Page | ||||
PART I. FINANCIAL INFORMATION | ||||
Item 1. | Financial Statements (Unaudited) | |||
Consolidated Balance Sheets | ||||
Consolidated Statements of Operations | ||||
Consolidated Statements of Comprehensive Loss | ||||
Consolidated Statement of Shareholders' Equity | ||||
Consolidated Statements of Cash Flows | ||||
Notes to Consolidated Financial Statements | ||||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | |||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | |||
Item 4. | Controls and Procedures | |||
Part II. OTHER INFORMATION | ||||
Item 1. | Legal Proceedings | |||
Item 1A. | Risk Factors | |||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |||
Item 3. | Defaults Upon Senior Securities | |||
Item 4. | Mine Safety Disclosure | |||
Item 5. | Other Information | |||
Item 6. | Exhibits | |||
Signatures | ||||
ITEM 1. | FINANCIAL STATEMENTS |
June 30, 2014 | December 31, 2013 | ||||||
Assets | |||||||
Unrestricted cash and cash equivalents | $ | 32,921 | $ | 50,873 | |||
Restricted cash and cash equivalents | 19,093 | 18,871 | |||||
Loans and fees receivable: | |||||||
Loans and fees receivable, net (of $13,801 and $13,258 in deferred revenue and $20,386 and $24,214 in allowances for uncollectible loans and fees receivable at June 30, 2014 and December 31, 2013, respectively) | 95,445 | 97,208 | |||||
Loans and fees receivable, at fair value | 9,489 | 12,080 | |||||
Loans and fees receivable pledged as collateral under structured financings, at fair value | 71,688 | 88,132 | |||||
Rental merchandise, net of depreciation | 11,082 | 28,849 | |||||
Property at cost, net of depreciation | 10,636 | 8,937 | |||||
Investments in equity-method investees | 32,397 | 35,134 | |||||
Deposits | 2,402 | 1,908 | |||||
Prepaid expenses and other assets | 14,099 | 10,243 | |||||
Total assets | $ | 299,252 | $ | 352,235 | |||
Liabilities | |||||||
Accounts payable and accrued expenses | $ | 36,369 | $ | 48,625 | |||
Notes payable, at face value | 53,345 | 56,740 | |||||
Notes payable associated with structured financings, at fair value | 75,509 | 94,523 | |||||
Convertible senior notes | 96,254 | 95,934 | |||||
Income tax liability | 57,788 | 55,255 | |||||
Total liabilities | 319,265 | 351,077 | |||||
Commitments and contingencies (Note 9) | |||||||
Equity | |||||||
Common stock, no par value, 150,000,000 shares authorized: 15,446,175 shares issued and outstanding (including 1,459,233 loaned shares to be returned) at June 30, 2014; and 15,594,325 shares issued and outstanding (including 1,672,656 loaned shares to be returned) at December 31, 2013 | — | — | |||||
Additional paid-in capital | 211,020 | 210,315 | |||||
Accumulated other comprehensive loss | (267 | ) | (737 | ) | |||
Retained deficit | (230,766 | ) | (208,414 | ) | |||
Total shareholders’ equity | (20,013 | ) | 1,164 | ||||
Noncontrolling interests | — | (6 | ) | ||||
Total equity | (20,013 | ) | 1,158 | ||||
Total liabilities and equity | $ | 299,252 | $ | 352,235 |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Interest income: | |||||||||||||||
Consumer loans, including past due fees | $ | 17,387 | $ | 16,681 | $ | 37,344 | $ | 36,505 | |||||||
Other | 37 | 84 | 274 | 195 | |||||||||||
Total interest income | 17,424 | 16,765 | 37,618 | 36,700 | |||||||||||
Interest expense | (6,158 | ) | (5,866 | ) | (12,345 | ) | (11,638 | ) | |||||||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable | 11,266 | 10,899 | 25,273 | 25,062 | |||||||||||
Fees and related income on earning assets | 22,196 | 10,219 | 55,081 | 17,025 | |||||||||||
Losses upon charge off of loans and fees receivable recorded at fair value, net of recoveries | 50 | (4,351 | ) | (1,835 | ) | (10,149 | ) | ||||||||
Provision for losses on loans and fees receivable recorded at net realizable value | (6,731 | ) | (6,670 | ) | (14,606 | ) | (9,952 | ) | |||||||
Net interest income, fees and related income on earning assets | 26,781 | 10,097 | 63,913 | 21,986 | |||||||||||
Other operating income: | |||||||||||||||
Servicing income | 1,234 | 2,604 | 2,474 | 5,205 | |||||||||||
Other income | 254 | 316 | 1,321 | 2,452 | |||||||||||
Equity in income of equity-method investees | 841 | 957 | 3,247 | 5,264 | |||||||||||
Total other operating income | 2,329 | 3,877 | 7,042 | 12,921 | |||||||||||
Other operating expense: | |||||||||||||||
Salaries and benefits | 4,664 | 4,371 | 9,762 | 8,780 | |||||||||||
Card and loan servicing | 12,956 | 10,849 | 26,734 | 21,528 | |||||||||||
Marketing and solicitation | 631 | 2,586 | 1,393 | 4,521 | |||||||||||
Depreciation | 16,573 | 418 | 42,281 | 791 | |||||||||||
Other | 4,791 | 5,078 | 10,331 | 11,156 | |||||||||||
Total other operating expense | 39,615 | 23,302 | 90,501 | 46,776 | |||||||||||
Loss before income taxes | (10,505 | ) | (9,328 | ) | (19,546 | ) | (11,869 | ) | |||||||
Income tax expense | (673 | ) | (462 | ) | (2,655 | ) | (908 | ) | |||||||
Net loss | (11,178 | ) | (9,790 | ) | (22,201 | ) | (12,777 | ) | |||||||
Net income attributable to noncontrolling interests | — | (59 | ) | (151 | ) | (80 | ) | ||||||||
Net loss attributable to controlling interests | $ | (11,178 | ) | $ | (9,849 | ) | $ | (22,352 | ) | $ | (12,857 | ) | |||
Net loss attributable to controlling interests per common share—basic | $ | (0.80 | ) | $ | (0.71 | ) | $ | (1.59 | ) | $ | (0.93 | ) | |||
Net loss attributable to controlling interests per common share—diluted | $ | (0.80 | ) | $ | (0.71 | ) | $ | (1.59 | ) | $ | (0.93 | ) |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Net loss | $ | (11,178 | ) | $ | (9,790 | ) | $ | (22,201 | ) | $ | (12,777 | ) | |||
Other comprehensive loss: | |||||||||||||||
Foreign currency translation adjustment | 386 | (117 | ) | 447 | (1,511 | ) | |||||||||
Income tax expense related to other comprehensive income | (11 | ) | 31 | 23 | 139 | ||||||||||
Comprehensive loss | (10,803 | ) | (9,876 | ) | (21,731 | ) | (14,149 | ) | |||||||
Comprehensive income attributable to noncontrolling interests | — | (59 | ) | (151 | ) | (80 | ) | ||||||||
Comprehensive loss attributable to controlling interests | $ | (10,803 | ) | $ | (9,935 | ) | $ | (21,882 | ) | $ | (14,229 | ) |
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, 2013 | 15,594,325 | $ | — | $ | 210,315 | $ | — | $ | (737 | ) | $ | (208,414 | ) | $ | (6 | ) | $ | 1,158 | ||||||||||||
Compensatory stock issuances, net of forfeitures | 77,600 | — | — | — | — | — | — | — | ||||||||||||||||||||||
Distributions to owners of noncontrolling interests | — | — | — | — | — | — | (145 | ) | (145 | ) | ||||||||||||||||||||
Amortization of deferred stock-based compensation costs | — | — | 736 | — | — | — | — | 736 | ||||||||||||||||||||||
Redemption and retirement of shares | (225,750 | ) | — | (31 | ) | — | — | — | — | (31 | ) | |||||||||||||||||||
Other comprehensive loss | — | — | — | — | 470 | (22,352 | ) | 151 | (21,731 | ) | ||||||||||||||||||||
Balance at June 30, 2014 | 15,446,175 | $ | — | $ | 211,020 | $ | — | $ | (267 | ) | $ | (230,766 | ) | $ | — | $ | (20,013 | ) |
For the Six Months Ended June 30, | |||||||
2014 | 2013 | ||||||
Operating activities | |||||||
Net loss | $ | (22,201 | ) | $ | (12,777 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Depreciation of rental merchandise | 40,746 | — | |||||
Depreciation, amortization and accretion, net | 643 | 656 | |||||
Losses upon charge off of loans and fees receivable recorded at fair value | 8,719 | 15,991 | |||||
Provision for losses on loans and fees receivable | 14,606 | 9,952 | |||||
Interest expense from accretion of discount on convertible senior notes | 321 | 293 | |||||
Income from accretion of discount associated with receivables purchases | (16,438 | ) | (13,919 | ) | |||
Unrealized gain on loans and fees receivable and underlying notes payable held at fair value | (4,359 | ) | (9,490 | ) | |||
Income from equity-method investments | (3,247 | ) | (5,264 | ) | |||
Other non-cash adjustments to income | — | 159 | |||||
Changes in assets and liabilities: | |||||||
Decrease (increase) in uncollected fees on earning assets | 121 | (295 | ) | ||||
Increase in income tax liability | 2,589 | 740 | |||||
(Increase) decrease in deposits | (494 | ) | 200 | ||||
Decrease (increase) in prepaid expenses | 217 | (83 | ) | ||||
Decrease in accounts payable and accrued expenses | (11,502 | ) | (3,558 | ) | |||
Additions to rental merchandise | (22,975 | ) | — | ||||
Other | (1,313 | ) | 3,183 | ||||
Net cash used in operating activities | (14,567 | ) | (14,212 | ) | |||
Investing activities | |||||||
Increase in restricted cash | (207 | ) | (2,127 | ) | |||
Investment in equity-method investees | — | (3,750 | ) | ||||
Proceeds from equity-method investees | 6,332 | 7,211 | |||||
Investments in earning assets | (100,915 | ) | (87,090 | ) | |||
Proceeds from earning assets | 122,617 | 121,761 | |||||
Purchases and development of property, net of disposals | (3,183 | ) | (1,362 | ) | |||
Net cash provided by investing activities | 24,644 | 34,643 | |||||
Financing activities | |||||||
Noncontrolling interests (distributions) contributions, net | (145 | ) | 26 | ||||
Purchase and retirement of outstanding stock | (31 | ) | (866 | ) | |||
Proceeds from borrowings | 28,322 | 21,198 | |||||
Repayment of borrowings | (56,445 | ) | (46,880 | ) | |||
Net cash used in financing activities | (28,299 | ) | (26,522 | ) | |||
Effect of exchange rate changes on cash | 270 | (867 | ) | ||||
Net decrease in unrestricted cash | (17,952 | ) | (6,958 | ) | |||
Unrestricted cash and cash equivalents at beginning of period | 50,873 | 67,915 | |||||
Unrestricted cash and cash equivalents at end of period | $ | 32,921 | $ | 60,957 | |||
Supplemental cash flow information | |||||||
Cash paid for interest | $ | 18,602 | $ | 11,287 | |||
Net cash income tax payments | $ | 66 | $ | 168 | |||
Supplemental non-cash information | |||||||
Issuance of stock options and restricted stock | $ | 931 | $ | 522 | |||
Notes payable associated with capital leases | $ | 159 | $ | 148 |
1. | Description of Our Business |
2. | Significant Accounting Policies and Consolidated Financial Statement Components |
Balance at December 31, 2013 | Additions | Subtractions | Balance at June 30, 2014 | ||||||||||||
Loans and fees receivable, gross | $ | 134.7 | $ | 134.9 | $ | (140.0 | ) | $ | 129.6 | ||||||
Deferred revenue | (13.3 | ) | (17.0 | ) | 16.5 | (13.8 | ) | ||||||||
Allowance for uncollectible loans and fees receivable | (24.2 | ) | (14.6 | ) | 18.4 | (20.4 | ) | ||||||||
Loans and fees receivable, net | $ | 97.2 | $ | 103.3 | $ | (105.1 | ) | $ | 95.4 | ||||||
Balance at December 31, 2012 | Additions | Subtractions | Balance at June 30, 2013 | ||||||||||||
Loans and fees receivable, gross | $ | 89.1 | $ | 109.2 | $ | (98.8 | ) | $ | 99.5 | ||||||
Deferred revenue | (8.3 | ) | (15.1 | ) | 13.9 | (9.5 | ) | ||||||||
Allowance for uncollectible loans and fees receivable | (11.2 | ) | (10.0 | ) | 7.6 | (13.6 | ) | ||||||||
Loans and fees receivable, net | $ | 69.6 | $ | 84.1 | $ | (77.3 | ) | $ | 76.4 |
For the Three Months Ended June 30, 2014 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | ||||||||||||
Allowance for uncollectible loans and fees receivable: | ||||||||||||||||
Balance at beginning of period | $ | (10.9 | ) | $ | (1.4 | ) | $ | (10.8 | ) | $ | (23.1 | ) | ||||
Provision for loan losses | (2.8 | ) | (0.1 | ) | (3.8 | ) | (6.7 | ) | ||||||||
Charge offs | 5.3 | 0.4 | 4.2 | 9.9 | ||||||||||||
Recoveries | (0.1 | ) | (0.3 | ) | (0.1 | ) | (0.5 | ) | ||||||||
Balance at end of period | $ | (8.5 | ) | $ | (1.4 | ) | $ | (10.5 | ) | $ | (20.4 | ) |
For the Six Months Ended June 30, 2014 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | ||||||||||||
Allowance for uncollectible loans and fees receivable: | ||||||||||||||||
Balance at beginning of period | $ | (11.6 | ) | $ | (1.4 | ) | $ | (11.2 | ) | $ | (24.2 | ) | ||||
Provision for loan losses | (7.0 | ) | 0.1 | (7.7 | ) | (14.6 | ) | |||||||||
Charge offs | 10.3 | 0.5 | 8.7 | 19.5 | ||||||||||||
Recoveries | (0.2 | ) | (0.6 | ) | (0.3 | ) | (1.1 | ) | ||||||||
Balance at end of period | $ | (8.5 | ) | $ | (1.4 | ) | $ | (10.5 | ) | $ | (20.4 | ) | ||||
Balance at end of period individually evaluated for impairment | $ | — | $ | (0.1 | ) | $ | (0.2 | ) | $ | (0.3 | ) | |||||
Balance at end of period collectively evaluated for impairment | $ | (8.5 | ) | $ | (1.3 | ) | $ | (10.3 | ) | $ | (20.1 | ) | ||||
Loans and fees receivable: | ||||||||||||||||
Loans and fees receivable, gross | $ | 14.5 | $ | 64.0 | $ | 51.1 | $ | 129.6 | ||||||||
Loans and fees receivable individually evaluated for impairment | $ | — | $ | 0.2 | $ | 0.3 | $ | 0.5 | ||||||||
Loans and fees receivable collectively evaluated for impairment | $ | 14.5 | $ | 63.8 | $ | 50.8 | $ | 129.1 |
For the Three Months Ended June 30, 2013 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | ||||||||||||
Allowance for uncollectible loans and fees receivable: | ||||||||||||||||
Balance at beginning of period | $ | (4.0 | ) | $ | (2.6 | ) | $ | (3.5 | ) | $ | (10.1 | ) | ||||
Provision for loan losses | (3.7 | ) | 0.5 | (3.5 | ) | (6.7 | ) | |||||||||
Charge offs | 1.5 | 1.2 | 1.0 | 3.7 | ||||||||||||
Recoveries | (0.1 | ) | (0.3 | ) | (0.1 | ) | (0.5 | ) | ||||||||
Balance at end of period | $ | (6.3 | ) | $ | (1.2 | ) | $ | (6.1 | ) | $ | (13.6 | ) |
For the Six Months Ended June 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 | (5.9 | ) | 0.7 | (4.8 | ) | (10.0 | ) | |||||||||
Charge offs | 4.3 | 2.3 | 2.3 | 8.9 | ||||||||||||
Recoveries | (0.1 | ) | (1.1 | ) | (0.1 | ) | (1.3 | ) | ||||||||
Balance at end of period | $ | (6.3 | ) | $ | (1.2 | ) | $ | (6.1 | ) | $ | (13.6 | ) | ||||
Balance at end of period individually evaluated for impairment | $ | — | $ | — | $ | — | $ | — | ||||||||
Balance at end of period collectively evaluated for impairment | $ | (6.3 | ) | $ | (1.2 | ) | $ | (6.1 | ) | $ | (13.6 | ) | ||||
Loans and fees receivable: | ||||||||||||||||
Loans and fees receivable, gross | $ | 13.2 | $ | 60.7 | $ | 25.6 | $ | 99.5 | ||||||||
Loans and fees receivable individually evaluated for impairment | $ | — | $ | — | $ | — | $ | — | ||||||||
Loans and fees receivable collectively evaluated for impairment | $ | 13.2 | $ | 60.7 | $ | 25.6 | $ | 99.5 |
June 30, 2014 | December 31, 2013 | ||||||
Current loans receivable | $ | 101.1 | $ | 103.3 | |||
Current fees receivable | 4.6 | 6.0 | |||||
Delinquent loans and fees receivable | 23.9 | 25.4 | |||||
Loans and fees receivable, gross | $ | 129.6 | $ | 134.7 |
Balance at June 30, 2014 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | ||||||||||||
30-59 days past due | $ | 1.1 | $ | 6.1 | $ | 2.6 | $ | 9.8 | ||||||||
60-89 days past due | 1.2 | 2.1 | 2.0 | 5.3 | ||||||||||||
90 or more days past due | 4.6 | 1.2 | 3.0 | 8.8 | ||||||||||||
Delinquent loans and fees receivable, gross | 6.9 | 9.4 | 7.6 | 23.9 | ||||||||||||
Current loans and fees receivable, gross | 7.6 | 54.6 | 43.5 | 105.7 | ||||||||||||
Total loans and fees receivable, gross | $ | 14.5 | $ | 64.0 | $ | 51.1 | $ | 129.6 | ||||||||
Balance of loans 90 or more days past due and still accruing interest and fees | $ | — | $ | 1.2 | $ | 3.0 | $ | 4.2 | ||||||||
Balance at December 31, 2013 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | ||||||||||||
30-59 days past due | $ | 1.6 | $ | 5.6 | $ | 2.5 | $ | 9.7 | ||||||||
60-89 days past due | 1.9 | 1.7 | 2.2 | 5.8 | ||||||||||||
90 or more days past due | 5.6 | 1.1 | 3.2 | 9.9 | ||||||||||||
Delinquent loans and fees receivable, gross | 9.1 | 8.4 | 7.9 | 25.4 | ||||||||||||
Current loans and fees receivable, gross | 12.8 | 55.1 | 41.4 | 109.3 | ||||||||||||
Total loans and fees receivable, gross | $ | 21.9 | $ | 63.5 | $ | 49.3 | $ | 134.7 | ||||||||
Balance of loans 90 or more days past due and still accruing interest and fees | $ | — | $ | 0.1 | $ | 3.2 | $ | 3.3 |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Fees on credit products | $ | 6,407 | $ | 5,385 | $ | 11,794 | $ | 9,301 | |||||||
Changes in fair value of loans and fees receivable recorded at fair value | 1,975 | 8,342 | 6,667 | 25,065 | |||||||||||
Changes in fair value of notes payable associated with structured financings recorded at fair value | (1,151 | ) | (970 | ) | (2,308 | ) | (15,575 | ) | |||||||
Rental revenue | 14,710 | — | 36,643 | — | |||||||||||
Other | 255 | (2,538 | ) | 2,285 | (1,766 | ) | |||||||||
Total fees and related income on earning assets | $ | 22,196 | $ | 10,219 | $ | 55,081 | $ | 17,025 |
3. | Segment Reporting |
Three months ended June 30, 2014 | Credit and Other Investments | Auto Finance | Total | |||||||||
Interest income: | ||||||||||||
Consumer loans, including past due fees | $ | 11,492 | $ | 5,895 | $ | 17,387 | ||||||
Other | 37 | — | 37 | |||||||||
Total interest income | 11,529 | 5,895 | 17,424 | |||||||||
Interest expense | (5,812 | ) | (346 | ) | (6,158 | ) | ||||||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable | $ | 5,717 | $ | 5,549 | $ | 11,266 | ||||||
Fees and related income on earning assets | $ | 22,155 | $ | 41 | $ | 22,196 | ||||||
Servicing income | $ | 1,075 | $ | 159 | $ | 1,234 | ||||||
Depreciation of rental merchandise | (15,735 | ) | — | (15,735 | ) | |||||||
Equity in income of equity-method investees | $ | 841 | $ | — | $ | 841 | ||||||
(Loss) income before income taxes | $ | (11,661 | ) | $ | 1,156 | $ | (10,505 | ) | ||||
Income tax expense | $ | (316 | ) | $ | (357 | ) | $ | (673 | ) |
Six months ended June 30, 2014 | Credit and Other Investments | Auto Finance | Total | |||||||||
Interest income: | ||||||||||||
Consumer loans, including past due fees | $ | 25,888 | $ | 11,456 | $ | 37,344 | ||||||
Other | 274 | — | 274 | |||||||||
Total interest income | 26,162 | 11,456 | 37,618 | |||||||||
Interest expense | (11,644 | ) | (701 | ) | (12,345 | ) | ||||||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable | $ | 14,518 | $ | 10,755 | $ | 25,273 | ||||||
Fees and related income on earning assets | $ | 54,957 | $ | 124 | $ | 55,081 | ||||||
Servicing income | $ | 2,130 | $ | 344 | $ | 2,474 | ||||||
Depreciation of rental merchandise | (40,746 | ) | — | (40,746 | ) | |||||||
Equity in income of equity-method investees | $ | 3,247 | $ | — | $ | 3,247 | ||||||
(Loss) income before income taxes | $ | (21,724 | ) | $ | 2,178 | $ | (19,546 | ) | ||||
Income tax expense | $ | (1,971 | ) | $ | (684 | ) | $ | (2,655 | ) | |||
Total assets | $ | 237,163 | $ | 62,089 | $ | 299,252 |
Three months ended June 30, 2013 | Credit and Other Investments | Auto Finance | Total | |||||||||
Interest income: | ||||||||||||
Consumer loans, including past due fees | $ | 10,866 | $ | 5,815 | $ | 16,681 | ||||||
Other | 37 | 47 | 84 | |||||||||
Total interest income | 10,903 | 5,862 | 16,765 | |||||||||
Interest expense | (5,603 | ) | (263 | ) | (5,866 | ) | ||||||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable | $ | 5,300 | $ | 5,599 | $ | 10,899 | ||||||
Fees and related income on earning assets | $ | 12,581 | $ | (2,362 | ) | $ | 10,219 | |||||
Servicing income | $ | 2,404 | $ | 200 | $ | 2,604 | ||||||
Depreciation of rental merchandise | — | — | — | |||||||||
Equity in income of equity-method investees | $ | 957 | $ | — | $ | 957 | ||||||
(Loss) income before income taxes | $ | (8,794 | ) | $ | (534 | ) | $ | (9,328 | ) | |||
Income tax expense | $ | (101 | ) | $ | (361 | ) | $ | (462 | ) |
Six months ended June 30, 2013 | Credit and Other Investments | Auto Finance | Total | |||||||||
Interest income: | ||||||||||||
Consumer loans, including past due fees | $ | 24,910 | $ | 11,595 | $ | 36,505 | ||||||
Other | 78 | 117 | 195 | |||||||||
Total interest income | 24,988 | 11,712 | 36,700 | |||||||||
Interest expense | (10,942 | ) | (696 | ) | (11,638 | ) | ||||||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable | $ | 14,046 | $ | 11,016 | $ | 25,062 | ||||||
Fees and related income on earning assets | $ | 19,321 | $ | (2,296 | ) | $ | 17,025 | |||||
Servicing income | $ | 4,804 | $ | 401 | $ | 5,205 | ||||||
Depreciation of rental merchandise | — | — | — | |||||||||
Equity in income of equity-method investees | $ | 5,264 | $ | — | $ | 5,264 | ||||||
(Loss) income before income taxes | $ | (12,765 | ) | $ | 896 | $ | (11,869 | ) | ||||
Income tax expense | $ | (179 | ) | $ | (729 | ) | $ | (908 | ) | |||
Total assets | $ | 292,342 | $ | 59,088 | $ | 351,430 |
4. | Shareholders' Equity |
5. | Investments in Equity-Method Investees |
As of | |||||||
June 30, 2014 | December 31, 2013 | ||||||
Loans and fees receivable pledged as collateral under structured financings, at fair value | $ | 28,762 | $ | 35,241 | |||
Investments in non-marketable debt securities, at fair value | $ | 30,120 | $ | 36,158 | |||
Total assets | $ | 60,831 | $ | 74,145 | |||
Notes payable associated with structured financings, at fair value | $ | 4,576 | $ | 12,125 | |||
Total liabilities | $ | 4,676 | $ | 12,251 | |||
Members’ capital | $ | 56,155 | $ | 61,894 |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Net interest income, fees and related income on earning assets | $ | 1,193 | $ | 1,937 | $ | 5,309 | $ | 10,574 | |||||||
Total other operating income | $ | 44 | $ | 176 | $ | 93 | $ | 514 | |||||||
Net income | $ | 896 | $ | 1,631 | $ | 4,676 | $ | 10,045 | |||||||
Net income attributable to our equity investment in investee | $ | 841 | $ | 957 | $ | 3,247 | $ | 5,264 |
As of | |||||||
June 30, 2014 | December 31, 2013 | ||||||
Investments in non-marketable debt securities, at fair value | $ | 30,120 | $ | 36,158 | |||
Total assets | $ | 30,241 | $ | 36,770 | |||
Total liabilities | $ | — | $ | — | |||
Members’ capital | $ | 30,241 | $ | 36,770 |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Net interest income, fees and related income on earning assets | $ | (287 | ) | $ | (964 | ) | $ | 1,698 | $ | 6,266 | |||||
Net (loss) income | $ | (300 | ) | $ | (976 | ) | $ | 1,674 | $ | 6,243 | |||||
Net (loss) income attributable to our equity investment in investee | $ | (150 | ) | $ | (487 | ) | $ | 837 | $ | 3,122 |
6. | Fair Values of Assets and Liabilities |
Assets – As of June 30, 2014 (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 | $ | — | $ | — | $ | 104,188 | $ | 88,990 | ||||||||
Loans and fees receivable, net for which it is not practicable to estimate fair value (2) | $ | — | $ | — | $ | — | $ | 6,455 | ||||||||
Loans and fees receivable, at fair value | $ | — | $ | — | $ | 9,489 | $ | 9,489 | ||||||||
Loans and fees receivable pledged as collateral, at fair value | $ | — | $ | — | $ | 71,688 | $ | 71,688 |
Assets – As of December 31, 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 | $ | — | $ | — | $ | 94,579 | $ | 92,924 | ||||||||
Loans and fees receivable, net for which it is not practicable to estimate fair value (2) | $ | — | $ | — | $ | — | $ | 4,284 | ||||||||
Loans and fees receivable, at fair value | $ | — | $ | — | $ | 12,080 | $ | 12,080 | ||||||||
Loans and fees receivable pledged as collateral, at fair value | $ | — | $ | — | $ | 88,132 | $ | 88,132 |
(1) | For cash, deposits and other short-term investments (including our investments in rental merchandise), 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, 2014 | $ | 12,080 | $ | 88,132 | $ | 100,212 | |||||
Total gains—realized/unrealized: | |||||||||||
Net revaluations of loans and fees receivable pledged as collateral under structured financings, at fair value | — | 4,867 | 4,867 | ||||||||
Net revaluations of loans and fees receivable, at fair value | 1,800 | — | 1,800 | ||||||||
Settlements, net | (4,391 | ) | (22,315 | ) | (26,706 | ) | |||||
Impact of foreign currency translation | — | 1,004 | 1,004 | ||||||||
Net transfers in and/or out of Level 3 | — | — | — | ||||||||
Balance at June 30, 2014 | $ | 9,489 | $ | 71,688 | $ | 81,177 | |||||
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 | — | 19,789 | 19,789 | ||||||||
Net revaluations of loans and fees receivable, at fair value | 5,276 | — | 5,276 | ||||||||
Settlements, net | (9,992 | ) | (43,553 | ) | (53,545 | ) | |||||
Impact of foreign currency translation | — | (2,573 | ) | (2,573 | ) | ||||||
Net transfers in and/or out of Level 3 | — | — | — | ||||||||
Balance at June 30, 2013 | $ | 15,662 | $ | 107,258 | $ | 122,920 |
Quantitative Information about Level 3 Fair Value Measurements | |||||||||||
Fair Value Measurements | Fair Value at June 30, 2014 | Valuation Technique | Unobservable Input | Range (Weighted Average)(1) | |||||||
Loans and fees receivable, at fair value | $ | 9,489 | Discounted cash flows | Gross yield | 25.1 | % | |||||
Principal payment rate | 3.5 | % | |||||||||
Expected credit loss rate | 13.9 | % | |||||||||
Servicing rate | 12.2 | % | |||||||||
Discount rate | 15.9 | % | |||||||||
Loans and fees receivable pledged as collateral under structured financings, at fair value | $ | 71,688 | Discounted cash flows | Gross yield | 11.9% to 27.7% (20.8%) | ||||||
Principal payment rate | 1.7% to 3.2% (2.5%) | ||||||||||
Expected credit loss rate | 6.9% to 17.0% (12.6%) | ||||||||||
Servicing rate | 8.5% to 12.4% (10.2%) | ||||||||||
Discount rate | 15.9% to 16.2% (16.0%) |
Quantitative Information about Level 3 Fair Value Measurements | |||||||||||
Fair Value Measurements | Fair Value at December 31, 2013 | Valuation Technique | Unobservable Input | Range (Weighted Average)(1) | |||||||
Loans and fees receivable, at fair value | $ | 12,080 | Discounted cash flows | Gross yield | 23.7 | % | |||||
Principal payment rate | 3.5 | % | |||||||||
Expected credit loss rate | 14.6 | % | |||||||||
Servicing rate | 14.0 | % | |||||||||
Discount rate | 15.9 | % | |||||||||
Loans and fees receivable pledged as collateral under structured financings, at fair value | $ | 88,132 | Discounted cash flows | Gross yield | 17.0% to 27.5% (23.4%) | ||||||
Principal payment rate | 1.7% to 3.2% (2.6%) | ||||||||||
Expected credit loss rate | 9.9% to 18.0% (14.9%) | ||||||||||
Servicing rate | 9.4% to 11.8% (10.3%) | ||||||||||
Discount rate | 15.9% to 16.2% (16.0%) |
Liabilities – As of June 30, 2014 | 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 | $ | — | $ | — | $ | 25,500 | $ | 25,500 | ||||||||
ACC amortizing debt facility | $ | — | $ | — | $ | 415 | $ | 415 | ||||||||
Amortizing debt facilities | $ | — | $ | — | $ | 16,044 | $ | 16,044 | ||||||||
Revolving credit facility | $ | — | $ | — | $ | 4,000 | $ | 4,000 | ||||||||
U.K. credit card accounts revolving credit facility | $ | — | $ | — | $ | 7,226 | $ | 7,226 | ||||||||
5.875% convertible senior notes | $ | — | $ | 54,392 | $ | — | $ | 95,804 | ||||||||
Liabilities carried at fair value | ||||||||||||||||
Interest rate swap underlying CAR facility | $ | — | $ | 40 | $ | — | $ | 40 | ||||||||
Economic sharing arrangement liability | $ | — | $ | — | $ | 199 | $ | 199 | ||||||||
Notes payable associated with structured financings, at fair value | $ | — | $ | — | $ | 75,509 | $ | 75,509 |
Liabilities - As of December 31, 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 | $ | — | $ | — | $ | 22,000 | $ | 22,000 | ||||||||
ACC amortizing debt facility | $ | — | $ | — | $ | 928 | $ | 928 | ||||||||
Amortizing debt facilities | $ | — | $ | — | $ | 21,411 | $ | 21,411 | ||||||||
Revolving credit facility | $ | — | $ | — | $ | 4,000 | $ | 4,000 | ||||||||
U.K. credit card accounts revolving credit facility | $ | — | $ | — | $ | 8,245 | $ | 8,245 | ||||||||
5.875% convertible senior notes | $ | — | $ | 57,007 | $ | — | $ | 95,484 | ||||||||
Liabilities carried at fair value | ||||||||||||||||
Interest rate swap underlying CAR facility | $ | — | $ | 97 | $ | — | $ | 97 | ||||||||
Economic sharing arrangement liability | $ | — | $ | — | $ | 354 | $ | 354 | ||||||||
Notes payable associated with structured financings, at fair value | $ | — | $ | — | $ | 94,523 | $ | 94,523 |
Notes Payable Associated with Structured Financings, at Fair Value | |||||||
2014 | 2013 | ||||||
Beginning balance, January 1 | $ | 94,523 | $ | 140,127 | |||
Transfers in due to consolidation of equity-method investees | — | — | |||||
Total (gains) losses—realized/unrealized: | |||||||
Net revaluations of notes payable associated with structured financings, at fair value | 2,308 | 15,575 | |||||
Repayments on outstanding notes payable, net | (22,425 | ) | (39,388 | ) | |||
Impact of foreign currency translation | 1,103 | (2,701 | ) | ||||
Net transfers in and/or out of Level 3 | — |