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 |
September 30, 2014 | December 31, 2013 | ||||||
Assets | |||||||
Unrestricted cash and cash equivalents | $ | 38,187 | $ | 50,873 | |||
Restricted cash and cash equivalents | 22,875 | 18,871 | |||||
Loans and fees receivable: | |||||||
Loans and fees receivable, net (of $14,849 and $13,258 in deferred revenue and $19,969 and $24,214 in allowances for uncollectible loans and fees receivable at September 30, 2014 and December 31, 2013, respectively) | 101,486 | 97,208 | |||||
Loans and fees receivable, at fair value | 9,007 | 12,080 | |||||
Loans and fees receivable pledged as collateral under structured financings, at fair value | 64,971 | 88,132 | |||||
Rental merchandise, net of depreciation | 12,268 | 28,849 | |||||
Property at cost, net of depreciation | 10,050 | 8,937 | |||||
Investments in equity-method investees | 31,402 | 35,134 | |||||
Deposits | 2,014 | 1,908 | |||||
Prepaid expenses and other assets | 10,135 | 10,243 | |||||
Total assets | $ | 302,395 | $ | 352,235 | |||
Liabilities | |||||||
Accounts payable and accrued expenses | $ | 32,730 | $ | 48,625 | |||
Notes payable, at face value | 71,304 | 56,740 | |||||
Notes payable associated with structured financings, at fair value | 69,657 | 94,523 | |||||
Convertible senior notes | 96,365 | 95,934 | |||||
Income tax liability | 58,700 | 55,255 | |||||
Total liabilities | 328,756 | 351,077 | |||||
Commitments and contingencies (Note 9) | |||||||
Equity | |||||||
Common stock, no par value, 150,000,000 shares authorized: 15,426,873 shares issued and outstanding (including 1,459,233 loaned shares to be returned) at September 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 | 211,339 | 210,315 | |||||
Accumulated other comprehensive loss | (1,090 | ) | (737 | ) | |||
Retained deficit | (236,612 | ) | (208,414 | ) | |||
Total shareholders’ equity | (26,363 | ) | 1,164 | ||||
Noncontrolling interests | 2 | (6 | ) | ||||
Total equity | (26,361 | ) | 1,158 | ||||
Total liabilities and equity | $ | 302,395 | $ | 352,235 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Interest income: | |||||||||||||||
Consumer loans, including past due fees | $ | 18,481 | $ | 17,975 | $ | 55,825 | $ | 54,480 | |||||||
Other | 51 | 33 | 325 | 228 | |||||||||||
Total interest income | 18,532 | 18,008 | 56,150 | 54,708 | |||||||||||
Interest expense | (6,106 | ) | (5,999 | ) | (18,451 | ) | (17,637 | ) | |||||||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable | 12,426 | 12,009 | 37,699 | 37,071 | |||||||||||
Fees and related income on earning assets | 20,669 | 18,382 | 75,750 | 35,407 | |||||||||||
Losses upon charge off of loans and fees receivable recorded at fair value, net of recoveries | 150 | (3,329 | ) | (1,685 | ) | (13,478 | ) | ||||||||
Provision for losses on loans and fees receivable recorded at net realizable value | (8,120 | ) | (10,681 | ) | (22,726 | ) | (20,633 | ) | |||||||
Net interest income, fees and related income on earning assets | 25,125 | 16,381 | 89,038 | 38,367 | |||||||||||
Other operating income: | |||||||||||||||
Servicing income | 1,058 | 1,713 | 3,532 | 6,918 | |||||||||||
Other income | 689 | 1,069 | 2,010 | 3,521 | |||||||||||
Equity in income of equity-method investees | 1,936 | 2,080 | 5,183 | 7,344 | |||||||||||
Total other operating income | 3,683 | 4,862 | 10,725 | 17,783 | |||||||||||
Other operating expense: | |||||||||||||||
Salaries and benefits | 4,544 | 4,421 | 14,306 | 13,201 | |||||||||||
Card and loan servicing | 11,383 | 11,732 | 38,117 | 33,260 | |||||||||||
Marketing and solicitation | 529 | 2,059 | 1,922 | 6,580 | |||||||||||
Depreciation | 11,285 | 5,108 | 53,566 | 5,899 | |||||||||||
Other | 5,973 | 5,365 | 16,304 | 16,521 | |||||||||||
Total other operating expense | 33,714 | 28,685 | 124,215 | 75,461 | |||||||||||
Loss before income taxes | (4,906 | ) | (7,442 | ) | (24,452 | ) | (19,311 | ) | |||||||
Income tax expense | (940 | ) | (1,443 | ) | (3,595 | ) | (2,351 | ) | |||||||
Net loss | (5,846 | ) | (8,885 | ) | (28,047 | ) | (21,662 | ) | |||||||
Net loss (income) attributable to noncontrolling interests | — | 1 | (151 | ) | (79 | ) | |||||||||
Net loss attributable to controlling interests | $ | (5,846 | ) | $ | (8,884 | ) | $ | (28,198 | ) | $ | (21,741 | ) | |||
Net loss attributable to controlling interests per common share—basic | $ | (0.42 | ) | $ | (0.65 | ) | $ | (2.01 | ) | $ | (1.58 | ) | |||
Net loss attributable to controlling interests per common share—diluted | $ | (0.42 | ) | $ | (0.65 | ) | $ | (2.01 | ) | $ | (1.58 | ) |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Net loss | $ | (5,846 | ) | $ | (8,885 | ) | $ | (28,047 | ) | $ | (21,662 | ) | |||
Other comprehensive loss: | |||||||||||||||
Foreign currency translation adjustment | (896 | ) | 1,476 | (449 | ) | (35 | ) | ||||||||
Income tax benefit (expense) related to other comprehensive income | 73 | (212 | ) | 96 | (73 | ) | |||||||||
Comprehensive loss | (6,669 | ) | (7,621 | ) | (28,400 | ) | (21,770 | ) | |||||||
Comprehensive loss (income) attributable to noncontrolling interests | — | 1 | (151 | ) | (79 | ) | |||||||||
Comprehensive loss attributable to controlling interests | $ | (6,669 | ) | $ | (7,620 | ) | $ | (28,551 | ) | $ | (21,849 | ) |
Common Stock | ||||||||||||||||||||||||||
Shares Issued | Amount | Additional Paid-In Capital | 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 | 65,600 | — | — | — | — | — | — | |||||||||||||||||||
Distributions to owners of noncontrolling interests | — | — | — | — | — | (143 | ) | (143 | ) | |||||||||||||||||
Amortization of deferred stock-based compensation costs | — | — | 1,076 | — | — | — | 1,076 | |||||||||||||||||||
Redemption and retirement of shares | (233,052 | ) | — | (52 | ) | — | — | — | (52 | ) | ||||||||||||||||
Other comprehensive loss | — | — | — | (353 | ) | (28,198 | ) | 151 | (28,400 | ) | ||||||||||||||||
Balance at September 30, 2014 | 15,426,873 | $ | — | $ | 211,339 | $ | (1,090 | ) | $ | (236,612 | ) | $ | 2 | $ | (26,361 | ) |
For the Nine Months Ended September 30, | |||||||
2014 | 2013 | ||||||
Operating activities | |||||||
Net loss | $ | (28,047 | ) | $ | (21,662 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Depreciation of rental merchandise | 51,064 | 4,637 | |||||
Depreciation, amortization and accretion, net | 1,545 | 1,060 | |||||
Losses upon charge off of loans and fees receivable recorded at fair value | 11,646 | 22,480 | |||||
Provision for losses on loans and fees receivable | 22,726 | 20,633 | |||||
Interest expense from accretion of discount on convertible senior notes | 486 | 445 | |||||
Income from accretion of discount associated with receivables purchases | (24,953 | ) | (21,721 | ) | |||
Unrealized gain on loans and fees receivable and underlying notes payable held at fair value | (6,923 | ) | (15,251 | ) | |||
Income from equity-method investments | (5,183 | ) | (7,344 | ) | |||
Changes in assets and liabilities: | |||||||
Decrease (increase) in uncollected fees on earning assets | 715 | (1,887 | ) | ||||
Increase in income tax liability | 3,524 | 2,196 | |||||
(Increase) decrease in deposits | (106 | ) | 10,085 | ||||
Decrease (increase) in prepaid expenses | 602 | (470 | ) | ||||
(Decrease) increase in accounts payable and accrued expenses | (11,807 | ) | 4,760 | ||||
Additions to rental merchandise | (34,479 | ) | (21,613 | ) | |||
Other | 574 | 3,467 | |||||
Net cash used in operating activities | (18,616 | ) | (20,185 | ) | |||
Investing activities | |||||||
Increase in restricted cash | (4,011 | ) | (6,037 | ) | |||
Investment in equity-method investees | — | (3,750 | ) | ||||
Proceeds from equity-method investees | 8,807 | 12,339 | |||||
Investments in earning assets | (160,942 | ) | (139,322 | ) | |||
Proceeds from earning assets | 185,381 | 181,302 | |||||
Purchases and development of property, net of disposals | (3,602 | ) | (2,040 | ) | |||
Net cash provided by investing activities | 25,633 | 42,492 | |||||
Financing activities | |||||||
Noncontrolling interests (distributions) contributions, net | (143 | ) | 26 | ||||
Purchase and retirement of outstanding stock | (52 | ) | (1,163 | ) | |||
Proceeds from borrowings | 64,396 | 36,187 | |||||
Repayment of borrowings | (83,564 | ) | (65,840 | ) | |||
Net cash used in financing activities | (19,363 | ) | (30,790 | ) | |||
Effect of exchange rate changes on cash | (340 | ) | 402 | ||||
Net decrease in unrestricted cash | (12,686 | ) | (8,081 | ) | |||
Unrestricted cash and cash equivalents at beginning of period | 50,873 | 67,915 | |||||
Unrestricted cash and cash equivalents at end of period | $ | 38,187 | $ | 59,834 | |||
Supplemental cash flow information | |||||||
Cash paid for interest | $ | 20,159 | $ | 19,176 | |||
Net cash income tax payments | $ | 71 | $ | 154 |
Supplemental non-cash information | |||||||
Issuance of stock options and restricted stock | $ | 931 | $ | 522 | |||
Notes payable associated with capital leases | $ | 160 | $ | 152 |
1. | Description of Our Business |
2. | Significant Accounting Policies and Consolidated Financial Statement Components |
Balance at December 31, 2013 | Additions | Subtractions | Balance at September 30, 2014 | ||||||||||||
Loans and fees receivable, gross | $ | 134.7 | $ | 211.8 | $ | (210.2 | ) | $ | 136.3 | ||||||
Deferred revenue | (13.3 | ) | (26.6 | ) | 25.1 | (14.8 | ) | ||||||||
Allowance for uncollectible loans and fees receivable | (24.2 | ) | (22.7 | ) | 26.9 | (20.0 | ) | ||||||||
Loans and fees receivable, net | $ | 97.2 | $ | 162.5 | $ | (158.2 | ) | $ | 101.5 | ||||||
Balance at December 31, 2012 | Additions | Subtractions | 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 |
For the Three Months Ended September 30, 2014 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | ||||||||||||
Allowance for uncollectible loans and fees receivable: | ||||||||||||||||
Balance at beginning of period | $ | (8.5 | ) | $ | (1.4 | ) | $ | (10.5 | ) | $ | (20.4 | ) | ||||
Provision for loan losses | (1.2 | ) | (0.3 | ) | (6.6 | ) | (8.1 | ) | ||||||||
Charge offs | 4.8 | 0.7 | 3.6 | 9.1 | ||||||||||||
Recoveries | (0.1 | ) | (0.3 | ) | (0.2 | ) | (0.6 | ) | ||||||||
Balance at end of period | $ | (5.0 | ) | $ | (1.3 | ) | $ | (13.7 | ) | $ | (20.0 | ) |
For the Nine Months Ended September 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 | (8.2 | ) | (0.2 | ) | (14.3 | ) | (22.7 | ) | ||||||||
Charge offs | 15.1 | 1.2 | 12.3 | 28.6 | ||||||||||||
Recoveries | (0.3 | ) | (0.9 | ) | (0.5 | ) | (1.7 | ) | ||||||||
Balance at end of period | $ | (5.0 | ) | $ | (1.3 | ) | $ | (13.7 | ) | $ | (20.0 | ) | ||||
Balance at end of period individually evaluated for impairment | $ | — | $ | (0.1 | ) | $ | (0.3 | ) | $ | (0.4 | ) | |||||
Balance at end of period collectively evaluated for impairment | $ | (5.0 | ) | $ | (1.2 | ) | $ | (13.4 | ) | $ | (19.6 | ) | ||||
Loans and fees receivable: | ||||||||||||||||
Loans and fees receivable, gross | $ | 9.6 | $ | 68.1 | $ | 58.6 | $ | 136.3 | ||||||||
Loans and fees receivable individually evaluated for impairment | $ | — | $ | 0.2 | $ | 0.3 | $ | 0.5 | ||||||||
Loans and fees receivable collectively evaluated for impairment | $ | 9.6 | $ | 67.9 | $ | 58.3 | $ | 135.8 |
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 | ) |
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 |
September 30, 2014 | December 31, 2013 | ||||||
Current loans receivable | $ | 109.2 | $ | 103.3 | |||
Current fees receivable | 3.9 | 6.0 | |||||
Delinquent loans and fees receivable | 23.2 | 25.4 | |||||
Loans and fees receivable, gross | $ | 136.3 | $ | 134.7 |
Balance at September 30, 2014 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | ||||||||||||
30-59 days past due | $ | 0.6 | $ | 5.8 | $ | 2.7 | $ | 9.1 | ||||||||
60-89 days past due | 0.7 | 2.0 | 2.3 | 5.0 | ||||||||||||
90 or more days past due | 2.9 | 1.8 | 4.4 | 9.1 | ||||||||||||
Delinquent loans and fees receivable, gross | 4.2 | 9.6 | 9.4 | 23.2 | ||||||||||||
Current loans and fees receivable, gross | 5.4 | 58.5 | 49.2 | 113.1 | ||||||||||||
Total loans and fees receivable, gross | $ | 9.6 | $ | 68.1 | $ | 58.6 | $ | 136.3 | ||||||||
Balance of loans 90 or more days past due and still accruing interest and fees | $ | — | $ | 1.8 | $ | 4.4 | $ | 6.2 | ||||||||
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 September 30, | Nine months ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Fees on credit products | $ | 4,223 | $ | 7,165 | $ | 16,017 | $ | 16,466 | |||||||
Changes in fair value of loans and fees receivable recorded at fair value | 6,217 | 9,296 | 12,884 | 34,361 | |||||||||||
Changes in fair value of notes payable associated with structured financings recorded at fair value | (3,653 | ) | (3,535 | ) | (5,961 | ) | (19,110 | ) | |||||||
Rental revenue | 11,400 | 5,446 | 48,043 | 5,446 | |||||||||||
Other | 2,482 | 10 | 4,767 | (1,756 | ) | ||||||||||
Total fees and related income on earning assets | $ | 20,669 | $ | 18,382 | $ | 75,750 | $ | 35,407 |
3. | Segment Reporting |
Three months ended September 30, 2014 | Credit and Other Investments | Auto Finance | Total | |||||||||
Interest income: | ||||||||||||
Consumer loans, including past due fees | $ | 12,209 | $ | 6,272 | $ | 18,481 | ||||||
Other | 51 | — | 51 | |||||||||
Total interest income | 12,260 | 6,272 | 18,532 | |||||||||
Interest expense | (5,773 | ) | (333 | ) | (6,106 | ) | ||||||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable | $ | 6,487 | $ | 5,939 | $ | 12,426 | ||||||
Fees and related income on earning assets | $ | 20,587 | $ | 82 | $ | 20,669 | ||||||
Servicing income | $ | 909 | $ | 149 | $ | 1,058 | ||||||
Depreciation of rental merchandise | (10,318 | ) | — | (10,318 | ) | |||||||
Equity in income of equity-method investees | $ | 1,936 | $ | — | $ | 1,936 | ||||||
(Loss) income before income taxes | $ | (6,231 | ) | $ | 1,325 | $ | (4,906 | ) | ||||
Income tax expense | $ | (465 | ) | $ | (475 | ) | $ | (940 | ) |
Nine months ended September 30, 2014 | Credit and Other Investments | Auto Finance | Total | |||||||||
Interest income: | ||||||||||||
Consumer loans, including past due fees | $ | 38,097 | $ | 17,728 | $ | 55,825 | ||||||
Other | 325 | — | 325 | |||||||||
Total interest income | 38,422 | 17,728 | 56,150 | |||||||||
Interest expense | (17,417 | ) | (1,034 | ) | (18,451 | ) | ||||||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable | $ | 21,005 | $ | 16,694 | $ | 37,699 | ||||||
Fees and related income on earning assets | $ | 75,544 | $ | 206 | $ | 75,750 | ||||||
Servicing income | $ | 3,039 | $ | 493 | $ | 3,532 | ||||||
Depreciation of rental merchandise | (51,064 | ) | — | (51,064 | ) | |||||||
Equity in income of equity-method investees | $ | 5,183 | $ | — | $ | 5,183 | ||||||
(Loss) income before income taxes | $ | (27,955 | ) | $ | 3,503 | $ | (24,452 | ) | ||||
Income tax expense | $ | (2,436 | ) | $ | (1,159 | ) | $ | (3,595 | ) | |||
Total assets | $ | 239,240 | $ | 63,155 | $ | 302,395 |
Three months ended September 30, 2013 | Credit 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 | ||||||
Depreciation of rental merchandise | 4,637 | — | 4,637 | |||||||||
Equity in income of equity-method investees | $ | 2,080 | $ | — | $ | 2,080 | ||||||
(Loss) income before income taxes | $ | (8,194 | ) | $ | 752 | $ | (7,442 | ) | ||||
Income tax expense | $ | (1,157 | ) | $ | (286 | ) | $ | (1,443 | ) |
Nine months ended September 30, 2013 | Credit 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 on earning assets | $ | 37,644 | $ | (2,237 | ) | $ | 35,407 | |||||
Servicing income | $ | 6,280 | $ | 638 | $ | 6,918 | ||||||
Depreciation of rental merchandise | 4,637 | — | 4,637 | |||||||||
Equity in income of equity-method investees | $ | 7,344 | $ | — | $ | 7,344 | ||||||
(Loss) income 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 |
4. | Shareholders' Equity |
5. | Investments in Equity-Method Investees |
As of | |||||||
September 30, 2014 | December 31, 2013 | ||||||
Loans and fees receivable pledged as collateral under structured financings, at fair value | $ | 25,467 | $ | 35,241 | |||
Investments in non-marketable debt securities, at fair value | $ | 28,005 | $ | 36,158 | |||
Total assets | $ | 55,806 | $ | 74,145 | |||
Notes payable associated with structured financings, at fair value | $ | 1,461 | $ | 12,125 | |||
Total liabilities | $ | 1,551 | $ | 12,251 | |||
Members’ capital | $ | 54,255 | $ | 61,894 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Net interest income, fees and related income on earning assets | $ | 3,544 | $ | 3,026 | $ | 8,853 | $ | 13,600 | |||||||
Total other operating income | $ | 17 | $ | 2,057 | $ | 110 | $ | 2,571 | |||||||
Net income | $ | 3,267 | $ | 4,648 | $ | 7,943 | $ | 14,693 | |||||||
Net income attributable to our equity investment in investee | $ | 1,936 | $ | 2,080 | $ | 5,183 | $ | 7,344 |
As of | |||||||
September 30, 2014 | December 31, 2013 | ||||||
Investments in non-marketable debt securities, at fair value | $ | 28,005 | $ | 36,158 | |||
Total assets | $ | 28,606 | $ | 36,770 | |||
Total liabilities | $ | — | $ | — | |||
Members’ capital | $ | 28,606 | $ | 36,770 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Net interest income, fees and related income on earning assets | $ | 2,515 | $ | (407 | ) | $ | 4,213 | $ | 5,859 | ||||||
Net (loss) income | $ | 2,503 | $ | (418 | ) | $ | 4,177 | $ | 5,825 | ||||||
Net (loss) income attributable to our equity investment in investee | $ | 1,252 | $ | (210 | ) | $ | 2,089 | $ | 2,912 |
6. | Fair Values of Assets and Liabilities |
Assets – As of September 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 | $ | — | $ | — | $ | 110,692 | $ | 96,541 | ||||||||
Loans and fees receivable, net for which it is not practicable to estimate fair value (2) | $ | — | $ | — | $ | — | $ | 4,945 | ||||||||
Loans and fees receivable, at fair value | $ | — | $ | — | $ | 9,007 | $ | 9,007 | ||||||||
Loans and fees receivable pledged as collateral, at fair value | $ | — | $ | — | $ | 64,971 | $ | 64,971 |
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 | — | 9,883 | 9,883 | ||||||||
Net revaluations of loans and fees receivable, at fair value | 3,001 | — | 3,001 | ||||||||
Settlements, net | (6,074 | ) | (32,798 | ) | (38,872 | ) | |||||
Impact of foreign currency translation | — | (246 | ) | (246 | ) | ||||||
Net transfers in and/or out of Level 3 | — | — | — | ||||||||
Balance at September 30, 2014 | $ | 9,007 | $ | 64,971 | $ | 73,978 | |||||
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 |
Quantitative Information about Level 3 Fair Value Measurements | |||||||||||
Fair Value Measurements | Fair Value at September 30, 2014 | Valuation Technique | Unobservable Input | Range (Weighted Average)(1) | |||||||
Loans and fees receivable, at fair value | $ | 9,007 | Discounted cash flows | Gross yield | 24.5 | % | |||||
Principal payment rate | 3.6 | % | |||||||||
Expected credit loss rate | 12.5 | % | |||||||||
Servicing rate | 11.4 | % | |||||||||
Discount rate | 15.9 | % | |||||||||
Loans and fees receivable pledged as collateral under structured financings, at fair value | $ | 64,971 | Discounted cash flows | Gross yield | 16.0% to 27.6% (22.6%) | ||||||
Principal payment rate | 1.5% to 3.0% (2.4%) | ||||||||||
Expected credit loss rate | 6.9% to 14.0% (11.0%) | ||||||||||
Servicing rate | 8.8% to 12.3% (10.3%) | ||||||||||
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 September 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 | $ | — | $ | — | $ | 27,500 | $ | 27,500 | ||||||||
ACC amortizing debt facility | $ | — | $ | — | $ | 259 | $ | 259 | ||||||||
Amortizing debt facilities | $ | — | $ | — | $ | 34,156 | $ | 34,156 | ||||||||
Revolving credit facility | $ | — | $ | — | $ | 4,000 | $ | 4,000 | ||||||||
U.K. credit card accounts revolving credit facility | $ | — | $ | — | $ | 5,229 | $ | 5,229 | ||||||||
5.875% convertible senior notes | $ | — | $ | 57,178 | $ | — | $ | 95,915 | ||||||||
Liabilities carried at fair value | ||||||||||||||||
Interest rate swap underlying CAR facility | $ | — | $ | — | $ | — | $ | — | ||||||||
Economic sharing arrangement liability | $ | — | $ | — | $ | 152 | $ | 152 | ||||||||
Notes payable associated with structured financings, at fair value | $ | — | $ | — | $ | 69,657 | $ | 69,657 |
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 | 5,961 | 19,110 | |||||
Repayments on outstanding notes payable, net | (30,596 | ) | (52,273 | ) | |||
Impact of foreign currency translation | (231 | ) | (570 | ) | |||
Net transfers in and/or out of Level 3 | — | — | |||||
Ending balance, September 30 | $ | 69,657 | $ | 106,394 |