Page | |||
PART I. FINANCIAL INFORMATION | |||
Item 1. | |||
Item 2. | |||
Item 3. | |||
Item 4. | |||
PART II. OTHER INFORMATION | |||
Item 1. | |||
Item 1A. | |||
Item 2. | |||
Item 3. | |||
Item 4. | |||
Item 5. | |||
Item 6. | |||
ITEM 1. | FINANCIAL STATEMENTS |
September 30, 2013 | December 31, 2012 | ||||||
(unaudited) | |||||||
Assets | |||||||
Unrestricted cash and cash equivalents | $ | 59,834 | $ | 67,915 | |||
Restricted cash and cash equivalents | 18,951 | 12,921 | |||||
Loans and fees receivable: | |||||||
Loans and fees receivable, net (of $11,216 and $8,274 in deferred revenue and $21,505 and $11,151 in allowances for uncollectible loans and fees receivable at September 30, 2013 and December 31, 2012, respectively) | 84,250 | 69,625 | |||||
Loans and fees receivable, at fair value | 14,403 | 20,378 | |||||
Loans and fees receivable pledged as collateral under structured financings, at fair value | 97,383 | 133,595 | |||||
Leased merchandise | 16,976 | — | |||||
Property at cost, net of depreciation | 8,017 | 7,192 | |||||
Investments in equity-method investees | 36,282 | 37,756 | |||||
Deposits | 6,311 | 16,397 | |||||
Prepaid expenses and other assets | 14,533 | 14,647 | |||||
Total assets | $ | 356,940 | $ | 380,426 | |||
Liabilities | |||||||
Accounts payable and accrued expenses | $ | 43,131 | $ | 38,596 | |||
Notes payable, at face value | 52,302 | 26,747 | |||||
Notes payable associated with structured financings, at fair value | 106,394 | 140,127 | |||||
Convertible senior notes | 95,779 | 95,335 | |||||
Income tax liability | 62,706 | 60,434 | |||||
Total liabilities | 360,312 | 361,239 | |||||
Commitments and contingencies (Note 10) | |||||||
Equity | |||||||
Common stock, no par value, 150,000,000 shares authorized: 15,366,125 shares issued and outstanding (including 1,672,656 loaned shares to be returned) at September 30, 2013; and 15,509,179 shares issued and outstanding (including 1,672,656 loaned shares to be returned) at December 31, 2012 | — | — | |||||
Additional paid-in capital | 210,307 | 211,122 | |||||
Accumulated other comprehensive loss | (1,262 | ) | (1,154 | ) | |||
Retained deficit | (212,414 | ) | (190,673 | ) | |||
Total shareholders’ equity | (3,369 | ) | 19,295 | ||||
Noncontrolling interests | (3 | ) | (108 | ) | |||
Total equity | (3,372 | ) | 19,187 | ||||
Total liabilities and equity | $ | 356,940 | $ | 380,426 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Interest income: | |||||||||||||||
Consumer loans, including past due fees | $ | 17,975 | $ | 20,054 | $ | 54,480 | $ | 68,037 | |||||||
Other | 33 | 323 | 228 | 731 | |||||||||||
Total interest income | 18,008 | 20,377 | 54,708 | 68,768 | |||||||||||
Interest expense | (5,999 | ) | (7,406 | ) | (17,637 | ) | (25,582 | ) | |||||||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable | 12,009 | 12,971 | 37,071 | 43,186 | |||||||||||
Fees and related income on earning assets | 18,382 | 4,699 | 35,407 | 68,997 | |||||||||||
Losses upon charge off of loans and fees receivable recorded at fair value, net of recoveries | (3,329 | ) | (8,790 | ) | (13,478 | ) | (81,693 | ) | |||||||
Provision for losses on loans and fees receivable recorded at net realizable value | (10,681 | ) | (5,373 | ) | (20,633 | ) | (13,828 | ) | |||||||
Net interest income, fees and related income on earning assets | 16,381 | 3,507 | 38,367 | 16,662 | |||||||||||
Other operating income: | |||||||||||||||
Servicing income | 1,713 | 1,002 | 6,918 | 3,234 | |||||||||||
Other income | 1,069 | 570 | 3,521 | 2,021 | |||||||||||
Equity in income of equity-method investees | 2,080 | 356 | 7,344 | 9,912 | |||||||||||
Total other operating income | 4,862 | 1,928 | 17,783 | 15,167 | |||||||||||
Other operating expense: | |||||||||||||||
Salaries and benefits | 4,421 | 3,519 | 13,201 | 13,986 | |||||||||||
Card and loan servicing | 11,732 | 10,428 | 33,260 | 31,618 | |||||||||||
Marketing and solicitation | 2,059 | 223 | 6,580 | 1,669 | |||||||||||
Depreciation | 5,108 | 1,518 | 5,899 | 2,294 | |||||||||||
Other | 5,365 | 5,557 | 16,521 | 18,755 | |||||||||||
Total other operating expense | 28,685 | 21,245 | 75,461 | 68,322 | |||||||||||
Loss on continuing operations before income taxes | (7,442 | ) | (15,810 | ) | (19,311 | ) | (36,493 | ) | |||||||
Income tax (expense) benefit | (1,443 | ) | 7,418 | (2,351 | ) | 10,391 | |||||||||
Loss on continuing operations | (8,885 | ) | (8,392 | ) | (21,662 | ) | (26,102 | ) | |||||||
Discontinued operations: | |||||||||||||||
Income from discontinued operations before income taxes | — | 50,151 | — | 61,301 | |||||||||||
Income tax expense | — | (8,835 | ) | — | (12,737 | ) | |||||||||
Income from discontinued operations | — | 41,316 | — | 48,564 | |||||||||||
Net (loss) income | (8,885 | ) | 32,924 | (21,662 | ) | 22,462 | |||||||||
Net loss (income) attributable to noncontrolling interests in continuing operations | 1 | 287 | (79 | ) | 572 | ||||||||||
Net (loss) income attributable to controlling interests | $ | (8,884 | ) | $ | 33,211 | $ | (21,741 | ) | $ | 23,034 | |||||
Loss on continuing operations attributable to controlling interests per common share—basic | $ | (0.65 | ) | $ | (0.42 | ) | $ | (1.58 | ) | $ | (1.21 | ) | |||
Loss on continuing operations attributable to controlling interests per common share—diluted | $ | (0.65 | ) | $ | (0.42 | ) | $ | (1.58 | ) | $ | (1.21 | ) | |||
Income from discontinued operations attributable to controlling interests per common share—basic | $ | — | $ | 2.14 | $ | — | $ | 2.30 | |||||||
Income from discontinued operations attributable to controlling interests per common share—diluted | $ | — | $ | 2.14 | $ | — | $ | 2.30 | |||||||
Net (loss) income attributable to controlling interests per common share—basic | $ | (0.65 | ) | $ | 1.72 | $ | (1.58 | ) | $ | 1.09 | |||||
Net (loss) income attributable to controlling interests per common share—diluted | $ | (0.65 | ) | $ | 1.72 | $ | (1.58 | ) | $ | 1.09 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net (loss) income | $ | (8,885 | ) | $ | 32,924 | $ | (21,662 | ) | $ | 22,462 | |||||
Other comprehensive (loss) income: | |||||||||||||||
Foreign currency translation adjustment | 1,476 | 867 | (35 | ) | 1,212 | ||||||||||
Reclassifications of foreign currency translation adjustment to consolidated statements of operations | — | (19 | ) | — | (19 | ) | |||||||||
Income tax benefit related to other comprehensive income | (212 | ) | (48 | ) | (73 | ) | (31 | ) | |||||||
Comprehensive (loss) income | (7,621 | ) | 33,724 | (21,770 | ) | 23,624 | |||||||||
Comprehensive (income) loss attributable to noncontrolling interests in continuing operations | 1 | 287 | (79 | ) | 572 | ||||||||||
Comprehensive (loss) income attributable to controlling interests | $ | (7,620 | ) | $ | 34,011 | $ | (21,849 | ) | $ | 24,196 |
Common Stock | ||||||||||||||||||||||||||||||
Shares Issued | Amount | Additional Paid-In Capital | Treasury Stock | Accumulated Other Comprehensive Loss | Retained Deficit | Noncontrolling Interests | Total Equity | |||||||||||||||||||||||
Balance at December 31, 2012 | 15,509,179 | $ | — | $ | 211,122 | $ | — | $ | (1,154 | ) | $ | (190,673 | ) | $ | (108 | ) | $ | 19,187 | ||||||||||||
Compensatory stock issuances | 172,964 | — | — | — | — | — | — | — | ||||||||||||||||||||||
Contributions by owners of noncontrolling interests | — | — | — | — | — | — | 26 | 26 | ||||||||||||||||||||||
Amortization of deferred stock-based compensation costs | — | — | 348 | — | — | — | — | 348 | ||||||||||||||||||||||
Redemption and retirement of shares | (316,018 | ) | — | (1,163 | ) | — | — | — | — | (1,163 | ) | |||||||||||||||||||
Net loss | — | — | — | — | — | (21,741 | ) | 79 | (21,662 | ) | ||||||||||||||||||||
Foreign currency translation adjustment, net of tax | — | — | — | — | (108 | ) | — | — | (108 | ) | ||||||||||||||||||||
Balance at September 30, 2013 | 15,366,125 | $ | — | $ | 210,307 | $ | — | $ | (1,262 | ) | $ | (212,414 | ) | $ | (3 | ) | $ | (3,372 | ) |
For the Nine Months Ended September 30, | |||||||
2013 | 2012 | ||||||
Operating activities | |||||||
Net (loss) income | $ | (21,662 | ) | $ | 22,462 | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation of leased merchandise | 4,637 | — | |||||
Depreciation, amortization and accretion, net | 1,060 | 2,193 | |||||
Losses upon charge off of loans and fees receivable recorded at fair value | 22,480 | 81,693 | |||||
Provision for losses on loans and fees receivable | 20,633 | 16,402 | |||||
Interest expense from accretion of discount on convertible senior notes | 445 | 2,287 | |||||
Income from accretion of discount associated with receivables purchases | (21,721 | ) | (23,435 | ) | |||
Unrealized gain on loans and fees receivable and underlying notes payable held at fair value | (15,251 | ) | (57,754 | ) | |||
Income from equity-method investments | (7,344 | ) | (9,912 | ) | |||
Net gain on sale of subsidiary operations | — | (49,579 | ) | ||||
Other non-cash adjustments to income | — | 287 | |||||
Changes in assets and liabilities, exclusive of business acquisitions: | |||||||
(Increase) decrease in uncollected fees on earning assets | (1,887 | ) | 19,386 | ||||
Increase in income tax liability | 2,196 | 2,294 | |||||
Decrease (increase) in deposits | 10,085 | (4,675 | ) | ||||
(Increase) decrease in prepaid expenses | (470 | ) | 5,281 | ||||
Increase (decrease) in accounts payable and accrued expenses | 4,760 | (5,087 | ) | ||||
Additions to leased merchandise | (21,613 | ) | — | ||||
Other | 3,467 | 1,351 | |||||
Net cash (used in) provided by operating activities | (20,185 | ) | 3,194 | ||||
Investing activities | |||||||
(Increase) decrease in restricted cash | (6,037 | ) | 9,602 | ||||
Investment in equity-method investees | (3,750 | ) | (1,354 | ) | |||
Proceeds from equity-method investees | 12,339 | 20,310 | |||||
Investments in earning assets | (139,322 | ) | (166,706 | ) | |||
Proceeds from earning assets | 181,302 | 230,177 | |||||
Investments in subsidiaries | — | (3,514 | ) | ||||
Proceeds from sale of subsidiary | — | 99,029 | |||||
Purchases and development of property, net of disposals | (2,040 | ) | (1,909 | ) | |||
Net cash provided by investing activities | 42,492 | 185,635 | |||||
Financing activities | |||||||
Noncontrolling interests contributions, net | 26 | — | |||||
Purchase of outstanding stock subject to tender offer | — | (82,500 | ) | ||||
Purchase and retirement of outstanding stock | (1,163 | ) | (196 | ) | |||
Proceeds from borrowings | 36,187 | 18,578 | |||||
Repayment of borrowings | (65,840 | ) | (221,914 | ) | |||
Net cash used in financing activities | (30,790 | ) | (286,032 | ) | |||
Effect of exchange rate changes on cash | 402 | 215 | |||||
Net decrease in unrestricted cash | (8,081 | ) | (96,988 | ) | |||
Unrestricted cash and cash equivalents at beginning of period | 67,915 | 144,913 | |||||
Unrestricted cash and cash equivalents at end of period | $ | 59,834 | $ | 47,925 | |||
Supplemental cash flow information | |||||||
Cash paid for interest | $ | 19,176 | $ | 25,596 | |||
Net cash income tax payments | $ | 154 | $ | 52 | |||
Supplemental non-cash information | |||||||
Issuance of stock options and restricted stock | $ | 522 | $ | 227 | |||
Notes payable associated with capital leases | $ | 152 | $ | 218 |
1. | Description of Our Business |
2. | Significant Accounting Policies and Consolidated Financial Statement Components |
Balance at December 31, 2012 | Additions | Subtractions | Sale of Assets | Balance at September 30, 2013 | |||||||||||||||
Loans and fees receivable, gross | $ | 89.1 | $ | 178.7 | $ | (150.8 | ) | — | $ | 117.0 | |||||||||
Deferred revenue | (8.3 | ) | (24.7 | ) | 21.8 | — | (11.2 | ) | |||||||||||
Allowance for uncollectible loans and fees receivable | (11.2 | ) | (20.6 | ) | 10.3 | — | (21.5 | ) | |||||||||||
Loans and fees receivable, net | $ | 69.6 | $ | 133.4 | $ | (118.7 | ) | $ | — | $ | 84.3 | ||||||||
Balance at December 31, 2011 | Additions | Subtractions | Sale of Assets | Balance at September 30, 2012 | |||||||||||||||
Loans and fees receivable, gross | $ | 119.3 | $ | 137.9 | $ | (146.0 | ) | $ | (18.6 | ) | $ | 92.6 | |||||||
Deferred revenue | (8.0 | ) | (20.0 | ) | 19.4 | — | (8.6 | ) | |||||||||||
Allowance for uncollectible loans and fees receivable | (14.7 | ) | (16.4 | ) | 12.7 | 3.6 | (14.8 | ) | |||||||||||
Loans and fees receivable, net | $ | 96.6 | $ | 101.5 | $ | (113.9 | ) | $ | (15.0 | ) | $ | 69.2 |
For the Three Months Ended September 30, 2013 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | ||||||||||||
Allowance for uncollectible loans and fees receivable: | ||||||||||||||||
Balance at beginning of period | $ | (6.3 | ) | $ | (1.2 | ) | $ | (6.1 | ) | $ | (13.6 | ) | ||||
Provision for loan losses | (5.7 | ) | (0.5 | ) | (4.5 | ) | (10.7 | ) | ||||||||
Charge offs | 1.5 | 0.6 | 1.0 | 3.1 | ||||||||||||
Recoveries | — | (0.3 | ) | — | (0.3 | ) | ||||||||||
Balance at end of period | $ | (10.5 | ) | $ | (1.4 | ) | $ | (9.6 | ) | $ | (21.5 | ) | ||||
Balance at end of period individually evaluated for impairment | $ | — | $ | — | $ | — | $ | — | ||||||||
Balance at end of period collectively evaluated for impairment | $ | (10.5 | ) | $ | (1.4 | ) | $ | (9.6 | ) | $ | (21.5 | ) |
For the Nine Months Ended September 30, 2013 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | ||||||||||||
Allowance for uncollectible loans and fees receivable: | ||||||||||||||||
Balance at beginning of period | $ | (4.6 | ) | $ | (3.1 | ) | $ | (3.5 | ) | $ | (11.2 | ) | ||||
Provision for loan losses | (11.6 | ) | 0.2 | (9.2 | ) | (20.6 | ) | |||||||||
Charge offs | 5.8 | 2.9 | 3.2 | 11.9 | ||||||||||||
Recoveries | (0.1 | ) | (1.4 | ) | (0.1 | ) | (1.6 | ) | ||||||||
Balance at end of period | $ | (10.5 | ) | $ | (1.4 | ) | $ | (9.6 | ) | $ | (21.5 | ) | ||||
Balance at end of period individually evaluated for impairment | $ | — | $ | — | $ | — | $ | — | ||||||||
Balance at end of period collectively evaluated for impairment | $ | (10.5 | ) | $ | (1.4 | ) | $ | (9.6 | ) | $ | (21.5 | ) | ||||
Loans and fees receivable: | ||||||||||||||||
Loans and fees receivable, gross | $ | 19.6 | $ | 59.2 | $ | 38.2 | $ | 117.0 | ||||||||
Loans and fees receivable individually evaluated for impairment | $ | — | $ | — | $ | — | $ | — | ||||||||
Loans and fees receivable collectively evaluated for impairment | $ | 19.6 | $ | 59.2 | $ | 38.2 | $ | 117.0 |
For the Three Months Ended September 30, 2012 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | ||||||||||||
Allowance for uncollectible loans and fees receivable: | ||||||||||||||||
Balance at beginning of period | $ | (10.5 | ) | $ | (4.5 | ) | $ | (2.0 | ) | $ | (17.0 | ) | ||||
Provision for loan losses (includes $0.7 million of provision netted within income from discontinued operations) | (4.1 | ) | (0.3 | ) | (1.7 | ) | (6.1 | ) | ||||||||
Charge offs | 3.4 | 1.4 | 0.7 | 5.5 | ||||||||||||
Recoveries | (0.1 | ) | (0.7 | ) | — | (0.8 | ) | |||||||||
Sale of assets | 3.6 | — | — | 3.6 | ||||||||||||
Balance at end of period | $ | (7.7 | ) | $ | (4.1 | ) | $ | (3.0 | ) | $ | (14.8 | ) | ||||
Balance at end of period individually evaluated for impairment | $ | — | $ | — | $ | — | $ | — | ||||||||
Balance at end of period collectively evaluated for impairment | $ | (7.7 | ) | $ | (4.1 | ) | $ | (3.0 | ) | $ | (14.8 | ) |
For the Nine Months Ended September 30, 2012 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | ||||||||||||
Allowance for uncollectible loans and fees receivable: | ||||||||||||||||
Balance at beginning of period | $ | (4.0 | ) | $ | (8.4 | ) | $ | (2.3 | ) | $ | (14.7 | ) | ||||
Provision for loan losses (includes $2.6 million of provision netted within income from discontinued operations) | (13.0 | ) | 1.0 | (4.4 | ) | (16.4 | ) | |||||||||
Charge offs | 6.4 | 6.1 | 3.7 | 16.2 | ||||||||||||
Recoveries | (0.7 | ) | (2.8 | ) | — | (3.5 | ) | |||||||||
Sale of assets | 3.6 | — | — | 3.6 | ||||||||||||
Balance at end of period | $ | (7.7 | ) | $ | (4.1 | ) | $ | (3.0 | ) | $ | (14.8 | ) | ||||
Balance at end of period individually evaluated for impairment | $ | — | $ | — | $ | — | $ | — | ||||||||
Balance at end of period collectively evaluated for impairment | $ | (7.7 | ) | $ | (4.1 | ) | $ | (3.0 | ) | $ | (14.8 | ) | ||||
Loans and fees receivable: | ||||||||||||||||
Loans and fees receivable, gross | $ | 9.9 | $ | 68.4 | $ | 14.3 | $ | 92.6 | ||||||||
Loans and fees receivable individually evaluated for impairment | $ | — | $ | 0.1 | $ | — | $ | 0.1 | ||||||||
Loans and fees receivable collectively evaluated for impairment | $ | 9.9 | $ | 68.3 | $ | 14.3 | $ | 92.5 |
September 30, 2013 | December 31, 2012 | ||||||
Current loans receivable | $ | 91.7 | $ | 71.4 | |||
Current fees receivable | 5.4 | 0.8 | |||||
Delinquent loans and fees receivable | 19.9 | 16.9 | |||||
Loans and fees receivable, gross | $ | 117.0 | $ | 89.1 |
Balance at September 30, 2013 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | ||||||||||||
30-59 days past due | $ | 1.8 | $ | 4.8 | $ | 1.6 | $ | 8.2 | ||||||||
60-89 days past due | 1.9 | 1.6 | 1.2 | 4.7 | ||||||||||||
90 or more days past due | 3.7 | 0.9 | 2.4 | 7.0 | ||||||||||||
Delinquent loans and fees receivable, gross | 7.4 | 7.3 | 5.2 | 19.9 | ||||||||||||
Current loans and fees receivable, gross | 12.2 | 51.9 | 33.0 | 97.1 | ||||||||||||
Total loans and fees receivable, gross | $ | 19.6 | $ | 59.2 | $ | 38.2 | $ | 117.0 | ||||||||
Balance of loans 90 or more days past due and still accruing interest and fees | $ | — | $ | 0.1 | $ | — | $ | 0.1 | ||||||||
Balance at December 31, 2012 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | ||||||||||||
30-59 days past due | $ | 0.7 | $ | 5.4 | $ | 0.6 | $ | 6.7 | ||||||||
60-89 days past due | 1.0 | 2.0 | 0.5 | 3.5 | ||||||||||||
90 or more days past due | 4.2 | 1.6 | 0.9 | 6.7 | ||||||||||||
Delinquent loans and fees receivable, gross | 5.9 | 9.0 | 2.0 | 16.9 | ||||||||||||
Current loans and fees receivable, gross | 1.3 | 55.2 | 15.7 | 72.2 | ||||||||||||
Total loans and fees receivable, gross | $ | 7.2 | $ | 64.2 | $ | 17.7 | $ | 89.1 | ||||||||
Balance of loans 90 or more days past due and still accruing interest and fees | $ | — | $ | 0.5 | $ | — | $ | 0.5 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Fees on credit products | $ | 7,165 | $ | 6,312 | $ | 16,466 | $ | 13,306 | |||||||
Changes in fair value of loans and fees receivable recorded at fair value | 9,296 | 10,742 | 34,361 | 93,613 | |||||||||||
Changes in fair value of notes payable associated with structured financings recorded at fair value | (3,535 | ) | (10,469 | ) | (19,110 | ) | (35,859 | ) | |||||||
Leased merchandise revenue | 5,446 | — | 5,446 | — | |||||||||||
Other | 10 | (1,886 | ) | (1,756 | ) | (2,063 | ) | ||||||||
Total fees and related income on earning assets | $ | 18,382 | $ | 4,699 | $ | 35,407 | $ | 68,997 |
3. | Discontinued Operations |
Three months ended September 30, 2012 | Nine months ended September 30, 2012 | ||||||
Net interest income, fees and related income on earning assets | $ | 5,605 | $ | 34,810 | |||
Other operating income | 167 | 2,327 | |||||
Other operating expense | (5,200 | ) | (25,415 | ) | |||
Gain on sale of assets | 49,579 | 49,579 | |||||
Income before income taxes | 50,151 | 61,301 | |||||
Income tax expense | (8,835 | ) | (12,737 | ) | |||
Net income | $ | 41,316 | $ | 48,564 | |||
Net income attributable to noncontrolling interests | $ | — | $ | — |
4. | Segment Reporting |
Three months ended September 30, 2013 | Credit Cards and Other Investments | Auto Finance | Total | |||||||||
Interest income: | ||||||||||||
Consumer loans, including past due fees | $ | 12,223 | $ | 5,752 | $ | 17,975 | ||||||
Other | 33 | — | 33 | |||||||||
Total interest income | 12,256 | 5,752 | 18,008 | |||||||||
Interest expense | (5,640 | ) | (359 | ) | (5,999 | ) | ||||||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable | $ | 6,616 | $ | 5,393 | $ | 12,009 | ||||||
Fees and related income on earning assets | $ | 18,323 | $ | 59 | $ | 18,382 | ||||||
Servicing income | $ | 1,476 | $ | 237 | $ | 1,713 | ||||||
Equity in income of equity-method investees | $ | 2,080 | $ | — | $ | 2,080 | ||||||
(Loss on) income from continuing operations before income taxes | $ | (8,194 | ) | $ | 752 | $ | (7,442 | ) | ||||
Income tax expense | $ | (1,157 | ) | $ | (286 | ) | $ | (1,443 | ) | |||
Total assets | $ | 299,199 | $ | 57,741 | $ | 356,940 |
Nine months ended September 30, 2013 | Credit Cards and Other Investments | Auto Finance | Total | |||||||||
Interest income: | ||||||||||||
Consumer loans, including past due fees | $ | 37,133 | $ | 17,347 | $ | 54,480 | ||||||
Other | 111 | 117 | 228 | |||||||||
Total interest income | 37,244 | 17,464 | 54,708 | |||||||||
Interest expense | (16,582 | ) | (1,055 | ) | (17,637 | ) | ||||||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable | $ | 20,662 | $ | 16,409 | $ | 37,071 | ||||||
Fees and related income (loss) on earning assets | $ | 37,644 | $ | (2,237 | ) | $ | 35,407 | |||||
Servicing income | $ | 6,280 | $ | 638 | $ | 6,918 | ||||||
Equity in income of equity-method investees | $ | 7,344 | $ | — | $ | 7,344 | ||||||
(Loss on) income from continuing operations before income taxes | $ | (20,959 | ) | $ | 1,648 | $ | (19,311 | ) | ||||
Income tax expense | $ | (1,336 | ) | $ | (1,015 | ) | $ | (2,351 | ) | |||
Total assets | $ | 299,199 | $ | 57,741 | $ | 356,940 |
Three months ended September 30, 2012 | Credit Cards and Other Investments | Auto Finance | Total | |||||||||
Interest income: | ||||||||||||
Consumer loans, including past due fees | $ | 14,190 | $ | 5,864 | $ | 20,054 | ||||||
Other | 256 | 67 | 323 | |||||||||
Total interest income | 14,446 | 5,931 | 20,377 | |||||||||
Interest expense | (5,497 | ) | (1,909 | ) | (7,406 | ) | ||||||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable | $ | 8,949 | $ | 4,022 | $ | 12,971 | ||||||
Fees and related income on earning assets | $ | 698 | $ | 4,001 | $ | 4,699 | ||||||
Servicing income | $ | 858 | $ | 144 | $ | 1,002 | ||||||
Equity in income of equity-method investees | $ | 356 | $ | — | $ | 356 | ||||||
Loss on continuing operations before income taxes | $ | (15,660 | ) | $ | (150 | ) | $ | (15,810 | ) | |||
Income tax benefit | $ | 7,849 | $ | (431 | ) | $ | 7,418 | |||||
Total assets | $ | 340,106 | $ | 66,506 | $ | 406,612 |
Nine months ended September 30, 2012 | Credit Cards and Other Investments | Auto Finance | Total | |||||||||
Interest income: | ||||||||||||
Consumer loans, including past due fees | $ | 49,360 | $ | 18,677 | $ | 68,037 | ||||||
Other | 531 | 200 | 731 | |||||||||
Total interest income | 49,891 | 18,877 | 68,768 | |||||||||
Interest expense | (20,034 | ) | (5,548 | ) | (25,582 | ) | ||||||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable | $ | 29,857 | $ | 13,329 | $ | 43,186 | ||||||
Fees and related income on earning assets | $ | 53,780 | $ | 15,217 | $ | 68,997 | ||||||
Servicing income | $ | 2,784 | $ | 450 | $ | 3,234 | ||||||
Equity in income of equity-method investees | $ | 9,912 | $ | — | $ | 9,912 | ||||||
(Loss on) income from continuing operations before income taxes | $ | (37,292 | ) | $ | 799 | $ | (36,493 | ) | ||||
Income tax benefit | $ | 11,822 | $ | (1,431 | ) | $ | 10,391 | |||||
Total assets | $ | 340,106 | $ | 66,506 | $ | 406,612 |
5. | Shareholders' Equity |
6. | Investments in Equity-Method Investees |
As of | |||||||
September 30, 2013 | December 31, 2012 | ||||||
Loans and fees receivable pledged as collateral under structured financings, at fair value | $ | 39,013 | $ | 53,375 | |||
Investments in non-marketable debt securities, at fair value | $ | 38,218 | $ | 46,564 | |||
Total assets | $ | 97,336 | $ | 114,375 | |||
Notes payable associated with structured financings, at fair value | $ | 16,211 | $ | 29,279 | |||
Total liabilities | $ | 16,444 | $ | 29,558 | |||
Members’ capital | $ | 80,892 | $ | 84,817 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net interest income, fees and related income on earning assets | $ | 3,026 | $ | 695 | $ | 13,600 | $ | 22,066 | |||||||
Total other operating income (loss) | $ | 2,057 | $ | (618 | ) | $ | 2,571 | $ | 311 | ||||||
Net income (loss) | $ | 4,648 | $ | (569 | ) | $ | 14,693 | $ | 20,135 | ||||||
Net income attributable to our equity investment in investee | $ | 2,080 | $ | 356 | $ | 7,344 | $ | 9,912 |
As of | |||||||
September 30, 2013 | December 31, 2012 | ||||||
Investments in non-marketable debt securities, at fair value | $ | 38,218 | $ | 46,564 | |||
Total assets | $ | 39,245 | $ | 47,125 | |||
Total liabilities | $ | — | $ | — | |||
Members’ capital | $ | 39,245 | $ | 47,125 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net interest income, fees and related (loss) income on earning assets | $ | (407 | ) | $ | 2,081 | $ | 5,859 | $ | 6,638 | ||||||
Net (loss) income | $ | (418 | ) | $ | 2,069 | $ | 5,825 | $ | 6,593 | ||||||
Net (loss) income attributable to our equity investment in investee | $ | (210 | ) | $ | 1,035 | $ | 2,912 | $ | 3,297 |
7. | Fair Values of Assets and Liabilities |
Assets – As of September 30, 2013 (1) | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Carrying Amount of Assets | ||||||||||||
Loans and fees receivable, net for which it is practicable to estimate fair value | $ | — | $ | — | $ | 90,580 | $ | 79,329 | ||||||||
Loans and fees receivable, net for which it is not practicable to estimate fair value (2) | $ | — | $ | — | $ | — | $ | 4,921 | ||||||||
Loans and fees receivable, at fair value | $ | — | $ | — | $ | 14,403 | $ | 14,403 | ||||||||
Loans and fees receivable pledged as collateral, at fair value | $ | — | $ | — | $ | 97,383 | $ | 97,383 |
Assets – As of December 31, 2012 (1) | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Carrying Amount of Assets | ||||||||||||
Loans and fees receivable, net for which it is practicable to estimate fair value | $ | — | $ | — | $ | 76,384 | $ | 65,198 | ||||||||
Loans and fees receivable, net for which it is not practicable to estimate fair value (2) | $ | — | $ | — | $ | — | $ | 4,427 | ||||||||
Loans and fees receivable, at fair value | $ | — | $ | — | $ | 20,378 | $ | 20,378 | ||||||||
Loans and fees receivable pledged as collateral, at fair value | $ | — | $ | — | $ | 133,595 | $ | 133,595 |
(1) | For cash, deposits and other short-term investments, the carrying amount is a reasonable estimate of fair value. |
(2) | We do not disclose fair value for this portion of our loans and fees receivable, net because it is not practicable to do so. These loans and fees receivable consist of a variety of receivables that are largely start-up in nature and for which we have neither sufficient history nor a comparable peer group from which we can calculate fair value. |
Loans and Fees Receivable, at Fair Value | Loans and Fees Receivable Pledged as Collateral under Structured Financings, at Fair Value | Total | |||||||||
Balance at January 1, 2013 | $ | 20,378 | $ | 133,595 | $ | 153,973 | |||||
Total gains—realized/unrealized: | |||||||||||
Net revaluations of loans and fees receivable pledged as collateral under structured financings, at fair value | — | 26,967 | 26,967 | ||||||||
Net revaluations of loans and fees receivable, at fair value | 7,394 | — | 7,394 | ||||||||
Settlements, net | (13,369 | ) | (62,621 | ) | (75,990 | ) | |||||
Impact of foreign currency translation | — | (558 | ) | (558 | ) | ||||||
Net transfers in and/or out of Level 3 | — | — | — | ||||||||
Balance at September 30, 2013 | $ | 14,403 | $ | 97,383 | $ | 111,786 | |||||
Balance at January 1, 2012 | $ | 28,226 | $ | 238,763 | $ | 266,989 | |||||
Total gains—realized/unrealized: | |||||||||||
Net revaluations of loans and fees receivable pledged as collateral under structured financings, at fair value | — | 83,041 | 83,041 | ||||||||
Net revaluations of loans and fees receivable, at fair value | 10,572 | — | 10,572 | ||||||||
Settlements, net | (19,513 | ) | (156,730 | ) | (176,243 | ) | |||||
Impact of foreign currency translation | — | 3,333 | 3,333 | ||||||||
Net transfers in and/or out of Level 3 | — | — | — | ||||||||
Balance at September 30, 2012 | $ | 19,285 | $ | 168,407 | $ | 187,692 |
Quantitative Information about Level 3 Fair Value Measurements | |||||||||||
Fair Value Measurements | Fair Value at September 30, 2013 | Valuation Technique | Unobservable Input | Range (Weighted Average)(1) | |||||||
Loans and fees receivable, at fair value | $ | 14,403 | Discounted cash flows | Gross yield | 23.9 | % | |||||
Principal payment rate | 3.6 | % | |||||||||
Expected credit loss rate | 15.2 | % | |||||||||
Servicing rate | 11.0 | % | |||||||||
Discount rate | 15.9 | % | |||||||||
Loans and fees receivable pledged as collateral under structured financings, at fair value | $ | 97,383 | Discounted cash flows | Gross yield | 9.8% to 27.5% (20.4%) | ||||||
Principal payment rate | 1.5% to 3.2% (2.5%) | ||||||||||
Expected credit loss rate | 14.2% to 18.0% (16.5%) | ||||||||||
Servicing rate | 7.4% to 8.3% (7.9%) | ||||||||||
Discount rate | 15.9% to 16.2% (16.0%) |
Liabilities – As of September 30, 2013 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Carrying Amount of Liabilities | ||||||||||||
Liabilities not carried at fair value | ||||||||||||||||
CAR revolving credit facility | $ | — | $ | — | $ | 20,000 | $ | 20,000 | ||||||||
ACC amortizing debt facility | $ | — | $ | — | $ | 1,348 | $ | 1,348 | ||||||||
Amortizing debt facility | $ | — | $ | — | $ | 18,731 | $ | 18,731 | ||||||||
Revolving credit facility | $ | — | $ | — | $ | 4,000 | $ | 4,000 | ||||||||
U.K. credit card accounts revolving credit facility | $ | — | $ | — | $ | 8,071 |