Page | ||||
PART I. FINANCIAL INFORMATION | ||||
Item 1. | Financial Statements (Unaudited) | |||
Consolidated Balance Sheets | ||||
Consolidated Statements of Operations | ||||
Consolidated Statements of Comprehensive Income (Loss) | ||||
Consolidated Statements 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, 2015 | December 31, 2014 | ||||||
Assets | |||||||
Unrestricted cash and cash equivalents | $ | 38,236 | $ | 39,925 | |||
Restricted cash and cash equivalents | 21,470 | 22,741 | |||||
Loans and fees receivable: | |||||||
Loans and fees receivable, net (of $16,323 and $15,730 in deferred revenue and $19,682 and $19,957 in allowances for uncollectible loans and fees receivable at September 30, 2015 and December 31, 2014, respectively) | 132,932 | 105,897 | |||||
Loans and fees receivable, at fair value | 8,825 | 18,255 | |||||
Loans and fees receivable pledged as collateral under structured financings, at fair value | 22,283 | 34,905 | |||||
Rental merchandise, net of depreciation | 9,230 | 14,177 | |||||
Property at cost, net of depreciation | 6,143 | 7,036 | |||||
Investments in equity-method investees | 11,317 | 15,833 | |||||
Deposits | 987 | 1,589 | |||||
Prepaid expenses and other assets | 19,593 | 7,997 | |||||
Total assets | $ | 271,016 | $ | 268,355 | |||
Liabilities | |||||||
Accounts payable and accrued expenses | $ | 44,688 | $ | 39,968 | |||
Notes payable, at face value | 85,205 | 78,749 | |||||
Notes payable to related parties | 20,000 | 20,000 | |||||
Notes payable associated with structured financings, at fair value | 23,225 | 36,511 | |||||
Convertible senior notes | 64,658 | 64,752 | |||||
Income tax liability | 20,614 | 20,933 | |||||
Total liabilities | 258,390 | 260,913 | |||||
Commitments and contingencies (Note 9) | |||||||
Equity | |||||||
Common stock, no par value, 150,000,000 shares authorized: 15,358,158 shares issued and outstanding (including 1,459,233 loaned shares to be returned) at September 30, 2015; and 15,308,971 shares issued and outstanding (including 1,459,233 loaned shares to be returned) at December 31, 2014 | — | — | |||||
Additional paid-in capital | 210,944 | 210,519 | |||||
Accumulated other comprehensive loss | (871 | ) | (1,841 | ) | |||
Retained deficit | (197,440 | ) | (201,237 | ) | |||
Total shareholders’ equity | 12,633 | 7,441 | |||||
Noncontrolling interests | (7 | ) | 1 | ||||
Total equity | 12,626 | 7,442 | |||||
Total liabilities and equity | $ | 271,016 | $ | 268,355 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Interest income: | |||||||||||||||
Consumer loans, including past due fees | $ | 16,863 | $ | 18,481 | $ | 51,175 | $ | 55,825 | |||||||
Other | 10 | 51 | 52 | 325 | |||||||||||
Total interest income | 16,873 | 18,532 | 51,227 | 56,150 | |||||||||||
Interest expense | (4,653 | ) | (6,106 | ) | (13,739 | ) | (18,451 | ) | |||||||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable | 12,220 | 12,426 | 37,488 | 37,699 | |||||||||||
Fees and related income on earning assets | 16,677 | 20,669 | 42,647 | 75,750 | |||||||||||
Net recovery of (losses upon) charge off of loans and fees receivable recorded at fair value, net of recoveries | 8,375 | 150 | 28,738 | (1,685 | ) | ||||||||||
Provision for losses on loans and fees receivable recorded at net realizable value | (8,876 | ) | (8,120 | ) | (18,005 | ) | (22,726 | ) | |||||||
Net interest income, fees and related income on earning assets | 28,396 | 25,125 | 90,868 | 89,038 | |||||||||||
Other operating income: | |||||||||||||||
Servicing income | 1,124 | 1,058 | 4,074 | 3,532 | |||||||||||
Other income | 76 | 689 | 435 | 2,010 | |||||||||||
Equity in income of equity-method investees | 431 | 1,936 | 2,213 | 5,183 | |||||||||||
Total other operating income | 1,631 | 3,683 | 6,722 | 10,725 | |||||||||||
Other operating expense: | |||||||||||||||
Salaries and benefits | 4,700 | 4,544 | 13,142 | 14,306 | |||||||||||
Card and loan servicing | 9,749 | 11,383 | 29,628 | 38,117 | |||||||||||
Marketing and solicitation | 711 | 529 | 1,529 | 1,922 | |||||||||||
Depreciation, primarily related to rental merchandise | 10,372 | 11,285 | 33,179 | 53,566 | |||||||||||
Other | 4,969 | 5,973 | 16,402 | 16,304 | |||||||||||
Total other operating expense | 30,501 | 33,714 | 93,880 | 124,215 | |||||||||||
(Loss) income before income taxes | (474 | ) | (4,906 | ) | 3,710 | (24,452 | ) | ||||||||
Income tax benefit (expense) | 903 | (940 | ) | 81 | (3,595 | ) | |||||||||
Net income (loss) | 429 | (5,846 | ) | 3,791 | (28,047 | ) | |||||||||
Net loss (income) attributable to noncontrolling interests | 4 | — | 6 | (151 | ) | ||||||||||
Net income (loss) attributable to controlling interests | $ | 433 | $ | (5,846 | ) | $ | 3,797 | $ | (28,198 | ) | |||||
Net income (loss) attributable to controlling interests per common share—basic | $ | 0.03 | $ | (0.42 | ) | $ | 0.27 | $ | (2.01 | ) | |||||
Net income (loss) attributable to controlling interests per common share—diluted | $ | 0.03 | $ | (0.42 | ) | $ | 0.27 | $ | (2.01 | ) |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net income (loss) | $ | 429 | $ | (5,846 | ) | $ | 3,791 | $ | (28,047 | ) | |||||
Other comprehensive income (loss): | |||||||||||||||
Foreign currency translation adjustment | (283 | ) | (896 | ) | (143 | ) | (449 | ) | |||||||
Reclassifications of foreign currency translation adjustment to consolidated statements of operations | — | — | 1,535 | — | |||||||||||
Income tax benefit (expense) related to other comprehensive income (loss) | 97 | 73 | (422 | ) | 96 | ||||||||||
Comprehensive income (loss) | 243 | (6,669 | ) | 4,761 | (28,400 | ) | |||||||||
Comprehensive loss (income) attributable to noncontrolling interests | 4 | — | 6 | (151 | ) | ||||||||||
Comprehensive income (loss) attributable to controlling interests | $ | 247 | $ | (6,669 | ) | $ | 4,767 | $ | (28,551 | ) |
Common Stock | ||||||||||||||||||||||||||
Shares Issued | Amount | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Retained Deficit | Noncontrolling Interests | Total Equity | ||||||||||||||||||||
Balance at December 31, 2014 | 15,308,971 | $ | — | $ | 210,519 | $ | (1,841 | ) | $ | (201,237 | ) | $ | 1 | $ | 7,442 | |||||||||||
Stock options exercises and proceeds related thereto | 3,334 | — | 8 | — | — | — | 8 | |||||||||||||||||||
Compensatory stock issuances, net of forfeitures | 106,334 | — | — | — | — | — | — | |||||||||||||||||||
Distributions to owners of noncontrolling interests | — | — | — | — | — | (2 | ) | (2 | ) | |||||||||||||||||
Amortization of deferred stock-based compensation costs | — | — | 663 | — | — | — | 663 | |||||||||||||||||||
Redemption and retirement of shares | (60,481 | ) | — | (178 | ) | — | — | — | (178 | ) | ||||||||||||||||
Tax effects of stock-based compensation plans | — | — | (68 | ) | — | — | — | (68 | ) | |||||||||||||||||
Other comprehensive income | — | — | — | 970 | 3,797 | (6 | ) | 4,761 | ||||||||||||||||||
Balance at September 30, 2015 | 15,358,158 | $ | — | $ | 210,944 | $ | (871 | ) | $ | (197,440 | ) | $ | (7 | ) | $ | 12,626 |
For the Nine Months Ended September 30, | |||||||
2015 | 2014 | ||||||
Operating activities | |||||||
Net income (loss) | $ | 3,791 | $ | (28,047 | ) | ||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | |||||||
Depreciation of rental merchandise | 31,470 | 51,064 | |||||
Depreciation, amortization and accretion, net | 1,517 | 1,545 | |||||
Losses upon charge off of loans and fees receivable recorded at fair value | 6,364 | 11,646 | |||||
Provision for losses on loans and fees receivable | 18,005 | 22,726 | |||||
Interest expense from accretion of discount on convertible senior notes | 357 | 486 | |||||
Income from accretion of discount associated with receivables purchases | (29,650 | ) | (24,953 | ) | |||
Unrealized gain on loans and fees receivable and underlying notes payable held at fair value | (5,878 | ) | (6,923 | ) | |||
Income from equity-method investments | (2,213 | ) | (5,183 | ) | |||
Changes in assets and liabilities: | |||||||
(Increase) decrease in uncollected fees on earning assets | (993 | ) | 715 | ||||
(Decrease) increase in income tax liability | (852 | ) | 3,524 | ||||
Decrease (increase) in deposits | 602 | (106 | ) | ||||
Increase (decrease) in accounts payable and accrued expenses | 5,231 | (11,807 | ) | ||||
Additions to rental merchandise | (26,522 | ) | (34,479 | ) | |||
Other | (8,399 | ) | 1,176 | ||||
Net cash used in operating activities | (7,170 | ) | (18,616 | ) | |||
Investing activities | |||||||
Decrease (increase) in restricted cash | 1,258 | (4,011 | ) | ||||
Proceeds from equity-method investees | 6,729 | 8,807 | |||||
Investments in earning assets | (203,041 | ) | (160,942 | ) | |||
Proceeds from earning assets | 207,848 | 185,381 | |||||
Purchases and development of property, net of disposals | (835 | ) | (3,602 | ) | |||
Net cash provided by investing activities | 11,959 | 25,633 | |||||
Financing activities | |||||||
Noncontrolling interests distributions, net | (2 | ) | (143 | ) | |||
Proceeds from exercise of stock options | 8 | — | |||||
Purchase and retirement of outstanding stock | (178 | ) | (52 | ) | |||
Proceeds from borrowings | 130,614 | 64,396 | |||||
Repayment of borrowings | (136,374 | ) | (83,564 | ) | |||
Net cash used in financing activities | (5,932 | ) | (19,363 | ) | |||
Effect of exchange rate changes on cash | (546 | ) | (340 | ) | |||
Net decrease in unrestricted cash | (1,689 | ) | (12,686 | ) | |||
Unrestricted cash and cash equivalents at beginning of period | 39,925 | 50,873 | |||||
Unrestricted cash and cash equivalents at end of period | $ | 38,236 | $ | 38,187 | |||
Supplemental cash flow information | |||||||
Cash paid for interest | $ | 14,805 | $ | 20,159 | |||
Net cash income tax payments | $ | 777 | $ | 71 | |||
Supplemental non-cash information | |||||||
Issuance of stock options and restricted stock | $ | 509 | $ | 931 | |||
Notes payable associated with capital leases | $ | — | $ | 160 |
1. | Description of Our Business |
2. | Significant Accounting Policies and Consolidated Financial Statement Components |
Balance at December 31, 2014 | Additions | Subtractions | Balance at September 30, 2015 | ||||||||||||
Loans and fees receivable, gross | $ | 141.6 | $ | 250.4 | $ | (223.1 | ) | $ | 168.9 | ||||||
Deferred revenue | (15.7 | ) | (30.3 | ) | 29.7 | (16.3 | ) | ||||||||
Allowance for uncollectible loans and fees receivable | (20.0 | ) | (18.0 | ) | 18.3 | (19.7 | ) | ||||||||
Loans and fees receivable, net | $ | 105.9 | $ | 202.1 | $ | (175.1 | ) | $ | 132.9 |
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 |
For the Three Months Ended September 30, 2015 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | ||||||||||||
Allowance for uncollectible loans and fees receivable: | ||||||||||||||||
Balance at beginning of period | $ | (1.5 | ) | $ | (1.3 | ) | $ | (13.5 | ) | $ | (16.3 | ) | ||||
Provision for loan losses | (0.3 | ) | (0.8 | ) | (7.8 | ) | (8.9 | ) | ||||||||
Charge offs | 0.9 | 0.8 | 4.4 | 6.1 | ||||||||||||
Recoveries | (0.2 | ) | (0.2 | ) | (0.2 | ) | (0.6 | ) | ||||||||
Balance at end of period | $ | (1.1 | ) | $ | (1.5 | ) | $ | (17.1 | ) | $ | (19.7 | ) | ||||
For the Nine Months Ended September 30, 2015 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | ||||||||||||
Allowance for uncollectible loans and fees receivable: | ||||||||||||||||
Balance at beginning of period | $ | (2.7 | ) | $ | (1.2 | ) | $ | (16.1 | ) | $ | (20.0 | ) | ||||
Provision for loan losses | (1.2 | ) | (1.4 | ) | (15.4 | ) | (18.0 | ) | ||||||||
Charge offs | 3.2 | 1.7 | 15.3 | 20.2 | ||||||||||||
Recoveries | (0.4 | ) | (0.6 | ) | (0.9 | ) | (1.9 | ) | ||||||||
Balance at end of period | $ | (1.1 | ) | $ | (1.5 | ) | $ | (17.1 | ) | $ | (19.7 | ) |
As of September 30, 2015 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | ||||||||||||
Allowance for uncollectible loans and fees receivable: | ||||||||||||||||
Balance at end of period individually evaluated for impairment | $ | — | $ | (0.1 | ) | $ | (1.8 | ) | $ | (1.9 | ) | |||||
Balance at end of period collectively evaluated for impairment | $ | (1.1 | ) | $ | (1.4 | ) | $ | (15.3 | ) | $ | (17.8 | ) | ||||
Loans and fees receivable: | ||||||||||||||||
Loans and fees receivable, gross | $ | 3.3 | $ | 73.5 | $ | 92.1 | $ | 168.9 | ||||||||
Loans and fees receivable individually evaluated for impairment | $ | — | $ | 0.2 | $ | 2.2 | $ | 2.4 | ||||||||
Loans and fees receivable collectively evaluated for impairment | $ | 3.3 | $ | 73.3 | $ | 89.9 | $ | 166.5 |
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 | ) |
As of December 31, 2014 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | ||||||||||||
Allowance for uncollectible loans and fees receivable: | ||||||||||||||||
Balance at end of period individually evaluated for impairment | $ | — | $ | (0.1 | ) | $ | (3.0 | ) | $ | (3.1 | ) | |||||
Balance at end of period collectively evaluated for impairment | $ | (2.7 | ) | $ | (1.1 | ) | $ | (13.1 | ) | $ | (16.9 | ) | ||||
Loans and fees receivable: | ||||||||||||||||
Loans and fees receivable, gross | $ | 6.7 | $ | 70.7 | $ | 64.2 | $ | 141.6 | ||||||||
Loans and fees receivable individually evaluated for impairment | $ | — | $ | 0.2 | $ | 5.0 | $ | 5.2 | ||||||||
Loans and fees receivable collectively evaluated for impairment | $ | 6.7 | $ | 70.5 | $ | 59.2 | $ | 136.4 |
September 30, 2015 | December 31, 2014 | ||||||
Current loans receivable | $ | 142.9 | $ | 116.1 | |||
Current fees receivable | 3.5 | 3.4 | |||||
Delinquent loans and fees receivable | 22.5 | 22.1 | |||||
Loans and fees receivable, gross | $ | 168.9 | $ | 141.6 |
Balance at September 30, 2015 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | ||||||||||||
30-59 days past due | $ | 0.2 | $ | 6.1 | $ | 3.7 | $ | 10.0 | ||||||||
60-89 days past due | 0.2 | 2.0 | 2.3 | 4.5 | ||||||||||||
90 or more days past due | 0.6 | 2.0 | 5.4 | 8.0 | ||||||||||||
Delinquent loans and fees receivable, gross | 1.0 | 10.1 | 11.4 | 22.5 | ||||||||||||
Current loans and fees receivable, gross | 2.3 | 63.4 | 80.7 | 146.4 | ||||||||||||
Total loans and fees receivable, gross | $ | 3.3 | $ | 73.5 | $ | 92.1 | $ | 168.9 | ||||||||
Balance of loans 90 or more days past due and still accruing interest and fees | $ | — | $ | 1.7 | $ | — | $ | 1.7 |
Balance at December 31, 2014 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | |||||||||||
30-59 days past due | $ | 0.4 | $ | 6.3 | $ | 2.8 | $ | 9.5 | |||||||
60-89 days past due | 0.4 | 2.1 | 2.2 | 4.7 | |||||||||||
90 or more days past due | 1.6 | 1.7 | 4.6 | 7.9 | |||||||||||
Delinquent loans and fees receivable, gross | 2.4 | 10.1 | 9.6 | 22.1 | |||||||||||
Current loans and fees receivable, gross | 4.3 | 60.6 | 54.6 | 119.5 | |||||||||||
Total loans and fees receivable, gross | $ | 6.7 | $ | 70.7 | $ | 64.2 | $ | 141.6 | |||||||
Balance of loans 90 or more days past due and still accruing interest and fees | $ | — | $ | 1.6 | $ | — | $ | 1.6 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Fees on credit products | $ | 1,759 | $ | 4,223 | $ | 5,824 | $ | 16,017 | |||||||
Changes in fair value of loans and fees receivable recorded at fair value | 1,307 | 6,217 | 4,519 | 12,884 | |||||||||||
Changes in fair value of notes payable associated with structured financings recorded at fair value | 2,141 | (3,653 | ) | 1,359 | (5,961 | ) | |||||||||
Rental revenue | 9,378 | 11,400 | 28,765 | 48,043 | |||||||||||
Other | 2,092 | 2,482 | 2,180 | 4,767 | |||||||||||
Total fees and related income on earning assets | $ | 16,677 | $ | 20,669 | $ | 42,647 | $ | 75,750 |
3. | Segment Reporting |
Three months ended September 30, 2015 | Credit and Other Investments | Auto Finance | Total | |||||||||
Interest income: | ||||||||||||
Consumer loans, including past due fees | $ | 9,902 | $ | 6,961 | $ | 16,863 | ||||||
Other | 10 | — | 10 | |||||||||
Total interest income | 9,912 | 6,961 | 16,873 | |||||||||
Interest expense | (4,349 | ) | (304 | ) | (4,653 | ) | ||||||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable | $ | 5,563 | $ | 6,657 | $ | 12,220 | ||||||
Fees and related income on earning assets | $ | 14,577 | $ | 2,100 | $ | 16,677 | ||||||
Servicing income | $ | 890 | $ | 234 | $ | 1,124 | ||||||
Depreciation of rental merchandise | $ | (9,847 | ) | $ | — | $ | (9,847 | ) | ||||
Equity in income of equity-method investees | $ | 431 | $ | — | $ | 431 | ||||||
(Loss) income before income taxes | $ | (3,853 | ) | $ | 3,379 | $ | (474 | ) | ||||
Income tax benefit (expense) | $ | 2,067 | $ | (1,164 | ) | $ | 903 | |||||
Nine months ended September 30, 2015 | Credit and Other Investments | Auto Finance | Total | |||||||||
Interest income: | ||||||||||||
Consumer loans, including past due fees | $ | 30,520 | $ | 20,655 | $ | 51,175 | ||||||
Other | 52 | — | 52 | |||||||||
Total interest income | 30,572 | 20,655 | 51,227 | |||||||||
Interest expense | (12,828 | ) | (911 | ) | (13,739 | ) | ||||||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable | $ | 17,744 | $ | 19,744 | $ | 37,488 | ||||||
Fees and related income on earning assets | $ | 40,333 | $ | 2,314 | $ | 42,647 | ||||||
Servicing income | $ | 3,428 | $ | 646 | $ | 4,074 | ||||||
Depreciation of rental merchandise | $ | (31,470 | ) | $ | — | $ | (31,470 | ) | ||||
Equity in income of equity-method investees | $ | 2,213 | $ | — | $ | 2,213 | ||||||
(Loss) income before income taxes | $ | (3,246 | ) | $ | 6,956 | $ | 3,710 | |||||
Income tax benefit (expense) | $ | 2,419 | $ | (2,338 | ) | $ | 81 | |||||
Total assets | $ | 201,706 | $ | 69,310 | $ | 271,016 |
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 |
4. | Shareholders' Equity |
5. | Investments in Equity-Method Investees |
As of | |||||||
September 30, 2015 | December 31, 2014 | ||||||
Loans and fees receivable pledged as collateral under structured financings, at fair value | $ | 16,173 | $ | 22,571 | |||
Total assets | $ | 17,033 | $ | 23,831 | |||
Total liabilities | $ | 59 | $ | 82 | |||
Members’ capital | $ | 16,974 | $ | 23,749 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net interest income, fees and related income on earning assets | $ | 659 | $ | 3,544 | $ | 3,343 | $ | 8,853 | |||||||
Total other operating income | $ | — | $ | 17 | $ | — | $ | 110 | |||||||
Net income | $ | 475 | $ | 3,267 | $ | 2,756 | $ | 7,943 | |||||||
Net income attributable to our equity investment in investee | $ | 431 | $ | 1,936 | $ | 2,213 | $ | 5,183 |
As of | |||
December 31, 2014 | |||
Investments in non-marketable debt securities, at fair value | $ | — | |
Total assets | $ | — | |
Total liabilities | $ | — | |
Members’ capital | $ | — |
Three Months Ended September 30, 2014 | Nine Months Ended September 30, 2014 | |||||||
Net interest income, fees and related income on earning assets | $ | 2,515 | $ | 4,213 | ||||
Net income | $ | 2,503 | $ | 4,177 | ||||
Net income attributable to our equity investment in investee | $ | 1,252 | $ | 2,089 |
6. | Fair Values of Assets and Liabilities |
Assets – As of September 30, 2015 (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 | $ | — | $ | — | $ | 152,427 | $ | 132,932 | ||||||||
Loans and fees receivable, at fair value | $ | — | $ | — | $ | 8,825 | $ | 8,825 | ||||||||
Loans and fees receivable pledged as collateral, at fair value | $ | — | $ | — | $ | 22,283 | $ | 22,283 |
Assets – As of December 31, 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 | $ | — | $ | — | $ | 111,010 | $ | 101,753 | ||||||||
Loans and fees receivable, net for which it is not practicable to estimate fair value (2) | $ | — | $ | — | $ | — | $ | 4,144 | ||||||||
Loans and fees receivable, at fair value | $ | — | $ | — | $ | 18,255 | $ | 18,255 | ||||||||
Loans and fees receivable pledged as collateral, at fair value | $ | — | $ | — | $ | 34,905 | $ | 34,905 |
(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 provide 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, 2015 | $ | 18,255 | $ | 34,905 | $ | 53,160 | |||||
Total gains—realized/unrealized: | |||||||||||
Net revaluations of loans and fees receivable pledged as collateral under structured financings, at fair value | — | 1,000 | 1,000 | ||||||||
Net revaluations of loans and fees receivable, at fair value | 3,519 | — | 3,519 | ||||||||
Settlements, net | (12,719 | ) | (13,622 | ) | (26,341 | ) | |||||
Impact of foreign currency translation | (230 | ) | — | (230 | ) | ||||||
Balance at September 30, 2015 | $ | 8,825 | $ | 22,283 | $ | 31,108 | |||||
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 | ) | ||||||
Balance at September 30, 2014 | $ | 9,007 | $ | 64,971 | $ | 73,978 |
Quantitative Information about Level 3 Fair Value Measurements | |||||||||||
Fair Value Measurements | Fair Value at September 30, 2015 | Valuation Technique | Unobservable Input | Range (Weighted Average)(1) | |||||||
Loans and fees receivable, at fair value | $ | 8,825 | Discounted cash flows | Gross yield | 18.5% to 24.1% (21.5%) | ||||||
Principal payment rate | 1.7% to 3.3% (2.6%) | ||||||||||
Expected credit loss rate | 6.8% to 16.7% (12.1%) | ||||||||||
Servicing rate | 8.4% to 12.5% (10.6%) | ||||||||||
Discount rate | 16.0% to 16.2% (16.1%) | ||||||||||
Loans and fees receivable pledged as collateral under structured financings, at fair value | $ | 22,283 | Discounted cash flows | Gross yield | 27.7 | % | |||||
Principal payment rate | 2.8 | % | |||||||||
Expected credit loss rate | 12.6 | % | |||||||||
Servicing rate | 12.9 | % | |||||||||
Discount rate | 16 | % |
Quantitative Information about Level 3 Fair Value Measurements | |||||||||||
Fair Value Measurements | Fair Value at December 31, 2014 | Valuation Technique | Unobservable Input | Range (Weighted Average)(1) | |||||||
Loans and fees receivable, at fair value | $ | 18,255 | Discounted cash flows | Gross yield | 17.9% to 25.6% (21.0%) | ||||||
Principal payment rate | 1.5% to 3.6% (2.3%) | ||||||||||
Expected credit loss rate | 7.4% to 13.7% (9.9%) | ||||||||||
Servicing rate | 7.4% to 15.1% (10.5%) | ||||||||||
Discount rate | 15.9% to 16.2% (16.1%) | ||||||||||
Loans and fees receivable pledged as collateral under structured financings, at fair value | $ | 34,905 | Discounted cash flows | Gross yield | 27.2 | % | |||||
Principal payment rate | 2.7 | % | |||||||||
Expected credit loss rate | 13.5 | % | |||||||||
Servicing rate | 11.0 | % | |||||||||
Discount rate | 15.9 | % |
Liabilities – As of September 30, 2015 | 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 | $ | — | $ | — | $ | 28,350 | $ | 28,350 | ||||||||
ACC amortizing debt facility | $ | — | $ | — | $ | — | $ | — | ||||||||
Amortizing debt facilities | $ | — | $ | — | $ | 56,517 | $ | 56,517 | ||||||||
Revolving credit facility | $ | — | $ | — | $ | — | $ | — | ||||||||
U.K. credit card accounts revolving credit facility | $ | — | $ | — | $ | 338 | $ | 338 | ||||||||
Senior secured term loan | $ | — | $ | — | $ | 20,000 | $ | 20,000 | ||||||||
5.875% convertible senior notes | $ | — | $ | 39,178 | $ | — | $ | 64,658 | ||||||||
Liabilities carried at fair value | ||||||||||||||||
Economic sharing arrangement liability | $ | — | $ | — | $ | 49 | $ | 49 | ||||||||
Notes payable associated with structured financings, at fair value | $ | — | $ | — | $ | 23,225 | $ | 23,225 |
Liabilities - As of December 31, 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 | $ | — | $ | — | $ | 28,500 | $ | 28,500 | ||||||||
ACC amortizing debt facility | $ | — | $ | — | $ | 125 | $ | 125 | ||||||||
Amortizing debt facilities | $ | — | $ | — | $ | 42,200 | $ | 42,200 | ||||||||
Revolving credit facility | $ | — | $ | — | $ | 4,000 | $ | 4,000 | ||||||||
U.K. credit card accounts revolving credit facility | $ | — | $ | — | $ | 3,924 | $ | 3,924 | ||||||||
Senior secured term loan | $ | — | $ | — | $ | 20,000 | $ | 20,000 | ||||||||
5.875% convertible senior notes | $ | — | $ | 37,662 | $ | — | $ | 64,302 | ||||||||
Liabilities carried at fair value | ||||||||||||||||
Economic sharing arrangement liability | $ | — | $ | — | $ | 119 | $ | 119 | ||||||||
Notes payable associated with structured financings, at fair value | $ | — | $ | — | $ | 36,511 | $ | 36,511 |
Notes Payable Associated with Structured Financings, at Fair Value | |||||||
2015 | 2014 | ||||||
Beginning balance, January 1 | $ | 36,511 | $ | 94,523 | |||
Total (gains) losses—realized/unrealized: | |||||||
Net revaluations of notes payable associated with structured financings, at fair value | (1,359 | ) | 5,961 | ||||
Repayments on outstanding notes payable, net | (11,927 | ) | (30,596 | ) | |||
Impact of foreign currency translation | — | (231 | ) | ||||
Ending balance, September 30 | $ | 23,225 | $ | 69,657 |
Quantitative Information about Level 3 Fair Value Measurements | |||||||||||
Fair Value Measurements |