Segment Information

The operating segments reported below are the segments for which separate financial information is available and for which segment results are evaluated by the chief operating decision makers. Our operating segments are organized based on factors including, but not limited to, type of business transactions, geographic location and store ownership. All operating segments offer merchandise from four basic product categories: consumer electronics, appliances, computers (including tablets), and furniture (including accessories), and our Core U.S., Mexico and franchising segments also offer smartphones. Reportable segments and their respective operations are defined as follows.

Our Core U.S. segment primarily operates rent-to-own stores in the United States and Puerto Rico whose customers enter into weekly, semi-monthly or monthly rental purchase agreements, which renew automatically upon receipt of each payment. We retain the title to the merchandise during the term of the rental purchase agreement and ownership passes to the customer if the customer has continuously renewed the rental purchase agreement through the end of the term or exercises a specified early purchase option. This segment also includes the 44 stores operating in two states that utilize a retail model which generates installment credit sales through a retail sale transaction. Segment assets include cash, receivables, rental merchandise, property assets and other intangible assets.

Our Acceptance Now segment operates kiosks within various traditional retailers’ locations where we generally offer the rent-to-own transaction to consumers who do not qualify for financing from the traditional retailer. The transaction offered is generally similar to that of the Core U.S. segment; however, the majority of the customers in this segment enter into monthly rather than weekly agreements. Segment assets include cash, rental merchandise, property assets, goodwill and other intangible assets.

Our Mexico segment currently consists of our company-owned rent-to-own stores in Mexico. The nature of this segment's operations and assets are the same as our Core U.S. segment.

The stores in our Franchising segment use Rent-A-Center’s, ColorTyme’s or RimTyme’s trade names, service marks, trademarks and logos, and operate under distinctive operating procedures and standards. Franchising’s primary source of revenue is the sale of rental merchandise to its franchisees who, in turn, offer the merchandise to the general public for rent or purchase under a rent-to-own program. As franchisor, Franchising receives royalties of 2.0% to 6.0% of the franchisees' monthly gross revenue and initial fees for new locations. Segment assets include cash, franchise fee receivables, property assets and intangible assets.

Segment information as of and for the years ended December 31, 2018, 2017 and 2016 is as follows:



	Year Ended December 31,
(In thousands)	2018		2017		2016
Revenues
Core U.S.	$	1,855,712	$	1,835,422	$	2,069,725
Acceptance Now	722,562		797,987		817,814
Mexico	49,613		47,005		50,927
Franchising	32,578		22,126		24,786
Total revenues	$	2,660,465	$	2,702,540	$	2,963,252



	Year Ended December 31,
(In thousands)	2018		2017		2016
Gross profit
Core U.S.	$	1,299,809	$	1,276,212	$	1,467,679
Acceptance Now	339,616		400,002		422,381
Mexico	34,364		32,592		35,549
Franchising	14,379		9,736		9,440
Total gross profit	$	1,688,168	$	1,718,542	$	1,935,049

Beginning in 2018, we implemented an intercompany book value adjustment charge for all rental merchandise transfers from Acceptance Now locations to Core U.S. stores. For the twelve months ended December 31, 2018, book value adjustments on intercompany rental merchandise transfers were $12.0 million, resulting in a corresponding increase in gross profit for the Core U.S. and decrease in gross profit for Acceptance Now.



	Year Ended December 31,
(In thousands)	2018			2017			2016
Operating profit (loss)
Core U.S.	$	147,787		$	86,196		$	(1,020	)
Acceptance Now	93,951			48,618			105,925
Mexico	2,605			(260		)	(2,449		)
Franchising	4,385			5,081			5,650
Total segments	248,728			139,635			108,106
Corporate	(192,591		)	(202,694		)	(174,702		)
Total operating profit (loss)	$	56,137		$	(63,059	)	$	(66,596	)

Beginning in 2018, we implemented an intercompany book value adjustment charge for all rental merchandise transfers from Acceptance Now locations to Core U.S. stores. For the twelve months ended December 31, 2018, book value adjustments for inventory charge-offs related to intercompany rental merchandise transfers were $2.2 million, resulting in a corresponding increase in operating profit for the Core U.S. and decrease in operating profit for Acceptance Now.



	Year Ended December 31,
(In thousands)	2018		2017		2016
Depreciation, amortization and write-down of intangibles
Core U.S.⁽¹⁾	$	25,566	$	31,070	$	39,734
Acceptance Now⁽²⁾	1,677		2,498		3,309
Mexico	1,006		1,973		3,179
Franchising	172		177		177
Total segments	28,421		35,718		46,399
Corporate	40,525		38,921		34,057
Total depreciation, amortization and write-down of intangibles	$	68,946	$	74,639	$	80,456

⁽¹⁾ We recorded a goodwill impairment charge of $151.3 million in the Core U.S. segment during the fourth quarter of 2016, not included in the table above.

⁽²⁾ We recorded an impairment of intangibles of $3.9 million in the Acceptance Now segment during the first quarter of 2017 that is not included in the table above. The impairment charge was recorded to Other Charges in the Consolidated Statement of Operations.



	Year Ended December 31,
(In thousands)	2018		2017		2016
Capital expenditures
Core U.S.	$	17,173	$	26,506	$	20,802
Acceptance Now	203		2,723		2,330
Mexico	295		124		283
Total segments	17,671		29,353		23,415
Corporate	10,291		36,107		37,728
Total capital expenditures	$	27,962	$	65,460	$	61,143



	December 31,
(In thousands)	2018		2017		2016
On rent rental merchandise, net
Core U.S.	$	424,829	$	408,993	$	426,845
Acceptance Now	242,978		278,443		354,486
Mexico	16,001		14,367		13,787
Total on rent rental merchandise, net	$	683,808	$	701,803	$	795,118



	December 31,
(In thousands)	2018		2017		2016
Held for rent rental merchandise, net
Core U.S.	$	117,294	$	156,039	$	192,718
Acceptance Now	1,207		4,940		7,489
Mexico	5,161		6,209		6,629
Total held for rent rental merchandise, net	$	123,662	$	167,188	$	206,836



	December 31,
(In thousands)	2018		2017		2016
Assets by segment
Core U.S.	$	714,914	$	776,296	$	860,717
Acceptance Now	312,151		350,970		432,383
Mexico	29,321		33,529		31,415
Franchising	4,287		3,802		2,197
Total segments	1,060,673		1,164,597		1,326,712
Corporate	336,244		256,184		276,029
Total assets	$	1,396,917	$	1,420,781	$	1,602,741



	December 31,
(In thousands)	2018		2017		2016
Assets by country
United States	$	1,366,405	$	1,383,004	$	1,567,933
Mexico	29,321		33,529		31,415
Canada	1,191		4,248		3,393
Total assets	$	1,396,917	$	1,420,781	$	1,602,741



	Year Ended December 31,
(In thousands)	2018		2017		2016
Rentals and fees by inventory category
Furniture and accessories	$	962,241	$	921,159	$	927,537
Consumer electronics	410,184		459,942		553,976
Appliances	344,548		351,893		391,539
Computers	120,756		124,158		148,889
Smartphones	62,592		57,927		93,449
Other products and services	344,539		352,662		384,663
Total rentals and fees	$	2,244,860	$	2,267,741	$	2,500,053



	Year Ended December 31,
(In thousands)	2018		2017		2016
Revenue by country
United States	$	2,610,432	$	2,654,819	$	2,911,613
Mexico	49,612		47,005		50,927
Canada	421		716		712
Total revenues	$	2,660,465	$	2,702,540	$	2,963,252