Page | ||||
PART I. FINANCIAL INFORMATION | ||||
Item 1. | Financial Statements (Unaudited) | |||
Consolidated Balance Sheets | ||||
Consolidated Statements of Operations | ||||
Consolidated Statements of Comprehensive Income | ||||
Consolidated Statements of 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, 2016 | December 31, 2015 | ||||||
Assets | |||||||
Unrestricted cash and cash equivalents | $ | 30,446 | $ | 51,033 | |||
Restricted cash and cash equivalents | 16,883 | 20,547 | |||||
Loans and fees receivable: | |||||||
Loans and fees receivable, net (of $20,348 and $16,721 in deferred revenue and $24,213 and $21,474 in allowances for uncollectible loans and fees receivable at June 30, 2016 and December 31, 2015, respectively) | 198,188 | 141,949 | |||||
Loans and fees receivable, at fair value | 5,255 | 6,353 | |||||
Loans and fees receivable pledged as collateral under structured financings, at fair value | 15,265 | 20,353 | |||||
Rental merchandise, net of depreciation | 588 | 4,666 | |||||
Property at cost, net of depreciation | 4,319 | 5,686 | |||||
Investment in equity-method investee | 8,351 | 10,123 | |||||
Deposits | 538 | 825 | |||||
Prepaid expenses and other assets | 20,475 | 19,194 | |||||
Total assets | $ | 300,308 | $ | 280,729 | |||
Liabilities | |||||||
Accounts payable and accrued expenses | $ | 60,544 | $ | 51,722 | |||
Notes payable, at face value | 103,611 | 90,000 | |||||
Notes payable to related parties | 20,000 | 20,000 | |||||
Notes payable associated with structured financings, at fair value | 15,626 | 20,970 | |||||
Convertible senior notes | 61,903 | 64,783 | |||||
Income tax liability | 22,490 | 22,303 | |||||
Total liabilities | 284,174 | 269,778 | |||||
Commitments and contingencies (Note 9) | |||||||
Equity | |||||||
Common stock, no par value, 150,000,000 shares authorized: 15,209,198 shares issued and outstanding (including 1,459,233 loaned shares to be returned) at June 30, 2016; and 15,332,041 shares issued and outstanding (including 1,459,233 loaned shares to be returned) at December 31, 2015 | — | — | |||||
Additional paid-in capital | 210,837 | 211,083 | |||||
Accumulated other comprehensive loss | — | (600 | ) | ||||
Retained deficit | (194,694 | ) | (199,524 | ) | |||
Total shareholders’ equity | 16,143 | 10,959 | |||||
Noncontrolling interests | (9 | ) | (8 | ) | |||
Total equity | 16,134 | 10,951 | |||||
Total liabilities and equity | $ | 300,308 | $ | 280,729 |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Interest income: | |||||||||||||||
Consumer loans, including past due fees | $ | 21,462 | $ | 16,869 | $ | 39,610 | $ | 34,312 | |||||||
Other | 60 | 10 | 152 | 42 | |||||||||||
Total interest income | 21,522 | 16,879 | 39,762 | 34,354 | |||||||||||
Interest expense | (4,792 | ) | (4,529 | ) | (9,436 | ) | (9,086 | ) | |||||||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable | 16,730 | 12,350 | 30,326 | 25,268 | |||||||||||
Fees and related income on earning assets | 5,878 | 12,751 | 13,765 | 25,970 | |||||||||||
Net recovery of charge off of loans and fees receivable recorded at fair value | 6,140 | 9,991 | 11,051 | 20,363 | |||||||||||
Provision for losses on loans and fees receivable recorded at net realizable value | (10,811 | ) | (5,961 | ) | (15,542 | ) | (9,129 | ) | |||||||
Net interest income, fees and related income on earning assets | 17,937 | 29,131 | 39,600 | 62,472 | |||||||||||
Other operating income: | |||||||||||||||
Servicing income | 981 | 1,390 | 2,428 | 2,950 | |||||||||||
Other income | 75 | 92 | 145 | 359 | |||||||||||
Gain on repurchase of convertible senior notes | 1,037 | — | 1,037 | — | |||||||||||
Equity in income of equity-method investee | 325 | 707 | 1,327 | 1,782 | |||||||||||
Total other operating income | 2,418 | 2,189 | 4,937 | 5,091 | |||||||||||
Other operating expense: | |||||||||||||||
Salaries and benefits | 6,181 | 4,322 | 11,913 | 8,442 | |||||||||||
Card and loan servicing | 7,285 | 9,608 | 16,273 | 19,879 | |||||||||||
Marketing and solicitation | 932 | 332 | 1,787 | 818 | |||||||||||
Depreciation, primarily related to rental merchandise | 2,099 | 9,961 | 6,255 | 22,807 | |||||||||||
Other | 2,928 | 4,261 | 2,629 | 11,433 | |||||||||||
Total other operating expense | 19,425 | 28,484 | 38,857 | 63,379 | |||||||||||
Income before income taxes | 930 | 2,836 | 5,680 | 4,184 | |||||||||||
Income tax expense | (657 | ) | (1,440 | ) | (855 | ) | (822 | ) | |||||||
Net income | 273 | 1,396 | 4,825 | 3,362 | |||||||||||
Net loss attributable to noncontrolling interests | 4 | 1 | 5 | 2 | |||||||||||
Net income attributable to controlling interests | $ | 277 | $ | 1,397 | $ | 4,830 | $ | 3,364 | |||||||
Net income attributable to controlling interests per common share—basic | $ | 0.02 | $ | 0.10 | $ | 0.35 | $ | 0.24 | |||||||
Net income attributable to controlling interests per common share—diluted | $ | 0.02 | $ | 0.10 | $ | 0.35 | $ | 0.24 |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net income | $ | 273 | $ | 1,396 | $ | 4,825 | $ | 3,362 | |||||||
Other comprehensive income: | |||||||||||||||
Foreign currency translation adjustment | — | 583 | — | 140 | |||||||||||
Reclassifications of foreign currency translation adjustment to consolidated statements of operations | 300 | — | 600 | 1,535 | |||||||||||
Income tax expense related to other comprehensive income | — | (200 | ) | — | (519 | ) | |||||||||
Comprehensive income | 573 | 1,779 | 5,425 | 4,518 | |||||||||||
Comprehensive loss attributable to noncontrolling interests | 4 | 1 | 5 | 2 | |||||||||||
Comprehensive income attributable to controlling interests | $ | 577 | $ | 1,780 | $ | 5,430 | $ | 4,520 |
Common Stock | ||||||||||||||||||||||||||
Shares Issued | Amount | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Retained Deficit | Noncontrolling Interests | Total Equity | ||||||||||||||||||||
Balance at December 31, 2015 | 15,332,041 | $ | — | $ | 211,083 | $ | (600 | ) | $ | (199,524 | ) | $ | (8 | ) | $ | 10,951 | ||||||||||
Stock options exercises and proceeds related thereto | 1,666 | — | 4 | — | — | — | 4 | |||||||||||||||||||
Compensatory stock issuances, net of forfeitures | 122,134 | — | — | — | — | — | — | |||||||||||||||||||
Contributions from owners of noncontrolling interests | — | — | — | — | — | 4 | 4 | |||||||||||||||||||
Amortization of deferred stock-based compensation costs | — | — | 532 | — | — | — | 532 | |||||||||||||||||||
Redemption and retirement of shares | (246,643 | ) | — | (745 | ) | — | — | — | (745 | ) | ||||||||||||||||
Tax effects of stock-based compensation plans | — | — | (37 | ) | — | — | — | (37 | ) | |||||||||||||||||
Other comprehensive income | — | — | — | 600 | 4,830 | (5 | ) | 5,425 | ||||||||||||||||||
Balance at June 30, 2016 | 15,209,198 | $ | — | $ | 210,837 | $ | — | $ | (194,694 | ) | $ | (9 | ) | $ | 16,134 |
For the Six Months Ended June 30, | |||||||
2016 | 2015 | ||||||
Operating activities | |||||||
Net income | $ | 4,825 | $ | 3,362 | |||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||
Depreciation of rental merchandise | 4,714 | 21,623 | |||||
Depreciation, amortization and accretion, net | 1,541 | 1,056 | |||||
Losses upon charge off of loans and fees receivable recorded at fair value | 3,361 | 3,050 | |||||
Provision for losses on loans and fees receivable | 15,542 | 9,129 | |||||
Interest expense from accretion of discount on convertible senior notes | 258 | 235 | |||||
Income from accretion of discount associated with receivables purchases | (19,867 | ) | (18,914 | ) | |||
Unrealized gain on loans and fees receivable and underlying notes payable held at fair value | (4,529 | ) | (2,430 | ) | |||
Income from equity-method investments | (1,327 | ) | (1,782 | ) | |||
Gain on repurchase of convertible senior notes | (1,037 | ) | — | ||||
Changes in assets and liabilities: | |||||||
Decrease in uncollected fees on earning assets | (1,877 | ) | (394 | ) | |||
Increase in income tax liability | 149 | 90 | |||||
Decrease in deposits | 287 | 608 | |||||
Increase in accounts payable and accrued expenses | 11,622 | 515 | |||||
Additions to rental merchandise | (636 | ) | (19,451 | ) | |||
Other | (299 | ) | (6,904 | ) | |||
Net cash provided by (used in) operating activities | 12,727 | (10,207 | ) | ||||
Investing activities | |||||||
Decrease in restricted cash | 3,613 | 5,889 | |||||
Proceeds from equity-method investee | 3,099 | 4,714 | |||||
Investments in earning assets | (191,023 | ) | (127,418 | ) | |||
Proceeds from earning assets | 144,461 | 137,397 | |||||
Purchases and development of property, net of disposals | (177 | ) | (616 | ) | |||
Net cash (used in) provided by investing activities | (40,027 | ) | 19,966 | ||||
Financing activities | |||||||
Noncontrolling interests contributions (distributions), net | 4 | (2 | ) | ||||
Proceeds from exercise of stock options | 4 | 4 | |||||
Purchase and retirement of outstanding stock | (745 | ) | (123 | ) | |||
Proceeds from borrowings | 84,655 | 88,802 | |||||
Repayment of borrowings | (76,332 | ) | (91,960 | ) | |||
Net cash provided by (used in) financing activities | 7,586 | (3,279 | ) | ||||
Effect of exchange rate changes on cash | (873 | ) | (77 | ) | |||
Net (decrease) increase in unrestricted cash | (20,587 | ) | 6,403 | ||||
Unrestricted cash and cash equivalents at beginning of period | 51,033 | 39,925 | |||||
Unrestricted cash and cash equivalents at end of period | $ | 30,446 | $ | 46,328 | |||
Supplemental cash flow information | |||||||
Cash paid for interest | $ | 9,209 | $ | 8,941 | |||
Net cash income tax payments | $ | 705 | $ | 737 | |||
Supplemental non-cash information | |||||||
Issuance of stock options and restricted stock | $ | 1,710 | $ | 281 |
1. | Description of Our Business |
2. | Significant Accounting Policies and Consolidated Financial Statement Components |
Balance at December 31, 2015 | Additions | Subtractions | Balance at June 30, 2016 | ||||||||||||
Loans and fees receivable, gross | $ | 180.1 | $ | 227.3 | $ | (164.7 | ) | $ | 242.7 | ||||||
Deferred revenue | (16.7 | ) | (23.5 | ) | 19.9 | (20.3 | ) | ||||||||
Allowance for uncollectible loans and fees receivable | (21.5 | ) | (15.5 | ) | 12.8 | (24.2 | ) | ||||||||
Loans and fees receivable, net | $ | 141.9 | $ | 188.3 | $ | (132.0 | ) | $ | 198.2 |
Balance at December 31, 2014 | Additions | Subtractions | Balance at June 30, 2015 | ||||||||||||
Loans and fees receivable, gross | $ | 141.6 | $ | 159.2 | $ | (146.2 | ) | $ | 154.6 | ||||||
Deferred revenue | (15.7 | ) | (21.4 | ) | 18.9 | (18.2 | ) | ||||||||
Allowance for uncollectible loans and fees receivable | (20.0 | ) | (9.1 | ) | 12.8 | (16.3 | ) | ||||||||
Loans and fees receivable, net | $ | 105.9 | $ | 128.7 | $ | (114.5 | ) | $ | 120.1 |
For the Three Months Ended June 30, 2016 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | ||||||||||||
Allowance for uncollectible loans and fees receivable: | ||||||||||||||||
Balance at beginning of period | $ | (1.3 | ) | $ | (1.8 | ) | $ | (16.8 | ) | $ | (19.9 | ) | ||||
Provision for loan losses | 0.4 | (0.8 | ) | (10.4 | ) | (10.8 | ) | |||||||||
Charge offs | 0.6 | 0.9 | 6.6 | 8.1 | ||||||||||||
Recoveries | (0.8 | ) | (0.3 | ) | (0.5 | ) | (1.6 | ) | ||||||||
Balance at end of period | $ | (1.1 | ) | $ | (2.0 | ) | $ | (21.1 | ) | $ | (24.2 | ) | ||||
For the Six Months Ended June 30, 2016 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | ||||||||||||
Allowance for uncollectible loans and fees receivable: | ||||||||||||||||
Balance at beginning of period | $ | (1.2 | ) | $ | (1.7 | ) | $ | (18.6 | ) | $ | (21.5 | ) | ||||
Provision for loan losses | 0.6 | (1.4 | ) | (14.7 | ) | (15.5 | ) | |||||||||
Charge offs | 1.0 | 1.7 | 13.2 | 15.9 | ||||||||||||
Recoveries | (1.5 | ) | (0.6 | ) | (1.0 | ) | (3.1 | ) | ||||||||
Balance at end of period | $ | (1.1 | ) | $ | (2.0 | ) | $ | (21.1 | ) | $ | (24.2 | ) |
As of June 30, 2016 | 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 | $ | — | $ | (0.2 | ) | $ | (0.7 | ) | $ | (0.9 | ) | |||||
Balance at end of period collectively evaluated for impairment | $ | (1.1 | ) | $ | (1.8 | ) | $ | (20.4 | ) | $ | (23.3 | ) | ||||
Loans and fees receivable: | ||||||||||||||||
Loans and fees receivable, gross | $ | 5.4 | $ | 78.6 | $ | 158.7 | $ | 242.7 | ||||||||
Loans and fees receivable individually evaluated for impairment | $ | — | $ | 0.3 | $ | 0.8 | $ | 1.1 | ||||||||
Loans and fees receivable collectively evaluated for impairment | $ | 5.4 | $ | 78.3 | $ | 157.9 | $ | 241.6 |
For the Three Months Ended June 30, 2015 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | ||||||||||||
Allowance for uncollectible loans and fees receivable: | ||||||||||||||||
Balance at beginning of period | $ | (1.9 | ) | $ | (1.2 | ) | $ | (12.5 | ) | $ | (15.6 | ) | ||||
Provision for loan losses | (0.4 | ) | (0.4 | ) | (5.2 | ) | (6.0 | ) | ||||||||
Charge offs | 0.9 | 0.4 | 4.4 | 5.7 | ||||||||||||
Recoveries | (0.1 | ) | (0.1 | ) | (0.2 | ) | (0.4 | ) | ||||||||
Balance at end of period | $ | (1.5 | ) | $ | (1.3 | ) | $ | (13.5 | ) | $ | (16.3 | ) | ||||
For the Six Months Ended June 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 | (0.9 | ) | (0.6 | ) | (7.6 | ) | (9.1 | ) | ||||||||
Charge offs | 2.3 | 0.9 | 10.9 | 14.1 | ||||||||||||
Recoveries | (0.2 | ) | (0.4 | ) | (0.7 | ) | (1.3 | ) | ||||||||
Balance at end of period | $ | (1.5 | ) | $ | (1.3 | ) | $ | (13.5 | ) | $ | (16.3 | ) |
As of December 31, 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 | ) | $ | (1.3 | ) | $ | (1.4 | ) | |||||
Balance at end of period collectively evaluated for impairment | $ | (1.2 | ) | $ | (1.6 | ) | $ | (17.3 | ) | $ | (20.1 | ) | ||||
Loans and fees receivable: | ||||||||||||||||
Loans and fees receivable, gross | $ | 5.2 | $ | 76.0 | $ | 98.9 | $ | 180.1 | ||||||||
Loans and fees receivable individually evaluated for impairment | $ | — | $ | 0.2 | $ | 1.5 | $ | 1.7 | ||||||||
Loans and fees receivable collectively evaluated for impairment | $ | 5.2 | $ | 75.8 | $ | 97.4 | $ | 178.4 |
June 30, 2016 | December 31, 2015 | ||||||
Current loans receivable | $ | 213.2 | $ | 150.0 | |||
Current fees receivable | 4.9 | 4.5 | |||||
Delinquent loans and fees receivable | 24.6 | 25.6 | |||||
Loans and fees receivable, gross | $ | 242.7 | $ | 180.1 |
Balance at June 30, 2016 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | ||||||||||||
30-59 days past due | $ | 0.1 | $ | 6.8 | $ | 5.0 | $ | 11.9 | ||||||||
60-89 days past due | 0.1 | 1.9 | 3.3 | 5.3 | ||||||||||||
90 or more days past due | 0.5 | 1.3 | 5.6 | 7.4 | ||||||||||||
Delinquent loans and fees receivable, gross | 0.7 | 10.0 | 13.9 | 24.6 | ||||||||||||
Current loans and fees receivable, gross | 4.7 | 68.6 | 144.8 | 218.1 | ||||||||||||
Total loans and fees receivable, gross | $ | 5.4 | $ | 78.6 | $ | 158.7 | $ | 242.7 | ||||||||
Balance of loans 90 or more days past due and still accruing interest and fees | $ | — | $ | 1.0 | $ | — | $ | 1.0 |
Balance at December 31, 2015 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | |||||||||||
30-59 days past due | $ | 0.2 | $ | 6.9 | $ | 4.4 | $ | 11.5 | |||||||
60-89 days past due | 0.1 | 2.2 | 3.1 | 5.4 | |||||||||||
90 or more days past due | 0.4 | 1.8 | 6.5 | 8.7 | |||||||||||
Delinquent loans and fees receivable, gross | 0.7 | 10.9 | 14.0 | 25.6 | |||||||||||
Current loans and fees receivable, gross | 4.5 | 65.1 | 84.9 | 154.5 | |||||||||||
Total loans and fees receivable, gross | $ | 5.2 | $ | 76.0 | $ | 98.9 | $ | 180.1 | |||||||
Balance of loans 90 or more days past due and still accruing interest and fees | $ | — | $ | 1.5 | $ | — | $ | 1.5 |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Fees on credit products | $ | 856 | $ | 1,891 | $ | 1,655 | $ | 4,065 | |||||||
Changes in fair value of loans and fees receivable recorded at fair value | 527 | 1,981 | 2,425 | 3,212 | |||||||||||
Changes in fair value of notes payable associated with structured financings recorded at fair value | 939 | (420 | ) | 2,104 | (782 | ) | |||||||||
Rental revenue | 3,119 | 9,278 | 7,333 | 19,387 | |||||||||||
Other | 437 | 21 | 248 | 88 | |||||||||||
Total fees and related income on earning assets | $ | 5,878 | $ | 12,751 | $ | 13,765 | $ | 25,970 |
3. | Segment Reporting |
Three months ended June 30, 2016 | Credit and Other Investments | Auto Finance | Total | |||||||||
Interest income: | ||||||||||||
Consumer loans, including past due fees | $ | 14,132 | $ | 7,330 | $ | 21,462 | ||||||
Other | 60 | — | 60 | |||||||||
Total interest income | 14,192 | 7,330 | 21,522 | |||||||||
Interest expense | (4,454 | ) | (338 | ) | (4,792 | ) | ||||||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable | $ | 9,738 | $ | 6,992 | $ | 16,730 | ||||||
Fees and related income on earning assets | $ | 5,840 | $ | 38 | $ | 5,878 | ||||||
Servicing income | $ | 732 | $ | 249 | $ | 981 | ||||||
Gain on repurchase of convertible senior notes | $ | 1,037 | $ | — | $ | 1,037 | ||||||
Depreciation of rental merchandise | $ | (1,335 | ) | $ | — | $ | (1,335 | ) | ||||
Equity in income of equity-method investee | $ | 325 | $ | — | $ | 325 | ||||||
(Loss) income before income taxes | $ | (664 | ) | $ | 1,594 | $ | 930 | |||||
Income tax expense | $ | (113 | ) | $ | (544 | ) | $ | (657 | ) | |||
Six months ended June 30, 2016 | Credit and Other Investments | Auto Finance | Total | |||||||||
Interest income: | ||||||||||||
Consumer loans, including past due fees | $ | 25,317 | $ | 14,293 | $ | 39,610 | ||||||
Other | 152 | — | 152 | |||||||||
Total interest income | 25,469 | 14,293 | 39,762 | |||||||||
Interest expense | (8,791 | ) | (645 | ) | (9,436 | ) | ||||||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable | $ | 16,678 | $ | 13,648 | $ | 30,326 | ||||||
Fees and related income on earning assets | $ | 13,669 | $ | 96 | $ | 13,765 | ||||||
Servicing income | $ | 1,924 | $ | 504 | $ | 2,428 | ||||||
Gain on repurchase of convertible senior notes | $ | 1,037 | $ | — | $ | 1,037 | ||||||
Depreciation of rental merchandise | $ | (4,714 | ) | $ | — | $ | (4,714 | ) | ||||
Equity in income of equity-method investee | $ | 1,327 | $ | — | $ | 1,327 | ||||||
Income before income taxes | $ | 2,662 | $ | 3,018 | $ | 5,680 | ||||||
Income tax benefit (expense) | $ | 204 | $ | (1,059 | ) | $ | (855 | ) | ||||
Total assets | $ | 228,729 | $ | 71,579 | $ | 300,308 |
Three months ended June 30, 2015 | Credit and Other Investments | Auto Finance | Total | |||||||||
Interest income: | ||||||||||||
Consumer loans, including past due fees | $ | 9,898 | $ | 6,971 | $ | 16,869 | ||||||
Other | 10 | — | 10 | |||||||||
Total interest income | 9,908 | 6,971 | 16,879 | |||||||||
Interest expense | (4,228 | ) | (301 | ) | (4,529 | ) | ||||||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable | $ | 5,680 | $ | 6,670 | $ | 12,350 | ||||||
Fees and related income on earning assets | $ | 12,683 | $ | 68 | $ | 12,751 | ||||||
Servicing income | $ | 1,179 | $ | 211 | $ | 1,390 | ||||||
Depreciation of rental merchandise | $ | (9,370 | ) | $ | — | $ | (9,370 | ) | ||||
Equity in income of equity-method investee | $ | 707 | $ | — | $ | 707 | ||||||
Income before income taxes | $ | 1,186 | $ | 1,650 | $ | 2,836 | ||||||
Income tax expense | $ | (896 | ) | $ | (544 | ) | $ | (1,440 | ) | |||
Six months ended June 30, 2015 | Credit and Other Investments | Auto Finance | Total | |||||||||
Interest income: | ||||||||||||
Consumer loans, including past due fees | $ | 20,618 | $ | 13,694 | $ | 34,312 | ||||||
Other | 42 | — | 42 | |||||||||
Total interest income | 20,660 | 13,694 | 34,354 | |||||||||
Interest expense | (8,479 | ) | (607 | ) | (9,086 | ) | ||||||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable | $ | 12,181 | $ | 13,087 | $ | 25,268 | ||||||
Fees and related income on earning assets | $ | 25,756 | $ | 214 | $ | 25,970 | ||||||
Servicing income | $ | 2,538 | $ | 412 | $ | 2,950 | ||||||
Depreciation of rental merchandise | $ | (21,623 | ) | $ | — | $ | (21,623 | ) | ||||
Equity in income of equity-method investee | $ | 1,782 | $ | — | $ | 1,782 | ||||||
Income before income taxes | $ | 607 | $ | 3,577 | $ | 4,184 | ||||||
Income tax benefit (expense) | $ | 352 | $ | (1,174 | ) | $ | (822 | ) | ||||
Total assets | $ | 202,510 | $ | 69,422 | $ | 271,932 |
4. | Shareholders' Equity |
5. | Investment in Equity-Method Investee |
As of | |||||||
June 30, 2016 | December 31, 2015 | ||||||
Loans and fees receivable pledged as collateral under structured financings, at fair value | $ | 12,013 | $ | 14,470 | |||
Total assets | $ | 12,571 | $ | 15,237 | |||
Total liabilities | $ | 44 | $ | 54 | |||
Members’ capital | $ | 12,527 | $ | 15,183 |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net interest income, fees and related income on earning assets | $ | 496 | $ | 1,067 | $ | 2,008 | $ | 2,684 | |||||||
Net income | $ | 355 | $ | 874 | $ | 1,715 | $ | 2,281 | |||||||
Net income attributable to our equity investment in investee | $ | 325 | $ | 707 | $ | 1,327 | $ | 1,782 |
6. | Fair Values of Assets and Liabilities |
Assets – As of June 30, 2016 (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 | $ | — | $ | — | $ | 217,680 | $ | 198,188 | ||||||||
Loans and fees receivable, at fair value | $ | — | $ | — | $ | 5,255 | $ | 5,255 | ||||||||
Loans and fees receivable pledged as collateral, at fair value | $ | — | $ | — | $ | 15,265 | $ | 15,265 |
Assets – As of December 31, 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 | $ | — | $ | — | $ | 161,199 | $ | 141,949 | ||||||||
Loans and fees receivable, at fair value | $ | — | $ | — | $ | 6,353 | $ | 6,353 | ||||||||
Loans and fees receivable pledged as collateral, at fair value | $ | — | $ | — | $ | 20,353 | $ | 20,353 |
(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. |
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, 2016 | $ | 6,353 | $ | 20,353 | $ | 26,706 | |||||
Total gains—realized/unrealized: | |||||||||||
Net revaluations of loans and fees receivable pledged as collateral under structured financings, at fair value | — | 806 | 806 | ||||||||
Net revaluations of loans and fees receivable, at fair value | 1,619 | — | 1,619 | ||||||||
Settlements, net | (2,528 | ) | (5,894 | ) | (8,422 | ) | |||||
Impact of foreign currency translation | (189 | ) | — | (189 | ) | ||||||
Balance at June 30, 2016 | $ | 5,255 | $ | 15,265 | $ | 20,520 | |||||
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 | — | 2,462 | 2,462 | ||||||||
Net revaluations of loans and fees receivable, at fair value | 750 | — | 750 | ||||||||
Settlements, net | (7,449 | ) | (9,903 | ) | (17,352 | ) | |||||
Impact of foreign currency translation | (44 | ) | — | (44 | ) | ||||||
Balance at June 30, 2015 | $ | 11,512 | $ | 27,464 | $ | 38,976 |
Quantitative Information about Level 3 Fair Value Measurements | |||||||||||
Fair Value Measurements | Fair Value at June 30, 2016 | Valuation Technique | Unobservable Input | Range (Weighted Average)(1) | |||||||
Loans and fees receivable, at fair value | $ | 5,255 | Discounted cash flows | Gross yield | 27.9% to 33.1% (29.7%) | ||||||
Principal payment rate | 1.9% to 3.5% (2.9%) | ||||||||||
Expected credit loss rate | 11.8% to 25.5% (16.5%) | ||||||||||
Servicing rate | 8.0% to 8.3% (8.2%) | ||||||||||
Discount rate | 16.1% to 16.2% (16.1%) | ||||||||||
Loans and fees receivable pledged as collateral under structured financings, at fair value | $ | 15,265 | Discounted cash flows | Gross yield | 24.0 | % | |||||
Principal payment rate | 2.6 | % | |||||||||
Expected credit loss rate | 11.1 | % | |||||||||
Servicing rate | 8.0 | % | |||||||||
Discount rate | 16.1 | % |
Quantitative Information about Level 3 Fair Value Measurements | |||||||||||
Fair Value Measurements | Fair Value at December 31, 2015 | Valuation Technique | Unobservable Input | Range (Weighted Average)(1) | |||||||
Loans and fees receivable, at fair value | $ | 6,353 | Discounted cash flows | Gross yield | 15.8% to 22.7% (20.0%) | ||||||
Principal payment rate | 2.1% to 3.0% (2.7%) | ||||||||||
Expected credit loss rate | 12.9% to 22.7% (16.7%) | ||||||||||
Servicing rate | 8.4% to 12.5% (10.9%) | ||||||||||
Discount rate | 16.0% to 16.2% (16.1%) | ||||||||||
Loans and fees receivable pledged as collateral under structured financings, at fair value | $ | 20,353 | Discounted cash flows | Gross yield | 28.5 | % | |||||
Principal payment rate | 2.9 | % | |||||||||
Expected credit loss rate | 12.5 | % | |||||||||
Servicing rate | 12.9 | % | |||||||||
Discount rate | 16.0 | % |
Liabilities – As of June 30, 2016 | 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 | ||||||||||||||||
Revolving credit facilities | $ | — | $ | — | $ | 64,992 | $ | 64,992 | ||||||||
Amortizing debt facilities | $ | — | $ | — | $ | 38,619 | $ | 38,619 | ||||||||
Senior secured term loan | $ | — | $ | — | $ | 20,000 | $ | 20,000 | ||||||||
5.875% convertible senior notes | $ | — | $ | 36,844 | $ | — | $ | 61,903 | ||||||||
Liabilities carried at fair value | ||||||||||||||||
Economic sharing arrangement liability | $ | — | $ | — | $ | 26 | $ | 26 | ||||||||
Notes payable associated with structured financings, at fair value | $ | — | $ | — | $ | 15,626 | $ | 15,626 |
Liabilities - As of December 31, 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 | ||||||||||||||||
Revolving credit facilities | $ | — | $ | — | $ | 28,900 | $ | 28,900 | ||||||||
Amortizing debt facilities | $ | — | $ | — | $ | 61,100 | $ | 61,100 | ||||||||
Senior secured term loan | $ | — | $ | — | $ | 20,000 | $ | 20,000 | ||||||||
5.875% convertible senior notes | $ | — | $ | 42,734 | $ | — | $ | 64,783 | ||||||||
Liabilities carried at fair value | ||||||||||||||||
Economic sharing arrangement liability | $ | — | $ | — | $ | 42 | $ | 42 | ||||||||
Notes payable associated with structured financings, at fair value | $ | — | $ | — | $ | 20,970 | $ | 20,970 |
Notes Payable Associated with Structured Financings, at Fair Value | |||||||
2016 | 2015 | ||||||
Beginning balance, January 1 | $ | 20,970 | $ | 36,511 | |||
Total (gains) losses—realized/unrealized: | |||||||
Net revaluations of notes payable associated with structured financings, at fair value | (2,104 | ) | 782 | ||||
Repayments on outstanding notes payable, net | (3,240 | ) | (8,608 | ) | |||
Ending balance, June 30 | $ | 15,626 | $ | 28,685 |
Quantitative Information about Level 3 Fair Value Measurements | |||||||||||
Fair Value Measurements | Fair Value at June 30, 2016 (in Thousands) | Valuation Technique | Unobservable Input | Weighted Average | |||||||
Notes payable associated with structured financings, at fair value | $ | 15,626 | Discounted cash flows | Gross yield | 24.0 | % | |||||
Principal payment rate | 2.6 | % | |||||||||
Expected credit loss rate | 11.1 | % | |||||||||
Discount rate | 16.1 | % |
Quantitative Information about Level 3 Fair Value Measurements | |||||||||||
Fair Value Measurements | Fair Value at December 31, 2015 (in Thousands) | Valuation Technique | Unobservable Input | Weighted Average | |||||||
Notes payable associated with structured financings, at fair value | $ | 20,970 | Discounted cash flows | Gross yield | 28.5 | % | |||||
Principal payment rate | 2.9 | % | |||||||||
Expected credit loss rate | 12.5 | % | |||||||||
Discount rate | 16.0 | % |
As of June 30, 2016 | Loans and Fees Receivable at Fair Value | Loans and Fees Receivable Pledged as Collateral under Structured Financings at Fair Value | ||||||
Aggregate unpaid principal balance within loans and fees receivable that are reported at fair value | $ | 6,011 | $ | 20,504 | ||||
Aggregate fair value of loans and fees receivable that are reported at fair value | $ |