought in connection with a broader
investigation of the lease-to-own industry in California . Since receiving such
demand, we have cooperated with the CAG in connection with its investigation and
made several productions of requested documents. In March 2020 , the CAG put
forth proposed settlement terms to address alleged violations of California law.
After several rounds of negotiations, in September 2020 , the CAG proposed
revised terms. In both cases, the proposed settlement terms include civil
penalties, disgorgement of certain revenues, additional training requirements,
and recommended changes to Acceptance Now business practices. We believe that
our business practices are in compliance with California law and are continuing
to discuss resolution of the inquiry with the CAG. At this point, while we
cannot predict the ultimate outcome, we do not believe any such outcome will
have a material impact on our condensed consolidated financial statements.
Item 1A. Risk Factors
There have been no material changes to the risk factors disclosed in Item 1A of
Part 1, "Risk Factors" of our Annual Report on Form 10-K for the year ended
December 31, 2019 and in Item 1A of Part II, "Risk Factors" of our Quarterly
Report on Form 10-Q for the quarter ended March 31, 2020 .
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table presents information with respect to purchases of our common
stock the Company made during the three months ended September 30, 2020 :
Total number of Maximum dollar value of
shares purchased as shares that may yet be
Average Price part of publicly purchased under publicly
Total Number of Paid per announced plans or announced plans or
Period Shares Purchased Share programs programs (in millions)
July 1, 2020 - September 30,
2020 2,200 $ 27.89 2,200 (1) $ 58.4 (1)
(1) Shares repurchased pursuant to the share repurchase program publicly
announced on May 11, 2020 that allows for the repurchase of an aggregate of up
to $75.0 million of shares of our common stock through open market and privately
negotiated transactions from time to time.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
33--------------------------------------------------------------------------------
© Edgar Online, source
