_________________________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
For the quarterly period ended September 30, 2011
of
COMPUCREDIT HOLDINGS CORPORATION
a Georgia Corporation
IRS Employer Identification No. 58-2336689
SEC File Number 0-53717
Five Concourse Parkway, Suite 400
Atlanta, Georgia 30328
(770) 828-2000
CompuCredit’s common stock, no par value per share, is registered pursuant to Section 12(b) of the Securities Exchange Act of 1934 (the “Act”).
CompuCredit (1) is required to file reports pursuant to Section 13 or Section 15(d) of the Act, (2) has filed all reports required to be filed by Section 13 or 15(d) of the Act during the preceding 12 months and (3) has been subject to such filing requirements for the past ninety days.
CompuCredit has submitted electronically and posted on its corporate Web site, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
CompuCredit is a smaller reporting company and is not a shell company.
As of October 31, 2011, 22,395,946 shares of common stock, no par value, of the registrant were outstanding. (This excludes 1,672,656 loaned shares to be returned as of that date.)
FORM 10-Q
TABLE OF CONTENTS
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Page
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PART I. FINANCIAL INFORMATION
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Item 1.
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| 1 | |||||
| 2 | |||||
| 3 | |||||
| 4 | |||||
| 5 | |||||
| 6 | |||||
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Item 2.
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26 | ||||
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Item 3.
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42 | ||||
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Item 4.
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42 | ||||
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Item 1.
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43 | ||||
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Item 1A.
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43 | ||||
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Item 2.
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51 | ||||
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Item 5.
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52 | ||||
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Item 6.
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52 | ||||
| 53 | |||||
Consolidated Balance Sheets
(Dollars in thousands)
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September 30, 2011
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December 31, 2010
|
|||||||
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Assets
|
(unaudited)
|
|||||||
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Unrestricted cash and cash equivalents
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$ | 105,996 | $ | 68,931 | ||||
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Restricted cash and cash equivalents
|
25,161 | 36,023 | ||||||
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Loans and fees receivable:
|
||||||||
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Loans and fees receivable, net (of $7,965 and $4,591 in deferred revenue and $5,896 and $9,282 in allowances for uncollectible loans and fees receivable at September 30, 2011 and December 31, 2010, respectively)
|
61,989 | 50,805 | ||||||
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Loans and fees receivable pledged as collateral under structured financings, net (of $1,847 and $15,912 in deferred revenue and $10,304 and $28,340 in allowances for uncollectible loans and fees receivable at September 30, 2011 and December 31, 2010, respectively)
|
38,719 | 118,801 | ||||||
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Loans and fees receivable, at fair value
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35,000 | 12,437 | ||||||
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Loans and fees receivable pledged as collateral under structured financings, at fair value
|
275,815 | 373,155 | ||||||
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Investments in previously charged-off receivables
|
39,818 | 29,889 | ||||||
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Investments in securities
|
6,132 | 64,317 | ||||||
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Deferred costs, net
|
2,551 | 3,151 | ||||||
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Property at cost, net of depreciation
|
7,561 | 15,893 | ||||||
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Investments in equity-method investees
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53,189 | 8,279 | ||||||
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Intangibles, net
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66 | 2,378 | ||||||
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Prepaid expenses and other assets
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10,218 | 16,591 | ||||||
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Assets held for sale
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48,623 | 80,259 | ||||||
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Total assets
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$ | 710,838 | $ | 880,909 | ||||
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Liabilities
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||||||||
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Accounts payable and accrued expenses
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$ | 58,246 | $ | 50,861 | ||||
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Notes payable associated with structured financings, at face value
|
30,959 | 96,905 | ||||||
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Notes payable associated with structured financings, at fair value
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277,793 | 370,544 | ||||||
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Convertible senior notes (Note 9)
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197,497 | 229,844 | ||||||
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Deferred revenue
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1,073 | 1,413 | ||||||
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Income tax liability
|
62,955 | 60,411 | ||||||
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Liabilities related to assets held for sale
|
2,808 | 9,114 | ||||||
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Total liabilities
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631,331 | 819,092 | ||||||
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Commitments and contingencies (Note 10)
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||||||||
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Equity
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||||||||
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Common stock, no par value, 150,000,000 shares authorized: 31,997,581 shares issued and 24,068,602 shares outstanding at September 30, 2011 (including 1,672,656 loaned shares to be returned); and 46,217,050 shares issued and 37,997,708 shares outstanding at December 31, 2010 (including 2,252,388 loaned shares to be returned)
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— | — | ||||||
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Additional paid-in capital
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297,636 | 408,751 | ||||||
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Treasury stock, at cost, 7,928,979 and 8,219,342 shares at September 30, 2011 and December 31, 2010, respectively
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(185,941 | ) | (208,696 | ) | ||||
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Accumulated other comprehensive loss
|
(1,183 | ) | (5,608 | ) | ||||
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Retained deficit
|
(31,354 | ) | (151,609 | ) | ||||
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Total shareholders’ equity (Note 2)
|
79,158 | 42,838 | ||||||
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Noncontrolling interests (Note 2)
|
349 | 18,979 | ||||||
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Total equity
|
79,507 | 61,817 | ||||||
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Total liabilities and equity (Note 2)
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$ | 710,838 | $ | 880,909 | ||||
See accompanying notes.
Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share data)
|
For the Three Months Ended
September 30,
|
For the Nine Months Ended
September 30,
|
|||||||||||||||
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2011
|
2010
|
2011
|
2010
|
|||||||||||||
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Interest income:
|
||||||||||||||||
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Consumer loans, including past due fees
|
$ | 35,802 | $ | 60,609 | $ | 117,281 | $ | 213,976 | ||||||||
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Other
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241 | 416 | 1,015 | 775 | ||||||||||||
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Total interest income
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36,043 | 61,025 | 118,296 | 214,751 | ||||||||||||
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Interest expense
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(10,148 | ) | (11,600 | ) | (33,454 | ) | (45,435 | ) | ||||||||
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Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable
|
25,895 | 49,425 | 84,842 | 169,316 | ||||||||||||
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Fees and related income on earning assets
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25,892 | 68,924 | 117,646 | 275,588 | ||||||||||||
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Losses upon charge off of loans and fees receivable recorded at fair value
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(28,019 | ) | (86,971 | ) | (117,209 | ) | (391,615 | ) | ||||||||
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Provision for losses on loans and fees receivable recorded at net realizable value
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(1,234 | ) | (8,330 | ) | (1,992 | ) | (27,294 | ) | ||||||||
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Net interest income, fees and related income on earning assets
|
22,534 | 23,048 | 83,287 | 25,995 | ||||||||||||
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Other operating income (loss):
|
||||||||||||||||
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Servicing income
|
767 | 1,621 | 2,593 | 5,447 | ||||||||||||
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Ancillary and interchange revenues
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2,359 | 2,728 | 7,324 | 8,722 | ||||||||||||
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Gain on repurchase of convertible senior notes
|
138 | 5,681 | 607 | 28,374 | ||||||||||||
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Gain on buy-out of equity-method investee members
|
— | — | 619 | — | ||||||||||||
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Equity in income (loss) of equity-method investees
|
6,630 | (1,372 | ) | 28,757 | (11,043 | ) | ||||||||||
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Total other operating income
|
9,894 | 8,658 | 39,900 | 31,500 | ||||||||||||
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Other operating expense:
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||||||||||||||||
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Salaries and benefits
|
4,785 | 7,454 | 17,615 | 26,439 | ||||||||||||
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Card and loan servicing
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18,107 | 21,010 | 56,314 | 77,958 | ||||||||||||
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Marketing and solicitation
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1,181 | 593 | 2,386 | 1,292 | ||||||||||||
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Depreciation
|
539 | 2,685 | 4,322 | 8,580 | ||||||||||||
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Other
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7,785 | 8,727 | 21,921 | 34,854 | ||||||||||||
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Total other operating expense
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32,397 | 40,469 | 102,558 | 149,123 | ||||||||||||
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Income from (loss on) continuing operations before income taxes
|
31 | (8,763 | ) | 20,629 | (91,628 | ) | ||||||||||
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Income tax (expense) benefit
|
(619 | ) | 1,648 | (1,743 | ) | 2,896 | ||||||||||
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(Loss on) income from continuing operations
|
(588 | ) | (7,115 | ) | 18,886 | (88,732 | ) | |||||||||
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Discontinued operations:
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||||||||||||||||
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Income from discontinued operations before income taxes
|
2,052 | 10,688 | 117,189 | 23,914 | ||||||||||||
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Income tax expense
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(42 | ) | (2,248 | ) | (4,142 | ) | (4,596 | ) | ||||||||
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Income from discontinued operations
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2,010 | 8,440 | 113,047 | 19,318 | ||||||||||||
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Net income (loss)
|
1,422 | 1,325 | 131,933 | (69,414 | ) | |||||||||||
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Net (income) loss attributable to noncontrolling interests (including $0 and $1,131 of income associated with noncontrolling interests in discontinued operations for the three and nine months ended September 30, 2011, versus to $1,050 and $2,269 of such income in the same 2010 periods)
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277 | 436 | (1,013 | ) | (565 | ) | ||||||||||
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Net income (loss) attributable to controlling interests
|
$ | 1,699 | $ | 1,761 | $ | 130,920 | $ | (69,979 | ) | |||||||
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(Loss on) income from continuing operations attributable to controlling interests per common share—basic
|
$ | (0.01 | ) | $ | (0.16 | ) | $ | 0.70 | $ | (2.11 | ) | |||||
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(Loss on) income from continuing operations attributable to controlling interests per common share—diluted
|
$ | (0.01 | ) | $ | (0.16 | ) | $ | 0.70 | $ | (2.11 | ) | |||||
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Income from discontinued operations attributable to controlling interests per common share—basic
|
$ | 0.09 | $ | 0.21 | $ | 4.15 | $ | 0.41 | ||||||||
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Income from discontinued operations attributable to controlling interests per common share—diluted
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$ | 0.09 | $ | 0.21 | $ | 4.13 | $ | 0.41 | ||||||||
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Net income (loss) attributable to controlling interests per common share—basic
|
$ | 0.08 | $ | 0.05 | $ | 4.85 | $ | (1.70 | ) | |||||||
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Net income (loss) attributable to controlling interests per common share—diluted
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$ | 0.08 | $ | 0.05 | $ | 4.83 | $ | (1.70 | ) | |||||||
See accompanying notes.
Consolidated Statement of Shareholders’ Equity
For the Nine Months Ended September 30, 2011 (Unaudited)
(Dollars in thousands)
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Common Stock
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||||||||||||||||||||||||||||||||||||
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Shares Issued
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Amount
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Additional Paid-In Capital
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Treasury Stock
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Accumulated Other Comprehensive Loss
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Retained Deficit
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Noncontrolling Interests
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Comprehensive Income
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Total Equity
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||||||||||||||||||||||||||||
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Balance at December 31, 2010
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46,217,050 | $ | — | $ | 408,751 | $ | (208,696 | ) | $ | (5,608 | ) | $ | (151,609 | ) | $ | 18,979 | $ | 61,817 | ||||||||||||||||||
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Use of treasury stock for stock-based compensation plans
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(550,414 | ) | — | (13,804 | ) | 24,469 | — | (10,665 | ) | — | — | |||||||||||||||||||||||||
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Issuance of restricted stock
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35,677 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
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Amortization of deferred stock-based compensation costs
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— | — | 2,337 | — | — | — | — | 2,337 | ||||||||||||||||||||||||||||
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Purchase of treasury stock
|
— | — | — | (1,714 | ) | — | — | — | (1,714 | ) | ||||||||||||||||||||||||||
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Repurchase of noncontrolling interests
|
— | — | 5,385 | — | — | — | (20,243 | ) | (14,858 | ) | ||||||||||||||||||||||||||
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Contributions by owners of noncontrolling interests
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— | — | — | — | — | — | 600 | 600 | ||||||||||||||||||||||||||||
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Redemption and retirement of shares
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(13,704,732 | ) | — | (105,000 | ) | — | — | — | — | (105,000 | ) | |||||||||||||||||||||||||
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Net income
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— | — | — | — | — | 130,920 | 1,013 | $ | 131,933 | 131,933 | ||||||||||||||||||||||||||
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Foreign currency translation adjustment, net of tax
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— | — | (33 | ) | — | 4,425 | — | — | 4,425 | 4,392 | ||||||||||||||||||||||||||
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Comprehensive income
|
— | — | — | — | — | — | — | $ | 136,358 | — | ||||||||||||||||||||||||||
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Balance at September 30, 2011
|
31,997,581 | $ | — | $ | 297,636 | $ | (185,941 | ) | $ | (1,183 | ) | $ | (31,354 | ) | $ | 349 | $ | 79,507 | ||||||||||||||||||
See accompanying notes.
Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
(Dollars in thousands)
|
For the Three Months Ended
September 30,
|
For the Nine Months Ended
September 30,
|
|||||||||||||||
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||
|
Net income (loss)
|
$ | 1,422 | $ | 1,325 | $ | 131,933 | $ | (69,414 | ) | |||||||
|
Other comprehensive income (loss):
|
||||||||||||||||
|
Foreign currency translation adjustment
|
(314 | ) | 3,069 | 2,079 | (108 | ) | ||||||||||
|
Amount of translation adjustment reclassified to earnings during the period
|
— | — | 2,301 | (500 | ) | |||||||||||
|
Income tax benefit related to other comprehensive income
|
91 | — | 45 | 1 | ||||||||||||
|
Comprehensive income (loss)
|
1,199 | 4,394 | 136,358 | (70,021 | ) | |||||||||||
|
Comprehensive loss (income) attributable to noncontrolling interests
|
277 | 436 | (1,013 | ) | (565 | ) | ||||||||||
|
Comprehensive income (loss) attributable to controlling interests
|
$ | 1,476 | $ | 4,830 | $ | 135,345 | $ | (70,586 | ) | |||||||
See accompanying notes.
Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
|
For the Nine Months Ended September 30,
|
||||||||
|
2011
|
2010
|
|||||||
|
Operating activities
|
||||||||
|
Net income (loss)
|
$ | 131,933 | $ | (69,414 | ) | |||
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
||||||||
|
Depreciation, amortization and accretion, net
|
5,698 | 10,462 | ||||||
|
Losses upon charge off of loans and fees receivable recorded at fair value
|
117,209 | 391,615 | ||||||
|
Provision for losses on loans and fees receivable
|
17,550 | 53,505 | ||||||
|
Accretion of discount on convertible senior notes
|
5,112 | 7,022 | ||||||
|
Stock-based compensation expense
|
2,337 | 7,055 | ||||||
|
Unrealized gain on loans and fees receivable and underlying notes payable held at fair value
|
(83,657 | ) | (217,882 | ) | ||||
|
Unrealized loss (gain) on trading securities
|
358 | (301 | ) | |||||
|
Other-than-temporary declines in investments in non-marketable debt securities
|
5,330 | — | ||||||
|
Gain on repurchase of convertible senior notes
|
(607 | ) | (28,374 | ) | ||||
|
(Income) loss on equity-method investments
|
(28,757 | ) | 11,043 | |||||
|
Gain on buy-out of equity-method investee members
|
(619 | ) | — | |||||
|
Net gain on sale of subsidiary
|
(101,359 | ) | — | |||||
|
Changes in assets and liabilities, exclusive of business acquisitions and dispositions:
|
||||||||
|
Increase in uncollected fees on non-securitized earning assets
|
(9,862 | ) | (5,594 | ) | ||||
|
Decrease in JRAS auto loans receivable
|
10,702 | 31,168 | ||||||
|
Increase in tax liability
|
39 | 95,222 | ||||||
|
Decrease in prepaid expenses
|
8,058 | 6,463 | ||||||
|
Increase (decrease) in accounts payable and accrued expenses
|
14,017 | (6,649 | ) | |||||
|
Other
|
(278 | ) | 8,975 | |||||
|
Net cash provided by operating activities
|
93,204 | 294,316 | ||||||
|
Investing activities
|
||||||||
|
Decrease (increase) in restricted cash
|
12,349 | (19,954 | ) | |||||
|
Investment in equity-method investees
|
(34,336 | ) | — | |||||
|
Proceeds from equity-method investees
|
17,553 | 5,145 | ||||||
|
Investments in earning assets
|
(562,253 | ) | (786,663 | ) | ||||
|
Proceeds from earning assets
|
763,819 | 926,704 | ||||||
|
Net cash associated with newly acquired consolidated subsidiaries
|
1,025 | — | ||||||
|
Proceeds from sale of subsidiary
|
147,449 | — | ||||||
|
Purchases and development of property, net of disposals
|
(1,390 | ) | (1,667 | ) | ||||
|
Net cash provided by investing activities
|
344,216 | 123,565 | ||||||
|
Financing activities
|
||||||||
|
Noncontrolling interests contributions (distributions), net
|
600 | (765 | ) | |||||
|
Purchase of outstanding stock subject to tender offers
|
(105,000 | ) | (85,264 | ) | ||||
|
Purchase of treasury stock
|
(1,714 | ) | (624 | ) | ||||
|
Purchases of noncontrolling interests
|
(4,067 | ) | (7,537 | ) | ||||
|
Proceeds from borrowings
|
9,697 | 8,143 | ||||||
|
Repayment of borrowings
|
(306,127 | ) | (428,250 | ) | ||||
|
Net cash used in financing activities
|
(406,611 | ) | (514,297 | ) | ||||
|
Effect of exchange rate changes on cash
|
986 | (274 | ) | |||||
|
Net increase (decrease) in unrestricted cash
|
31,795 | (96,690 | ) | |||||
|
Unrestricted cash and cash equivalents at beginning of period
|
85,350 | 185,019 | ||||||
|
Unrestricted cash and cash equivalents at end of period
|
$ | 117,145 | $ | 88,329 | ||||
|
Supplemental cash flow information
|
||||||||
|
Effect of adoption of accounting pronouncements on restricted cash
|
$ | — | $ | (14,082 | ) | |||
|
Unrestricted cash included in assets held for sale
|
$ | 11,149 | $ | — | ||||
|
Cash paid for interest
|
$ | 29,894 | $ | 39,911 | ||||
|
Net cash income tax payments (refunds)
|
$ | 5,891 | $ | (93,456 | ) | |||
|
Supplemental non-cash information
|
||||||||
|
Notes payable associated with capital leases
|
$ | — | $ | 684 | ||||
|
Issuance of stock options and restricted stock
|
$ | 303 | $ | 1,127 | ||||
See accompanying notes.
Notes to Consolidated Financial Statements
September 30, 2011
|
1.
|
Basis of Presentation
|
We have prepared our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Securities and Exchange Commission (“SEC”) Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete consolidated financial statements. They do include, however, all normal recurring adjustments that we consider necessary to fairly state our results for the interim periods.
The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of our consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Certain estimates, such as credit losses, payment rates, costs of funds, discount rates and the yields earned on credit card receivables significantly affect the reported amount of two categories of credit card receivables that we report at fair value and our notes payable associated with structured
financings, at fair value, as reported on our consolidated balance sheets; these estimates likewise affect our changes in fair value of loans and fees receivable recorded at fair value and changes in fair value of notes payable associated with structured financings recorded at fair value categories within our fees and related income on earning assets line item on our consolidated statements of operations. Additionally, estimates of future credit losses on our loans and fees receivable that we report at net realizable value, rather than fair value, have a significant effect on two categories of such loans and fees receivable, net, that we show on our consolidated balance sheets, as well as on the provision for losses on loans and fees receivable within our consolidated statements of operations. Operating results for the three and nine months ended September 30, 2011 are not indicative of
what our results will be for the year ending December 31, 2011.
We have reclassified certain amounts in our prior period consolidated financial statements to conform to current period presentation, and we have eliminated all significant intercompany balances and transactions for financial reporting purposes.
In accordance with applicable accounting literature, we classified the net assets and liabilities of our Month End Money (“MEM”) business operations as held for sale on our December 31, 2010 consolidated balance sheet, and we have classified our MEM business operations as discontinued operations within our consolidated statements of operations for all periods presented. On April 1, 2011, we completed the planned sale of these operations for $195.0 million. We received net pre-tax proceeds of $170.5 million after the purchase of minority shares and other transaction-related expenditures, and inclusive of MEM’s excess working capital that was returned to us prior to completion of the transaction
under the terms of the sales contract. The sale resulted in a gain (net of related sales expenditures) of $106.0 million which is included as a component of discontinued operations on our consolidated statement of operations for the three and nine month periods ended September 30, 2011.
In connection with our consideration of a potential spin-off of our United States (“U.S.”) and United Kingdom (“U.K.”) micro-loan businesses, one of our subsidiaries, Purpose Financial Holdings, Inc. (“Purpose Financial”), filed a Form 10 Registration Statement and a related Information Statement with the SEC on January 4, 2010 and amended the Form 10 Registration Statement and related Information Statement in response to SEC comments most recently on November 30, 2010. On April 13, 2011, we formally requested the withdrawal of this registration statement due to the completion of our MEM sale.
Also in accordance with applicable accounting literature, we have classified the net assets and liabilities of our Retail Micro-Loans segment as held for sale on our September 30, 2011 consolidated balance sheet, and we have classified this segment’s business operations as discontinued operations within our consolidated statements of operations for all periods presented. On August 5, 2011, we entered into a definitive agreement to sell our Retail Micro-Loans segment operations to a subsidiary of Advance America, Cash Advance Centers, Inc. On October 10, 2011, we completed the sale for $46.7 million, comprised of a $45.6 million contract amount and a working capital adjustment of approximately $1.1 million (an
amount which may be subject to further post-closing adjustments and indemnities). Together with another $9.5 million of excess working capital we received immediately prior to completion of the transaction under its terms, and net of transaction-related expenditures, our net pre-tax proceeds are expected to approximate $53.8 million.
|
2.
|
Significant Accounting Policies and Consolidated Financial Statement Components
|
The following is a summary of significant accounting policies we use to prepare our consolidated financial statements, as well as a description of significant components of our consolidated financial statements.
Loans and Fees Receivable, Net. Our two categories of loans and fees receivable, net, currently consist of receivables carried at net realizable value associated with our U.S. Internet micro-loan activities, credit card accounts opened under our Investment in Previously Charged-off Receivables segment’s balance transfer program, and our Auto Finance segment (the receivables of our former ACC and JRAS auto finance businesses being separately categorized as pledged as collateral for non-recourse asset-backed structured financing facilities). Our balance
transfer program receivables are included as a component of our Credit Cards segment data and aggregated $15.0 million (net of allowances for uncollectible loans and fees receivable and deferred revenue) or 3.6% of our consolidated loans and fees receivable (net or at fair value) as of September 30, 2011. Our loans and fees receivable generally are unsecured; however, our auto finance loans are secured by the underlying automobiles in which we hold the vehicle title.
The components of our aggregated categories of loans and fees receivable, net (in millions) for reporting periods relevant to this Report are as follows:
|
Balance at
December 31,
2010
|
Additions
|
Subtractions
|
Transfer to Assets Held for Sale
|
Balance at
September 30,
2011
|
||||||||||||||||
|
Loans and fees receivable, gross
|
$ | 227.7 | $ | 317.5 | $ | (376.2 | ) | $ | (42.3 | ) | $ | 126.7 | ||||||||
|
Deferred revenue
|
(20.5 | ) | (33.3 | ) | 38.2 | 5.8 | (9.8 | ) | ||||||||||||
|
Allowance for uncollectible loans and fees receivable
|
(37.6 | ) | (7.1 | ) | 24.5 | 4.0 | (16.2 | ) | ||||||||||||
|
Loans and fees receivable, net
|
$ | 169.6 | $ | 277.1 | $ | (313.5 | ) | $ | (32.5 | ) | $ | 100.7 | ||||||||
|
Balance at
December 31,
2009
|
Additions
|
Subtractions
|
Balance at
September 30,
2010
|
|||||||||||||
|
Loans and fees receivable, gross
|
$ | 379.7 | $ | 846.4 | $ | (932.4 | ) | $ | 293.7 | |||||||
|
Deferred revenue
|
(40.9 | ) | (50.9 | ) | 63.9 | (27.9 | ) | |||||||||
|
Allowance for uncollectible loans and fees receivable
|
(53.4 | ) | (53.5 | ) | 59.3 | (47.6 | ) | |||||||||
|
Loans and fees receivable, net
|
$ | 285.4 | $ | 742.0 | $ | (809.2 | ) | $ | 218.2 | |||||||
As of September 30, 2011 and 2010, the weighted average remaining accretion periods for the $9.8 million and $27.9 million, respectively, of deferred revenue reflected in the above tables were 15.5 and 16.6 months, respectively.
A roll-forward of our allowance for uncollectible loans and fees receivable, net (in millions) by category of loans and fees receivable is as follows:
|
For the Three Months Ended September 30, 2011
|
Credit Cards
|
Micro-Loans
|
Auto Finance
|
Other
|
Total
|
|||||||||||||||
|
Allowance for uncollectible loans and fees receivable:
|
||||||||||||||||||||
|
Balance at beginning of period
|
$ | (2.8 | ) | $ | (0.8 | ) | $ | (15.0 | ) | $ | (0.4 | ) | $ | (19.0 | ) | |||||
|
Provision for loan losses
|
(1.3 | ) | (0.9 | ) | 1.2 | (0.2 | ) | (1.2 | ) | |||||||||||
|
Charge offs
|
0.8 | 0.9 | 4.1 | — | 5.8 | |||||||||||||||
|
Recoveries
|
(0.2 | ) | — | (1.6 | ) | — | (1.8 | ) | ||||||||||||
|
Transfer to assets held for sale
|
— | — | — | — | — | |||||||||||||||
|
Sale of assets
|
— | — | — | — | — | |||||||||||||||
|
Balance at end of period
|
$ | (3.5 | ) | $ | (0.8 | ) | $ | (11.3 | ) | $ | (0.6 | ) | $ | (16.2 | ) | |||||
|
Balance at end of period individually evaluated for impairment
|
$ | — | $ | — | $ | (0.3 | ) | $ | — | $ | (0.3 | ) | ||||||||
|
Balance at end of period collectively evaluated for impairment
|
$ | (3.5 | ) | $ | (0.8 | ) | $ | (11.0 | ) | $ | (0.6 | ) | $ | (15.9 | ) | |||||
|
Loans and fees receivable:
|
||||||||||||||||||||
|
Loans and fees receivable, gross
|
$ | 18.6 | $ | 2.2 | $ | 103.5 | $ | 2.4 | $ | 126.7 | ||||||||||
|
Loans and fees receivable individually evaluated for impairment
|
$ | — | $ | — | $ | 0.6 | $ | — | $ | 0.6 | ||||||||||
|
Loans and fees receivable collectively evaluated for impairment
|
$ | 18.6 | $ | 2.2 | $ | 102.9 | $ | 2.4 | $ | 126.1 | ||||||||||
|
For the Nine Months Ended September 30, 2011
|
Credit Cards
|
Micro-Loans
|
Auto
Finance
|
Other
|
Total
|
|||||||||||||||
|
Allowance for uncollectible loans and fees receivable:
|
||||||||||||||||||||
|
Balance at beginning of period
|
$ | (4.0 | ) | $ | (5.2 | ) | $ | (28.3 | ) | $ | (0.1 | ) | $ | (37.6 | ) | |||||
|
Provision for loan losses (includes $5.1 million of provision netted within income from discontinued operations)
|
(2.5 | ) | (7.1 | ) | 3.0 | (0.5 | ) | (7.1 | ) | |||||||||||
|
Charge offs
|
3.8 | 7.9 | 18.6 | — | 30.3 | |||||||||||||||
|
Recoveries
|
(0.8 | ) | (0.4 | ) | (5.3 | ) | — | (6.5 | ) | |||||||||||
|
Transfers to assets held for sale
|
— | 4.0 | — | — | 4.0 | |||||||||||||||
|
Sale of assets
|
— | — | 0.7 | — | 0.7 | |||||||||||||||
|
Balance at end of period
|
$ | (3.5 | ) | $ | (0.8 | ) | $ | (11.3 | ) | $ | (0.6 | ) | $ | (16.2 | ) | |||||
|
Balance at end of period individually evaluated for impairment
|
$ | — | $ | — | $ | (0.3 | ) | $ | — | $ | (0.3 | ) | ||||||||
|
Balance at end of period collectively evaluated for impairment
|
$ | (3.5 | ) | $ | (0.8 | ) | $ | (11.0 | ) | $ | (0.6 | ) | $ | (15.9 | ) | |||||
|
Loans and fees receivable:
|
||||||||||||||||||||
|
Loans and fees receivable, gross
|
$ | 18.6 | $ | 2.2 | $ | 103.5 | $ | 2.4 | $ | 126.7 | ||||||||||
|
Loans and fees receivable individually evaluated for impairment
|
$ | — | $ | — | $ | 0.6 | $ | — | $ | 0.6 | ||||||||||
|
Loans and fees receivable collectively evaluated for impairment
|
$ | 18.6 | $ | 2.2 | $ | 102.9 | $ | 2.4 | $ | 126.1 | ||||||||||
|
For the Three Months Ended September 30, 2010
|
Credit Cards
|
Micro-Loans
|
Auto Finance
|
Other
|
Total
|
|||||||||||||||
|
Allowance for uncollectible loans and fees receivable:
|
||||||||||||||||||||
|
Balance at beginning of period
|
$ | (4.0 | ) | $ | (11.4 | ) | $ | (33.1 | ) | $ | — | $ | (48.5 | ) | ||||||
|
Provision for loan losses (includes $9.2 million of provision netted within income from discontinued operations)
|
(2.2 | ) | (10.5 | ) | (4.8 | ) | — | (17.5 | ) | |||||||||||
|
Charge offs
|
1.4 | 10.4 | 9.3 | — | 21.1 | |||||||||||||||
|
Recoveries
|
(0.3 | ) | (0.2 | ) | (2.2 | ) | — | (2.7 | ) | |||||||||||
|
Balance at end of period
|
$ | (5.1 | ) | $ | (11.7 | ) | $ | (30.8 | ) | $ | — | $ | (47.6 | ) | ||||||
|
Balance at end of period individually evaluated for impairment
|
$ | — | $ | — | $ | (0.8 | ) | $ | — | $ | (0.8 | ) | ||||||||
|
Balance at end of period collectively evaluated for impairment
|
$ | (5.1 | ) | $ | (11.7 | ) | $ | (30.0 | ) | $ | — | $ | (46.8 | ) | ||||||
|
Loans and fees receivable:
|
||||||||||||||||||||
|
Loans and fees receivable, gross
|
$ | 18.6 | $ | 85.9 | $ | 189.2 | $ | — | $ | 293.7 | ||||||||||
|
Loans and fees receivable individually evaluated for impairment
|
$ | — | $ | — | $ | 2.5 | $ | — | $ | 2.5 | ||||||||||
|
Loans and fees receivable collectively evaluated for impairment
|
$ | 18.6 | $ | 85.9 | $ | 186.7 | $ | — | $ | 291.2 | ||||||||||
|
For the Nine Months Ended September 30, 2010
|
Credit Cards
|
Micro-Loans
|
Auto Finance
|
Other
|
Total
|
|||||||||||||||
|
Allowance for uncollectible loans and fees receivable:
|
||||||||||||||||||||
|
Balance at beginning of period
|
$ | (5.0 | ) | $ | (10.0 | ) | $ | (38.4 | ) | $ | — | $ | (53.4 | ) | ||||||
|
Provision for loan losses (includes $26.2 million of provision netted within income from discontinued operations)
|
(4.0 | ) | (27.0 | ) | (22.5 | ) | — | (53.5 | ) | |||||||||||
|
Charge offs
|
5.0 | 26.0 | 36.3 | — | 67.3 | |||||||||||||||
|
Recoveries
|
(1.1 | ) | (0.7 | ) | (6.2 | ) | — | (8.0 | ) | |||||||||||
|
Balance at end of period
|
$ | (5.1 | ) | $ | (11.7 | ) | $ | (30.8 | ) | $ | — | $ | (47.6 | ) | ||||||
|
Balance at end of period individually evaluated for impairment
|
$ | — | $ | — | $ | (0.8 | ) | $ | — | $ | (0.8 | ) | ||||||||
|
Balance at end of period collectively evaluated for impairment
|
$ | (5.1 | ) | $ | (11.7 | ) | $ | (30.0 | ) | $ | — | $ | (46.8 | ) | ||||||
|
Loans and fees receivable:
|
||||||||||||||||||||
|
Loans and fees receivable, gross
|
$ | 18.6 | $ | 85.9 | $ | 189.2 | $ | — | $ | 293.7 | ||||||||||
|
Loans and fees receivable individually evaluated for impairment
|
$ | — | $ | — | $ | 2.5 | $ | — | $ | 2.5 | ||||||||||
|
Loans and fees receivable collectively evaluated for impairment
|
$ | 18.6 | $ | 85.9 | $ | 186.7 | $ | — | $ | 291.2 | ||||||||||
The components (in millions) of loans and fees receivable, net as of the date of each of our consolidated balance sheets are as follows:
|
As of
|
||||||||
|
September 30, 2011
|
December 31, 2010
|
|||||||
|
Current loans receivable
|
$ | 109.4 | $ | 189.9 | ||||
|
Current fees receivable
|
1.1 | 7.7 | ||||||
|
Delinquent loans and fees receivable
|
16.2 | 30.1 | ||||||
|
Loans and fees receivable, gross
|
$ | 126.7 | $ | 227.7 | ||||
Delinquent loans and fees receivable reflect the principal, fee and interest components of loans that we did not collect on the contractual due date. Amounts we believe we will not ultimately collect are included as a component in our overall allowance for uncollectible loans and fees receivable and typically are charged off 90 days from the point they become delinquent for our micro-loan receivables, 180 days from the point they become delinquent for our auto finance and credit card receivables, or sooner if facts and circumstances earlier indicate non-collectability. Recoveries on accounts previously charged off are credited to the allowance for uncollectible loans and fees receivable and
effectively offset our provision for loan losses in our accompanying consolidated statements of operations.
An aging of our delinquent loans and fees receivable, gross (in millions) as of September 30, 2011 and December 31, 2010 is as follows:
|
As of September 30, 2011
|
Credit Cards
|
Micro-Loans
|
Auto Finance
|
Other
|
Total
|
|||||||||||||||
|
0-29 days past due
|
$ | 0.8 | $ | 0.4 | $ | 7.2 | $ | — | $ | 8.4 | ||||||||||
|
30-59 days past due
|
0.6 | 0.3 | 2.4 | — | 3.3 | |||||||||||||||
|
60 or more days past due
|
1.5 | 0.7 | 2.3 | — | 4.5 | |||||||||||||||
|
Delinquent loans and fees receivable, gross
|
$ | 2.9 | $ | 1.4 | $ | 11.9 | $ | — | $ | 16.2 | ||||||||||
|
Current loans and fees receivable, gross
|
15.7 | 0.8 | 91.6 | 2.4 | 110.5 | |||||||||||||||
|
Total loans and fees receivable, gross
|
$ | 18.6 | $ | 2.2 | $ | 103.5 | $ | 2.4 | $ | 126.7 | ||||||||||
|
Balance of loans greater than 90-days delinquent still accruing interest and fees
|
$ | — | $ | — | $ | 1.8 | $ | — | $ | 1.8 | ||||||||||
|
As of December 31, 2010
|
Credit Cards
|
Micro-Loans
|
Auto Finance
|
Other
|
Total
|
|||||||||||||||
|
0-29 days past due
|
$ | 0.8 | $ | 3.6 | $ | 11.6 | $ | — | $ | 16.0 | ||||||||||
|
30-59 days past due
|
0.7 | 2.2 | 4.3 | — | 7.2 | |||||||||||||||
|
60 or more days past due
|
1.8 | 1.4 | 3.7 | — | 6.9 | |||||||||||||||
|
Delinquent loans and fees receivable, gross
|
$ | 3.3 | $ | 7.2 | $ | 19.6 | $ | — | $ | 30.1 | ||||||||||
|
Current loans and fees receivable, gross
|
15.4 | 38.4 | 143.5 | 0.3 | 197.6 | |||||||||||||||
|
Total loans and fees receivable, gross
|
$ | 18.7 | $ | 45.6 | $ | 163.1 | $ | 0.3 | $ | 227.7 | ||||||||||
|
Balance of loans greater than 90-days delinquent still accruing interest and fees
|
$ | — | $ | — | $ | 2.7 | $ | — | $ | 2.7 | ||||||||||
Investments in Previously Charged-Off Receivables
The following table shows (in thousands) a roll-forward of our investments in previously charged-off receivables activities:
|
For the Three Months Ended
September 30,
|
For the Nine Months Ended
September 30,
|
|||||||||||||||
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||
|
Unrecovered balance at beginning of period
|
$ | 31,280 | $ | 33,297 | $ | 29,889 | $ | 29,669 | ||||||||
|
Acquisitions of defaulted accounts
|
19,191 | 5,839 | 38,675 | 22,409 | ||||||||||||
|
Cash collections
|
(20,948 | ) | (17,158 | ) | (60,804 | ) | (45,858 | ) | ||||||||
|
Cost-recovery method income recognized on defaulted accounts (included as a component of fees and related income on non-securitized earning assets on our consolidated statements of operations)
|
10,295 | 8,676 | 32,058 | 24,434 | ||||||||||||
|
Unrecovered balance at end of period
|
$ | 39,818 | $ | 30,654 | $ | 39,818 | $ | 30,654 | ||||||||
Previously charged-off receivables held as of September 30, 2011 are comprised principally of: normal delinquency charged-off accounts; charged-off accounts associated with Chapter 13 Bankruptcy-related debt; and charged-off accounts acquired through our Investments in Previously Charged-Off Receivables segment’s balance transfer program prior to such time as credit cards are issued relating to the program’s underlying accounts. At September 30, 2011, $4.4 million of our investments in previously charged-off receivables balance was comprised of previously charged-off receivables that our Investments in Previously Charged-Off Receivables segment purchased from our other consolidated
subsidiaries, and in determining our net income or loss as reflected on our consolidated statements of operations, we eliminate all material intercompany profits that are associated with these transactions. Although we eliminate all intercompany profits associated with these purchases, we do not eliminate the corresponding purchases from our consolidated balance sheet categories so as to better reflect the ongoing business operations of each of our reportable segments and because the amounts represent just 0.6% of our consolidated total assets.
We estimate the life of each pool of previously charged-off receivables acquired by us generally to be between 60 months for normal delinquency charged-off accounts and approximately 84 months for Chapter 13 Bankruptcies. Our estimated remaining collections on the $39.8 million unrecovered balance of our investments in previously charged-off receivables as of September 30, 2011 amount to $186.9 million (before servicing costs), of which we expect to collect 39.8% over the next 12 months, with the balance to be collected thereafter.
Investments in Securities
The carrying values (in thousands) of our investments in debt and equity securities are as follows
|
As of
|
||||||||
|
September 30,
2011
|
December 31,
2010
|
|||||||
|
Held to maturity:
|
||||||||
|
Investments in non-marketable debt securities
|
$ | 93 | $ | 2,414 | ||||
|
Available for sale:
|
||||||||
|
Investments in non-marketable debt securities
|
3,776 | 4,087 | ||||||
|
Investments in non-marketable equity securities
|
2,075 | 1,500 | ||||||
|
Trading:
|
||||||||
|
Investments in marketable debt securities
|
— | 55,770 | ||||||
|
Investments in marketable equity securities
|
188 | 546 | ||||||
|
Total investments in securities
|
$ | 6,132 | $ | 64,317 | ||||
Investments in Equity-Method Investees
We account for investments using the equity method of accounting if we have the ability to exercise significant influence, but not control, over the investees. Significant influence is generally deemed to exist if we have an ownership interest in the voting stock of an incorporated investee of between 20% and 50%, although other factors, such as representation on an investee’s board of managers, specific voting and veto rights held by each investor and the effects of commercial arrangements, are considered in determining whether equity method accounting is appropriate. We use the equity method for our investment in a 33.3%-owned limited liability company made during the fourth quarter of 2004. We also use the
equity method to account for our March 2011 investment to acquire a 50.0% interest in a joint venture that purchased all of the outstanding notes issued out of the structured financing trust underlying our U.K. portfolio of credit card receivables (the “U.K. Portfolio”). We record our respective interests in the income or losses of our equity-method investees within the equity in income (loss) of equity-method investees category on our consolidated statements of operations. The carrying amount of our equity-method investments is recorded on our consolidated balance sheets as investments in equity-method investees.
In January 2011, we acquired an additional 47.5% interest in a 47.5% equity-method investee which we had historically accounted for under the equity method of accounting, thereby bringing our aggregate interest in this entity to a 95.0% ownership threshold and leading us to conclude that the assets and liabilities of this entity should be consolidated within our consolidated balance sheets. Additionally, we acquired the remaining 5.0% noncontrolling interest in the April 2011 bringing our total ownership to 100% as of September 30, 2011.
Income Taxes
Our overall effective income tax rates (computed considering results for only continuing operations before income taxes) were 1,996.8% and 8.5% in the three and nine months ended September 30, 2011, respectively, compared to 18.8% and 3.2% for the three and nine months ended September 30, 2010, respectively. We have experienced no material changes in effective tax rates associated with differences in filing jurisdictions, and the variations in our effective tax rates between the periods principally bear the effects of (1) changes in valuation allowances against income statement-oriented federal, foreign and state deferred tax assets and (2) variations in the level of our pre-tax income among the different
reporting periods relative to the level of our permanent differences within such periods. Computed without regard to the effects of the valuation allowance changes, it is more likely than not that our effective tax rates would have been 3,398.5% and 50.9%, in the three and nine months ended September 30, 2011, respectively, compared to 62.5% and 35.6% in the three and nine months ended September 30, 2010, respectively.
We recognize potential accrued interest and penalties related to unrecognized tax benefits in income tax expense. We recognized $0.6 million and $1.7 million in potential interest and penalties associated with uncertain tax positions during the three and nine months ended September 30, 2011, respectively, compared to $0.6 million and $1.8 million during the three and nine months ended September 30, 2010, respectively. To the extent such interest and penalties are not assessed as a result of a resolution of the underlying tax position, amounts accrued will be reduced and reflected as a reduction of income tax expense. We recognized such reductions in the amounts of $0.0 million and $2.0 million in the
three months ended September 30, 2011 and September 30, 2010, respectively. Reductions during the three months ended September 30, 2010 resulted from closings of statutes of limitations, and we experienced no such closings during the three months ended September 30, 2011.
Fees and Related Income on Earning Assets
The components (in thousands) of our fees and related income on earning assets are as follows:
|
For the Three Months Ended
September 30, 2011
|
For the Nine Months Ended
September 30, 2011
|
|||||||||||||||
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||
|
Internet micro-loan fees
|
$ | 954 | $ | 718 | $ | 2,202 | $ | 1,210 | ||||||||
|
Fees on credit card receivables held on balance sheet
|
2,454 | 5,002 | 8,441 | 20,861 | ||||||||||||
|
Changes in fair value of loans and fees receivable recorded at fair value (1)
|
46,646 | 61,183 | 166,164 | 186,846 | ||||||||||||
|
Changes in fair value of notes payable associated with structured financings recorded at fair value
|
(29,538 | ) | (19,158 | ) | (82,507 | ) | 31,036 | |||||||||
|
Income on investments in previously charged-off receivables
|
10,295 | 8,676 | 32,058 | 24,434 | ||||||||||||
|
Gross loss on auto sales
|
— | (478 | ) | (111 | ) | (2,127 | ) | |||||||||
|
(Losses) gains on investments in securities
|
(5,418 | ) | 153 | (5,277 | ) | 301 | ||||||||||
|
Loss on sale of JRAS assets
|
— | — | (4,648 | ) | — | |||||||||||
|
Gains upon litigation settlement with former third-party issuing bank partner
|
— | 12,150 | — | 12,150 | ||||||||||||
|
Other
|
499 | 678 | 1,324 | 877 | ||||||||||||
|
Total fees and related income on earning assets
|
$ | 25,892 | $ | 68,924 | $ | 117,646 | $ | 275,588 | ||||||||
|
(1)
|
The above changes in fair value of loans and fees receivable recorded at fair value category excludes the impact of charge offs associated with these receivables which are separately stated on our consolidated statements of operations. See Note 9, “Fair values of Assets and Liabilities,” for further discussion of these receivables and their effects on our consolidated statements of operations.
|
Subsequent Events
We evaluate subsequent events that occur after our consolidated balance sheet date but before our consolidated financial statements are issued. There are two types of subsequent events: (1) recognized, or those that provide additional evidence with respect to conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements; and (2) nonrecognized, or those that provide evidence with respect to conditions that did not exist at the date of the balance sheet but arose subsequent to that date. We have evaluated subsequent events occurring after September 30, 2011, and based on our evaluation, we did not identify any
recognized or nonrecognized subsequent events that would have required further adjustments to our consolidated financial statements.
In October 2011, our CAR subsidiaries within our Auto Finance segment obtained a new credit facility with $40.0 million in available financing that can be drawn to the extent of CAR outstanding eligible principal receivables (of which $23.8 million was drawn as of October 31, 2011). This new facility is secured by the financial and operating assets of our CAR subsidiaries (such assets having a carrying value of $49.8 million at September 30, 2011), accrues interest at an annual rate equal to LIBOR plus 4.0%, matures in October 2014, and is subject to certain affirmative covenants, including a coverage ratio, a leverage ratio and a
collateral performance test, the failure of which could result in required early repayment of all or a portion of the outstanding balance.
Also on October 10, 2011, we completed the sale of our Retail Micro-Loans segment operations to a subsidiary of Advance America, Cash Advance Centers, Inc. for $46.7 million, comprised of the $45.6 million contract amount and a working capital adjustment of approximately $1.1 million (an amount which may be subject to further post-closing adjustments and indemnities). Together with another $9.5 million of excess working capital that we received immediately prior to completion of the transaction under its terms, and net of transaction-related expenditures, our net pre-tax proceeds are expected to approximate $53.8 million.
In October and November 2011, in open market transactions, we purchased an aggregate $21.3 million in face amount of our 3.625% convertible senior notes due 2025, reducing our outstanding balance of the notes to $85.1 million.
Lastly, in November 2011, our Investment in Previously Charged-Off Receivables segment obtained a new credit facility. This facility initially provides for $35.0 million in available financing to facilitate the growth of its operations, can be drawn upon to the extent of outstanding eligible receivables within the segment’s operations, and accrues interest at an annual rate equal to LIBOR plus an applicable margin ranging from 3.25% to 4.75% based on certain financial metrics. The facility is subject to certain affirmative covenants, including a coverage ratio, a leverage ratio, a collections minimum and a tangible net worth minimum, the failure of which could result in required early repayment of
all or a portion of the outstanding balance. The facility matures in November 2014.
|
3.
|
Discontinued Operations
|
On December 31, 2010, we entered into an agreement to sell our subsidiary with a controlling interest in MEM. The transaction closed in April 2011 and resulted in a gain (net of related sales expenditures) of $106.0 million. In accordance with applicable accounting literature, we classified MEM’s net assets as held for sale on our December 31, 2010 consolidated balance sheet, and we have reflected its operating results and gain on sale as discontinued operations within our consolidated statements of operations for all periods presented. Additionally, on August 5, 2011, we entered into an agreement to sell our Retail Micro-Loans segment to a subsidiary of Advance America, Cash Advance
Centers, Inc.—a transaction we completed on October 10, 2011 and the details of which are disclosed throughout this Report. In accordance with applicable accounting literature, we have classified our Retail Micro-Loans segment’s net assets as held for sale on our September 30, 2011 consolidated balance sheet and have reflected its operating results as discontinued operations within our consolidated statements of operations for all periods presented.
The following tables reflect (in thousands) the components of our discontinued operations:
|
For the Three Months Ended
September 30,
|
For the Nine Months Ended
September 30,
|
|||||||||||||||
|
2011
|
2010
|
2011
|
2010
|
|||||||||||||
|
Net interest income, fees and related income on non-securitized earning assets
|
$ | 15,330 | $ | 34,525 | $ | 65,121 | $ | 92,345 | ||||||||
|
Gain on sale of assets
|
— | — | 103,706 | — | ||||||||||||
|
Other operating expense
|
13,278 | 23,837 | 51,638 | 68,431 | ||||||||||||
|
Income before income taxes
|
2,052 | 10,688 | 117,189 | 23,914 | ||||||||||||
|
Income tax expense
|
(42 | ) | (2,248 | ) | (4,142 | ) | (4,596 | ) | ||||||||
|
Net income
|
$ | 2,010 | $ | 8,440 | $ | 113,047 | $ | 19,318 | ||||||||
|
Net income attributable to noncontrolling interests
|
$ | — | $ | 1,050 | $ | 1,131 | $ | 2,269 | ||||||||
The table below presents the components (in thousands) of our consolidated balance sheet accounts classified as assets held for sale and liabilities related to assets held for sale:
|
As of
|
||||||||
|
September 30, 2011
|
December 31, 2010
|
|||||||
|
Assets held for sale:
|
||||||||
|
Unrestricted cash and cash equivalents
|
$ | 11,149 | $ | 16,419 | ||||
|
Loans and fees receivable, net (of $6,110 and $5,218 in deferred revenue and $4,430 and $8,465 of allowances for uncollectible loans and fees receivable as of September 30, 2011 and December 31, 2010, respectively)
|
33,508 | 32,786 | ||||||
|
Property at cost, net of depreciation
|
752 | 6,506 | ||||||
|
Prepaid expenses and other assets
|
1,058 | 1,537 | ||||||
|
Intangibles, net
|
2,156 | — | ||||||
|
Goodwill
|
— | 23,011 | ||||||
|
Total assets held for sale
|
$ | 48,623 | $ | 80,259 | ||||
|
Liabilities related to assets held for sale:
|
||||||||
|
Accounts payable and accrued expenses
|
$ | 2,808 | $ | 3,396 | ||||
|
Income tax liability
|
— | 5,718 | ||||||
|
Total liabilities related to assets held for sale
|
$ | 2,808 | $ | 9,114 | ||||
|
4.
|
Segment Reporting
|
We operate primarily within one industry consisting of five reportable segments by which we manage our business. Our five reportable segments are: Credit Cards; Investments in Previously Charged-Off Receivables; Retail Micro-Loans; Auto Finance; and Internet Micro-Loans. In March 2010, we acquired all of the noncontrolling interests in our Investments in Previously Charged-Off Receivables segment for $1.0 million, such that we now own 100% of this segment. Similarly, in 2011 we purchased the remaining noncontrolling interests in our Credit Cards segment majority-owned subsidiaries for an aggregate purchase price of $4.1 million.
Summary operating segment information (in thousands) is as follows:
|
Three Months Ended September 30, 2011
|
Credit Cards
|
Investments in
Previously
Charged-Off
Receivables
|
Retail
Micro-Loans
|
Auto Finance
|
Internet Micro-Loans
|
Total
|
||||||||||||||||||
|
Net interest income, fees and related income on earning assets
|
$ | 3,471 | $ | 10,509 | $ | — | $ | 8,300 | $ | 254 | $ | 22,534 | ||||||||||||
|
Total other operating income
|
$ | 8,951 | $ | 801 | $ | — | $ | 130 | $ | 12 | $ | 9,894 | ||||||||||||
|
Income (loss) from continuing operations before income taxes
|
$ | (4,350 | ) | $ | 3,239 | $ | — | $ | 3,209 | $ | (2,067 | ) | $ | 31 | ||||||||||
|
Income from discontinued operations before income taxes
|
$ | — | $ | — | $ | 2,052 | $ | — | $ | — | $ | 2,052 | ||||||||||||
|
Loans and fees receivable, gross
|
$ | 20,957 | $ | — | $ | — | $ | 103,548 | $ | 2,215 | $ | 126,720 | ||||||||||||
|
Loans and fees receivable, net
|
$ | 16,750 | $ | — | $ | — | $ | 82,629 | $ | 1,329 | $ | 100,708 | ||||||||||||
|
Loans and fees receivable held at fair value
|
$ | 310,815 | $ | — | $ | — | $ | — | $ | — | $ | 310,815 | ||||||||||||
|
Total assets
|
$ | 560,465 | $ | 53,630 | $ | — | $ | 92,272 | $ | 4,471 | $ | 710,838 | ||||||||||||
|
Nine Months Ended September 30, 2011
|
Credit Cards
|
Investments in
Previously
Charged-Off
Receivables
|
Retail
Micro-Loans
|
Auto Finance
|
Internet Micro-Loans
|
Total
|
||||||||||||||||||
|
Net interest income, fees and related income on earning assets
|
$ | 30,712 | $ | 32,133 | $ | — | $ | 19,872 | $ | 570 | $ | 83,287 | ||||||||||||
|
Total other operating income
|
$ | 37,233 | $ | 2,269 | $ | — | $ | 386 | $ | 12 | $ | 39,900 | ||||||||||||
|
Income (loss) from continuing operations before income taxes
|
$ | 11,235 | $ | 11,250 | $ | — | $ | 2,741 | $ | (4,597 | ) | $ | 20,629 | |||||||||||
|
Income from discontinued operations before income taxes
|
$ | — | $ | — | $ | 6,139 | $ | — | $ | 111,050 | $ | 117,189 | ||||||||||||
|
Loans and fees receivable, gross
|
$ | 20,957 | $ | — | $ | — | $ | 103,548 | $ | 2,215 | $ | 126,720 | ||||||||||||
|
Loans and fees receivable, net
|
$ | 16,750 | $ | — | $ | — | $ | 82,629 | $ | 1,329 | $ | 100,708 | ||||||||||||
|
Loans and fees receivable held at fair value
|
$ | 310,815 | $ | — | $ | — | $ | — | $ | — | $ | 310,815 | ||||||||||||
|
Total assets
|
$ | 560,465 | $ | 53,630 | $ | — | $ | 92,272 | $ | 4,471 | $ | 710,838 | ||||||||||||
|
Three Months Ended September 30, 2010
|
Credit Cards
|
Investments in
Previously
Charged-Off
Receivables
|
Retail
Micro-Loans
|
Auto Finance
|
Internet Micro-Loans
|
Total
|
||||||||||||||||||
|
Net interest income, fees and related income (loss) on earning assets
|
$ | 9,474 | $ | 8,567 | $ | — | $ | 5,046 | $ | (39 | ) | $ | 23,048 | |||||||||||
|
Total other operating income
|
$ | 8,031 | $ | 494 | $ | — | $ | 133 | $ | — | $ | 8,658 | ||||||||||||
|
(Loss) income from continuing operations before income taxes
|
$ | (6,932 | ) | $ | 2,482 | $ | — | $ | (3,324 | ) | $ | (989 | ) | $ | (8,763 | ) | ||||||||
|
Income from discontinued operations before income taxes
|
$ | — | $ | — | $ | 2,835 | $ | — | $ | 7,853 | $ | 10,688 | ||||||||||||
|
Loans and fees receivable, gross
|
$ | 18,659 | $ | — | $ | 40,291 | $ | 189,172 | $ | 45,649 | $ | 293,771 | ||||||||||||
|
Loans and fees receivable, net
|
$ | 14,478 | $ | — | $ | 32,504 | $ | 139,146 | $ | 32,087 | $ | 218,215 | ||||||||||||
|
Loans and fees receivable held at fair value
|
$ | 469,713 | $ | — | $ | — | $ | — | $ | — | $ | 469,713 | ||||||||||||
|
Total assets
|
$ | 676,926 | $ | 36,316 | $ | 67,605 | $ | 155,950 | $ | 75,130 | $ | 1,011,927 | ||||||||||||
|
Nine Months Ended September 30, 2010
|
Credit Cards
|
Investments in
Previously
Charged-Off
Receivables
|
Retail
Micro-Loans
|
Auto Finance
|
Internet Micro-Loans
|
Total
|
|||||||||||||||||