Segment Information

12 Months Ended

Dec. 31, 2019

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 certain basic product categories: furniture, consumer electronics, appliances, computers, and accessories. Smartphones are also offered in our company owned stores and franchise locations. In addition, in the Rent-A-Center business segment, we have recently expanded into other product categories including, tools, tires, jewelry and other accessories.

We report financial operating performance under four operating segments. To better reflect the Company's current strategic focus, our retail partner business operations are now reported as the Preferred Lease segment (formerly Acceptance Now), which includes our virtual, staffed and hybrid business models; and our Rent-A-Center Business segment (formerly the Core U.S.) segment, which operates our company-owned stores and e-commerce platform through rentacenter.com. In addition we report operating results for our Mexico and Franchising segments. Reportable segments and their respective operations are defined as follows.

Our Rent-A-Center Business segment primarily operates lease-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 Preferred Lease segment, which operates in the United States and Puerto Rico, and includes the operations of the recently acquired Merchants Preferred, generally offers the lease-to-own transactions to consumers who do not qualify for financing from the traditional retailer. Our Preferred Lease operating model is highly agile and dynamic because we can open and close locations quickly and efficiently. Generally, our Preferred Lease staffed locations consist of an area with a computer, desk and chairs. We occupy the space without charge by agreement with each retailer. In our virtual locations, transactions are initiated through an electronic portal accessible by retail partners on their store computers. Accordingly, capital expenditures with respect to new Preferred Lease locations are minimal. The transaction offered at our Preferred Lease locations (excluding virtual) is generally similar to that of the Rent-A-Center Business segment; however, we pay the retail price for merchandise purchased from our retail partners and subsequently leased to the customer. In addition, the majority of the customers in this segment enter into monthly rather than weekly agreements. Under the virtual business model, revenues are earned prior to the renal payment due date. Therefore, revenue is accrued prior to receipt of the rental payment, net of estimated returns and uncollectible renewal payments. Segment assets include cash, rental merchandise, property assets, goodwill and other intangible assets.

Our Mexico segment currently consists of our company-owned lease-to-own stores in Mexico. The nature of this segment's operations and assets are the same as our Rent-A-Center Business 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 lease-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, trade receivables, property assets and intangible assets.

Segment information as of and for the years ended December 31, 2019, 2018 and 2017 is as follows:



	Year Ended December 31,
(In thousands)	2019		2018		2017
Revenues
Rent-A-Center Business	$	1,800,486	$	1,855,712	$	1,835,422
Preferred Lease	749,260		722,562		797,987
Mexico	53,960		49,613		47,005
Franchising	66,146		32,578		22,126
Total revenues	$	2,669,852	$	2,660,465	$	2,702,540



	Year Ended December 31,
(In thousands)	2019		2018		2017
Gross profit
Rent-A-Center Business	$	1,255,153	$	1,299,809	$	1,276,212
Preferred Lease	333,798		339,616		400,002
Mexico	37,488		34,364		32,592
Franchising	17,632		14,379		9,736
Total gross profit	$	1,644,071	$	1,688,168	$	1,718,542



	Year Ended December 31,
(In thousands)	2019			2018			2017
Operating profit (loss)
Rent-A-Center Business	$	235,964		$	147,787		$	86,196
Preferred Lease	83,066			93,951			48,618
Mexico	5,357			2,605			(260		)
Franchising	7,205			4,385			5,081
Total segments	331,592			248,728			139,635
Corporate	(77,733		)	(192,591		)	(202,694		)
Total operating profit (loss)	$	253,859		$	56,137		$	(63,059	)



	Year Ended December 31,
(In thousands)	2019		2018		2017
Depreciation and amortization
Rent-A-Center Business	$	20,822	$	25,566	$	31,070
Preferred Lease	1,533		1,677		2,498
Mexico	401		1,006		1,973
Franchising	45		172		177
Total segments	22,801		28,421		35,718
Corporate	38,303		40,525		38,921
Total depreciation and amortization	$	61,104	$	68,946	$	74,639



	Year Ended December 31,
(In thousands)	2019		2018		2017
Capital expenditures
Rent-A-Center Business	$	10,255	$	17,173	$	26,506
Preferred Lease	141		203		2,723
Mexico	172		295		124
Total segments	10,568		17,671		29,353
Corporate	10,589		10,291		36,107
Total capital expenditures	$	21,157	$	27,962	$	65,460



	December 31,
(In thousands)	2019		2018		2017
On rent rental merchandise, net
Rent-A-Center Business	$	411,482	$	424,829	$	408,993
Preferred Lease	268,845		242,978		278,443
Mexico	16,943		16,001		14,367
Total on rent rental merchandise, net	$	697,270	$	683,808	$	701,803



	December 31,
(In thousands)	2019		2018		2017
Held for rent rental merchandise, net
Rent-A-Center Business	$	131,086	$	117,294	$	156,039
Preferred Lease	1,254		1,207		4,940
Mexico	6,078		5,161		6,209
Total held for rent rental merchandise, net	$	138,418	$	123,662	$	167,188



	December 31,
(In thousands)	2019		2018		2017
Assets by segment
Rent-A-Center Business	$	953,151	$	714,914	$	776,296
Preferred Lease	357,859		312,151		350,970
Mexico	33,707		29,321		33,529
Franchising	11,095		4,287		3,802
Total segments	1,355,812		1,060,673		1,164,597
Corporate	226,986		336,244		256,184
Total assets	$	1,582,798	$	1,396,917	$	1,420,781



	December 31,
(In thousands)	2019		2018		2017
Assets by country
United States	$	1,547,895	$	1,366,405	$	1,383,004
Mexico	33,707		29,321		33,529
Canada	1,196		1,191		4,248
Total assets	$	1,582,798	$	1,396,917	$	1,420,781



	Year Ended December 31,
(In thousands)	2019		2018		2017
Rentals and fees by inventory category
Furniture and accessories	$	982,644	$	962,241	$	921,159
Consumer electronics	358,619		410,184		459,942
Appliances	346,668		344,548		351,893
Computers	103,171		120,756		124,158
Smartphones	62,948		62,592		57,927
Other products and services	370,352		344,539		352,662
Total rentals and fees	$	2,224,402	$	2,244,860	$	2,267,741



	Year Ended December 31,
(In thousands)	2019		2018		2017
Revenue by country
United States	$	2,615,892	$	2,610,432	$	2,654,819
Mexico	53,960		49,612		47,005
Canada	—		421		716
Total revenues	$	2,669,852	$	2,660,465	$	2,702,540