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 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
|
||
|
|
September 30,
2017 |
|
December 31,
2016 |
||||
Assets
|
|
|
|
||||
Unrestricted cash and cash equivalents
|
$
|
68,582
|
|
|
$
|
76,052
|
|
Restricted cash and cash equivalents
|
28,659
|
|
|
16,589
|
|
||
Loans and fees receivable:
|
|
|
|
|
|
||
Loans and fees receivable, at fair value
|
12,019
|
|
|
15,648
|
|
||
Loans and fees receivable, gross
|
359,823
|
|
|
290,697
|
|
||
Allowances for uncollectible loans and fees receivable
|
(52,118
|
)
|
|
(43,275
|
)
|
||
Deferred revenue
|
(35,881
|
)
|
|
(23,639
|
)
|
||
Net loans and fees receivable
|
283,843
|
|
|
239,431
|
|
||
Rental merchandise, net of depreciation
|
—
|
|
|
27
|
|
||
Property at cost, net of depreciation
|
3,296
|
|
|
3,829
|
|
||
Investment in equity-method investee
|
4,745
|
|
|
6,725
|
|
||
Deposits
|
306
|
|
|
505
|
|
||
Prepaid expenses and other assets
|
39,636
|
|
|
19,389
|
|
||
Total assets
|
$
|
429,067
|
|
|
$
|
362,547
|
|
Liabilities
|
|
|
|
|
|
||
Accounts payable and accrued expenses
|
$
|
114,883
|
|
|
$
|
86,768
|
|
Notes payable, at face value, net
|
208,980
|
|
|
141,166
|
|
||
Notes payable to related parties
|
40,000
|
|
|
40,000
|
|
||
Notes payable associated with structured financings, at fair value
|
9,769
|
|
|
12,276
|
|
||
Convertible senior notes
|
61,238
|
|
|
60,791
|
|
||
Income tax liability
|
11,059
|
|
|
15,769
|
|
||
Total liabilities
|
445,929
|
|
|
356,770
|
|
||
Commitments and contingencies (Note 9)
|
|
|
|
|
|
||
Equity
|
|
|
|
|
|
||
Common stock, no par value, 150,000,000 shares authorized: 15,335,468 shares issued and outstanding (including 1,459,233 loaned shares to be returned) at September 30, 2017; and 15,348,086 shares issued and outstanding (including 1,459,233 loaned shares to be returned) at December 31, 2016
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
212,618
|
|
|
211,646
|
|
||
Accumulated other comprehensive loss
|
(1,096
|
)
|
|
—
|
|
||
Retained deficit
|
(228,382
|
)
|
|
(205,859
|
)
|
||
Total shareholders’ equity
|
(16,860
|
)
|
|
5,787
|
|
||
Noncontrolling interests
|
(2
|
)
|
|
(10
|
)
|
||
Total equity
|
(16,862
|
)
|
|
5,777
|
|
||
Total liabilities and equity
|
$
|
429,067
|
|
|
$
|
362,547
|
|
|
For the Three Months Ended September 30,
|
|
For the Nine Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Interest income:
|
|
|
|
|
|
|
|
||||||||
Consumer loans, including past due fees
|
$
|
28,985
|
|
|
$
|
24,053
|
|
|
$
|
81,457
|
|
|
$
|
63,663
|
|
Other
|
34
|
|
|
36
|
|
|
178
|
|
|
188
|
|
||||
Total interest income
|
29,019
|
|
|
24,089
|
|
|
81,635
|
|
|
63,851
|
|
||||
Interest expense
|
(7,268
|
)
|
|
(5,257
|
)
|
|
(19,504
|
)
|
|
(14,693
|
)
|
||||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable
|
21,751
|
|
|
18,832
|
|
|
62,131
|
|
|
49,158
|
|
||||
Fees and related income on earning assets
|
4,166
|
|
|
75
|
|
|
10,938
|
|
|
13,840
|
|
||||
Net recovery of charge off of loans and fees receivable recorded at fair value
|
2,393
|
|
|
1,556
|
|
|
10,763
|
|
|
12,607
|
|
||||
Provision for losses on loans and fees receivable recorded at net realizable value
|
(24,087
|
)
|
|
(17,470
|
)
|
|
(50,484
|
)
|
|
(33,012
|
)
|
||||
Net interest income, fees and related income on earning assets
|
4,223
|
|
|
2,993
|
|
|
33,348
|
|
|
42,593
|
|
||||
Other operating income:
|
|
|
|
|
|
|
|
|
|
||||||
Servicing income
|
1,034
|
|
|
885
|
|
|
2,984
|
|
|
3,313
|
|
||||
Other income
|
590
|
|
|
69
|
|
|
939
|
|
|
214
|
|
||||
Gain on repurchase of convertible senior notes
|
—
|
|
|
—
|
|
|
—
|
|
|
1,037
|
|
||||
Equity in income of equity-method investee
|
164
|
|
|
629
|
|
|
902
|
|
|
1,956
|
|
||||
Total other operating income
|
1,788
|
|
|
1,583
|
|
|
4,825
|
|
|
6,520
|
|
||||
Other operating expense:
|
|
|
|
|
|
|
|
|
|
||||||
Salaries and benefits
|
5,296
|
|
|
6,329
|
|
|
16,314
|
|
|
18,242
|
|
||||
Card and loan servicing
|
8,687
|
|
|
7,027
|
|
|
23,866
|
|
|
23,300
|
|
||||
Marketing and solicitation
|
2,072
|
|
|
587
|
|
|
6,731
|
|
|
2,374
|
|
||||
Depreciation
|
236
|
|
|
794
|
|
|
789
|
|
|
7,049
|
|
||||
Other
|
4,210
|
|
|
3,570
|
|
|
16,842
|
|
|
6,199
|
|
||||
Total other operating expense
|
20,501
|
|
|
18,307
|
|
|
64,542
|
|
|
57,164
|
|
||||
Loss before income taxes
|
(14,490
|
)
|
|
(13,731
|
)
|
|
(26,369
|
)
|
|
(8,051
|
)
|
||||
Income tax benefit
|
22
|
|
|
4,666
|
|
|
3,847
|
|
|
3,811
|
|
||||
Net loss
|
(14,468
|
)
|
|
(9,065
|
)
|
|
(22,522
|
)
|
|
(4,240
|
)
|
||||
Net (income) loss attributable to noncontrolling interests
|
1
|
|
|
—
|
|
|
(1
|
)
|
|
5
|
|
||||
Net loss attributable to controlling interests
|
$
|
(14,467
|
)
|
|
$
|
(9,065
|
)
|
|
$
|
(22,523
|
)
|
|
$
|
(4,235
|
)
|
Net loss attributable to controlling interests per common share—basic
|
$
|
(1.04
|
)
|
|
$
|
(0.65
|
)
|
|
$
|
(1.61
|
)
|
|
$
|
(0.31
|
)
|
Net loss attributable to controlling interests per common share—diluted
|
$
|
(1.04
|
)
|
|
$
|
(0.65
|
)
|
|
$
|
(1.61
|
)
|
|
$
|
(0.31
|
)
|
|
For the Three Months Ended September 30,
|
|
For the Nine Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net loss
|
$
|
(14,468
|
)
|
|
$
|
(9,065
|
)
|
|
$
|
(22,522
|
)
|
|
$
|
(4,240
|
)
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency translation adjustment
|
(1,721
|
)
|
|
—
|
|
|
(1,721
|
)
|
|
—
|
|
||||
Reclassifications of foreign currency translation adjustment to consolidated statements of operations
|
—
|
|
|
—
|
|
|
—
|
|
|
600
|
|
||||
Income tax expense related to other comprehensive income
|
625
|
|
|
—
|
|
|
625
|
|
|
—
|
|
||||
Comprehensive loss
|
(15,564
|
)
|
|
(9,065
|
)
|
|
(23,618
|
)
|
|
(3,640
|
)
|
||||
Comprehensive (income) loss attributable to noncontrolling interests
|
1
|
|
|
—
|
|
|
(1
|
)
|
|
5
|
|
||||
Comprehensive loss attributable to controlling interests
|
$
|
(15,563
|
)
|
|
$
|
(9,065
|
)
|
|
$
|
(23,619
|
)
|
|
$
|
(3,635
|
)
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Shares Issued
|
|
Amount
|
|
Additional Paid-In Capital
|
|
Accumulated Other Comprehensive Loss
|
|
Retained Deficit
|
|
Noncontrolling Interests
|
|
Total Equity
|
|||||||||||||
Balance at December 31, 2016
|
15,348,086
|
|
|
$
|
—
|
|
|
$
|
211,646
|
|
|
$
|
—
|
|
|
$
|
(205,859
|
)
|
|
$
|
(10
|
)
|
|
$
|
5,777
|
|
Compensatory stock issuances, net of forfeitures
|
102,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Contributions from owners of noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
7
|
|
||||||
Amortization of deferred stock-based compensation costs
|
—
|
|
|
—
|
|
|
1,258
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,258
|
|
||||||
Redemption and retirement of shares
|
(114,618
|
)
|
|
—
|
|
|
(286
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(286
|
)
|
||||||
Other comprehensive (loss) income
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,096
|
)
|
|
(22,523
|
)
|
|
1
|
|
|
(23,618
|
)
|
||||||
Balance at September 30, 2017
|
15,335,468
|
|
|
$
|
—
|
|
|
$
|
212,618
|
|
|
$
|
(1,096
|
)
|
|
$
|
(228,382
|
)
|
|
$
|
(2
|
)
|
|
$
|
(16,862
|
)
|
|
For the Nine Months Ended September 30,
|
||||||
|
2017
|
|
2016
|
||||
Operating activities
|
|
|
|
||||
Net loss
|
$
|
(22,522
|
)
|
|
$
|
(4,240
|
)
|
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
|
|
|
|
|
|
||
Depreciation of rental merchandise
|
27
|
|
|
5,172
|
|
||
Depreciation, amortization and accretion, net
|
762
|
|
|
1,877
|
|
||
Losses upon charge off of loans and fees receivable recorded at fair value
|
2,973
|
|
|
4,647
|
|
||
Provision for losses on loans and fees receivable
|
50,484
|
|
|
33,012
|
|
||
Interest expense from accretion of discount on convertible senior notes
|
406
|
|
|
385
|
|
||
Income from accretion of discount associated with receivables purchases
|
(41,961
|
)
|
|
(30,662
|
)
|
||
Unrealized gain on loans and fees receivable and underlying notes payable held at fair value
|
(4,504
|
)
|
|
(2,931
|
)
|
||
Income from equity-method investments
|
(902
|
)
|
|
(1,956
|
)
|
||
Gain on repurchase of convertible senior notes
|
—
|
|
|
(1,037
|
)
|
||
Changes in assets and liabilities:
|
|
|
|
|
|
||
Increase in uncollected fees on earning assets
|
(1,530
|
)
|
|
(2,782
|
)
|
||
Decrease in income tax liability
|
(4,084
|
)
|
|
(4,521
|
)
|
||
Decrease in deposits
|
199
|
|
|
295
|
|
||
Increase in accounts payable and accrued expenses
|
22,032
|
|
|
28,555
|
|
||
Additions to rental merchandise
|
—
|
|
|
(634
|
)
|
||
Other
|
(13,395
|
)
|
|
(475
|
)
|
||
Net cash (used in) provided by operating activities
|
(12,015
|
)
|
|
24,705
|
|
||
Investing activities
|
|
|
|
|
|
||
(Increase) decrease in restricted cash
|
(12,049
|
)
|
|
3,252
|
|
||
Proceeds from equity-method investee
|
2,882
|
|
|
4,396
|
|
||
Investments in earning assets
|
(335,664
|
)
|
|
(286,654
|
)
|
||
Proceeds from earning assets
|
282,064
|
|
|
222,606
|
|
||
Purchases and development of property, net of disposals
|
(229
|
)
|
|
(244
|
)
|
||
Net cash used in investing activities
|
(62,996
|
)
|
|
(56,644
|
)
|
||
Financing activities
|
|
|
|
|
|
||
Noncontrolling interests contributions, net
|
7
|
|
|
4
|
|
||
Purchase and retirement of outstanding stock
|
(286
|
)
|
|
(869
|
)
|
||
Proceeds from borrowings
|
243,945
|
|
|
156,869
|
|
||
Repayment of borrowings
|
(176,417
|
)
|
|
(115,245
|
)
|
||
Net cash provided by financing activities
|
67,249
|
|
|
40,759
|
|
||
Effect of exchange rate changes on cash
|
292
|
|
|
(1,133
|
)
|
||
Net (decrease) increase in unrestricted cash
|
(7,470
|
)
|
|
7,687
|
|
||
Unrestricted cash and cash equivalents at beginning of period
|
76,052
|
|
|
51,033
|
|
||
Unrestricted cash and cash equivalents at end of period
|
$
|
68,582
|
|
|
$
|
58,720
|
|
Supplemental cash flow information
|
|
|
|
|
|
||
Cash paid for interest
|
$
|
19,214
|
|
|
$
|
15,390
|
|
Net cash income tax payments
|
$
|
238
|
|
|
$
|
710
|
|
Supplemental non-cash information
|
|
|
|
|
|
||
Issuance of stock options and restricted stock
|
$
|
1,364
|
|
|
$
|
2,310
|
|
1.
|
Description of Our Business
|
2.
|
Significant Accounting Policies and Consolidated Financial Statement Components
|
For the Three Months Ended September 30, 2017
|
|
Credit Cards
|
|
Auto Finance
|
|
Other Unsecured Lending Products
|
|
Total
|
||||||||
Allowance for uncollectible loans and fees receivable:
|
|
|
|
|
|
|
|
|
||||||||
Balance at beginning of period
|
|
$
|
(3.2
|
)
|
|
$
|
(2.0
|
)
|
|
$
|
(36.0
|
)
|
|
$
|
(41.2
|
)
|
Provision for loan losses
|
|
(6.2
|
)
|
|
(0.2
|
)
|
|
(17.7
|
)
|
|
(24.1
|
)
|
||||
Charge offs
|
|
0.7
|
|
|
0.5
|
|
|
13.2
|
|
|
14.4
|
|
||||
Recoveries
|
|
(0.1
|
)
|
|
(0.3
|
)
|
|
(0.8
|
)
|
|
(1.2
|
)
|
||||
Balance at end of period
|
|
$
|
(8.8
|
)
|
|
$
|
(2.0
|
)
|
|
$
|
(41.3
|
)
|
|
$
|
(52.1
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
For the Nine Months Ended September 30, 2017
|
|
Credit Cards
|
|
Auto Finance
|
|
Other Unsecured Lending Products
|
|
Total
|
||||||||
Allowance for uncollectible loans and fees receivable:
|
|
|
|
|
|
|
|
|
||||||||
Balance at beginning of period
|
|
$
|
(1.4
|
)
|
|
$
|
(2.1
|
)
|
|
$
|
(39.8
|
)
|
|
$
|
(43.3
|
)
|
Provision for loan losses
|
|
(8.1
|
)
|
|
(1.0
|
)
|
|
(41.4
|
)
|
|
(50.5
|
)
|
||||
Charge offs
|
|
1.9
|
|
|
2.1
|
|
|
42.2
|
|
|
46.2
|
|
||||
Recoveries
|
|
(1.2
|
)
|
|
(1.0
|
)
|
|
(2.3
|
)
|
|
(4.5
|
)
|
||||
Balance at end of period
|
|
$
|
(8.8
|
)
|
|
$
|
(2.0
|
)
|
|
$
|
(41.3
|
)
|
|
$
|
(52.1
|
)
|
As of September 30, 2017
|
|
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
|
)
|
|
$
|
(0.2
|
)
|
Balance at end of period collectively evaluated for impairment
|
|
$
|
(8.8
|
)
|
|
$
|
(2.0
|
)
|
|
$
|
(41.1
|
)
|
|
$
|
(51.9
|
)
|
Loans and fees receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loans and fees receivable, gross
|
|
$
|
61.8
|
|
|
$
|
75.5
|
|
|
$
|
222.5
|
|
|
$
|
359.8
|
|
Loans and fees receivable individually evaluated for impairment
|
|
$
|
—
|
|
|
$
|
0.2
|
|
|
$
|
0.2
|
|
|
$
|
0.4
|
|
Loans and fees receivable collectively evaluated for impairment
|
|
$
|
61.8
|
|
|
$
|
75.3
|
|
|
$
|
222.3
|
|
|
$
|
359.4
|
|
For the Three Months Ended September 30, 2016
|
|
Credit Cards
|
|
Auto Finance
|
|
Other Unsecured Lending Products
|
|
Total
|
||||||||
Allowance for uncollectible loans and fees receivable:
|
|
|
|
|
|
|
|
|
||||||||
Balance at beginning of period
|
|
$
|
(1.1
|
)
|
|
$
|
(2.0
|
)
|
|
$
|
(21.1
|
)
|
|
$
|
(24.2
|
)
|
Provision for loan losses
|
|
0.1
|
|
|
(0.7
|
)
|
|
(16.9
|
)
|
|
(17.5
|
)
|
||||
Charge offs
|
|
0.5
|
|
|
0.8
|
|
|
6.9
|
|
|
8.2
|
|
||||
Recoveries
|
|
(0.5
|
)
|
|
(0.2
|
)
|
|
(0.4
|
)
|
|
(1.1
|
)
|
||||
Balance at end of period
|
|
$
|
(1.0
|
)
|
|
$
|
(2.1
|
)
|
|
$
|
(31.5
|
)
|
|
$
|
(34.6
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
For the Nine Months Ended September 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
|
|
0.7
|
|
|
(2.1
|
)
|
|
(31.6
|
)
|
|
(33.0
|
)
|
||||
Charge offs
|
|
1.5
|
|
|
2.5
|
|
|
20.1
|
|
|
24.1
|
|
||||
Recoveries
|
|
(2.0
|
)
|
|
(0.8
|
)
|
|
(1.4
|
)
|
|
(4.2
|
)
|
||||
Balance at end of period
|
|
$
|
(1.0
|
)
|
|
$
|
(2.1
|
)
|
|
$
|
(31.5
|
)
|
|
$
|
(34.6
|
)
|
As of December 31, 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
|
|
$
|
—
|
|
|
$
|
(0.3
|
)
|
|
$
|
(0.3
|
)
|
|
$
|
(0.6
|
)
|
Balance at end of period collectively evaluated for impairment
|
|
$
|
(1.4
|
)
|
|
$
|
(1.8
|
)
|
|
$
|
(39.5
|
)
|
|
$
|
(42.7
|
)
|
Loans and fees receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loans and fees receivable, gross
|
|
$
|
11.0
|
|
|
$
|
77.1
|
|
|
$
|
202.6
|
|
|
$
|
290.7
|
|
Loans and fees receivable individually evaluated for impairment
|
|
$
|
—
|
|
|
$
|
0.7
|
|
|
$
|
0.3
|
|
|
$
|
1.0
|
|
Loans and fees receivable collectively evaluated for impairment
|
|
$
|
11.0
|
|
|
$
|
76.4
|
|
|
$
|
202.3
|
|
|
$
|
289.7
|
|
Balance at September 30, 2017
|
|
Credit Cards
|
|
Auto Finance
|
|
Other Unsecured Lending Products
|
|
Total
|
||||||||
30-59 days past due
|
|
$
|
1.7
|
|
|
$
|
6.3
|
|
|
$
|
9.3
|
|
|
$
|
17.3
|
|
60-89 days past due
|
|
0.8
|
|
|
2.2
|
|
|
7.1
|
|
|
10.1
|
|
||||
90 or more days past due
|
|
1.4
|
|
|
1.7
|
|
|
14.2
|
|
|
17.3
|
|
||||
Delinquent loans and fees receivable, gross
|
|
3.9
|
|
|
10.2
|
|
|
30.6
|
|
|
44.7
|
|
||||
Current loans and fees receivable, gross
|
|
57.9
|
|
|
65.3
|
|
|
191.9
|
|
|
315.1
|
|
||||
Total loans and fees receivable, gross
|
|
$
|
61.8
|
|
|
$
|
75.5
|
|
|
$
|
222.5
|
|
|
$
|
359.8
|
|
Balance of loans 90 or more days past due and still accruing interest and fees
|
|
$
|
—
|
|
|
$
|
1.3
|
|
|
$
|
—
|
|
|
$
|
1.3
|
|
Balance at December 31, 2016
|
Credit Cards
|
|
Auto Finance
|
|
Other Unsecured Lending Products
|
|
Total
|
||||||||
30-59 days past due
|
$
|
0.2
|
|
|
$
|
7.0
|
|
|
$
|
8.2
|
|
|
$
|
15.4
|
|
60-89 days past due
|
0.2
|
|
|
2.4
|
|
|
6.7
|
|
|
9.3
|
|
||||
90 or more days past due
|
0.4
|
|
|
1.9
|
|
|
11.4
|
|
|
13.7
|
|
||||
Delinquent loans and fees receivable, gross
|
0.8
|
|
|
11.3
|
|
|
26.3
|
|
|
38.4
|
|
||||
Current loans and fees receivable, gross
|
10.2
|
|
|
65.8
|
|
|
176.3
|
|
|
252.3
|
|
||||
Total loans and fees receivable, gross
|
$
|
11.0
|
|
|
$
|
77.1
|
|
|
$
|
202.6
|
|
|
$
|
290.7
|
|
Balance of loans 90 or more days past due and still accruing interest and fees
|
$
|
—
|
|
|
$
|
1.5
|
|
|
$
|
—
|
|
|
$
|
1.5
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Fees on credit products
|
$
|
3,248
|
|
|
$
|
944
|
|
|
$
|
6,351
|
|
|
$
|
2,599
|
|
Changes in fair value of loans and fees receivable recorded at fair value
|
1,153
|
|
|
(1,857
|
)
|
|
2,718
|
|
|
568
|
|
||||
Changes in fair value of notes payable associated with structured financings recorded at fair value
|
259
|
|
|
259
|
|
|
1,786
|
|
|
2,363
|
|
||||
Rental revenue
|
—
|
|
|
758
|
|
|
148
|
|
|
8,091
|
|
||||
Other
|
(494
|
)
|
|
(29
|
)
|
|
(65
|
)
|
|
219
|
|
||||
Total fees and related income on earning assets
|
$
|
4,166
|
|
|
$
|
75
|
|
|
$
|
10,938
|
|
|
$
|
13,840
|
|
3.
|
Segment Reporting
|
Three months ended September 30, 2017
|
|
Credit and Other Investments
|
|
Auto Finance
|
|
Total
|
||||||
Interest income:
|
|
|
|
|
|
|
||||||
Consumer loans, including past due fees
|
|
$
|
21,901
|
|
|
$
|
7,084
|
|
|
$
|
28,985
|
|
Other
|
|
34
|
|
|
—
|
|
|
34
|
|
|||
Total interest income
|
|
21,935
|
|
|
7,084
|
|
|
29,019
|
|
|||
Interest expense
|
|
(6,998
|
)
|
|
(270
|
)
|
|
(7,268
|
)
|
|||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable
|
|
$
|
14,937
|
|
|
$
|
6,814
|
|
|
$
|
21,751
|
|
Fees and related income on earning assets
|
|
$
|
4,137
|
|
|
$
|
29
|
|
|
$
|
4,166
|
|
Servicing income
|
|
$
|
831
|
|
|
$
|
203
|
|
|
$
|
1,034
|
|
Depreciation of rental merchandise
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Equity in income of equity-method investee
|
|
$
|
164
|
|
|
$
|
—
|
|
|
$
|
164
|
|
(Loss) income before income taxes
|
|
$
|
(16,547
|
)
|
|
$
|
2,057
|
|
|
$
|
(14,490
|
)
|
Income tax benefit (expense)
|
|
$
|
655
|
|
|
$
|
(633
|
)
|
|
$
|
22
|
|
|
|
|
|
|
|
|
||||||
Nine months ended September 30, 2017
|
|
Credit and Other Investments
|
|
Auto Finance
|
|
Total
|
||||||
Interest income:
|
|
|
|
|
|
|
||||||
Consumer loans, including past due fees
|
|
$
|
60,320
|
|
|
$
|
21,137
|
|
|
$
|
81,457
|
|
Other
|
|
178
|
|
|
—
|
|
|
178
|
|
|||
Total interest income
|
|
60,498
|
|
|
21,137
|
|
|
81,635
|
|
|||
Interest expense
|
|
(18,758
|
)
|
|
(746
|
)
|
|
(19,504
|
)
|
|||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable
|
|
$
|
41,740
|
|
|
$
|
20,391
|
|
|
$
|
62,131
|
|
Fees and related income on earning assets
|
|
$
|
10,859
|
|
|
$
|
79
|
|
|
$
|
10,938
|
|
Servicing income
|
|
$
|
2,332
|
|
|
$
|
652
|
|
|
$
|
2,984
|
|
Depreciation of rental merchandise
|
|
$
|
(27
|
)
|
|
$
|
—
|
|
|
$
|
(27
|
)
|
Equity in income of equity-method investee
|
|
$
|
902
|
|
|
$
|
—
|
|
|
$
|
902
|
|
(Loss) income before income taxes
|
|
$
|
(32,071
|
)
|
|
$
|
5,702
|
|
|
$
|
(26,369
|
)
|
Income tax benefit (expense)
|
|
$
|
5,677
|
|
|
$
|
(1,830
|
)
|
|
$
|
3,847
|
|
Total assets
|
|
$
|
363,526
|
|
|
$
|
65,541
|
|
|
$
|
429,067
|
|
Three months ended September 30, 2016
|
|
Credit and Other Investments
|
|
Auto Finance
|
|
Total
|
||||||
Interest income:
|
|
|
|
|
|
|
||||||
Consumer loans, including past due fees
|
|
$
|
16,701
|
|
|
$
|
7,352
|
|
|
$
|
24,053
|
|
Other
|
|
36
|
|
|
—
|
|
|
36
|
|
|||
Total interest income
|
|
16,737
|
|
|
7,352
|
|
|
24,089
|
|
|||
Interest expense
|
|
(4,944
|
)
|
|
(313
|
)
|
|
(5,257
|
)
|
|||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable
|
|
$
|
11,793
|
|
|
$
|
7,039
|
|
|
$
|
18,832
|
|
Fees and related income on earning assets
|
|
$
|
92
|
|
|
$
|
(17
|
)
|
|
$
|
75
|
|
Servicing income
|
|
$
|
645
|
|
|
$
|
240
|
|
|
$
|
885
|
|
Gain on repurchase of convertible senior notes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Depreciation of rental merchandise
|
|
$
|
(458
|
)
|
|
$
|
—
|
|
|
$
|
(458
|
)
|
Equity in income of equity-method investee
|
|
$
|
629
|
|
|
$
|
—
|
|
|
$
|
629
|
|
(Loss) income before income taxes
|
|
$
|
(15,709
|
)
|
|
$
|
1,978
|
|
|
$
|
(13,731
|
)
|
Income tax benefit (expense)
|
|
$
|
5,296
|
|
|
$
|
(630
|
)
|
|
$
|
4,666
|
|
|
|
|
|
|
|
|
||||||
Nine months ended September 30, 2016
|
|
Credit and Other Investments
|
|
Auto Finance
|
|
Total
|
||||||
Interest income:
|
|
|
|
|
|
|
||||||
Consumer loans, including past due fees
|
|
$
|
42,018
|
|
|
$
|
21,645
|
|
|
$
|
63,663
|
|
Other
|
|
188
|
|
|
—
|
|
|
188
|
|
|||
Total interest income
|
|
42,206
|
|
|
21,645
|
|
|
63,851
|
|
|||
Interest expense
|
|
(13,735
|
)
|
|
(958
|
)
|
|
(14,693
|
)
|
|||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable
|
|
$
|
28,471
|
|
|
$
|
20,687
|
|
|
$
|
49,158
|
|
Fees and related income on earning assets
|
|
$
|
13,761
|
|
|
$
|
79
|
|
|
$
|
13,840
|
|
Servicing income
|
|
$
|
2,569
|
|
|
$
|
744
|
|
|
$
|
3,313
|
|
Gain on repurchase of convertible senior notes
|
|
$
|
1,037
|
|
|
$
|
—
|
|
|
$
|
1,037
|
|
Depreciation of rental merchandise
|
|
$
|
(5,172
|
)
|
|
$
|
—
|
|
|
$
|
(5,172
|
)
|
Equity in income of equity-method investee
|
|
$
|
1,956
|
|
|
$
|
—
|
|
|
$
|
1,956
|
|
(Loss) income before income taxes
|
|
$
|
(13,047
|
)
|
|
$
|
4,996
|
|
|
$
|
(8,051
|
)
|
Income tax benefit (expense)
|
|
$
|
5,500
|
|
|
$
|
(1,689
|
)
|
|
$
|
3,811
|
|
Total assets
|
|
$
|
267,390
|
|
|
$
|
68,440
|
|
|
$
|
335,830
|
|
4.
|
Shareholders’ Equity
|
5.
|
Investment in Equity-Method Investee
|
|
As of
|
||||||
|
September 30, 2017
|
|
December 31, 2016
|
||||
Loans and fees receivable, at fair value
|
$
|
6,833
|
|
|
$
|
9,650
|
|
Total assets
|
$
|
7,145
|
|
|
$
|
10,291
|
|
Total liabilities
|
$
|
28
|
|
|
$
|
204
|
|
Members’ capital
|
$
|
7,117
|
|
|
$
|
10,087
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net interest income, fees and related income on earning assets
|
$
|
247
|
|
|
$
|
949
|
|
|
$
|
1,358
|
|
|
$
|
2,957
|
|
Net income
|
$
|
159
|
|
|
$
|
822
|
|
|
$
|
1,067
|
|
|
$
|
2,537
|
|
Net income attributable to our equity investment in investee
|
$
|
164
|
|
|
$
|
629
|
|
|
$
|
902
|
|
|
$
|
1,956
|
|
6.
|
Fair Values of Assets and Liabilities
|
Assets – As of September 30, 2017 (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
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
310,557
|
|
|
$
|
271,824
|
|
Loans and fees receivable, at fair value
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12,019
|
|
|
$
|
12,019
|
|
Assets – As of December 31, 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
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
248,171
|
|
|
$
|
223,783
|
|
Loans and fees receivable, at fair value
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15,648
|
|
|
$
|
15,648
|
|
(1)
|
For cash, deposits and other short-term investments, the carrying amount is a reasonable estimate of fair value.
|
|
Loans and Fees Receivable, at
Fair Value |
||||||
|
2017
|
|
2016
|
||||
Balance at January 1,
|
$
|
15,648
|
|
|
$
|
26,706
|
|
Total gains—realized/unrealized:
|
|
|
|
|
|||
Net revaluations of loans and fees receivable, at fair value
|
2,718
|
|
|
568
|
|
||
Settlements
|
(6,398
|
)
|
|
(8,590
|
)
|
||
Impact of foreign currency translation
|
51
|
|
|
(239
|
)
|
||
Balance at September 30,
|
$
|
12,019
|
|
|
$
|
18,445
|
|
Liabilities – As of September 30, 2017
|
|
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
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
143,834
|
|
|
$
|
143,834
|
|
Amortizing debt facilities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
66,191
|
|
|
$
|
66,191
|
|
Senior secured term loan
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
40,000
|
|
|
$
|
40,000
|
|
5.875% convertible senior notes
|
|
$
|
—
|
|
|
$
|
39,064
|
|
|
$
|
—
|
|
|
$
|
61,238
|
|
Liabilities carried at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Notes payable associated with structured financings, at fair value
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,769
|
|
|
$
|
9,769
|
|
Liabilities - As of December 31, 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
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
83,399
|
|
|
$
|
83,399
|
|
Amortizing debt facilities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
58,190
|
|
|
$
|
58,190
|
|
Senior secured term loan
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
40,000
|
|
|
$
|
40,000
|
|
5.875% convertible senior notes
|
|
$
|
—
|
|
|
$
|
40,609
|
|
|
$
|
—
|
|
|
$
|
60,791
|
|
Liabilities carried at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Notes payable associated with structured financings, at fair value
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12,276
|
|
|
$
|
12,276
|
|
|
Notes Payable Associated with
Structured Financings, at Fair Value |
||||||
|
2017
|
|
2016
|
||||
Beginning balance, January 1
|
$
|
12,276
|
|
|
$
|
20,970
|
|
Total (gains) losses—realized/unrealized:
|
|
|
|
|
|
||
Net revaluations of notes payable associated with structured financings, at fair value
|
(1,786
|
)
|
|
(2,363
|
)
|
||
Repayments on outstanding notes payable, net
|
(721
|
)
|
|
(4,240
|
)
|
||
Ending balance, September 30,
|
$
|
9,769
|
|
|
$
|
14,367
|
|
As of September 30, 2017
|
|
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
|
|
$
|
4,810
|
|
|
$
|
12,473
|
|
Aggregate fair value of loans and fees receivable that are reported at fair value
|
|
$
|
2,250
|
|
|
$
|
9,769
|
|
Aggregate fair value of receivables carried at fair value that are 90 days or more past due (which also coincides with finance charge and fee non-accrual policies)
|
|
$
|
5
|
|
|
$
|
24
|
|
Aggregate excess of balance of unpaid principal receivables within loans and fees receivable that are reported at fair value and are 90 days or more past due (which also coincides with finance charge and fee non-accrual policies) over the fair value of such loans and fees receivable
|
|
$
|
110
|
|
|
$
|
347
|
|
As of December 31, 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
|
|
$
|
6,251
|
|
|
$
|
16,614
|
|
Aggregate fair value of loans and fees receivable that are reported at fair value
|
|
$
|
3,484
|
|
|
$
|
12,164
|
|
Aggregate fair value of receivables carried at fair value that are 90 days or more past due (which also coincides with finance charge and fee non-accrual policies)
|
|
$
|
6
|
|
|
$
|
22
|
|
Aggregate excess of balance of unpaid principal receivables within loans and fees receivable that are reported at fair value and are 90 days or more past due (which also coincides with finance charge and fee non-accrual policies) over the fair value of such loans and fees receivable
|
|
$
|
204
|
|
|
$
|
562
|
|
Notes Payable
|
|
Notes Payable Associated with Structured Financings, at Fair Value as of September 30, 2017
|
|
Notes Payable Associated with Structured Financings, at Fair Value as of December 31, 2016
|
||||
Aggregate unpaid principal balance of notes payable
|
|
$
|
101,314
|
|
|
$
|
102,035
|
|
Aggregate fair value of notes payable
|
|
$
|
9,769
|
|
|
$
|
12,276
|
|
7.
|
Notes Payable
|
|
Carrying Amounts at Fair Value as of
|
||||||
|
September 30, 2017
|
|
December 31, 2016
|
||||
Amortizing securitization facility (stated maturity of December 2021), outstanding face amount of $101.3 million as of September 30, 2017 ($102.0 million as of December 31, 2016) bearing interest at a weighted average 6.5% interest rate at September 30, 2017 (6.1% at December 31, 2016), which is secured by credit card receivables and restricted cash aggregating $9.8 million as of September 30, 2017 ($12.3 million as of December 31, 2016) in carrying amount
|
$
|
9.8
|
|
|
$
|
12.3
|
|
|
As of
|
||||||
|
September 30, 2017
|
|
December 31, 2016
|
||||
Revolving credit facilities at a weighted average interest rate equal to 7.1% at September 30, 2017 (4.8% at December 31, 2016) secured by the financial and operating assets of CAR and/or certain receivables and restricted cash with a combined aggregate carrying amount of $194.2 million as of September 30, 2017 ($127.9 million at December 31, 2016)
|
|
|
|
||||
Revolving credit facility, not to exceed $40.0 million (expiring November 1, 2018) (3)
|
26.2
|
|
|
29.2
|
|
||
Revolving credit facility, not to exceed $50.0 million (expiring October 30, 2019) (1) (2)
|
49.2
|
|
|
34.7
|
|
||
Revolving credit facility, not to exceed $20.0 million (expiring December 31, 2019) (1) (2)
|
19.7
|
|
|
19.5
|
|
||
Revolving credit facility, not to exceed $90.0 million (expiring February 8, 2022) (1) (4)
|
50.0
|
|
|
—
|
|
||
Amortizing facilities at a weighted average interest rate equal to 5.8% at September 30, 2017 (5.4% at December 31, 2016) secured by certain receivables and restricted cash with a combined aggregate carrying amount of $76.6 million as of September 30, 2017 ($69.9 million as of December 31, 2016)
|
|
|
|
||||
Amortizing debt facility (repaid in June 2017) (1) (2) (5)
|
—
|
|
|
20.4
|
|
||
Amortizing debt facility (repaid in September 2017) (1) (2)
|
—
|
|
|
9.7
|
|
||
Amortizing debt facility (expiring March 31, 2018) (1) (2) (5)
|
7.3
|
|
|
14.6
|
|
||
Amortizing debt facility (expiring June 30, 2018) (1) (2) (5)
|
27.5
|
|
|
—
|
|
||
Amortizing debt facility (expiring August 15, 2018) (1) (2)
|
5.4
|
|
|
6.0
|
|
||
Amortizing debt facility (expiring September 14, 2018) (1) (2)
|
10.0
|
|
|
7.5
|
|
||
Amortizing debt facility (expiring November 30, 2018) (1) (2) (5)
|
16.0
|
|
|
—
|
|
||
Other facilities
|
|
|
|
||||
Senior secured term loan from related parties (expiring November 22, 2017) that is secured by certain assets of the Company with an annual interest rate equal to 9.0% (4)
|
40.0
|
|
|
40.0
|
|
||
Total notes payable before unamortized debt issuance costs and discounts
|
251.3
|
|
|
181.6
|
|
||
Unamortized debt issuance costs and discounts
|
2.3
|
|
|
0.4
|
|
||
Total notes payable outstanding, net
|
$
|
249.0
|
|
|
$
|
181.2
|
|
(1)
|
Loans are subject to certain affirmative covenants tied to default rates and other performance metrics the failure of which could result in required early repayment of the remaining unamortized balances of the notes.
|
(2)
|
These notes reflect modifications to either extend the maturity date, increase the loaned amount or both.
|
(3)
|
Loan is subject to certain affirmative covenants, including a coverage ratio, a leverage ratio and a collateral performance test, the failure of which could result in required early repayment of all or a portion of the outstanding balance by our CAR Auto Finance operations.
|
(4)
|
See below for additional information.
|
(5)
|
Loans are comprised of three tranches with the same lenders. Terms and conditions are substantially identical with the exception of maturity date as indicated in the table above.
|
8.
|
Convertible Senior Notes
|
|
As of
|
||||||
|
September 30, 2017
|
|
December 31, 2016
|
||||
Face amount of 5.875% convertible senior notes
|
$
|
88,280
|
|
|
$
|
88,280
|
|
Discount
|
(27,042
|
)
|
|
(27,489
|
)
|
||
Net carrying value
|
$
|
61,238
|
|
|
$
|
60,791
|
|
Carrying amount of equity component included in additional paid-in capital
|
$
|
108,714
|
|
|
$
|
108,714
|
|
Excess of instruments’ if-converted values over face principal amounts
|
$
|
—
|
|
|
$
|
—
|
|
9.
|
Commitments and Contingencies
|
10.
|
Net Loss Attributable to Controlling Interests Per Common Share
|
|
For the Three Months Ended September 30,
|
|
For the Nine Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net loss attributable to controlling interests
|
$
|
(14,467
|
)
|
|
$
|
(9,065
|
)
|
|
$
|
(22,523
|
)
|
|
$
|
(4,235
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic (including unvested share-based payment awards) (1)
|
13,921
|
|
|
13,867
|
|
|
13,949
|
|
|
13,857
|
|
||||
Effect of dilutive stock compensation arrangements (2)
|
10
|
|
|
63
|
|
|
19
|
|
|
68
|
|
||||
Diluted (including unvested share-based payment awards) (1)
|
13,931
|
|
|
13,930
|
|
|
13,968
|
|
|
13,925
|
|
||||
Net loss attributable to controlling interests per common share—basic
|
$
|
(1.04
|
)
|
|
$
|
(0.65
|
)
|
|
$
|
(1.61
|
)
|
|
$
|
(0.31
|
)
|
Net loss attributable to controlling interests per common share—diluted
|
$
|
(1.04
|
)
|
|
$
|
(0.65
|
)
|
|
$
|
(1.61
|
)
|
|
$
|
(0.31
|
)
|
(1)
|
Shares related to unvested share-based payment awards included in our basic and diluted share counts were
238,967
and
318,253
for the
three and nine months ended
September 30, 2017
, compared to
358,970
and
277,361
for the
three and nine months ended
September 30, 2016
.
|
(2)
|
The effect of dilutive stock compensation arrangements is shown only for informational purposes where we are in a net loss position. In such situations, the effect of including outstanding options and restricted stock would be anti-dilutive, and they are thus excluded from all loss period calculations.
|
11.
|
Stock-Based Compensation
|
|
September 30, 2017
|
|||||||||||
|
Number of
Shares |
|
Weighted-
Average Exercise Price |
|
Weighted-
Average of Remaining Contractual Life (in years) |
|
Aggregate
Intrinsic Value |
|||||
Outstanding at December 31, 2016
|
1,411,667
|
|
|
$
|
3.09
|
|
|
|
|
|
|
|
Issued
|
1,215,000
|
|
|
$
|
2.98
|
|
|
|
|
|
||
Exercised
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
Cancelled/Forfeited
|
(4,000
|
)
|
|
$
|
3.04
|
|
|
|
|
|
|
|
Outstanding at September 30, 2017
|
2,622,667
|
|
|
$
|
3.04
|
|
|
3.6
|
|
$
|
10,653
|
|
Exercisable at September 30, 2017
|
792,205
|
|
|
$
|
2.92
|
|
|
2.3
|
|
$
|
10,653
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
|
|
|
|
Income
|
||||||
|
For the Three Months Ended September 30,
|
|
Increases (Decreases)
|
||||||||
(In Thousands)
|
2017
|
|
2016
|
|
from 2016 to 2017
|
||||||
Total interest income
|
$
|
29,019
|
|
|
$
|
24,089
|
|
|
$
|
4,930
|
|
Interest expense
|
(7,268
|
)
|
|
(5,257
|
)
|
|
(2,011
|
)
|
|||
Fees and related income on earning assets:
|
|
|
|
|
|
||||||
Fees on credit products
|
3,248
|
|
|
944
|
|
|
2,304
|
|
|||
Changes in fair value of loans and fees receivable recorded at fair value
|
1,153
|
|
|
(1,857
|
)
|
|
3,010
|
|
|||
Changes in fair value of notes payable associated with structured financings recorded at fair value
|
259
|
|
|
259
|
|
|
—
|
|
|||
Rental revenue
|
—
|
|
|
758
|
|
|
(758
|
)
|
|||
Other
|
(494
|
)
|
|
(29
|
)
|
|
(465
|
)
|
|||
Other operating income:
|
|
|
|
|
|
||||||
Servicing income
|
1,034
|
|
|
885
|
|
|
149
|
|
|||
Other income
|
590
|
|
|
69
|
|
|
521
|
|
|||
Gain on repurchase of convertible senior notes
|
—
|
|
|
—
|
|
|
—
|
|
|||
Equity in income equity-method investee
|
164
|
|
|
629
|
|
|
(465
|
)
|
|||
Total
|
$
|
27,705
|
|
|
$
|
20,490
|
|
|
$
|
7,215
|
|
Net recovery of losses upon charge off of loans and fees receivable recorded at fair value
|
(2,393
|
)
|
|
(1,556
|
)
|
|
837
|
|
|||
Provision for losses on loans and fees receivable recorded at net realizable value
|
24,087
|
|
|
17,470
|
|
|
(6,617
|
)
|
|||
Other operating expenses:
|
|
|
|
|
|
||||||
Salaries and benefits
|
5,296
|
|
|
6,329
|
|
|
1,033
|
|
|||
Card and loan servicing
|
8,687
|
|
|
7,027
|
|
|
(1,660
|
)
|
|||
Marketing and solicitation
|
2,072
|
|
|
587
|
|
|
(1,485
|
)
|
|||
Depreciation, primarily related to rental merchandise
|
236
|
|
|
794
|
|
|
558
|
|
|||
Other
|
4,210
|
|
|
3,570
|
|
|
(640
|
)
|
|||
Net loss
|
(14,468
|
)
|
|
(9,065
|
)
|
|
(5,403
|
)
|
|||
Net loss attributable to noncontrolling interests
|
1
|
|
|
—
|
|
|
1
|
|
|||
Net loss attributable to controlling interests
|
(14,467
|
)
|
|
(9,065
|
)
|
|
(5,402
|
)
|
|
|
|
|
|
Income
|
||||||
|
For the Nine Months Ended September 30,
|
|
Increases (Decreases)
|
||||||||
(In Thousands)
|
2017
|
|
2016
|
|
from 2016 to 2017
|
||||||
Total interest income
|
$
|
81,635
|
|
|
$
|
63,851
|
|
|
$
|
17,784
|
|
Interest expense
|
(19,504
|
)
|
|
(14,693
|
)
|
|
(4,811
|
)
|
|||
Fees and related income on earning assets:
|
|
|
|
|
|
||||||
Fees on credit products
|
6,351
|
|
|
2,599
|
|
|
3,752
|
|
|||
Changes in fair value of loans and fees receivable recorded at fair value
|
2,718
|
|
|
568
|
|
|
2,150
|
|
|||
Changes in fair value of notes payable associated with structured financings recorded at fair value
|
1,786
|
|
|
2,363
|
|
|
(577
|
)
|
|||
Rental revenue
|
148
|
|
|
8,091
|
|
|
(7,943
|
)
|
|||
Other
|
(65
|
)
|
|
219
|
|
|
(284
|
)
|
|||
Other operating income:
|
|
|
|
|
|
||||||
Servicing income
|
2,984
|
|
|
3,313
|
|
|
(329
|
)
|
|||
Other income
|
939
|
|
|
214
|
|
|
725
|
|
|||
Gain on repurchase of convertible senior notes
|
—
|
|
|
1,037
|
|
|
(1,037
|
)
|
|||
Equity in income equity-method investee
|
902
|
|
|
1,956
|
|
|
(1,054
|
)
|
|||
Total
|
$
|
77,894
|
|
|
$
|
69,518
|
|
|
$
|
8,376
|
|
Net recovery of losses upon charge off of loans and fees receivable recorded at fair value
|
(10,763
|
)
|
|
(12,607
|
)
|
|
(1,844
|
)
|
|||
Provision for losses on loans and fees receivable recorded at net realizable value
|
50,484
|
|
|
33,012
|
|
|
(17,472
|
)
|
|||
Other operating expenses:
|
|
|
|
|
|
||||||
Salaries and benefits
|
16,314
|
|
|
18,242
|
|
|
1,928
|
|
|||
Card and loan servicing
|
23,866
|
|
|
23,300
|
|
|
(566
|
)
|
|||
Marketing and solicitation
|
6,731
|
|
|
2,374
|
|
|
(4,357
|
)
|
|||
Depreciation, primarily related to rental merchandise
|
789
|
|
|
7,049
|
|
|
6,260
|
|
|||
Other
|
16,842
|
|
|
6,199
|
|
|
(10,643
|
)
|
|||
Net loss
|
(22,522
|
)
|
|
(4,240
|
)
|
|
(18,282
|
)
|
|||
Net (income) loss attributable to noncontrolling interests
|
(1
|
)
|
|
5
|
|
|
(6
|
)
|
|||
Net loss attributable to controlling interests
|
(22,523
|
)
|
|
(4,235
|
)
|
|
(18,288
|
)
|
•
|
declines in rental revenue as we significantly reduced rent-to-own operations in the fourth quarter of 2015 and for which we discontinued new acquisitions in 2016. We do not expect future revenues associated with this product offering as existing rent-to-own contracts have effectively concluded with no new acquisitions expected;
|
•
|
increases in fees on credit products, associated with growth in point-of-sale finance and direct-to-consumer products offset somewhat by general net declines in historical credit card receivables; and
|
•
|
the effects of changes in the fair values of credit card receivables recorded at fair value and notes payable associated with structured financings recorded at fair value as described below.
|
•
|
slight increases in card and loan servicing expenses in the three and nine months ended
September 30, 2017
when compared to the three and nine months ended
September 30, 2016
due to growth in receivables associated with our investments in point-of-sale and direct-to-consumer receivables which grew from
$192.5 million
outstanding to
$284.3 million
outstanding at
September 30, 2016
and
September 30, 2017
, respectively, offset by the discontinuation of acquisitions of our rent-to-own products as well as continued net liquidations in our historical credit card portfolios, the receivables of which declined from
$32.5 million
outstanding to
$23.8 million
outstanding at
September 30, 2016
and
September 30, 2017
, respectively;
|
•
|
increases in other expenses due to the reversal of a
£3.4 million
(
$5.0 million
) reserve in the
nine months ended September 30, 2016
. This reserve related to a review in the U.K. by HM Revenue and Customs (“HMRC”) associated with filings by one of our U.K. subsidiaries to reclaim value-added-tax. Additionally impacting the higher expenses noted during the
three and nine months ended
September 30, 2017
are increased occupancy costs, legal costs associated with new product offerings and increased costs associated with translation impacts for U.K. liabilities;
|
•
|
increases in marketing and solicitation costs for the
three and nine months ended
September 30, 2017
primarily due to volume related increases in costs attributable to the growth in our retail point-of-sale and direct-to-consumer portfolios. We expect that increased origination and brand marketing support will result in overall increases in year-over-year costs during the remainder of 2017 and into 2018 although the frequency and timing of marketing efforts could result in reductions in quarter-over-quarter marketing costs; and
|
•
|
general increases in other expenses related to receivables acquisition, risk management costs and third party costs associated with ongoing information technology upgrades.
|
|
At or for the Three Months Ended
|
||||||||||||||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||||||||||||||
|
Sept. 30
|
|
Jun. 30
|
|
Mar. 31
|
|
Dec. 31
|
|
Sept. 30
|
|
Jun. 30
|
|
Mar. 31
|
|
Dec. 31
|
||||||||
Period-end managed receivables
|
$307,886
|
|
$272,727
|
|
$253,308
|
|
$245,007
|
|
$221,683
|
|
$201,406
|
|
$155,425
|
|
$152,528
|
||||||||
Percent 30 or more days past due
|
11.6
|
%
|
|
10.9
|
%
|
|
10.9
|
%
|
|
11.8
|
%
|
|
10.9
|
%
|
|
8.2
|
%
|
|
9.7
|
%
|
|
11.5
|
%
|
Percent 60 or more days past due
|
7.9
|
%
|
|
7.4
|
%
|
|
7.8
|
%
|
|
8.1
|
%
|
|
7.3
|
%
|
|
5.3
|
%
|
|
7.1
|
%
|
|
7.9
|
%
|
Percent 90 or more days past due
|
5.3
|
%
|
|
4.8
|
%
|
|
5.2
|
%
|
|
5.2
|
%
|
|
4.7
|
%
|
|
3.4
|
%
|
|
5.1
|
%
|
|
5.4
|
%
|
Average managed receivables
|
$298,128
|
|
$265,175
|
|
$250,862
|
|
$236,103
|
|
$216,951
|
|
$188,128
|
|
$152,831
|
|
$152,983
|
||||||||
Total yield ratio
|
35.4
|
%
|
|
34.7
|
%
|
|
34.4
|
%
|
|
32.6
|
%
|
|
33.5
|
%
|
|
36.8
|
%
|
|
35.4
|
%
|
|
35.2
|
%
|
Combined gross charge-off ratio
|
18.1
|
%
|
|
21.6
|
%
|
|
23.6
|
%
|
|
21.1
|
%
|
|
13.3
|
%
|
|
14.9
|
%
|
|
18.2
|
%
|
|
16.8
|
%
|
Adjusted charge-off ratio
|
15.3
|
%
|
|
18.4
|
%
|
|
20.1
|
%
|
|
17.8
|
%
|
|
10.7
|
%
|
|
11.7
|
%
|
|
14.1
|
%
|
|
12.9
|
%
|
|
At or for the Three Months Ended
|
||||||||||||||||||||||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||||||||||||||||||||||
|
Sept. 30
|
|
Jun. 30
|
|
Mar. 31
|
|
Dec. 31
|
|
Sept. 30
|
|
Jun. 30
|
|
Mar. 31
|
|
Dec. 31
|
||||||||||||||||
Period-end managed receivables
|
$
|
78,459
|
|
|
$
|
80,014
|
|
|
$
|
75,311
|
|
|
$
|
79,683
|
|
|
$
|
76,615
|
|
|
$
|
80,903
|
|
|
$
|
78,415
|
|
|
$
|
77,833
|
|
Percent 30 or more days past due
|
13.0
|
%
|
|
11.7
|
%
|
|
10.0
|
%
|
|
14.2
|
%
|
|
12.7
|
%
|
|
12.3
|
%
|
|
10.2
|
%
|
|
14.0
|
%
|
||||||||
Percent 60 or more days past due
|
5.0
|
%
|
|
4.0
|
%
|
|
4.2
|
%
|
|
5.4
|
%
|
|
4.5
|
%
|
|
3.9
|
%
|
|
4.2
|
%
|
|
5.5
|
%
|
||||||||
Percent 90 or more days past due
|
2.2
|
%
|
|
1.4
|
%
|
|
2.1
|
%
|
|
2.4
|
%
|
|
1.8
|
%
|
|
1.5
|
%
|
|
2.2
|
%
|
|
2.5
|
%
|
||||||||
Average managed receivables
|
$
|
78,764
|
|
|
$
|
78,258
|
|
|
$
|
75,986
|
|
|
$
|
78,209
|
|
|
$
|
78,089
|
|
|
$
|
80,213
|
|
|
$
|
78,122
|
|
|
$
|
76,413
|
|
Total yield ratio
|
37.2
|
%
|
|
37.2
|
%
|
|
38.4
|
%
|
|
37.8
|
%
|
|
39.1
|
%
|
|
38.0
|
%
|
|
37.3
|
%
|
|
38.3
|
%
|
||||||||
Combined gross charge-off ratio
|
1.1
|
%
|
|
2.4
|
%
|
|
2.4
|
%
|
|
2.6
|
%
|
|
2.8
|
%
|
|
3.1
|
%
|
|
2.7
|
%
|
|
3.3
|
%
|
||||||||
Recovery ratio
|
1.6
|
%
|
|
1.9
|
%
|
|
1.6
|
%
|
|
1.6
|
%
|
|
1.0
|
%
|
|
1.5
|
%
|
|
1.3
|
%
|
|
1.6
|
%
|
Revolving credit facility (expiring October 30, 2019) that is secured by certain receivables and restricted cash
|
$
|
49.2
|
|
Revolving credit facility (expiring November 1, 2018) that is secured by the financial and operating assets of our CAR operations
|
26.2
|
|
|
Revolving credit facility (expiring December 31, 2019) that is secured by certain receivables and restricted cash
|
19.7
|
|
|
Senior secured term loan from related parties (expiring November 22, 2017) that is secured by certain assets of the Company with an annual interest rate equal to 9.0%
|
40.0
|
|
|
Total
|
$
|
135.1
|
|
•
|
During the
nine months
ended
September 30, 2017
, we
used
$12.0 million
of cash flows from operations compared to the
generation of
$24.7 million
of cash flows from operations during the
nine months
ended
September 30, 2016
. The decrease in cash provided by operating activities was principally related to decreases in 1) collections associated with rental payments in the
nine months
ended
September 30, 2017
relative to the same period in 2016, given the cessation of our rent-to-own program of approximately $8.0 million; and 2) increases in billed but
|
•
|
During the
nine months
ended
September 30, 2017
, we
used
$63.0 million
of cash from our investing activities, compared to
use of
$56.6 million
of cash from investing activities during the
nine months
ended
September 30, 2016
. This increase is primarily due to: 1) the shrinking size of our historical credit card receivables, resulting in lower corresponding payments from consumers; 2) increasing levels of investments in the point-of-sale and direct-to-consumer receivables relative to the same period in 2016 and which we expect to continue to make throughout 2017; and 3) increased levels of restricted cash required to be maintained due to increasing levels of collections on loans and fees receivable, the cash balances of which are required to be distributed to noteholders under our debt facilities and minimum cash balances held in accounts at the request of certain of our business partners. Slightly offsetting this increase in cash used by investing activities are returns on our aforementioned investments in point-of-sale and direct-to-consumer receivables which contributed positively to our cash generated from investing activities.
|
•
|
During the
nine months
ended
September 30, 2017
, we
generated
$67.2 million
of cash in financing activities, compared to our
generating
$40.8 million
of cash in financing activities during the
nine months
ended
September 30, 2016
. In both periods, the data reflect borrowings associated with point-of-sale and direct-to-consumer receivables offset by net repayments of amortizing debt facilities as payments are made on the underlying receivables that serve as collateral.
|
•
|
the availability of adequate financing to support growth;
|
•
|
the extent to which federal, state, local and foreign governmental regulation of our various business lines and the products we service for others limits or prohibits the operation of our businesses;
|
•
|
current and future litigation and regulatory proceedings against us;
|
•
|
the effect of adverse economic conditions on our revenues, loss rates and cash flows;
|
•
|
competition from various sources providing similar financial products, or other alternative sources of credit, to consumers;
|
•
|
the adequacy of our allowances for uncollectible loans and fees receivable and estimates of loan losses used within our risk management and analyses;
|
•
|
the possible impairment of assets;
|
•
|
our ability to manage costs in line with the expansion or contraction of our various business lines;
|
•
|
our relationship with (i) the merchants that participate in point-of-sale finance operations and (ii) the banks that issue credit cards and provide certain other credit products utilizing our technology platform and related services; and
|
•
|
theft and employee errors.
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
•
|
the availability of funding on favorable terms;
|
•
|
our relationships with the banks that issue credit cards;
|
•
|
the degree to which we lose business to competitors;
|
•
|
the level of usage of our credit card products by consumers;
|
•
|
the availability of portfolios for purchase on attractive terms;
|
•
|
levels of delinquencies and charge offs;
|
•
|
the level of costs of acquiring new receivables;
|
•
|
our ability to employ and train new personnel;
|
•
|
our ability to maintain adequate management systems, collection procedures, internal controls and automated systems; and
|
•
|
general economic and other factors beyond our control.
|
•
|
receivables not originated in compliance with law (or revised interpretations) could become unenforceable and uncollectible under their terms against the obligors;
|
•
|
we may be required to credit or refund previously collected amounts;
|
•
|
certain fees and finance charges could be limited, prohibited or restricted, which would reduce the profitability of certain investments in receivables;
|
•
|
certain collection methods could be prohibited, forcing us to revise our practices or adopt more costly or less effective practices;
|
•
|
limitations on our ability to recover on charged-off receivables regardless of any act or omission on our part;
|
•
|
some credit products and services could be banned in certain states or at the federal level;
|
•
|
federal or state bankruptcy or debtor relief laws could offer additional protections to consumers seeking bankruptcy protection, providing a court greater leeway to reduce or discharge amounts owed to us; and
|
•
|
a reduction in our ability or willingness to invest in receivables arising under loans to certain consumers, such as military personnel.
|
•
|
actual or anticipated fluctuations in our operating results;
|
•
|
changes in expectations as to our future financial performance, including financial estimates by securities analysts and investors;
|
•
|
the overall financing environment, which is critical to our value;
|
•
|
the operating and stock performance of our competitors;
|
•
|
announcements by us or our competitors of new products or services or significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;
|
•
|
changes in interest rates;
|
•
|
the announcement of enforcement actions or investigations against us or our competitors or other negative publicity relating to us or our industry;
|
•
|
changes in GAAP, laws, regulations or the interpretations thereof that affect our various business activities and segments;
|
•
|
general domestic or international economic, market and political conditions;
|
•
|
changes in ownership by executive officers, directors and parties related to them who control a majority of our common stock;
|
•
|
additions or departures of key personnel; and
|
•
|
future sales of our common stock and the transfer or cancellation of shares of common stock pursuant to a share lending agreement.
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
|
Total Number of
Shares Purchased |
|
Average Price
Paid per Share |
|
Total Number of
Shares Purchased as Part of Publicly Announced Plans or Programs |
|
Maximum Number
of Shares that May Yet Be Purchased under the Plans or Programs (1)(2) |
|||||
July 1 - July 31
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
4,912,401
|
|
August 1 - August 31
|
84,225
|
|
|
$
|
2.49
|
|
|
17,525
|
|
|
4,894,876
|
|
September 1 - September 30
|
23,691
|
|
|
$
|
2.48
|
|
|
23,691
|
|
|
4,871,185
|
|
Total
|
107,916
|
|
|
$
|
2.49
|
|
|
41,216
|
|
|
4,871,185
|
|
(1)
|
Because withholding tax-related stock repurchases are permitted outside the scope of our 5,000,000 share Board-authorized repurchase plan, these amounts exclude shares of stock returned to us by employees in satisfaction of withholding tax requirements on vested stock grants. There were 66,700 such shares returned to us during the three months ended
September 30, 2017
.
|
(2)
|
Pursuant to a share repurchase plan authorized by our Board of Directors on May 12, 2016, we are authorized to repurchase 5,000,000 shares of our common stock through June 30, 2018.
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ITEM 3.
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DEFAULTS UPON SENIOR SECURITIES
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ITEM 4.
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MINE SAFETY DISCLOSURES
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ITEM 5.
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OTHER INFORMATION
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ITEM 6.
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EXHIBITS
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Exhibit Number
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Description of Exhibit
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Incorporated by Reference from Atlanticus’ SEC Filings Unless Otherwise Indicated
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10.1
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Filed herewith
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31.1
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Filed herewith
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31.2
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Filed herewith
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32.1
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Filed herewith
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101.INS
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XBRL Instance Document
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Filed herewith
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101.SCH
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XBRL Taxonomy Extension Schema Document
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Filed herewith
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase Document
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Filed herewith
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101.LAB
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XBRL Taxonomy Extension Label Linkbase Document
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Filed herewith
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101.PRE
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XBRL Taxonomy Presentation Linkbase Document
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Filed herewith
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase Document
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Filed herewith
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ATLANTICUS HOLDINGS CORPORATION
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November 14, 2017
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By
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/s/ WILLIAM R. McCAMEY
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William R. McCamey
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Chief Financial Officer
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(duly authorized officer and principal financial officer)
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Annual Cash Retainer
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$
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50,000
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Attendance Fee for Each Board Meeting (including telephonic attendance)
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$
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3,000
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Attendance Fee for Each Committee Meeting (including telephonic attendance)
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$
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1,500
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a)
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designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the fourth fiscal period in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
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a)
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all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b)
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any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ DAVID G. HANNA
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David G. Hanna
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Chief Executive Officer and Chairman of the Board
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a)
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designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the fourth fiscal period in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
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a)
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all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b)
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any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ WILLIAM R. McCAMEY
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William R. McCamey
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Chief Financial Officer
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/s/ DAVID G. HANNA
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David G. Hanna
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Chief Executive Officer and
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Chairman of the Board
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/s/ WILLIAM R. McCAMEY
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William R. McCamey
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Chief Financial Officer
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