Wdesk | Document
false--12-31Q320190000933036RENT A CENTER INC DE5517500005640620000.010.0125000000025000000010990950411110593023900011200091000110005636975256369752 0000933036 2019-01-01 2019-09-30 0000933036 2019-10-29 0000933036 2018-07-01 2018-09-30 0000933036 2018-01-01 2018-09-30 0000933036 2019-07-01 2019-09-30 0000933036 2018-12-31 0000933036 2019-09-30 0000933036 us-gaap:RetainedEarningsMember 2019-01-01 2019-09-30 0000933036 us-gaap:RetainedEarningsMember 2018-07-01 2018-09-30 0000933036 us-gaap:RetainedEarningsMember 2018-01-01 2018-09-30 0000933036 us-gaap:RetainedEarningsMember 2019-07-01 2019-09-30 0000933036 us-gaap:CommonStockMember 2018-12-31 0000933036 us-gaap:TreasuryStockMember 2019-09-30 0000933036 us-gaap:CommonStockMember 2019-01-01 2019-03-31 0000933036 us-gaap:CommonStockMember 2019-03-31 0000933036 us-gaap:CommonStockMember 2019-07-01 2019-09-30 0000933036 us-gaap:TreasuryStockMember 2019-01-01 2019-03-31 0000933036 us-gaap:CommonStockMember 2019-04-01 2019-06-30 0000933036 us-gaap:AdditionalPaidInCapitalMember 2019-09-30 0000933036 us-gaap:TreasuryStockMember 2019-07-01 2019-09-30 0000933036 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-07-01 2019-09-30 0000933036 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-03-31 0000933036 us-gaap:AdditionalPaidInCapitalMember 2019-07-01 2019-09-30 0000933036 2019-04-01 2019-06-30 0000933036 2019-01-01 2019-03-31 0000933036 2019-03-31 0000933036 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-03-31 0000933036 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-04-01 2019-06-30 0000933036 2019-06-30 0000933036 us-gaap:TreasuryStockMember 2018-12-31 0000933036 us-gaap:CommonStockMember 2019-06-30 0000933036 us-gaap:TreasuryStockMember 2019-04-01 2019-06-30 0000933036 us-gaap:RetainedEarningsMember 2019-01-01 2019-03-31 0000933036 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0000933036 us-gaap:AdditionalPaidInCapitalMember 2019-04-01 2019-06-30 0000933036 us-gaap:RetainedEarningsMember 2019-06-30 0000933036 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-03-31 0000933036 us-gaap:RetainedEarningsMember 2019-04-01 2019-06-30 0000933036 us-gaap:TreasuryStockMember 2019-03-31 0000933036 us-gaap:CommonStockMember 2019-09-30 0000933036 us-gaap:RetainedEarningsMember 2019-09-30 0000933036 us-gaap:RetainedEarningsMember 2019-03-31 0000933036 us-gaap:AdditionalPaidInCapitalMember 2019-03-31 0000933036 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 0000933036 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-09-30 0000933036 us-gaap:RetainedEarningsMember 2018-12-31 0000933036 us-gaap:AdditionalPaidInCapitalMember 2019-06-30 0000933036 us-gaap:TreasuryStockMember 2019-06-30 0000933036 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-06-30 0000933036 us-gaap:CommonStockMember 2018-01-01 2018-03-31 0000933036 us-gaap:RetainedEarningsMember 2018-01-01 2018-03-31 0000933036 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-07-01 2018-09-30 0000933036 2018-01-01 2018-03-31 0000933036 us-gaap:AdditionalPaidInCapitalMember 2018-04-01 2018-06-30 0000933036 us-gaap:TreasuryStockMember 2018-01-01 2018-03-31 0000933036 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-12-31 0000933036 us-gaap:CommonStockMember 2018-07-01 2018-09-30 0000933036 us-gaap:TreasuryStockMember 2018-09-30 0000933036 2018-04-01 2018-06-30 0000933036 us-gaap:CommonStockMember 2018-09-30 0000933036 us-gaap:TreasuryStockMember 2018-07-01 2018-09-30 0000933036 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-03-31 0000933036 us-gaap:CommonStockMember 2018-06-30 0000933036 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-06-30 0000933036 us-gaap:CommonStockMember 2018-03-31 0000933036 us-gaap:CommonStockMember 2018-04-01 2018-06-30 0000933036 us-gaap:AdditionalPaidInCapitalMember 2018-03-31 0000933036 us-gaap:RetainedEarningsMember 2017-12-31 0000933036 us-gaap:RetainedEarningsMember 2018-04-01 2018-06-30 0000933036 us-gaap:AdditionalPaidInCapitalMember 2018-01-01 2018-03-31 0000933036 us-gaap:AdditionalPaidInCapitalMember 2018-07-01 2018-09-30 0000933036 us-gaap:TreasuryStockMember 2018-04-01 2018-06-30 0000933036 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-09-30 0000933036 us-gaap:RetainedEarningsMember 2018-06-30 0000933036 us-gaap:TreasuryStockMember 2017-12-31 0000933036 us-gaap:AdditionalPaidInCapitalMember 2018-06-30 0000933036 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-04-01 2018-06-30 0000933036 us-gaap:CommonStockMember 2017-12-31 0000933036 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-01-01 2018-03-31 0000933036 2018-03-31 0000933036 2017-12-31 0000933036 us-gaap:TreasuryStockMember 2018-03-31 0000933036 us-gaap:TreasuryStockMember 2018-06-30 0000933036 us-gaap:AdditionalPaidInCapitalMember 2018-09-30 0000933036 2018-06-30 0000933036 us-gaap:RetainedEarningsMember 2018-03-31 0000933036 us-gaap:RetainedEarningsMember 2018-09-30 0000933036 us-gaap:AdditionalPaidInCapitalMember 2017-12-31 0000933036 2018-09-30 0000933036 rcii:MerchantsPreferredMember 2019-08-13 0000933036 2019-08-13 0000933036 rcii:MerchantsPreferredMember 2019-01-01 2019-09-30 0000933036 rcii:FranchisingMember 2018-07-01 2018-09-30 0000933036 rcii:AcceptanceNowMember 2018-07-01 2018-09-30 0000933036 rcii:MexicoMember 2018-07-01 2018-09-30 0000933036 rcii:CoreUsMember 2018-07-01 2018-09-30 0000933036 rcii:OtherproductplansMember 2018-12-31 0000933036 rcii:RentalpurchaseagreementsMember 2019-09-30 0000933036 rcii:RentalpurchaseagreementsMember 2018-12-31 0000933036 rcii:FranchisefeesMember 2018-12-31 0000933036 rcii:FranchisefeesMember 2019-09-30 0000933036 rcii:OtherproductplansMember 2019-09-30 0000933036 rcii:AcceptanceNowMember 2018-01-01 2018-09-30 0000933036 rcii:FranchisingMember 2018-01-01 2018-09-30 0000933036 rcii:MexicoMember 2018-01-01 2018-09-30 0000933036 rcii:CoreUsMember 2018-01-01 2018-09-30 0000933036 rcii:AcceptanceNowMember 2019-01-01 2019-09-30 0000933036 rcii:CoreUsMember 2019-01-01 2019-09-30 0000933036 rcii:FranchisingMember 2019-01-01 2019-09-30 0000933036 rcii:MexicoMember 2019-01-01 2019-09-30 0000933036 rcii:CoreUsMember 2019-07-01 2019-09-30 0000933036 rcii:AcceptanceNowMember 2019-07-01 2019-09-30 0000933036 rcii:FranchisingMember 2019-07-01 2019-09-30 0000933036 rcii:MexicoMember 2019-07-01 2019-09-30 0000933036 rcii:InstallmentSalesReceivableMember 2018-12-31 0000933036 rcii:TradeandNotesReceivablesMember 2018-12-31 0000933036 rcii:TradeandNotesReceivablesMember 2019-09-30 0000933036 rcii:InstallmentSalesReceivableMember 2019-09-30 0000933036 rcii:OtherstoreexpensesMember 2019-01-01 2019-09-30 0000933036 rcii:OtherstoreexpensesMember 2019-07-01 2019-09-30 0000933036 rcii:OtherchargesMember 2019-07-01 2019-09-30 0000933036 rcii:OtherchargesMember 2019-01-01 2019-09-30 0000933036 srt:MinimumMember us-gaap:RevolvingCreditFacilityMember 2019-01-01 2019-09-30 0000933036 srt:MaximumMember us-gaap:RevolvingCreditFacilityMember 2019-01-01 2019-09-30 0000933036 srt:MaximumMember us-gaap:RevolvingCreditFacilityMember 2019-09-30 0000933036 us-gaap:RevolvingCreditFacilityMember 2019-09-30 0000933036 2019-08-05 0000933036 us-gaap:SeniorLoansMember 2019-01-01 2019-09-30 0000933036 us-gaap:RevolvingCreditFacilityMember 2019-01-01 2019-09-30 0000933036 us-gaap:RevolvingCreditFacilityMember us-gaap:EurodollarMember 2019-09-30 0000933036 srt:MinimumMember us-gaap:RevolvingCreditFacilityMember us-gaap:EurodollarMember 2019-01-01 2019-09-30 0000933036 us-gaap:SeniorLoansMember us-gaap:EurodollarMember 2019-09-30 0000933036 us-gaap:SeniorLoansMember 2019-09-30 0000933036 srt:MaximumMember us-gaap:SeniorLoansMember 2019-09-30 0000933036 srt:MaximumMember us-gaap:RevolvingCreditFacilityMember us-gaap:EurodollarMember 2019-01-01 2019-09-30 0000933036 us-gaap:SeniorLoansMember us-gaap:EurodollarMember 2019-01-01 2019-09-30 0000933036 rcii:SeniorNotesDue2020Member 2010-11-02 0000933036 rcii:SeniorNotesDue2021Member 2013-05-02 0000933036 rcii:SeniorNotesDue2021Member 2019-01-01 2019-09-30 0000933036 us-gaap:OtherRestructuringMember rcii:CostSavingsInitiativeMember 2019-01-01 2019-09-30 0000933036 rcii:StoreConsolidationPlanMember rcii:CoreUsMember 2019-01-01 2019-09-30 0000933036 rcii:CapitalizedsoftwarewritedownMember 2018-01-01 2018-09-30 0000933036 us-gaap:EmployeeSeveranceMember rcii:StoreConsolidationPlanMember 2018-01-01 2018-09-30 0000933036 rcii:CostSavingsInitiativeMember 2018-01-01 2018-09-30 0000933036 us-gaap:EmployeeSeveranceMember rcii:CostSavingsInitiativeMember 2018-01-01 2018-09-30 0000933036 rcii:StoreConsolidationPlanMember rcii:MexicoMember 2018-01-01 2018-09-30 0000933036 us-gaap:EmployeeSeveranceMember rcii:CostSavingsInitiativeMember 2019-01-01 2019-09-30 0000933036 rcii:DisposaloffixedassetsMember rcii:CostSavingsInitiativeMember 2019-01-01 2019-09-30 0000933036 us-gaap:FacilityClosingMember rcii:CostSavingsInitiativeMember 2018-01-01 2018-09-30 0000933036 rcii:DisposaloffixedassetsMember rcii:StoreConsolidationPlanMember 2019-01-01 2019-09-30 0000933036 rcii:DisposaloffixedassetsMember rcii:CostSavingsInitiativeMember 2018-01-01 2018-09-30 0000933036 rcii:StoreConsolidationPlanMember rcii:CoreUsMember 2018-01-01 2018-09-30 0000933036 us-gaap:EmployeeSeveranceMember rcii:StoreConsolidationPlanMember 2019-01-01 2019-09-30 0000933036 us-gaap:ContractTerminationMember rcii:CostSavingsInitiativeMember 2018-01-01 2018-09-30 0000933036 us-gaap:OtherRestructuringMember rcii:StoreConsolidationPlanMember 2019-01-01 2019-09-30 0000933036 rcii:StoreConsolidationPlanMember 2018-01-01 2018-09-30 0000933036 us-gaap:FacilityClosingMember rcii:CostSavingsInitiativeMember 2019-01-01 2019-09-30 0000933036 rcii:DisposaloffixedassetsMember rcii:StoreConsolidationPlanMember 2018-01-01 2018-09-30 0000933036 us-gaap:OtherRestructuringMember rcii:CostSavingsInitiativeMember 2018-01-01 2018-09-30 0000933036 us-gaap:FacilityClosingMember rcii:StoreConsolidationPlanMember 2019-01-01 2019-09-30 0000933036 us-gaap:OtherRestructuringMember rcii:StoreConsolidationPlanMember 2018-01-01 2018-09-30 0000933036 us-gaap:FacilityClosingMember rcii:StoreConsolidationPlanMember 2018-01-01 2018-09-30 0000933036 us-gaap:OtherRestructuringMember 2019-09-30 0000933036 us-gaap:EmployeeSeveranceMember 2019-01-01 2019-09-30 0000933036 us-gaap:FacilityClosingMember 2018-12-31 0000933036 us-gaap:EmployeeSeveranceMember 2018-12-31 0000933036 us-gaap:FacilityClosingMember 2019-01-01 2019-09-30 0000933036 us-gaap:OtherRestructuringMember 2018-12-31 0000933036 us-gaap:EmployeeSeveranceMember 2019-09-30 0000933036 us-gaap:FacilityClosingMember 2019-09-30 0000933036 us-gaap:OtherRestructuringMember 2019-01-01 2019-09-30 0000933036 rcii:CoreUsMember 2019-09-30 0000933036 rcii:MexicoMember 2019-09-30 0000933036 us-gaap:CorporateNonSegmentMember 2018-12-31 0000933036 rcii:AcceptanceNowMember 2019-09-30 0000933036 us-gaap:OperatingSegmentsMember 2019-09-30 0000933036 rcii:MexicoMember 2018-12-31 0000933036 rcii:CoreUsMember 2018-12-31 0000933036 rcii:FranchisingMember 2018-12-31 0000933036 rcii:AcceptanceNowMember 2018-12-31 0000933036 us-gaap:CorporateNonSegmentMember 2019-09-30 0000933036 rcii:FranchisingMember 2019-09-30 0000933036 us-gaap:OperatingSegmentsMember 2018-12-31 0000933036 us-gaap:OperatingSegmentsMember 2018-07-01 2018-09-30 0000933036 us-gaap:CorporateNonSegmentMember 2018-07-01 2018-09-30 0000933036 us-gaap:CorporateNonSegmentMember 2019-07-01 2019-09-30 0000933036 us-gaap:OperatingSegmentsMember 2018-01-01 2018-09-30 0000933036 us-gaap:OperatingSegmentsMember 2019-01-01 2019-09-30 0000933036 us-gaap:CorporateNonSegmentMember 2018-01-01 2018-09-30 0000933036 us-gaap:CorporateNonSegmentMember 2019-01-01 2019-09-30 0000933036 us-gaap:OperatingSegmentsMember 2019-07-01 2019-09-30 0000933036 srt:MaximumMember 2019-01-01 2019-09-30 0000933036 srt:MinimumMember 2019-01-01 2019-09-30 0000933036 us-gaap:RestrictedStockUnitsRSUMember 2019-01-01 2019-09-30 0000933036 us-gaap:PerformanceSharesMember 2019-01-01 2019-09-30 0000933036 stpr:MA rcii:AcceptanceNowMember 2019-09-30 0000933036 us-gaap:EmployeeStockOptionMember 2018-07-01 2018-09-30 0000933036 us-gaap:PerformanceSharesMember 2018-07-01 2018-09-30 0000933036 us-gaap:EmployeeStockOptionMember 2019-01-01 2019-09-30 0000933036 us-gaap:EmployeeStockOptionMember 2019-07-01 2019-09-30 0000933036 us-gaap:PerformanceSharesMember 2019-07-01 2019-09-30 0000933036 us-gaap:PerformanceSharesMember 2019-01-01 2019-09-30 0000933036 us-gaap:EmployeeStockOptionMember 2018-01-01 2018-09-30 0000933036 us-gaap:PerformanceSharesMember 2018-01-01 2018-09-30 xbrli:shares iso4217:USD xbrli:shares iso4217:USD rcii:store xbrli:pure
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
or 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission File Number: 001-38047
Rent-A-Center, Inc.
(Exact name of registrant as specified in its charter)
Delaware
 
45-0491516
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
5501 Headquarters Drive
Plano, Texas 75024
(Address, including zip code of registrant’s principal executive offices)
Registrant’s telephone number, including area code: 972-801-1100
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol
 
Name of each exchange on which registered
Common Stock, $.01 Par Value
 
RCII
 
New York Stock Exchange
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes     No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    
Yes       No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
 
Accelerated filer
 
 
 
 
 
 
Non-accelerated filer
(Do not check if a smaller reporting company)
 
Smaller reporting company
Emerging Growth Company
 
 
 
 
 
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes      No  
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of October 29, 2019:
Class
 
Outstanding
Common stock, $.01 par value per share
 
54,754,436



TABLE OF CONTENTS
 
 
 
 
 
 
Page No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



i


Item 1. Condensed Consolidated Financial Statements.
RENT-A-CENTER, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
(In thousands, except per share data)
 
 
 
Revenues
 
 
 
 
 
 
 
Store
 
 
 
 
 
 
 
Rentals and fees
$
550,795

 
$
552,580

 
$
1,665,829

 
$
1,679,697

Merchandise sales
65,552

 
67,141

 
240,864

 
239,487

Installment sales
16,952

 
15,681

 
49,658

 
49,459

Other
1,054

 
2,140

 
2,962

 
6,995

Total store revenues
634,353

 
637,542

 
1,959,313

 
1,975,638

Franchise
 
 
 
 
 
 
 
Merchandise sales
11,178

 
4,135

 
30,307

 
12,649

Royalty income and fees
3,840

 
3,265

 
12,370

 
10,428

Total revenues
649,371


644,942

 
2,001,990

 
1,998,715

Cost of revenues
 
 
 
 
 
 
 
Store
 
 
 
 
 
 
 
Cost of rentals and fees
161,971

 
153,716

 
473,001

 
465,852

Cost of merchandise sold
70,575

 
74,340

 
250,000

 
236,255

Cost of installment sales
5,527

 
5,244

 
16,133

 
16,103

Total cost of store revenues
238,073

 
233,300

 
739,134

 
718,210

Franchise cost of merchandise sold
11,302

 
3,902

 
29,923

 
11,901

Total cost of revenues
249,375

 
237,202

 
769,057

 
730,111

Gross profit
399,996

 
407,740

 
1,232,933

 
1,268,604

Operating expenses
 
 
 
 
 
 
 
Store expenses
 
 
 
 
 
 
 
Labor
158,666

 
168,297

 
473,221

 
513,543

Other store expenses
150,366

 
149,326

 
463,385

 
492,129

General and administrative expenses
34,364

 
40,818

 
105,822

 
127,480

Depreciation and amortization
14,894

 
16,946

 
45,788

 
52,274

Other charges and (gains)
2,859

 
6,721

 
(41,308
)
 
40,665

Total operating expenses
361,149

 
382,108

 
1,046,908

 
1,226,091

Operating profit
38,847

 
25,632

 
186,025

 
42,513

Debt refinancing charges
2,168

 

 
2,168

 

Interest expense
6,733

 
10,496

 
26,214

 
32,662

Interest income
(85
)
 
(345
)
 
(2,956
)
 
(756
)
Earnings before income taxes
30,031

 
15,481

 
160,599

 
10,607

Income tax (benefit) expense
(1,246
)
 
2,563

 
27,544

 
3,779

Net earnings
$
31,277

 
$
12,918

 
$
133,055

 
$
6,828

Basic earnings per common share
$
0.57

 
$
0.24

 
$
2.46

 
$
0.13

Diluted earnings per common share
$
0.56

 
$
0.24

 
$
2.39

 
$
0.13

See accompanying notes to condensed consolidated financial statements.


1


RENT-A-CENTER, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
(In thousands)

 
 
Net earnings
$
31,277

 
$
12,918

 
$
133,055

 
$
6,828

Other comprehensive (loss) income:
 
 
 
 
 
 
 
Foreign currency translation adjustments, net of tax of $(91) and $239, and $(11) and $112, for the three and nine months ended 2019 and 2018, respectively
(344
)
 
900

 
(40
)
 
423

Total other comprehensive (loss) income
(344
)
 
900

 
(40
)
 
423

Comprehensive income
$
30,933

 
$
13,818

 
$
133,015

 
$
7,251

See accompanying notes to condensed consolidated financial statements.


2


RENT-A-CENTER, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED BALANCE SHEETS

 
 
September 30, 2019
 
December 31, 2018
(In thousands, except share and par value data)
Unaudited
 
 
ASSETS
 
 
 
Cash and cash equivalents
$
73,682

 
$
155,391

Receivables, net of allowance for doubtful accounts of $5,981 and $4,883 in 2019 and 2018, respectively
70,762

 
69,645

Prepaid expenses and other assets
39,120

 
51,352

Rental merchandise, net
 
 
 
On rent
633,740

 
683,808

Held for rent
109,931

 
123,662

Merchandise held for installment sale
3,631

 
3,834

Property assets, net of accumulated depreciation of $564,062 and $551,750 in 2019 and 2018, respectively
193,925

 
226,323

Operating lease right-of-use assets
268,101

 

Deferred tax asset
25,568

 
25,558

Goodwill
71,749

 
56,845

Other intangible assets, net
7,723

 
499

Total assets
$
1,497,932

 
$
1,396,917

LIABILITIES
 
 
 
Accounts payable – trade
$
105,042

 
$
113,838

Accrued liabilities
301,797

 
337,459

Operating lease liabilities
272,515

 

Deferred tax liability
135,837

 
119,061

Senior debt, net
251,001

 

Senior notes, net

 
540,042

Total liabilities
1,066,192

 
1,110,400

STOCKHOLDERS’ EQUITY
 
 
 
Common stock, $.01 par value; 250,000,000 shares authorized; 111,105,930 and 109,909,504 shares issued in 2019 and 2018, respectively
1,110

 
1,099

Additional paid-in capital
866,316

 
838,436

Retained earnings
923,296

 
805,924

Treasury stock at cost, 56,369,752 shares in 2019 and 2018
(1,347,677
)
 
(1,347,677
)
Accumulated other comprehensive loss
(11,305
)
 
(11,265
)
Total stockholders' equity
431,740

 
286,517

Total liabilities and stockholders' equity
$
1,497,932

 
$
1,396,917

See accompanying notes to condensed consolidated financial statements.


3


RENT-A-CENTER, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
 
Common Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Treasury
Stock
 
Accumulated Other Comprehensive Income (Loss)
 
Total
 
Shares
 
Amount
 
 (In thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2018
109,910

 
$
1,099

 
$
838,436

 
$
805,924

 
$
(1,347,677
)
 
$
(11,265
)
 
$
286,517

Net earnings

 

 

 
7,323

 

 

 
7,323

Other comprehensive income

 

 

 

 

 
521

 
521

Exercise of stock options
284

 
3

 
2,889

 

 

 

 
2,892

Vesting of restricted share units
218

 
2

 
(2
)
 

 

 

 

Shares withheld for employee taxes on awards vested & exercised

 

 
(1,734
)
 

 

 

 
(1,734
)
Stock-based compensation

 

 
709

 

 

 

 
709

ASC 842 adoption

 

 

 
(1,976
)
 

 

 
(1,976
)
Balance at March 31, 2019
110,412

 
1,104

 
840,298

 
811,271

 
(1,347,677
)
 
(10,744
)
 
294,252

Net earnings

 

 

 
94,455

 

 

 
94,455

Other comprehensive loss

 

 

 

 

 
(217
)
 
(217
)
Exercise of stock options
101

 
1

 
1,417

 

 

 

 
1,418

Vesting of restricted share units
49

 

 

 

 

 

 

Stock-based compensation

 

 
1,982

 

 

 

 
1,982

Balance at June 30, 2019
110,562

 
1,105

 
843,697

 
905,726

 
(1,347,677
)
 
(10,961
)
 
391,890

Net earnings

 

 

 
31,277

 

 

 
31,277

Other comprehensive loss

 

 

 

 

 
(344
)
 
(344
)
Exercise of stock options
105

 
1

 
1,502

 

 

 

 
1,503

Stock-based compensation

 

 
1,952

 

 

 

 
1,952

Dividends declared

 

 

 
(13,707
)
 

 

 
(13,707
)
Merchants Preferred acquisition
439

 
4

 
19,165

 

 

 

 
19,169

Balance at September 30, 2019
111,106

 
$
1,110

 
$
866,316

 
$
923,296

 
$
(1,347,677
)
 
$
(11,305
)
 
$
431,740

See accompanying notes to consolidated financial statements.


4


RENT-A-CENTER, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - (Continued)
(Unaudited)
 
Common Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Treasury
Stock
 
Accumulated Other Comprehensive Income (Loss)
 
Total
 
Shares
 
Amount
 
 (In thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2017
109,682

 
$
1,097

 
$
831,271

 
$
798,743

 
$
(1,347,677
)
 
$
(10,991
)
 
$
272,443

Net loss

 

 

 
(19,843
)
 

 

 
(19,843
)
Other comprehensive income

 

 

 

 

 
1,648

 
1,648

Exercise of stock options
36

 

 
374

 

 

 

 
374

Vesting of restricted share units
66

 

 
(1
)
 

 

 

 
(1
)
Shares withheld for employee taxes on awards vested & exercised

 

 
(195
)
 

 

 

 
(195
)
Stock-based compensation

 

 
1,862

 

 

 

 
1,862

ASC 606 adoption

 

 

 
(1,311
)
 

 

 
(1,311
)
Balance at March 31, 2018
109,784

 
1,097

 
833,311

 
777,589

 
(1,347,677
)
 
(9,343
)
 
254,977

Net earnings

 

 

 
13,753

 

 

 
13,753

Other comprehensive loss

 

 

 

 

 
(2,125
)
 
(2,125
)
Exercise of stock options
61

 
1

 
596

 

 

 

 
597

Vesting of restricted share units
25

 

 

 

 

 

 

Stock-based compensation

 

 
1,133

 

 

 

 
1,133

Balance at June 30, 2018
109,870

 
1,098

 
835,040

 
791,342

 
(1,347,677
)
 
(11,468
)
 
268,335

Net earnings

 

 

 
12,918

 

 

 
12,918

Other comprehensive income

 

 

 

 

 
900

 
900

Exercise of stock options
9

 

 
94

 

 

 

 
94

Vesting of restricted share units

 
1

 

 

 

 

 
1

Stock-based compensation

 

 
1,498

 

 

 

 
1,498

Balance at September 30, 2018
109,879

 
$
1,099

 
$
836,632

 
$
804,260

 
$
(1,347,677
)
 
$
(10,568
)
 
$
283,746

See accompanying notes to consolidated financial statements.



5


RENT-A-CENTER, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
Nine Months Ended September 30,
 
2019
 
2018
(In thousands)

Cash flows from operating activities
 
 
 
Net earnings
$
133,055

 
$
6,828

Adjustments to reconcile net earnings to net cash provided by operating activities
 
 
 
Depreciation of rental merchandise
455,143

 
461,484

Bad debt expense
11,591

 
10,372

Stock-based compensation expense
4,644

 
4,493

Depreciation of property assets
45,551

 
51,778

Loss on sale or disposal of property assets
278

 
2,529

Amortization of intangibles
237

 
496

Amortization of financing fees
2,574

 
4,074

Write-off of debt financing fees
2,168

 

Deferred income taxes
16,629

 
4,379

Changes in operating assets and liabilities, net of effects of acquisitions
 
 
 
Rental merchandise
(387,098
)
 
(375,013
)
Receivables
(11,891
)
 
(5,746
)
Prepaid expenses and other assets
10,080

 
(2,663
)
Operating lease right-of-use assets and lease liabilities
5,305

 

Accounts payable – trade
(8,796
)
 
7,711

Accrued liabilities
(51,341
)
 
13,133

Net cash provided by operating activities
228,129

 
183,855

Cash flows from investing activities
 
 
 
Purchase of property assets
(12,010
)
 
(22,491
)
Proceeds from sale of property assets
16,922

 
16,474

Hurricane insurance recovery proceeds
995

 

Acquisitions of businesses
(28,722
)
 
(2,049
)
Net cash used in investing activities
(22,815
)
 
(8,066
)
Cash flows from financing activities
 
 
 
Exercise of stock options
5,813

 
1,064

Shares withheld for payment of employee tax withholdings
(1,733
)
 
(283
)
Debt issuance costs
(8,454
)
 

Proceeds from debt
285,400

 
27,060

Repayments of debt
(568,140
)
 
(166,357
)
Net cash used in financing activities
(287,114
)
 
(138,516
)
Effect of exchange rate changes on cash
91

 
767

Net (decrease) increase in cash and cash equivalents
(81,709
)
 
38,040

Cash and cash equivalents at beginning of period
155,391

 
72,968

Cash and cash equivalents at end of period
$
73,682

 
$
111,008

See accompanying notes to condensed consolidated financial statements.


6

RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Note 1 - Basis of Presentation
The interim condensed consolidated financial statements of Rent-A-Center, Inc. included herein have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to the SEC’s rules and regulations, although we believe the disclosures are adequate to make the information presented not misleading. We suggest these financial statements be read in conjunction with the financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2018. In our opinion, the accompanying unaudited interim financial statements contain all adjustments, consisting only of those of a normal recurring nature, necessary to present fairly our results of operations and cash flows for the periods presented. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.
These financial statements include the accounts of Rent-A-Center, Inc. and its direct and indirect subsidiaries. All intercompany accounts and transactions have been eliminated. Unless the context indicates otherwise, references to “Rent-A-Center” refer only to Rent-A-Center, Inc., the parent, and references to “we,” “us” and “our” refer to the consolidated business operations of Rent-A-Center and any or all of its direct and indirect subsidiaries. We report four operating segments: Core U.S., Acceptance Now, Mexico and Franchising.
Our Core U.S. segment consists of company-owned rent-to-own stores in the United States and Puerto Rico that lease household durable goods to customers on a rent-to-own basis. We also offer merchandise on an installment sales basis in certain of our stores under the names “Get It Now” and “Home Choice.”
Our Acceptance Now segment, which operates in the United States and Puerto Rico, and includes the recently acquired Merchants Preferred virtual business model, generally offers the rent-to-own transaction to consumers who do not qualify for financing from the traditional retailer through kiosks located within such retailers’ locations. Those kiosks can be staffed by an Acceptance Now employee (staffed locations) or employ a virtual solution where customers, either directly or with the assistance of a representative of the third-party retailer, initiate the rent-to-own transaction online in the retailers' locations using our virtual solutions (virtual locations).
Our Mexico segment consists of our company-owned rent-to-own stores in Mexico that lease household durable goods to customers on a rent-to-own basis.
Rent-A-Center Franchising International, Inc., an indirect, wholly owned subsidiary of Rent-A-Center, is a franchisor of rent-to-own stores. Our Franchising segment’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 transaction. The balance of our Franchising segment’s revenue is generated primarily from royalties based on franchisees’ monthly gross revenues.
Newly Adopted Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which replaces existing accounting literature relating to the classification of, and accounting for, leases. Under ASU 2016-02, a company must recognize for all leases (with the exception of leases with terms of 12 months or less) a liability representing a lessee's obligation to make lease payments arising from a lease, and a right-of-use asset representing the lessee's right to use, or control the use of, a specified asset for the lease term. Lessor accounting is largely unchanged, with certain improvements to align lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. Adoption of ASU 2016-02 requires the use of a modified retrospective transition method to measure leases at the beginning of the earliest period presented in the consolidated financial statements. In July 2018, the FASB issued ASU 2018-11, allowing companies to apply a transition method for adoption of the new standard as of the adoption date, with recognition of any cumulative-effects as adjustments to the opening balance of retained earnings in the period of adoption. We adopted these ASUs beginning January 1, 2019 and elected the transition method under ASU 2018-11.
Our rent-to-own agreements, which comprise the majority of our annual revenue, fall within the scope of ASU 2016-02 under lessor accounting; however, the new standard does not significantly affect the timing of recognition or presentation of revenue for our rental contracts.
As a lessee, the new standard affected a substantial portion of our lease contracts. As of September 30, 2019, we have $268.1 million operating lease right-of-use assets and $272.5 million operating lease liabilities in our condensed consolidated balance sheet. Upon adoption, we identified impairment losses related to closure of our product service centers and Core U.S. stores resulting in a cumulative-effect decrease of $2.0 million, net of tax, to our January 1, 2019 retained earnings balance. There were no significant effects to our condensed consolidated statements of operations or condensed consolidated statements of cash flows.


7

RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

We elected a package of optional practical expedients in our adoption of the new standard, including the option to retain the current classification for leases entered into prior to the date of adoption; the option not to reassess initial direct costs for capitalization for leases entered into prior to the date of adoption; and the option not to separate lease and non-lease components for our rent-to-own agreements as a lessor, and our real estate, and certain categories of equipment leases, as a lessee.
In conjunction with the adoption of the new lease accounting standard, we implemented a new back-office lease administration and accounting system to support the new accounting and disclosure requirements as a lessee. In addition, we implemented changes to our previous accounting policies, processes, and internal controls to ensure compliance with the new standard.
In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows a company to reclassify to retained earnings the disproportionate income tax effects of the Tax Act on items with accumulated other comprehensive income that the FASB refers to as having been stranded in accumulated other comprehensive income. The adoption of ASU 2018-02 was required for us beginning January 1, 2019. We elected not to exercise the option to reclassify stranded tax effects within accumulated other comprehensive income in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Act (or portion thereof) is recorded.
Note 2 - Acquisitions
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 rent-to-own services. The aggregate purchase price was approximately $46.6 million, including net cash consideration of approximately $28.0 million, and 701,918 shares of our common stock valued at $27.31 per share, as of the date of closing, less working capital adjustments of approximately $0.5 million.
Assets acquired and liabilities assumed in connection with the acquisition have been recorded at their fair values. The following table provides the preliminary estimated fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date:
(in thousands)
August 13, 2019
Receivables
$
1,813

Prepaid expenses and other assets
138

Rental merchandise
17,903

Software
4,300

Right of use operating leases
404

Other intangible assets
7,600

Goodwill
14,934

Lease liabilities
(487
)
Net identifiable assets acquired
$
46,605


The fair value measurements were primarily based on significant unobservable inputs (level 3) developed using company-specific information. Certain fair value estimates were determined based on an independent valuation of the net assets acquired, including identifiable intangible assets, relating to dealer relationships, of $7.6 million, and software of $4.3 million. The fair value for dealer relationships and software were estimated using common industry valuation methods for similar asset types, based primarily on cost inputs and projected cash flows. The dealer relationships and software assets were both assigned remaining lives of 10 years.
In addition, we recorded goodwill of $14.9 million, which consists of the excess of the net purchase price over the fair value of the net assets acquired. The goodwill is not deductible for tax purposes.
The values reflected in the table above may change as we finalize our assessment of the acquired assets and liabilities. A change in these valuations may also impact the income tax related accounts and goodwill. Merchants Preferred results of operations are reflected in our unaudited Condensed Consolidated Statements of Operations from the date of acquisition.
In connection with this acquisition, we recorded approximately $1.1 million in acquisition-related expenses during the nine months ended September 30, 2019 including expenses related to legal, professional, and banking transaction fees. These costs were included in other charges and (gains) in our unaudited condensed consolidated statement of operations.


8

RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

Note 3 - Revenues
The following table disaggregates our revenue for the periods ended September 30, 2019 and 2018:
 
Three Months Ended September 30, 2019
 
Core U.S.
 
Acceptance Now
 
Mexico
 
Franchising
 
Consolidated
(In thousands)
 
Store
 
 
 
 
 
 
 
 
 
Rentals and fees
$
389,421

 
$
148,711

 
$
12,663

 
$

 
$
550,795

Merchandise sales
29,185

 
35,667

 
700

 

 
65,552

Installment sales
16,952

 

 

 

 
16,952

Other
939

 
108

 
7

 

 
1,054

Total store revenues
436,497

 
184,486

 
13,370

 

 
634,353

Franchise
 
 
 
 
 
 
 
 
 
Merchandise sales

 

 

 
11,178

 
11,178

Royalty income and fees

 

 

 
3,840

 
3,840

Total revenues
$
436,497

 
$
184,486

 
$
13,370

 
$
15,018

 
$
649,371

 
Nine Months Ended September 30, 2019
 
Core U.S.
 
Acceptance Now
 
Mexico
 
Franchising
 
Consolidated
(In thousands)
 
Store
 
 
 
 
 
 
 
 
 
Rentals and fees
$
1,196,800

 
$
431,008

 
$
38,021

 
$

 
$
1,665,829

Merchandise sales
112,678

 
125,963

 
2,223

 

 
240,864

Installment sales
49,658

 

 

 

 
49,658

Other
2,514

 
426

 
22

 

 
2,962

Total store revenues
1,361,650

 
557,397

 
40,266

 

 
1,959,313

Franchise
 
 
 
 
 
 
 
 
 
Merchandise sales

 

 

 
30,307

 
30,307

Royalty income and fees

 

 

 
12,370

 
12,370

Total revenues
$
1,361,650

 
$
557,397

 
$
40,266

 
$
42,677

 
$
2,001,990

 
Three Months Ended September 30, 2018
 
Core U.S.
 
Acceptance Now
 
Mexico
 
Franchising
 
Consolidated
(In thousands)
 
Store
 
 
 
 
 
 
 
 
 
Rentals and fees
$
403,483

 
$
137,061

 
$
12,036

 
$

 
$
552,580

Merchandise sales
30,135

 
36,264

 
742

 

 
67,141

Installment sales
15,681

 

 

 

 
15,681

Other
2,021

 
113

 
6

 

 
2,140

Total store revenues
451,320

 
173,438

 
12,784

 

 
637,542

Franchise
 
 
 
 
 
 
 
 
 
Merchandise sales

 

 

 
4,135

 
4,135

Royalty income and fees

 

 

 
3,265

 
3,265

Total revenues
$
451,320

 
$
173,438

 
$
12,784

 
$
7,400

 
$
644,942



9

RENT-A-CENTER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

 
Nine Months Ended September 30, 2018
 
Core U.S.
 
Acceptance Now
 
Mexico
 
Franchising
 
Consolidated
(In thousands)
 
Store
 
 
 
 
 
 
 
 
 
Rentals and fees
$
1,226,233

 
$
418,684

 
$
34,780

 
$

 
$
1,679,697

Merchandise sales
106,828

 
130,347

 
2,312

 

 
239,487

Installment sales
49,459

 

 

 

 
49,459

Other
6,561

 
404

 
30

 

 
6,995

Total store revenues
1,389,081

 
549,435

 
37,122

 

 
1,975,638

Franchise